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SHORT-TERM
INVESTMENTS TRUST
Prospectus
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TREASURY
TAXADVANTAGE The Treasury TaxAdvantage Portfolio is a money
PORTFOLIO market fund whose investment objective is the
maximization of current income to the extent
consistent with the preservation of capital and the
maintenance of liquidity. The Treasury TaxAdvantage
INSTITUTIONAL CLASS Portfolio seeks to achieve its objective by investing
in direct obligations of the U.S. Treasury. The
Treasury TaxAdvantage Portfolio's investment strategy
is intended to enable the Portfolio to provide its
shareholders with dividends that are exempt from state
and local income taxation in certain jurisdictions.
DECEMBER 30, 1996 The instruments purchased by the Treasury TaxAdvantage
Portfolio will have maturities of 397 days or less.
The Treasury TaxAdvantage Portfolio is a series
portfolio of Short-Term Investments Trust (the
"Trust"), an open-end diversified series management
investment company. This prospectus relates solely to
the Institutional Class of the Treasury TaxAdvantage
Portfolio, a class of shares designed to be a
convenient vehicle in which institutions, particularly
banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity,
can invest short-term cash reserves. The Trust also
offers shares of another class of the Treasury
TaxAdvantage Portfolio, the Private Investment Class,
pursuant to a separate prospectus, as well as shares
of classes of another portfolio, the Treasury
Portfolio, pursuant to separate prospectuses.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT
A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING IN
SHARES OF THE TREASURY TAXADVANTAGE PORTFOLIO AND
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A
STATEMENT OF ADDITIONAL INFORMATION, DATED DECEMBER
30, 1996, HAS BEEN FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS
HEREBY INCORPORATED BY REFERENCE. A COPY OF THE
STATEMENT OF ADDITIONAL INFORMATION IS ATTACHED
HERETO. THE SEC MAINTAINS A WEB SITE AT
HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY
REFERENCE, AND OTHER INFORMATION REGARDING THE TRUST
THE TRUST'S SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, AND THE TRUST'S SHARES ARE NOT FEDERALLY
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO
ASSURANCE THAT THE TREASURY TAXADVANTAGE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE. SHARES OF THE TRUST INVOLVE
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
[LOGO APPEARS HERE]
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
(800) 659-1005
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SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Trust is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Trust offers shares of the Institutional Class
(the "Class") of the Treasury TaxAdvantage Portfolio (the "Portfolio") without a
sales charge. The investment objective of the Portfolio is the maximization of
current income to the extent consistent with the preservation of capital and the
maintenance of liquidity. To achieve its objective, the Portfolio will invest in
direct obligations of the U.S. Treasury. The instruments purchased by the
Portfolio will have maturities of 397 days or less. The Portfolio's investment
strategy is intended to enable the Portfolio to provide its shareholders with
dividends that are exempt from state and local income taxation in certain
jurisdictions.
Pursuant to a separate prospectus, the Trust offers shares of another class of
shares of beneficial interest of the Portfolio representing an interest in the
Portfolio. Such class has a different distribution arrangement and is designed
for another category of investors. The Trust also offers shares of several
classes of the Trust representing an interest in another portfolio, the Treasury
Portfolio. The portfolios of the Trust are referred to collectively as the
"Portfolios."
Because the Trust declares dividends on a daily basis, shares of each class of
the Portfolio have the same net asset value (proportionate interest in the net
assets of the Portfolio) and bear equally those expenses, such as the advisory
fee, that are allocated to the Portfolio as a whole. All classes of the
Portfolio share a common investment objective and portfolio of investments.
However, different classes of the Portfolio have different shareholder
qualifications and are separately allocated certain class expenses, such as
those associated with the distribution of their shares. Therefore, each class
will have a different dividend payment and a different yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical investment vehicle in
which institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Class may not be purchased by individuals
directly, institutions may purchase shares for accounts maintained by
individuals. See "Suitability for Investors." Although there is no sales charge
imposed on the purchase of shares of the Class, banks or other institutions may
charge a recordkeeping, account maintenance or other fee to their customers and
beneficial holders of the shares of the Class should consult with the
institutions maintaining their accounts to obtain a schedule of applicable fees.
PURCHASE OF SHARES
The shares of the Class are sold at net asset value, without a sales charge.
The minimum initial investment in the Class is $1,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in federal funds or other funds immediately available to the Portfolio.
See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
1:00 p.m. Eastern Time will normally be made in federal funds on the same day.
See "Redemption of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 1:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless a shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 3:30 p.m. Eastern Time on that day.
See "Dividends."
CONSTANT NET ASSET VALUE
The Trust uses the amortized cost method of valuing its securities held by the
Portfolio and rounds the per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally remain
constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE. SEE "NET ASSET VALUE."
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INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets pursuant to a
master investment advisory agreement. For its services, AIM receives a fee based
on the average daily net assets of the Portfolio. During the fiscal year ended
August 31, 1996, the Trust paid AIM fees with respect to the Portfolio which
represented 0.15% of the average net assets of the Portfolio. AIM is primarily
engaged in the business of acting as manager or advisor to investment companies.
See "Management of the Trust -- Investment Advisor." Under a separate
administrative services agreement with the Trust, AIM may receive reimbursement
of its costs to perform certain accounting and other administrative services for
the Portfolio. See "Management of the Trust -- Investment Advisor" and
"-- Administrative Services."
On November 4, 1996, A I M Management Group Inc. ("AIM Management"), announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services, Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services, Inc. INVESCO plc and its
subsidiaries are an independent investment management group engaged in
institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific region. It is contemplated that the merger
will occur on February 28, 1997. The Trust's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the Master Investment Advisory Agreement between the Trust and AIM.
Under the 1940 Act and the Master Investment Advisory Agreement, an assignment
results in the automatic termination of the Master Investment Advisory
Agreement.
On December 11, 1996, the Board of Trustees of the Trust approved a new
investment advisory agreement, subject to shareholder approval, between AIM and
the Trust with respect to the Portfolio. Shareholders will be asked to approve
the proposed advisory agreement at an annual meeting of shareholders to be held
on February 7, 1997 (the "Annual Meeting"). The Board of Trustees has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.
The Board of Trustees has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management into a subsidiary of
INVESCO plc. Provided that the Portfolio's shareholders approve the new
investment advisory agreement at the Annual Meeting and the merger is
consummated, the new investment advisory agreement with respect to the
Portfolio, as well as the new administrative services and distribution
agreements, will automatically become effective as of the closing date of the
merger.
DISTRIBUTOR
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. FMC does not receive any fee for distribution services from
the Trust. See "Purchase of Shares."
SPECIAL RISK CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements
for temporary or emergency purposes, and may purchase securities for delayed
delivery. Accordingly, an investment in the Portfolio may entail somewhat
different risks from an investment in an investment company that does not engage
in such practices. There can be no assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
Logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
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TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES*
Maximum sales load imposed on purchases
(as a percentage of offering price)...................................... None
Maximum sales load on reinvested dividends
(as a percentage of offering price)...................................... None
Deferred sales load (as a percentage of original
purchase price or redemption proceeds, as applicable).................... None
Redemption fees (as a percentage of amount
redeemed, if applicable)................................................. None
Exchange fee................................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES -- INSTITUTIONAL CLASS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management fees**........................................................... 0.15%
12b-1 fees.................................................................. None
Other expenses:
Custodian fees........................................................... 0.01%
Other.................................................................... 0.04%
-----
Total other expenses................................................... 0.05%
----
Total portfolio operating expenses --
Institutional Class................................................. 0.20%
=====
</TABLE>
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* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** Had there been no fee waivers, Management fees and Total portfolio operating
expenses would have been 0.18% and 0.23%, respectively.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year............................................................ $ 2
3 years........................................................... $ 6
5 years........................................................... $11
10 years........................................................... $26
</TABLE>
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Management of the Trust" below. The expense figures are based
upon actual costs and fees charged to the Class for the fiscal year ended August
31, 1996. Future waivers of fees (if any) may vary from the figures reflected in
the Table of Fees and Expenses. To the extent any service providers assume
expenses of the Class, such assumption of expenses will have the effect of
lowering the Class' overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Class should also consider the effect of any
charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual Portfolio
Operating Expenses -- Institutional Class" remain the same in the years shown.
The example shown in the above table is based on the amounts listed under
"Annual Portfolio Operating Expenses." THE EXAMPLE SHOULD NOT BE CONSIDERED TO
BE AN ACCURATE REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.
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FINANCIAL HIGHLIGHTS
Shown below are the per share ratios and supplemental data (collectively
"data") for the years in the six-year period ended August 31, 1996 and the
period August 17, 1990 (date operations commenced) through August 31, 1990. The
data has been audited and reported on by KPMG Peat Marwick LLP, independent
auditors, whose unqualified report on the financial statements and the related
notes appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
AUGUST 31,
-----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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... 0.05 0.05 0.03 0.03 0.04 0.07 0.003
-------- -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income..... (0.05) (0.05) (0.03) (0.03) (0.04) (0.07) (0.003)
-------- -------- -------- -------- -------- -------- -------
Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== =======
Total return.............. 5.19% 5.35% 3.29% 2.96% 4.32% 6.70% 7.79%(a)
======== ======== ======== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of
period (000s
omitted).............. $407,218 $394,376 $403,882 $434,693 $573,283 $403,846 $ 16,201
======== ======== ======== ======== ======== ======== =======
Ratio of expenses to
average net assets.... 0.20%(b)(c) 0.20%(c) 0.20%(c) 0.20% 0.17%(e) 0.14%(e) 0.10%(a)(e)
======== ======== ======== ======== ======== ======== =======
Ratio of net investment
income to average net
assets................ 5.06%(b)(d) 5.21%(d) 3.23%(d) 2.93% 4.16%(f) 6.16%(f) 7.74%(a)(f)
======== ======== ======== ======== ======== ======== =======
</TABLE>
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(a) Annualized.
(b) Ratios are based on average net assets of $424,432,042.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
were 0.23% for the periods 1996-1994, respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees were 5.04%, 5.18% and 3.20% for the periods 1996-1994,
respectively.
(e) Ratios of expenses to average net assets prior to waiver of advisory fees
and/or expense reimbursements were 0.21%, 0.25% and 1.24% for the periods
1992-1990, respectively.
(f) Ratios of net investment income to average net assets prior to waiver of
advisory fees and/or expense reimbursements were 4.13%, 6.04% and 6.60% for
the periods 1992-1990, respectively.
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SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or other
similar capacity. It is designed to be a convenient and economical vehicle in
which such institutions can invest short-term cash reserves. The Portfolio's
investment strategy is intended to provide its shareholders with dividends that
are exempt from state and local income taxation in certain jurisdictions. Shares
of the Class may not be purchased directly by individuals, although institutions
may purchase shares for accounts maintained by individuals. Prospective
investors should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money market
instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell; valuation of
portfolio securities; selection and scheduling of maturities; receipt, delivery
and safekeeping of securities; and portfolio recordkeeping. It is anticipated
that most institutions will perform their own sub-accounting. To assist these
institutions, information concerning the dividends declared by the Portfolio on
any particular day will normally be available by 3:30 p.m. Eastern Time on that
day.
Investors in the Class have the opportunity to receive a somewhat higher yield
than might be obtainable through direct investment in money market instruments,
and enjoy the benefits of same-day liquidity. Although there is no sales charge
imposed on the purchase of shares of the Class, banks or other institutions may
charge a recordkeeping, account maintenance or other fee to their customers, and
beneficial holders of the shares of the Class should consult with the
institutions maintaining their accounts to obtain a schedule of applicable fees.
Generally, higher interest rates can be obtained on the purchase of very large
blocks of money market instruments. Of course, any such relative increase in
interest rates may be offset to some extent by the operating expenses of the
Class. However, these expenses are expected to be relatively small due primarily
to the following factors: the Class will have a small number of shareholders who
do not need many of the services provided by other money market investment
companies, thereby resulting in lower transfer agent fees and costs for printing
reports and proxy statements; sales of the Class' shares to institutions acting
for themselves or in a fiduciary capacity are exempt from the registration
requirements of most state securities laws, thereby resulting in reduced state
registration fees; and the relatively low investment advisory fee paid to AIM.
Because the Portfolio invests in direct obligations of the U.S. Treasury it
may be considered to have somewhat less risk than many other money market funds
and yields on the Portfolio may be expected to be somewhat lower than many other
money market funds. However, the possible exemption from state and local income
taxation with respect to dividends paid by the Portfolio may enable shareholders
to achieve an after-tax return comparable to or higher than that obtained from
other money market funds, which may provide an advantage to some shareholders.
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio intends to provide its shareholders with
dividends that are exempt from state and local income taxation in certain
jurisdictions. The Portfolio seeks to achieve its objective by investing in
direct obligations of the U. S. Treasury. The obligations in which the Portfolio
invests are considered to carry very little risk and accordingly may not have as
high a yield as that available on instruments of lesser quality.
INVESTMENT POLICIES
The Portfolio invests exclusively in direct obligations of the U.S. Treasury,
which include Treasury bills, notes and bonds. The market values of the money
market instruments held by the Portfolio will be affected by changes in the
yields available on similar securities. If yields have increased since a
security was purchased, the market value of such security will generally have
decreased. Conversely, if yields have decreased, the market value of such
security will generally have increased.
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. The Portfolio will
only borrow money or enter into reverse repurchase agreements for temporary or
emergency purposes, such as to facilitate the orderly sale of portfolio
securities to accommodate abnormally heavy redemption requests should they
occur. Borrowing will not be made for leverage purposes. Reverse repurchase
transactions are limited to a term not to exceed 92 days. The Portfolio will use
reverse repurchase agreements when the interest income to be earned from the
securities that would otherwise have to be liquidated to meet redemption
requests is greater than the interest expense of the reverse repurchase
transaction. Reverse repurchase agreements involve the risk that
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the market value of securities retained by the Portfolio in lieu of liquidation
may decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.
PURCHASING DELAYED DELIVERY SECURITIES. In managing the Portfolio's
investments, AIM may indicate to dealers or issuers its interest in acquiring
certain securities for the Portfolio for settlement beyond a customary
settlement date. In some cases, the Portfolio may agree to purchase such
securities at stated prices and yields. In such cases, such securities are
considered "delayed delivery" securities when traded in the secondary market.
Since this is done to facilitate the acquisition of portfolio securities and is
not for the purpose of investment leverage, the amount of delayed delivery
securities involved may not exceed the estimated amount of funds available for
investment on the settlement date. Until the settlement date, assets of the
Portfolio with a dollar value sufficient at all times to make payment for the
delayed delivery securities will be segregated. The total amount of segregated
assets may not exceed 25% of the Portfolio's total assets. The delayed delivery
securities, which will not begin to accrue interest until the settlement date,
will be recorded as an asset of the Portfolio and will be subject to the risks
of market value fluctuations. The purchase price of the delayed delivery
securities will be recorded as a liability of the Portfolio until settlement.
Absent extraordinary circumstances, the Portfolio's right to acquire delayed
delivery securities will not be divested prior to the settlement date.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-term
trading and will generally hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money market. 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 or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet redemption
requests. The Portfolio'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
Portfolio, however, the high turnover rate should not adversely affect the
Portfolio's net income.
The investment policies described above may be changed by the Board of
Trustees without the affirmative vote of a majority of the outstanding shares of
the Portfolio.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which may
be concentrated in any specific industry or issuer. The most significant of
these restrictions provides that the Portfolio will not:
borrow money or issue senior securities except (a) for
temporary or emergency purposes (e.g., in order to facilitate
the orderly sale of portfolio securities to accommodate
abnormally heavy redemption requests), the Portfolio may
borrow money from banks or obtain funds by entering into
reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance
with the Portfolio's investment program may be considered the
issuance of senior securities. The Portfolio will not purchase
securities while borrowings in excess of 5% of its total
assets are outstanding.
The foregoing investment restriction of the Portfolio (as well as certain
others set forth in the Statement of Additional Information) is a matter of
fundamental policy which may not be changed without the affirmative vote of a
majority of the outstanding shares of the Portfolio.
The Board of Trustees has unanimously approved the elimination of a
fundamental investment policy of the Trust, subject to shareholder approval.
Shareholders will be asked to approve this change at the Annual Meeting. If
approved, they will become effective on March 1, 1997.
The Trust is currently generally prohibited from investing in other investment
companies. The Board of Trustees has approved the elimination of this
prohibition. The elimination of this fundamental investment policy would permit
investment in other investment companies to the extent permitted by the 1940
Act, and rules and regulations thereunder, and, if applicable, exemptive orders
granted by the SEC.
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<PAGE> 8
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which governs the operations of money market
funds, and may be more restrictive than the policies described herein. The SEC
has proposed certain changes to Rule 2a-7. While such proposed changes may have
a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuous basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Trust reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks or
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers, and beneficial holders of the shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 1:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Following the initial investment, subsequent purchases of shares of the
Class may also be made via AIM LINK--Registered Trademark--, a personal computer
application software product. Shares of the Class will earn the dividend
declared on the effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal Reserve
Bank of New York and The Bank of New York, the Trust's custodian, are open for
business. It is expected that The Bank of New York and the Federal Reserve Bank
of New York will be closed during the next twelve months on Saturdays and
Sundays, and on the observed holidays of New Year's Day, Martin Luther King,
Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Trust's right to reject any
purchase order, orders will be accepted (i) when payment for the shares of the
Class purchased is received by The Bank of New York, the Trust's custodian bank,
in the form described below and notice of such order is provided to A I M
Institutional Fund Services, Inc. ("AIFS") (the Trust's transfer agent) or (ii)
at the time the order is placed, if the Trust is assured of payment. Shares of
the Class purchased by orders which are accepted prior to 1:00 p.m. Eastern Time
will earn the dividend declared on the date of purchase.
Payments for shares purchased must be in the form of federal funds or other
funds immediately available to the Portfolio. Federal Reserve wires should be
sent as early as possible in order to facilitate crediting to the shareholder's
account. Any funds received with respect to an order which is not accepted by
the Portfolio and any funds received for which an order has not been received
will be returned to the sending institution.
The minimum initial investment in the Class is $1,000,000. Institutions may be
requested to maintain separate Master Accounts in the Class for shares held by
the institution (i) for its own account, for the account of other institutions
and for accounts for which the institution acts as a fiduciary, and (ii) for
accounts for which the institution acts in some other capacity. An institution's
Master Account(s) and sub-accounts with the Class may be aggregated for the
purpose of the minimum investment requirement. No minimum amount is required for
subsequent investments in the Class nor are minimum balances required. Prior to
the initial purchase of shares of the Class, an Account Application must be
completed and sent to A I M Institutional Fund Services, Inc., 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046-1173. Account Applications may be
obtained from AIFS. Any changes made to the information provided in the Account
Application must be made in writing or by completing a new form and providing it
to AIFS.
The Trust reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Trust. Redemption requests with respect to the Class may also be
made via AIM LINK--Registered Trademark--. Normally, the net asset value per
share of the Portfolio will remain constant at $1.00 per share. See "Net Asset
Value." Redemption requests with respect to shares are normally made by calling
the Trust.
Payment for redeemed shares is normally made by Federal Reserve wire to the
commercial bank account designated in the shareholder's Account Application, but
may be remitted by check upon request by a shareholder. If a redemption request
is received by AIFS prior to 1:00 p.m. Eastern Time on a business day of the
Portfolio, the redemption will be effected at the net
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<PAGE> 9
asset value next determined on such day and the shares to be redeemed will not
receive the dividend declared on the effective date of the redemption. If a
redemption request is received by AIFS after 1:00 p.m. Eastern Time or on other
than a business day of the Portfolio, the redemption will be effected at the net
asset value of the Portfolio determined as of 1:00 p.m. Eastern Time on the next
business day of the Portfolio, and the proceeds of such redemption will normally
be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Trust. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Trust or AIFS, the
Trust's transfer agent.
Shareholders may request a redemption by telephone. AIFS and FMC will not be
liable for any loss, expense or cost arising out of any telephone redemption
request effected in accordance with the authorization set forth in the Account
Application if they reasonably believe such request to be genuine but 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 for verification of telephone
transactions may include recordings of telephone transactions (maintained for
six months), and mailings of confirmations promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Trust may make
payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Trust unless
the Board of Trustees of the Trust determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Trust.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class as of immediately after 1:00 p.m. Eastern
Time on the day of declaration. Net income for dividend purposes is determined
daily as of 1 :00 p.m. Eastern Time. The dividend accrued and paid for each
class will consist of (a) income of the Portfolio, the allocation of which is
based upon such class' pro rata share of the total outstanding shares
representing an interest in the Portfolio, less (b) Portfolio expenses, such as
custodian fees, trustees' fees and accounting and legal expenses, based upon
such class' pro rata share of the net assets of the Portfolio, less (c) expenses
directly attributable to such class, such as distribution expenses, if any, and
transfer agency fees. Although realized gains and losses on the assets of the
Portfolio are reflected in its net asset value, they are not expected to be of
an amount which would affect the Portfolio's net asset value of $1.00 per share
for purposes of purchases and redemptions. See "Net Asset Value." Distributions
from net realized short-term gains may be declared and paid yearly or more
frequently. See "Taxes." The Portfolio does not expect to realize any long-term
capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Portfolio at the net asset value of
such shares as of 1:00 p.m. Eastern Time on the last business day of the month.
Such election, or any revocation thereof, must be made in writing by the
shareholder to AIFS at P.O. Box 4497, Houston, Texas 77210-4497 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Portfolio in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain its net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Trust incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Trust's 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 the then prevailing circumstances. For example, under such unusual
circumstances the Board of Trustees might reduce or suspend the daily dividend
in order to prevent to the extent possible the net asset value per share of the
Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its Shares and cause such a shareholder to receive upon
redemption a price per share lower than the shareholder's original cost.
TAXES
FEDERAL TAXATION
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio intends to
distribute at least 98% of its net investment income for the calendar
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<PAGE> 10
year and at least 98% of its net realized capital gains, if any, for the
one-year period ending on October 31 and therefore to meet the distribution
requirements imposed by the Code in order to avoid the imposition of a 4% excise
tax. The Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and sources
of income, so that the Portfolio will pay no federal income taxes on net
investment income and net realized capital gains paid to shareholders.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against losses
of the other portfolio of the Trust and each portfolio of the Trust must
specifically comply with all the provisions of the Code.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or shares of the Portfolio.
The Code provides an exception to this general rule: if the Portfolio declares a
dividend in October, November or December to shareholders of record in such
months and pays the dividend during January of the next year, a shareholder will
be treated for tax purposes as having received the dividend on December 31 of
the year in which it is declared rather than in January of the following year
when it is paid. It is anticipated that no portion of distributions will be
eligible for the dividends received deduction for corporations. Dividends paid
by the Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("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 AIFS.
STATE AND LOCAL TAXATION
Distributions and other Trust transactions referred to in the preceding
paragraphs may be subject to state, local or foreign taxes, and the treatment
thereof may differ from the federal income tax consequences discussed herein.
The Portfolio's investment strategy is intended to provide shareholders with
dividends that are exempt from state and local personal and, in some cases,
corporate income taxation in as many jurisdictions as possible. The possible
exemption from such taxation may enable shareholders to achieve an after-tax
return comparable to or higher than that obtained from other money market funds.
Shareholders should consult their own tax advisors concerning the tax impact of
their investment in the Portfolio and the application of state, local or foreign
taxes.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 1:00
p.m. Eastern Time on each business day of the Portfolio. Net asset value per
share is determined by dividing the value of the Portfolio's securities, cash
and other assets (including interest accrued but not collected), less all its
liabilities (including accrued expenses and dividends payable), by the number of
shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. 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 premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods, the daily yield on shares of the Portfolio, computed as
described in "Purchases and Redemptions -- Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Trust at (800)
659-1005. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not provide
a basis for comparison with investments which pay a fixed rate of interest for a
stated period of time. Yield is a function of the type and quality of the
Portfolio's investments, the Portfolio's maturity and the operating expense
ratio of the Portfolio. A SHAREHOLDER'S INVESTMENT IN THE TRUST IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY INSTITUTION. These factors should
be carefully considered by the investor before making an investment in the
Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the average annualized
current yield for
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<PAGE> 11
the period) were 5.64% and 5.16%, respectively. These performance numbers are
quoted for illustration purposes only. The performance numbers for any other
seven-day period may be substantially different from those quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 3:30 p.m. Eastern
Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Trust furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual financial
statements are audited by the Trust's independent certified public accountants.
A copy of the current list of the investments of the Portfolio will be sent to
shareholders upon request.
Unless otherwise requested by the shareholder, each shareholder will be
provided with a written confirmation for each transaction. Institutions
establishing sub-accounts will receive a written confirmation for each
transaction in a sub-account. Duplicate confirmations may be transmitted to the
beneficial owner of the sub-account if requested by the institution. The
institution will receive a periodic statement setting forth, for each
sub-account, the share balance, income earned for the month, income earned for
the year to date and the total current value of the account.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The overall management of the business and affairs of the Trust is vested with
its Board of Trustees. The Board of Trustees approves all significant agreements
between the Trust and persons or companies furnishing services to the Trust,
including agreements with the Trust's investment advisor, distributor, custodian
and transfer agent. The day-to-day operations of the Trust are delegated to the
Trust's officers and to AIM, subject always to the objective and policies of the
Trust and to the general supervision of the Trust's Board of Trustees.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173, acts as the investment advisor for the Portfolio pursuant to a
Master Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM, organized in 1976, together with its affiliates, manages or
advises 41 investment company portfolios. As of November 14, 1996, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $61.1 billion. All of the directors and certain of
the officers of AIM are also trustees or executive officers of the Trust. AIM is
a wholly-owned subsidiary of AIM Management. AIM Management is a holding company
in the financial services business.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment of
the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The
Advisory Agreement requires AIM to reduce its fee to the extent required to
satisfy any expense limitations imposed by the securities laws or regulations
thereunder of any state in which the Portfolio's shares are qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees from the Trust
under the Advisory Agreement with respect to the Portfolio which represented
0.15% of the Portfolio's average daily net assets. During such fiscal year, the
expenses of the Class, including AIM's fees, amounted to 0.20% of the Class'
average daily net assets.
ADMINISTRATIVE SERVICES
The Trust has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"), pursuant
to which AIM has agreed to provide or arrange for the provision of certain
accounting and other administrative services to the Portfolio, including the
services of a principal financial officer of the Trust and related staff. As
compensation to AIM for its services under the Administrative Services Agreement
the Portfolio may reimburse AIM for expenses incurred by AIM in connection with
such services.
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FEE WAIVERS
AIM or its affiliates may in its discretion from time to time agree to waive
voluntarily all or any portion of its advisory fee and/or assume certain
expenses of the Portfolio but will retain its ability to be reimbursed for such
fee or expenses prior to the end of each fiscal year. AIM voluntarily waived
advisory fees of $116,126 on the Portfolio and assumed expenses of $25,600.
DISTRIBUTOR
The Trust has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer and
a wholly-owned subsidiary of AIM, to act as the exclusive distributor of the
shares of the Portfolio. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain trustees and officers of the Trust are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Trust either directly or through
other broker-dealers. FMC is the distributor of several of the mutual funds
managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other consideration
or incentive to dealers, banks or other financial institutions who sell a
minimum dollar amount of the shares of the Class during a specific period of
time. In some instances, these incentives may be offered only to certain
dealers, banks or financial institutions who have sold or may sell significant
amounts of shares. The total amount of such additional bonus payments or other
consideration shall not exceed .05% of the net asset value of the shares of the
Class sold. Any such bonus or incentive programs will not change the price paid
by investors for the purchase of shares of the Class or the amount received as
proceeds from such sales. Sales of the shares of the Class may not be used to
qualify for any incentives to the extent that such incentives may be prohibited
by the laws of any jurisdiction.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the Portfolio,
broker-dealer selection and negotiation of commission rates. Since purchases and
sales of portfolio securities by the Portfolio are usually principal
transactions, the Portfolio incurs little or no brokerage commissions. Portfolio
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment programs. Certain research
services furnished by dealers may be useful to clients of AIM with clients other
than the Portfolio. Similarly, any research services received by AIM through
placement of portfolio transactions of other clients may be of value to AIM in
fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Trust is a Delaware business trust. The Trust was originally incorporated
in Maryland on January 24, 1977, but had no operations prior to November 10,
1980. Effective December 31, 1986, the Trust was reorganized as a Massachusetts
business trust; and effective October 15, 1993, the Trust was reorganized as a
Delaware business trust. On October 15, 1993, the Portfolio succeeded to the
assets and assumed the liabilities of the Treasury TaxAdvantage Portfolio (the
"Predecessor Portfolio") of Short-Term Investments Co., a Massachusetts business
trust ("STIC"), pursuant to an Agreement and Plan of Reorganization between the
Trust and STIC. All historical financial and other information contained in this
Prospectus for periods prior to October 15, 1993 relating to the Portfolio (or a
class thereof) is that of the Predecessor Portfolio (or the corresponding class
thereof). Shares of beneficial interest of the Trust are divided into seven
classes of which five represent interests in the Treasury Portfolio and two
represent interests in the Portfolio. Each class of shares has a par value of
$.01 per share. The other classes of the Trust may have different sales charges
and other expenses which may affect performance. An investor may obtain
information concerning the Trust's other classes by contacting FMC.
All shares of the Trust have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the exclusive
right to vote on matters pertaining solely to that portfolio or class. For
example, holders of shares of a particular portfolio will have the exclusive
right to vote on any investment advisory agreement or investment restriction
that relates only to such portfolio. In addition, if a portfolio is divided into
various classes, holders of shares of a particular class will have the exclusive
right to vote on any matter, such as distribution arrangements, which relates
solely to such class. The holders of shares of the Portfolio have distinctive
rights with respect to dividends and redemption which are more fully described
in this Prospectus. In the event of liquidation or termination of the Trust,
holders of shares of each portfolio will receive
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pro rata, subject to the rights of creditors, (a) the proceeds of the sale of
the assets held in the respective portfolio to which such shares relate, less
(b) the liabilities of the Trust attributable or allocated to the respective
portfolio based on the liquidation value of the portfolio. Fractional shares of
each portfolio have the same rights as full shares to the extent of their
proportionate interest.
There will not normally be annual shareholders' meetings. Shareholders may
remove trustees from office by votes cast at a meeting of shareholders called
solely for such purpose or by written consent. A meeting of shareholders for the
sole purpose of considering removal of a trustee shall be called at the request
of the holders of 10% or more of the Trust's outstanding shares. As of December
1, 1996, First Trust/VAR & Co. was the owner of record of 33.57% of the
outstanding shares of the Class. As long as First Trust/VAR & Co. owns over 25%
of such shares, it may be presumed to be in "control" of the Institutional Class
of the Treasury TaxAdvantage Portfolio, as defined in the 1940 Act.
There are no preemptive or conversion rights applicable to any of the Trust's
shares. The Trust's shares, when issued, will be fully paid and non-assessable.
The Board of Trustees may create additional portfolios or classes of shares of
the Trust without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the Portfolio.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173, acts as transfer agent for the shares of the Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania,
serves as counsel to the Trust and has passed upon the legality of the shares of
the Portfolio.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Trust at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 659-1005.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Trust and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Trust or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted herein, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 15
STATEMENT OF
ADDITIONAL INFORMATION
SHORT-TERM INVESTMENTS TRUST
TREASURY TAXADVANTAGE PORTFOLIO
(INSTITUTIONAL CLASS)
(PRIVATE INVESTMENT CLASS)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS
OF EACH OF THE ABOVE-NAMED FUNDS,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 659-1005
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 30, 1996
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE
TREASURY TAXADVANTAGE PORTFOLIO:
INSTITUTIONAL CLASS PROSPECTUS DATED DECEMBER 30, 1996
AND PRIVATE INVESTMENT CLASS PROSPECTUS DATED DECEMBER 30, 1996
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction....................................................... 3
General Information about the Trust................................ 3
The Trust and Its Shares...................................... 3
Trustees and Officers......................................... 4
Remuneration of Trustees...................................... 7
Investment Advisor............................................ 8
Administrative Services....................................... 9
Expenses...................................................... 9
Banking Regulations........................................... 10
Transfer Agent and Custodian.................................. 10
Reports....................................................... 10
Principal Holders of Securities............................... 11
Purchases and Redemptions.......................................... 13
Net Asset Value Determination................................. 13
Distribution Agreement........................................ 14
Distribution Plan............................................. 14
Performance Information....................................... 14
Suspension of Redemption Rights............................... 15
Investment Program and Restrictions................................ 15
Investment Program............................................ 15
Eligible Securities........................................... 15
Investment Restrictions....................................... 16
Other Investment Policies..................................... 17
Portfolio Transactions............................................. 17
Tax Matters........................................................ 18
Qualifications as a Regulated Investment Company.............. 18
Excise Tax on Regulated Investment Companies.................. 19
Portfolio Distributions....................................... 19
Sale or Redemption of Shares.................................. 19
Foreign Shareholders.......................................... 20
Effect of Future Legislation; State and Local Tax
Considerations............................................... 20
Financial Statements............................................... FS-1
</TABLE>
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INTRODUCTION
The Treasury TaxAdvantage Portfolio (the "Portfolio") is an investment
portfolio of Short-Term Investments Trust (the "Trust"), a mutual fund. The
rules and regulations of the United States Securities and Exchange Commission
(the "SEC") require all mutual funds to furnish prospective investors certain
information concerning the activities of the fund being considered for
investment. This information is included in the Institutional Class Prospectus
dated December 30, 1996 and the Private Investment Class Prospectus dated
December 30, 1996 (each a "Prospectus"). Copies of each Prospectus and
additional copies of this Statement of Additional Information may be obtained
without charge by writing the principal distributor of the Trust's shares, Fund
Management Company ("FMC"), 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173 or by calling (800) 659-1005. Investors must receive a Prospectus
before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning each class of the Portfolio.
Some of the information required to be in this Statement of Additional
Information is also included in each Prospectus; and, in order to avoid
repetition, reference will be made to sections of the applicable Prospectus.
Additionally, each Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the SEC.
Copies of the registration statement, including items omitted from each
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust is an open-end, diversified, management series investment company
which was originally organized as a corporation under the laws of the State of
Maryland on January 24, 1977, but which had no operations prior to November 10,
1980. The Trust was reorganized as a business trust under the laws of the
Commonwealth of Massachusetts on December 31, 1986. The Trust was again
reorganized as a business trust under the laws of the State of Delaware on
October 15, 1993. A copy of the Agreement and Declaration of Trust ("Declaration
of Trust") establishing the Trust is on file with the SEC. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the
Treasury TaxAdvantage Portfolio (the "Predecessor Portfolio") of Short-Term
Investments Co., a Massachusetts business trust ("STIC"), pursuant to an
Agreement and Plan of Reorganization between the Trust and STIC. All historical
financial and other information contained in this Statement of Additional
Information for periods prior to October 15, 1993 relating to the Portfolio (or
a class thereof) is that of the Predecessor Portfolio (or the corresponding
class thereof). Shares of beneficial interest of the Trust are redeemable at the
net asset value thereof at the option of the shareholder or at the option of the
Trust in certain circumstances. For information concerning the methods of
redemption and the rights of share ownership, investors should consult the
Prospectus under the captions "General Information" and "Redemption of Shares."
The Trust offers on a continuous basis shares representing an interest in one
of two portfolios: the Portfolio and the Treasury Portfolio (together, the
"Portfolios"). The Portfolio consists of the following two classes of shares:
Institutional Class and Private Investment Class. Each class of shares is sold
pursuant to a separate prospectus and this joint Statement of Additional
Information. The Treasury Portfolio consists of the following five classes of
shares: Cash Management Class, Institutional Class, Personal Investment Class,
Private Investment Class and Resource Class. Each such class has different
shareholder qualifications and bears expenses differently. This Statement of
Additional Information relates to the shares of each class of the Portfolio.
Shares of the five classes of the Treasury Portfolio are offered pursuant to
separate prospectuses and a separate statement of additional information.
Shares of beneficial interest of the Trust will be redeemable at the net asset
value thereof at the option of the shareholder or at the option of the Trust in
certain circumstances. For information concerning the methods of redemption and
the rights of share ownership, investors should consult the Prospectus under the
caption "Redemption of Shares."
As used in the Prospectus, the term "majority of the outstanding shares" of
the Trust, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Trust, such portfolio
or such class present at a meeting of the Trust's shareholders, if the holders
of more than 50% of the outstanding shares of the Trust, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Trust, such portfolio or such class.
Shareholders of the Trust do not have cumulative voting rights. Therefore the
holders of more than 50% of the outstanding shares of all series or classes
voting together for election of trustees may elect all of the members of the
Board of Trustees and in such event, the remaining holders cannot elect any
members of the Board of Trustees.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust, either Portfolio and any class thereof, however, may be terminated at
any time, upon the recommendation of the Board of Trustees, by vote of a
majority of the out-
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standing shares of the Trust, such Portfolio and such class, respectively;
provided, however that the Board of Trustees may terminate, without such
shareholder approval, the Trust, either Portfolio and any class thereof with
respect to which there are fewer than 100 shares outstanding.
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares, of $.01 par value, of each class of shares of
beneficial interest of the Trust. The Board of Trustees may establish additional
series or classes of shares from time to time without shareholder approval.
Additional information concerning the rights of share ownership is set forth in
the prospectus applicable to each such class or portfolio of shares of the
Trust.
The assets received by the Trust for the issue or sale of shares of each class
relating to a portfolio and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, will be allocated to that
portfolio, and constitute the underlying assets of that portfolio. The
underlying assets of each portfolio will be segregated and will be charged with
the expenses with respect to that portfolio and with a share of the general
expenses of the Trust. While certain expenses of the Trust will be allocated to
the separate books of account of each portfolio, certain other expenses may be
legally chargeable against the assets of the entire Trust.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility 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. However, the Declaration of Trust
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 Declaration of Trust provides
for indemnification out of the Trust's property for all losses and expenses of
any shareholder of the Trust 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 the Trust would be
unable to meet its obligations and wherein the complaining party was held not to
be bound by the disclaimer.
The Declaration of Trust further provides that the trustees will not be liable
for errors of judgment or mistakes of fact or law. However, nothing in the
Declaration of Trust protects a trustee against any liability to which a trustee
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
office. The Declaration of Trust provides for indemnification by the Trust of
the trustees and the officers of the Trust except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
his action was in or not opposed to the best interests of the Trust. Such person
may not be indemnified against any liability to the Trust or to the Trust's
shareholders to which he 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 office. The Declaration of Trust also authorizes
the purchase of liability insurance on behalf of trustees and officers.
As described in the Prospectus, the Trust will not normally hold annual
shareholders' meetings. At such time as less than a majority of the trustees
have been elected by the shareholders, the trustees then in office will call a
shareholders' meeting for the election of trustees. In addition, trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares of the Trust and filed with the Trust's custodian or by a
vote of the holders of two-thirds of the outstanding shares at a meeting duly
called for the purpose, which meeting shall be held upon written request of the
holders of not less than 10% of the outstanding shares of the Trust.
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations during
the last five years are set forth below. Unless otherwise indicated, the address
of each trustee and officer is 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173.
*CHARLES T. BAUER, Trustee and Chairman (77)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; and Chairman of the Board of Directors, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services,
Inc., A I M Institutional Fund Services, Inc. and Fund Management Company.
- ---------------
*A trustee who is an "interested person" of the Trust and A I M Advisors, Inc.,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
4
<PAGE> 19
BRUCE L. CROCKETT, Trustee (52)
906 Frome Lane
McLean, VA 22102
Formerly, Director, President and Chief Executive Officer, COMSAT
Corporation (Includes COMSAT World Systems, COMSAT Mobile Communications,
COMSAT Video Enterprises, COMSAT RSI and COMSAT International Ventures).
Previously, President and Chief Operating Officer, COMSAT Corporation;
President, World Systems Division, COMSAT Corporation; and Chairman, Board
of Governors of INTELSAT (each of the COMSAT companies listed above is an
international communication, information and entertainment-distribution
services company).
OWEN DALY II, Trustee (72)
6 Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF & I Steel Corp., Monumental Life Insurance Company and
Monumental General Insurance Company; and Chairman of the Board of
Equitable Bancorporation.
**CARL FRISCHLING, Trustee (59)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis & Frankel (law firm). Formerly,
Partner, Reid & Priest (law firm); and, prior thereto, Partner, Spengler
Carlson Gubar Brodsky & Frischling (law firm).
*ROBERT H. GRAHAM, Trustee and President (50)
Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; and Director and
Senior Vice President, A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc., A I M Institutional Fund Services, Inc.
and Fund Management Company.
JOHN F. KROEGER, Trustee (72)
37 Pippins Way
Morristown, NJ 07960
Director, Flag Investors International Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc.,
Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury Fund,
Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed Municipal
Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real
Estate Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North
American Government Bond Fund, Inc. (investment companies). Formerly,
Consultant, Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Trustee (54)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Trustee (73)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management
services to telephone companies); Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone companies); and Vice President and
Chief Financial Officer, Bell Telephone Company of Pennsylvania and Diamond
State Telephone Company.
- ---------------
*A trustee who is an "interested person" of the Trust and A I M Advisors, Inc.,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
**A trustee who is an "interested person" of the Trust, as defined in the 1940
Act.
5
<PAGE> 20
LOUIS S. SKLAR, Trustee (57)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
*JOHN J. ARTHUR, Senior Vice President and Treasurer (52)
Senior Vice President and Treasurer, A I M Advisors, Inc.; and Vice
President and Treasurer, A I M Management Group Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc.,
A I M Institutional Fund Services, Inc. and Fund Management Company.
GARY T. CRUM, Senior Vice President (49)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc. and A I M Advisors,
Inc.; and Director, A I M Distributors, Inc.
*CAROL F. RELIHAN, Senior Vice President and Secretary (42)
Senior Vice President, General Counsel and Secretary, A I M Advisors,
Inc.; Vice President, General Counsel and Secretary, A I M Management Group
Inc.; Vice President and General Counsel, Fund Management Company; and Vice
President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (37)
Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (53)
Vice President and Chief Compliance Officer, A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., A I M Institutional Fund Services, Inc., and Fund
Management Company. Formerly, Vice President, Charles Schwab & Co., Inc.;
Assistant Secretary, Charles Schwab Family of Funds and Schwab Investments;
Chief Compliance Officer, Charles Schwab Investment Management, Inc.; and
Vice President, Integrated Resources Life Insurance Co. and Capitol Life
Insurance Co.
KAREN DUNN KELLEY, Vice President (36)
Senior Vice President, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
J. ABBOTT SPRAGUE, Vice President (41)
Director and President, A I M Institutional Fund Services, Inc. and
Fund Management Company; Director and Senior Vice President, A I M
Advisors, Inc.; and Senior Vice President, A I M Fund Services, Inc. and
A I M Management Group Inc.
The standing committees of the Board of Trustees are the Audit Committee, the
Investments Committee, and the Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Trust's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the trustees as
a whole with respect to the Trust's fund accounting or its internal accounting
controls, or for considering such matters as may from time to time be set forth
in a charter adopted by the Board of Trustees and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Trustees and such committee.
- ---------------
*Mr. Arthur and Ms. Relihan are married to each other.
6
<PAGE> 21
The members of the Nominating and Compensation Committee are Messrs. Crockett,
Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and Compensation
Committee is responsible for considering and nominating individuals to stand for
election as trustees who are not interested persons as long as the Trust
maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
trustees, or considering such matters as may from time to time be set forth in a
charter adopted by the Board of Trustees and such committee.
All of the Trust's trustees also serve as directors or trustees of some or all
of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. All of the Trust's executive
officers hold similar offices with some or all of such investment companies.
REMUNERATION OF TRUSTEES
Each trustee is reimbursed for expenses incurred in connection with each
meeting of the Board of Trustees or any committee thereof. Each trustee who is
not an officer of the Trust is compensated for his services according to a fee
schedule which recognizes the fact that such trustee also serves as a director
or trustee of other regulated investment companies managed, administered or
distributed by AIM or its affiliates (the "AIM Funds"). Each such trustee
receives a fee, allocated among the AIM Funds for which he serves as a director
or trustee, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued for each
trustee of the Trust:
<TABLE>
<CAPTION>
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
FROM BY ALL FROM ALL
TRUSTEE TRUST(1) AIM FUNDS(2) AIM FUNDS(3)
------- ------------ ------------ ------------
<S> <C> <C> <C>
Charles T. Bauer.................................... $ 0 $ 0 $ 0
Bruce L. Crockett................................... 4,823 3,655 57,750
Owen Daly II........................................ 5,708 18,662 58,125
Carl Frischling..................................... 5,560 11,323 57,250(4)
Robert H. Graham.................................... 0 0 0
John F. Kroeger..................................... 5,345 22,313 58,125
Lewis F. Pennock.................................... 4,705 5,067 58,125
Ian W. Robinson..................................... 4,841 15,381 56,750
Louis S. Sklar...................................... 5,613 6,632 57,250
</TABLE>
- ---------------
(1) The total amount of compensation deferred by all Trustees of the Trust
during the fiscal year ended August 31, 1996, including interest earned
thereon, was $20,310.
(2) During the fiscal year ended August 31, 1996, the total amount of expenses
allocated to the Trust in respect of such retirement benefits was $25,775.
Data reflects compensation for the calendar year ended December 31, 1995.
(3) Each serves as a Director or Trustee of a total of 10 AIM Funds. Data
reflects total compensation for the calendar year ended December 31, 1995.
(4) See also page 8 regarding fees earned by Mr. Frischling's law firm.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each trustee (who is not an employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible trustee is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 75% of the retainer paid or accrued by the AIM Funds for such trustee
during the twelve-month period immediately preceding the trustee's retirement
(including amounts deferred under separate agreement between the AIM Funds and
the trustee) for the number of such trustee's years of service (not in excess of
10 years of service) completed with respect to any of the AIM Funds. Such
benefit is payable to each eligible trustee in quarterly installments. If an
eligible trustee dies after attaining the normal retirement date but before
receipt of any benefits under the Plan commences, the trustee's surviving spouse
(if any) shall receive a quarterly survivor's benefit equal to 50% of the amount
payable to the deceased trustee, for no more than ten years beginning the first
day of the calendar quarter following the date of the trustee's death. Payments
under the Plan are not secured or funded by any AIM Fund.
7
<PAGE> 22
Set forth below is a table that shows the estimated annual benefits payable to
an eligible director upon retirement assuming various compensation and years of
service classifications. The estimated credited years of service for Messrs.
Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar are 9, 9, 19,
18, 14, 9, and 6 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
ANNUAL COMPENSATION PAID BY ALL AIM FUNDS
NUMBER OF YEARS OF SERVICE -----------------------------------------
WITH THE AIM FUNDS $55,000 $60,000 $65,000
- -------------------------- ------- ------- -------
<S> <C> <C> <C> <C>
10..................................... $41,250 $45,000 $48,750
9..................................... $37,125 $40,500 $43,875
8..................................... $33,000 $36,000 $39,000
7..................................... $28,875 $31,500 $34,125
6..................................... $24,750 $27,000 $29,250
5..................................... $20,625 $22,500 $24,375
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring trustees") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring trustees may 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 may 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 five years
beginning on the date the deferring trustee's retirement benefits commence under
the Plan. The Trust's Board of Trustees, in its sole discretion, 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 deferral account, the
balance of the deferral account will be distributed to his designated
beneficiary in a single lump sum payment as soon as practicable after such
deferring trustee's death. The 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.
The Portfolio paid legal fees of $3,900 for the year ended August 31, 1996 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Trustees. Carl Frischling, a trustee of the Trust, is a member of that firm.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173, acts as the investment advisor of the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976, and together with its affiliates advises
or manages 41 investment company portfolios. As of November 14, 1996, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $61.1 billion.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment of
the assets of the Portfolio. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Trust's Board of Trustees. AIM shall not be
liable to the Trust or to its shareholders for any act or omission by AIM or for
any loss sustained by the Trust or its shareholders except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
AIM and the Trust have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Trustees reviews annually such reports
(including information on any substantial violations of the Code). Violations of
the Code may result in censure, monetary penalties, suspension or termination of
employment.
As compensation for its services with respect to the Portfolio, AIM receives a
monthly fee which is calculated by applying the following annual rates to the
average daily net assets of the Portfolio:
<TABLE>
<CAPTION>
NET ASSETS RATE
-------------------------------------------------------------- ----
<S> <C>
First $250 million............................................ .20%
Over $250 million to $500 million............................. .15%
Over $500 million............................................. .10%
</TABLE>
8
<PAGE> 23
The Advisory Agreement requires AIM to reduce its fee to the extent required to
satisfy any expense limitations imposed by the securities laws or regulations
thereunder of any state in which the Portfolio's shares are qualified for sale.
Pursuant to the Advisory Agreement between the Trust and AIM currently in
effect, AIM received fees (net of fee waivers, if any) from the Trust for the
fiscal years ended August 31, 1996, 1995 and 1994, with respect to the Portfolio
in the amounts of $675,795, $596,449 and $640,698, respectively. For the fiscal
years ended August 31, 1996, 1995 and 1994, AIM waived fees with respect to the
Portfolio in the amounts of $116,126, $117,100 and $131,042, respectively.
The Advisory Agreement provides, that, upon the request of the Board of
Trustees, AIM may perform or arrange for the performance of certain additional
services on behalf of the Portfolio which are not required by the Advisory
Agreement. AIM may receive reimbursement or reasonable compensation for certain
additional services, as may be agreed upon by AIM and the Board of Trustees,
based upon a finding by the Board of Trustees that the provision of such
services would be in the best interest of the Portfolio and its shareholders.
The Board of Trustees has made such a finding and, accordingly, has entered into
a Master Administrative Services Agreement under which AIM will provide the
additional services described below under the caption "Administrative Services."
The Advisory Agreement was approved for its initial term by the Board of
Trustees on July 19, 1993. The Advisory Agreement will continue in effect until
June 30, 1997 and from year to year thereafter provided that it is specifically
approved at least annually by the Trust's Board of Trustees and the affirmative
vote of a majority of the trustees who are not parties to the Advisory Agreement
or "interested persons" of any such party by votes cast in person at a meeting
called for such purpose. The Trust or AIM may terminate the Advisory Agreement
on 60 days' notice without penalty. The Advisory Agreement terminates
automatically in the event of its assignment, as defined in the 1940 Act.
AIM is a wholly-owned subsidiary of A I M Management Group Inc. ("AIM
Management"), 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173. All of
the directors and certain of the officers of AIM are also executive officers of
the Trust and their affiliations are shown under "Trustees and Officers." The
address of each director and officer of AIM is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046.
FMC is a registered broker-dealer and a wholly-owned subsidiary of AIM. FMC
acts as distributor of the shares of the Portfolio.
ADMINISTRATIVE SERVICES
AIM also provides certain services pursuant to a Master Administrative
Services Agreement dated as of October 18, 1993 between AIM and the Trust (the
"Administrative Services Agreement").
Under the Administrative Services Agreement, AIM performs accounting and other
administrative services for the Portfolio. As full compensation for the
performance of such services, AIM is reimbursed for any personnel and other
costs (including applicable office space, facilities and equipment) of
furnishing the services of a principal financial officer of the Trust and of
persons working under his supervision for maintaining the financial accounts and
books and records of the Trust, including calculation of the Portfolio's daily
net asset value, and preparing tax returns and financial statements for the
Portfolio. The method of calculating such reimbursements must be annually
approved, and the amounts paid will be periodically reviewed, by the Trust's
Board of Trustees.
Under the Administrative Services Agreement, AIM was reimbursed for the fiscal
years ended August 31, 1996, 1995 and 1994, in the amounts of $30,056, $42,823
and $31,534, respectively, for fund accounting services for the Portfolio.
Under the terms of a Transfer Agency and Service Agreement, dated September
16, 1994, as amended, July 1, 1995, between the Trust and A I M Institutional
Fund Services, Inc. ("AIFS"), a registered transfer agent and wholly-owned
subsidiary of AIM, as well as under previous agreements, AIFS received $33,534
and $10,913 for the fiscal years ended August 31, 1996 and 1995, respectively,
for the provision of certain shareholder services for the Trust.
EXPENSES
In addition to fees paid to AIM pursuant to the Agreement and the expenses
reimbursed to AIM under the Administrative Services Agreement, the Trust also
pays or causes to be paid all other expenses of the Trust, including, without
limitation: the charges and expenses of any registrar, any custodian or
depository appointed by the Trust for the safekeeping of its cash, portfolio
securities and other property, and any transfer, dividend or accounting agent or
agents appointed by the Trust; brokers' commissions chargeable to the Trust in
connection with portfolio securities transactions to which the Trust is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Trust to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing shares of the
Trust; all costs and expenses in connection with the registration and
maintenance of registration of the Trust and its shares with the SEC and various
states and
9
<PAGE> 24
other jurisdictions (including filing and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Trust
and supplements thereto to the Trust's shareholders; all expenses of
shareholders' and trustees' meetings and of preparing, printing and mailing of
prospectuses, proxy statements and reports to shareholders; fees and travel
expenses of trustees and trustee members of any advisory board or committee; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Trust's shares; charges and expenses of legal
counsel, including counsel to the trustees of the Trust who are not "interested
persons" (as defined in the 1940 Act) of the Trust or AIM, and of independent
accountants in connection with any matter relating to the Trust; membership dues
of industry associations; interest payable on Trust borrowings; postage;
insurance premiums on property or personnel (including officers and trustees) of
the Trust which inure to its benefit; and extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto). FMC bears the expenses of printing and
distributing prospectuses and statements of additional information (other than
those prospectuses and statements of additional information distributed to
existing shareholders of the Trust) and any other promotional or sales
literature used by FMC or furnished by FMC to purchasers or dealers in
connection with the public offering of the Trust's shares.
Expenses of the Trust which are not directly attributable to the operations of
any class of shares or portfolio of the Trust are prorated among all classes of
the Trust. Expenses of the Trust except those listed in the next sentence are
prorated among all classes of such Portfolio. Distribution and service fees,
transfer agency fees and shareholder recordkeeping fees which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised banks from engaging in the
business of underwriting, selling or distributing securities, but permit banks
to make shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a bank
were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the Trust and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the Trust might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or other
services then being provided by such bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may differ from
the interpretations of federal law expressed herein and certain banks and
financial institutions may be required to register as dealers pursuant to state
law.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York ("BONY") acts as custodian for the portfolio securities
and cash of the Portfolio. BONY receives such compensation from the Trust for
its services in such capacity as is agreed to from time to time by BONY and the
Trust. The address of BONY is 90 Washington Street, 11th Floor, New York, New
York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173, acts as transfer agent for the shares of each class
of the Portfolio and receives an annual fee from the Trust for its services in
such capacity in the amount of .007% of average daily net assets of the Trust,
payable monthly. Such compensation may be changed from time to time as is agreed
to by A I M Institutional Fund Services, Inc. and the Trust.
REPORTS
The Trust furnishes shareholders with semi-annual reports containing
information about the Trust and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Trust's independent auditors. The Board
of Trustees has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
10
<PAGE> 25
PRINCIPAL HOLDERS OF SECURITIES
TREASURY PORTFOLIO
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding shares of any class of the Portfolio as
of December 1, 1996, and the percentage of such shares owned by such
shareholders as of such date are as follows:
CASH MANAGEMENT CLASS
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- --------------
<S> <C>
The Bank of New York........................................................... 68.64%b
4 Fisher Lane
White Plains, NY 10603
Fund Services Associates....................................................... 22.85%
11835 West Olympic Boulevard
Suite 205
Los Angeles, CA 90064
</TABLE>
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- --------------
<S> <C>
Trust Company Bank............................................................. 10.66%
P.O. Box 105504
Atlanta, GA 30348
Victoria Bank & Trust.......................................................... 8.76%
One O'Connor Plaza 6th Fl.
Victoria, TX 77902
Liberty Registration Co. of Oklahoma........................................... 7.46%
P.O. Box 25848
Oklahoma City, OK 73125
U.S. Bank of Washington....................................................... 7.31%
P.O. Box 3168
Portland, OR 97208
NationsBank Texas.............................................................. 6.32%
P.O. Box 831000
Dallas, TX 75283-1000
Wachovia Bank and Trust........................................................ 5.85%
P.O. Box 3075
Winston-Salem, NC 27150
SunTrust Bank.................................................................. 5.67%
P.O. Box 105504
Atlanta, GA 30308
FRNCO.......................................................................... 5.47%
P.O. Box 939
Rogers, AR 72757-0939
Key Trust Company.............................................................. 5.02%
4900 Tiedman
Cleveland, OH 44101-5971
</TABLE>
- ---------------
(a) The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
(b) A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
11
<PAGE> 26
PERSONAL INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- --------------
<S> <C>
Cullen/Frost Discount Brokers............................................ 64.64%(b)
P.O. Box 2358
San Antonio, TX 78299
The Bank of New York..................................................... 26.55%(b)
4 Fisher Lane
White Plains, NY 10603
Kinco & Co............................................................... 6.88%
c/o RNB Securities
1 Hanson Pl., Lower Level
Brooklyn, NY 11243
</TABLE>
PRIVATE INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- --------------
<S> <C>
Liberty Bank and Trust Co. of Tulsa, N.A. ............................... 45.06%(b)
P.O. Box 25848
Oklahoma City, OK 73125
First Trust/VAR & Co..................................................... 19.67%
180 E. 5th Street
St. Paul, MN 55101
Huntington Capital Corp.................................................. 17.05%
41 S. High St., 9th Floor
Columbus, Ohio 43287
The Bank of New York..................................................... 6.25%
4 Fisher Lane
White Plains, NY 10603
</TABLE>
RESOURCE CLASS
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- --------------
<S> <C>
Corestates Capital Markets............................................... 63.59%(b)
1345 Chestnut Street
Philadelphia, PA 19101
Mellon Bank.............................................................. 35.27%(b)
Three Mellon Center, Room 3840
Pittsburgh, PA 15259-0001
</TABLE>
- ---------------
(a) The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
(b) A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
12
<PAGE> 27
TREASURY TAXADVANTAGE PORTFOLIO
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding shares of any class of the Treasury
TaxAdvantage Portfolio as of December 1, 1996, and the percentage of such shares
owned by such shareholders as of such date are as follows:
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- --------------
<S> <C>
First Trust/VAR & Co. ............................................. 33.57%(b)
180 East 5th Street
St. Paul, MN 55101
Peoples Two Ten Company............................................ 19.12%
c/o Summit Bank
Trust Operations, 7th Floor
P.O. Box 821
Hackensack, NJ 07602
Boatmen's Trust Company............................................ 11.22%
100 North Broadway
St. Louis, MO 63101
Liberty Registration Co. of Oklahoma............................... 10.02%
P.O. Box 25848
Oklahoma City, OK 73125
</TABLE>
PRIVATE INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- --------------
<S> <C>
First National Bank of Chicago..................................... 61.27%(b)
Mail Suite 0126
Chicago, IL 60670-0126
The Bank of New York............................................... 19.76%
4 Fisher Lane
White Plains, NY 10603
Huntington Capital Corp............................................ 18.82%
41 S. High St., 9th Floor
Columbus, OH 43287
</TABLE>
- ---------------
(a) The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
(b) A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
Shares shown as beneficially owned by the above institutions are those shares
for which the institutions possessed or shared voting or investment power with
respect to such shares on behalf of their underlying accounts.
To the best of the knowledge of the Trust, as of December 1, 1996, the
trustees and officers of the Trust beneficially owned less than 1% of each class
of the Trust's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Portfolio are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
The valuation of the portfolio instruments based upon their amortized cost and
the concomitant maintenance of the net asset value per share of $1.00 for the
Portfolio is permitted in accordance with applicable rules and regulations of
the SEC, including Rule 2a-7, which require the Trust to adhere to certain
conditions. These rules require that the Fund maintain a dollar-weighted average
portfolio maturity of 90 days or less for the Portfolio, purchase only
instruments having remaining maturities of 397 days or less and invest only in
securities determined by the Board of Trustees to be of high quality with
minimal credit risk.
13
<PAGE> 28
The Board of Trustees is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Trust's price per share at
$1.00 for the Portfolio as computed for the purpose of sales and redemptions.
Such procedures include review of the Portfolio's portfolio holdings by the
Board of Trustees, at such intervals as they may deem appropriate, to determine
whether the net asset value calculated by using available market quotations or
other reputable sources for the Portfolio deviates from $1.00 per share and, if
so, whether such deviation may result in material dilution or is otherwise
unfair to existing holders of the Portfolio's shares. In the event the Board of
Trustees determines that such a deviation exists for the Portfolio, it will take
such corrective action as the Board of Trustees deems necessary and appropriate
with respect to the Portfolio, including the sale of portfolio instruments prior
to maturity to realize capital gains or losses or to shorten the average
portfolio maturity; the withholding of dividends; redemption of shares in kind;
or the establishment of a net asset value per share by using available market
quotations.
DISTRIBUTION AGREEMENT
The Trust has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer and
a wholly-owned subsidiary of AIM, to act as the exclusive distributor of the
shares of each class of the Portfolio. The address of FMC is 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. See "General Information About the
Trust -- Trustees and Officers" and "-- Investment Advisor" for information as
to the affiliation of certain trustees and officers of the Trust with FMC, AIM
and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right to
distribute shares of each class of the Portfolio either directly or through
other broker-dealers. The Distribution Agreement also provides that FMC will pay
promotional expenses, including the incremental costs of printing prospectuses
and statements of additional information, annual reports and other periodic
reports for distribution to persons who are not shareholders of the Trust and
the costs of preparing and distributing any other supplemental sales literature.
FMC has not undertaken to sell any specified number of shares of the Portfolio.
FMC does not receive any fees with respect to the shares of the Institutional
Class pursuant to the Distribution Agreement.
The Distribution Agreement will remain in effect until June 30, 1997, and it
will continue in effect from year to year thereafter only if such continuation
is specifically approved at least annually by the Trust's Board of Trustees and
the affirmative vote of the trustees who are not parties to the Distribution
Agreement or "interested persons" of any such party by votes cast in person at a
meeting called for such purpose. A prior distribution agreement between the
Trust and FMC, with terms substantially the same as those of the Distribution
Agreement, was in effect through October 15, 1993. The Trust or FMC may
terminate the Distribution Agreement on sixty days' written notice without
penalty. The Distribution Agreement will terminate automatically in the event of
its "assignment," as defined in the 1940 Act.
DISTRIBUTION PLAN
The Trust has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. Pursuant to the Plan, the Trust may enter into
Shareholder Service Agreements ("Service Agreements") with selected
broker-dealers, banks, other financial institutions or their affiliates. Such
firms may receive from the Portfolio compensation for servicing investors as
beneficial owners of the shares of the Private Investment Class of the
Portfolio. These services may include among other things: (i) answering customer
inquiries regarding the shares of the class and the Portfolio; (ii) assisting
customers in changing dividend options, account designations and addresses;
(iii) performing sub-accounting; (iv) establishing and maintaining shareholder
accounts and records; (v) processing purchase and redemption transactions; (vi)
automatic investment in the shares of the class of customer cash account
balances; (vii) providing periodic statements showing a customer's account
balance and integrating such statements with those of other transactions and
balances in the customer's other accounts serviced by such firm; (viii)
arranging for bank wires; and (ix) such other services as the Trust may request
on behalf of the shares of the class, to the extent such firms are permitted to
engage in such services by applicable statute, rule or regulation. The Plan may
only be used for the purposes specified above and as stated in the Plan.
Expenses may not be carried over from year to year.
For the fiscal year ended August 31, 1996, FMC received compensation pursuant
to the Plan in the amount of $52,922, or an amount equal to 0.25% of the average
daily net assets of the Private Investment Class. With respect to the Private
Investment Class, all of such amount was paid to dealers and financial
institutions and none of such compensation was retained by FMC.
FMC is a wholly-owned subsidiary of AIM, a wholly-owned subsidiary of AIM
Management. Charles T. Bauer, a Trustee and Chairman of the Trust, owns shares
of AIM Management and Robert H. Graham, a Trustee and President of the Trust,
also owns shares of AIM Management.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus, yield
information for the shares of each class of the Portfolio may be obtained by
calling the Trust at (800) 659-1005. The current yield quoted will be the net
average annualized yield
14
<PAGE> 29
for an identified period, such as seven days or a month. Current yield will be
computed by assuming that an account was established with a single share (the
"Single Share Account") on the first day of the period. To arrive at the quoted
yield, the net change in the value of that Single Share Account for the period
(which would include dividends accrued with respect to the share, and dividends
declared on shares purchased with dividends accrued and paid, if any, but would
not include realized gains and losses or unrealized appreciation or
depreciation) will be multiplied by 365 and then divided by the number of days
in the period, with the resulting figure carried to the nearest hundredth of one
percent. The Trust may also furnish a quotation of effective yield that assumes
the reinvestment of dividends for a 365-day year and a return for the entire
year equal to the average annualized yield for the period, which will be
computed by compounding the unannualized current yield for the period by adding
1 to the unannualized current yield, raising the sum to a power equal to 365
divided by the number of days in the period, and then subtracting 1 from the
result.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield (which assumes the reinvestment of dividends for a 365-day year
and a return for the entire year equal to the annualized current yield for the
period) for the Institutional Class were 5.04% and 5.16% and for the Private
Investment Class were 4.79% and 4.90%, respectively. These performance numbers
are quoted for illustration purposes only. Performance numbers for any other
seven-day period may be substantially different from those quoted above.
The Trust may compare the performance of a class or the performance of
securities in which it may invest to:
- IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
- other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by
IBC/Donoghue's Money Fund Report of Holliston, Massachusetts or by Lipper
Analytical Services, Inc., a widely recognized independent service located
in Summit, New Jersey, which monitors the performance of mutual funds;
- yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate,
a financial information network, or by Bloomberg, a financial information
firm; and
- other fixed-income investments such as Certificates of Deposit
(CDs).
The principal value and interest rate of CDs and money market securities are
fixed at the time of purchase whereas a class' yield will fluctuate. Unlike some
CDs and certain other money market securities, money market mutual funds are not
insured by the FDIC. Investors should give consideration to the quality and
maturity of the Portfolio's securities when comparing investment alternatives.
The Trust may reference the growth and variety of money market mutual funds
and AIM's innovation and participation in the industry.
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
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 the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Portfolio seeks to achieve its objective by investing in high grade money
market instruments. The money market instruments in which the Portfolio invests
are considered to carry very little risk and accordingly may not have as high a
yield as that available on money market instruments of lesser quality. The
Portfolio invests exclusively in direct obligations of the U.S. Treasury, which
include Treasury bills, notes and bonds.
ELIGIBLE SECURITIES
The Portfolio limits its investments to direct U.S. Treasury obligations.
These securities are "Eligible Securities" as defined in Rule 2a-7. Rule 2a-7
limits securities that may be purchased by money market funds to "Eligible
Securities," and defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 calendar days or
less that has received a short-term rating (or that has been issued by
an issuer that is rated with respect to a class of short-term debt
obligations, or any debt obli-
15
<PAGE> 30
gation within that class, that is comparable in priority and security
with the security) by the Requisite NRSROs1 in one of the two highest
rating categories for short-term debt obligations (within which there
may be sub-categories or gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance had a remaining maturity of
more than 397 calendar days but that has a remaining maturity of
397 calendar days or less, and
(B) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of debt obligations (or any within
that class) that is now comparable in priority and security with
the security, in one of the two highest rating categories (within
which there may be sub-categories or gradations indicating relative
standing); or
(iii) an Unrated Security that is of comparable quality to a
security meeting the requirements of paragraphs (a)(9)(i) or (ii) of
this section, as determined by the money market fund's board of
trustees; provided, however, that:
(A) the board of trustees may base its determination that a
Standby Commitment that is not a Demand Feature is an Eligible
Security upon a finding that the issuer of the commitment presents
a minimal risk of default; and
(B) a security that at the time of issuance had a remaining
maturity of more than 397 calendar days but that has a remaining
maturity of 397 calendar days or less and that is an unrated
security is not an Eligible Security if the security has received a
long-term rating from any NRSRO that is not within the NRSRO's
three highest long-term rating categories (within which there may
be sub-categories or gradations indicating relative standing).
The securities purchased by the Portfolio, which are limited to those issued
by the U.S. Treasury, are considered to be in the highest ratings category for
short-term debt obligations.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without a majority
vote of shareholders of the Portfolio (as that term is defined under "General
Information about the Trust -- The Trust and its Shares"), the Portfolio may
not:
(1) concentrate more than 25% of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) borrow money or issue senior securities except (a) for temporary
or emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities, provided that the Portfolio will not purchase portfolio
securities while borrowings in excess of 5% of its total assets are
outstanding;
(3) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and then
only in an amount up to 33 1/3% of the value of its total assets at the
time of borrowing or entering into a reverse repurchase agreement;
(4) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements and (c) by lending
portfolio securities to the extent permitted by law or regulation;
(5) underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Portfolio's investment program may be
deemed an underwriting;
- ---------------
1 "Requisite NRSRO" shall mean (a) any two nationally recognized statistical
rating organizations 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 class of debt obligations of an issuer
at the time the fund purchases or rolls over the security, that NRSRO. At
present the NRSROs are: Standard & Poor's Corp., ("S&P"), Moody's Investors
Service, Inc., ("Moody's"), Duff and Phelps, Inc., Fitch Investors Services,
Inc. and, with respect to certain types of securities, IBCA Limited and its
affiliate, IBCA Inc. Subcategories or gradations in ratings (such as a "+" or
"-") do not count as rating categories.
16
<PAGE> 31
(6) invest in real estate, except that the Portfolio may purchase and
sell securities secured by real estate or interests therein or issued by
issuers which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or calls;
(8) invest in any obligation not payable as to principal and interest
in United States currency; or
(9) acquire for value the securities of any other investment company,
except in connection with a merger, consolidation, reorganization or
acquisition of assets.
On December 11, 1996, the Board of Trustees of the Trust approved, subject to
shareholder approval, the elimination of Investment Restriction No. (9) of the
Trust, indicated above. Shareholders of the Trust will be asked to approve the
change at an annual meeting of shareholders to be held on February 7, 1997. In
the event shareholders approve the proposed change, Investment Restriction No.
(9) will no longer apply. If approved, the change will become effective as of
March 1, 1997.
OTHER INVESTMENT POLICIES
The Portfolio does not intend to invest in companies for the purpose of
exercising control or management. The Portfolio may also lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned, or of delay in recovering the securities loaned, or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks. None of the foregoing policies is
fundamental.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the Portfolio,
broker-dealer selection and negotiation of commission rates. Since purchases and
sales of portfolio securities by the Portfolio are usually principal
transactions, the Portfolio incurs little or no brokerage commissions. Portfolio
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices.
The Portfolio does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors 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 or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the execution and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients other
than the Portfolio. Similarly, any research services received by AIM through
placement of portfolio transactions of other clients may be of value to AIM in
fulfilling its obligations to the Portfolio. AIM is of the opinion that the
material received is beneficial in supplementing AIM's research and analysis,
and, therefore, it may benefit the Portfolio by improving the quality of AIM's
investment advice. The advisory fees paid by the Portfolio are not reduced
because AIM receives such services.
From time to time, the Trust may sell a security, or purchase a security from
an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital") when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Trust.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Trust from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any
17
<PAGE> 32
investment company managed or advised by AIM. The Trust has obtained an order of
exemption from the SEC which permits the Trust to engage in certain transactions
with such 5% holder, if the Trust complies with conditions and procedures
designed to ensure that such transactions are executed at fair market value and
present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some of which
may have objectives similar to the Portfolio's. It is possible that at times
identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise 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 Portfolio and one or more of these accounts and is considered at or about
the same time, transactions in such securities will be allocated in good faith
among such accounts, in accordance with applicable laws and regulations, in
order to obtain the best net price and most favorable execution. The allocation
and combination of simultaneous securities purchases on behalf of the Portfolio
will be made in the same way that such purchases are allocated among or combined
with those of other AIM accounts. Simultaneous transactions could adversely
affect the ability of the Portfolio to obtain or dispose of the full amount of a
security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Portfolios as principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
Furthermore, the 1940 Act prohibits the Trust from purchasing a security being
publicly underwritten by a syndicate of which persons affiliated with the Trust
are a member except in accordance with certain conditions. These conditions may
restrict the ability of the Portfolio to purchase money market obligations being
publicly underwritten by such a syndicate, and the Portfolio 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 money market
obligations and be paid a fee by such issuer. The Portfolio may purchase such
money market obligations directly from the issuer, provided that the purchase
made in accordance with procedures adopted by the Trust's Board of Trustees and
any such purchases are reviewed at least quarterly by the Trust's Board of
Trustees and a determination is made that all such purchases were effected in
compliance with such procedures, including a determination that the placement
fee or other remuneration paid by the issuer to the person affiliated with the
Trust was fair and reasonable in relation to the fees charged by others
performing similar services. During the fiscal year ended August 31, 1996, no
securities or instruments were purchased by the Portfolio from issuers who paid
placement fees or other compensation to a broker affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio 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
The Portfolio has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Portfolio 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 at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Portfolio 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
gains for the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, a regulated investment
company must (1) 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 or securities or foreign currencies (to the extent
such currency gains are 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 with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement"); and (2) derive less than 30% of its gross
income (exclusive of certain gains on designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from the sale
or other disposition of stock, securities or foreign currencies (or options,
futures or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). However, foreign currency gains, including those
derived from options, futures and forward contracts, will not be characterized
as Short-Short Gain if they are directly related to the regulated investment
company's prin-
18
<PAGE> 33
cipal business of investing in stock or securities (or options or futures
thereon). Because of the Short-Short Gain Test, the Portfolio may have to limit
the sale of appreciated securities that it has held for less than three months.
However, the Short-Short Gain Test will not prevent the Portfolio from disposing
of investments at a loss, since the recognition of a loss before the expiration
of the three-month holding period is disregarded. Interest (including original
issue discount) received by the Portfolio at maturity or upon the disposition of
a security held for less than three months will not be treated as gross income
derived from the sale or other disposition of a security within the meaning of
the Short-Short Gain Test. However, income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
In addition to satisfying the requirements described above, the Portfolio must
satisfy an asset diversification test in order to qualify for tax purposes as a
regulated investment company. Under this test, at the close of each quarter of
the Portfolio's taxable year, at least 50% of the value of the Portfolio'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 Portfolio has not invested more than 5% of the value of
the Portfolio's total assets in securities of such issuer and as to which the
Portfolio 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 other issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two or
more issuers which the Portfolio controls and which are engaged in the same or
similar trades or businesses.
If for any taxable year the Portfolio 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 the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
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
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.
The Portfolio 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. However, investors
should note that the Portfolio may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio 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 not qualify for the 70% dividends received deduction
for corporations.
Distributions by the Portfolio will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. 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 the Portfolio
into account in the year in which the distributions are made. However,
distributions 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 Portfolio) on December
31 of such calendar year if such distributions are actually made 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.
The Portfolio will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Portfolio that it is not subject to backup withholding
or that it is a corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of shares
of a class 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
19
<PAGE> 34
loss so recognized may be disallowed if the shareholder purchases other shares
of the class 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 class 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. 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. For this
purpose, the special holding period rules of Code Section 246(c)(3) and (4)
generally will apply in determining the holding period of shares.
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 the Portfolio is
"effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and
distributions (other than capital gains dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the dividend or distribution. Such a foreign shareholder would generally be
exempt from U.S. federal income tax on gains realized on the sale of shares of a
class, capital gain dividends and amounts retained by the Portfolio that are
designated as undistributed capital gains.
If the income from the Portfolio 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 of shares of the
Portfolio 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 noncorporate shareholders, the Portfolio may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax unless such shareholders furnish
the Portfolio with proper notification of their foreign status.
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 the Portfolio,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; STATE AND 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 December
30, 1996. 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 dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. It is anticipated that the
ordinary income dividends paid by the Portfolio from net investment income will
be exempt from state and local personal and, in some cases, corporate income
taxes in many states. Shareholders are urged to consult their tax advisers as to
the consequences of these and other state and local tax rules affecting their
investment in the Portfolio.
20
<PAGE> 35
FINANCIAL STATEMENTS
FS-1
<PAGE> 36
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
U.S. TREASURY SECURITIES-99.76%
U.S. TREASURY BILLS(a)-69.58%
5.215% 09/17/96 $ 49,680 $ 49,579,246
- -----------------------------------------------------------------------------------------------
5.05% 09/19/96 2,984 2,976,465
- -----------------------------------------------------------------------------------------------
5.04% 09/19/96 7,000 6,982,360
- -----------------------------------------------------------------------------------------------
5.045% 09/19/96 4,670 4,658,220
- -----------------------------------------------------------------------------------------------
5.065% 09/26/96 12,800 12,754,978
- -----------------------------------------------------------------------------------------------
5.095% 09/26/96 9,765 9,730,450
- -----------------------------------------------------------------------------------------------
5.06% 09/26/96 22,915 22,834,479
- -----------------------------------------------------------------------------------------------
5.145% 10/03/96 44,995 44,789,224
- -----------------------------------------------------------------------------------------------
5.10% 10/03/96 1,405 1,398,631
- -----------------------------------------------------------------------------------------------
5.095% 10/03/96 540 537,555
- -----------------------------------------------------------------------------------------------
5.115% 10/03/96 1,820 1,811,725
- -----------------------------------------------------------------------------------------------
5.095% 10/03/96 3,000 2,986,413
- -----------------------------------------------------------------------------------------------
5.155% 10/24/96 19,525 19,376,819
- -----------------------------------------------------------------------------------------------
5.175% 10/24/96 20,025 19,872,434
- -----------------------------------------------------------------------------------------------
5.18% 10/24/96 2,380 2,361,850
- -----------------------------------------------------------------------------------------------
5.01% 11/07/96 23,000 22,785,544
- -----------------------------------------------------------------------------------------------
4.975% 11/07/96 4,200 4,161,112
- -----------------------------------------------------------------------------------------------
5.00% 11/07/96 11,185 11,080,917
- -----------------------------------------------------------------------------------------------
4.995% 11/07/96 5,200 5,151,660
- -----------------------------------------------------------------------------------------------
5.02% 11/14/96 13,000 12,865,854
- -----------------------------------------------------------------------------------------------
5.04% 11/14/96 5,300 5,245,092
- -----------------------------------------------------------------------------------------------
5.06% 11/14/96 8,000 7,916,791
- -----------------------------------------------------------------------------------------------
5.01% 11/21/96 12,250 12,111,912
- -----------------------------------------------------------------------------------------------
5.02% 11/21/96 4,700 4,646,914
- -----------------------------------------------------------------------------------------------
5.03% 11/21/96 14,415 14,251,858
- -----------------------------------------------------------------------------------------------
5.06% 11/21/96 2,200 2,174,953
- -----------------------------------------------------------------------------------------------
5.095% 11/29/96 13,235 13,068,292
- -----------------------------------------------------------------------------------------------
318,111,748
- -----------------------------------------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 37
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
U.S. TREASURY SECURITIES-continued
U.S. TREASURY NOTES-30.18%
8.00% 10/15/96 $ 42,475 $ 42,605,929
- -----------------------------------------------------------------------------------------------
6.875% 10/31/96 40,500 40,589,317
- -----------------------------------------------------------------------------------------------
7.25% 11/15/96 24,505 24,593,717
- -----------------------------------------------------------------------------------------------
7.50% 12/31/96 30,000 30,209,989
- -----------------------------------------------------------------------------------------------
137,998,952
- -----------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 456,110,700
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.76% 456,110,700(b)
- -----------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.24% 1,085,450
- -----------------------------------------------------------------------------------------------
NET ASSETS-100.00% $457,196,150
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) U.S. Treasury bills 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 Portfolio.
(b) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-3
<PAGE> 38
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $456,110,700
- -------------------------------------------------------------------------------------------
Cash 4,084
- -------------------------------------------------------------------------------------------
RECEIVABLES FOR:
Interest 3,140,128
- -------------------------------------------------------------------------------------------
Reimbursement from advisor 4,800
- -------------------------------------------------------------------------------------------
Investments sold 49,603,992
- -------------------------------------------------------------------------------------------
Investment for deferred compensation plan 13,600
- -------------------------------------------------------------------------------------------
Other assets 11,168
- -------------------------------------------------------------------------------------------
Total assets 508,888,472
- -------------------------------------------------------------------------------------------
LIABILITIES:
PAYABLES FOR:
Investments purchased 49,579,246
- -------------------------------------------------------------------------------------------
Dividends 1,966,957
- -------------------------------------------------------------------------------------------
Deferred compensation 13,600
- -------------------------------------------------------------------------------------------
Accrued advisory fees 55,963
- -------------------------------------------------------------------------------------------
Accrued distribution fees 10,833
- -------------------------------------------------------------------------------------------
Accrued transfer agent fees 3,541
- -------------------------------------------------------------------------------------------
Accrued trustees' fees 1,297
- -------------------------------------------------------------------------------------------
Accrued administrative services fees 2,545
- -------------------------------------------------------------------------------------------
Accrued operating expenses 58,340
- -------------------------------------------------------------------------------------------
Total liabilities 51,692,322
- -------------------------------------------------------------------------------------------
NET ASSETS $457,196,150
===========================================================================================
NET ASSETS:
Institutional Class $407,218,040
===========================================================================================
Private Investment Class $ 49,978,110
===========================================================================================
Shares of beneficial interest, $.01 par value per share:
Institutional Class 407,107,656
===========================================================================================
Private Investment Class 49,964,561
===========================================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $ 1.00
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-4
<PAGE> 39
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $23,434,439
- ----------------------------------------------------------------------------------
EXPENSES:
Advisory fees 791,921
- ----------------------------------------------------------------------------------
Custodian fees 30,033
- ----------------------------------------------------------------------------------
Administrative services fees 30,056
- ----------------------------------------------------------------------------------
Trustees' fees and expenses 9,082
- ----------------------------------------------------------------------------------
Transfer agent fees 34,495
- ----------------------------------------------------------------------------------
Distribution fees (Note 2) 52,922
- ----------------------------------------------------------------------------------
Other 140,352
- ----------------------------------------------------------------------------------
Total expenses 1,088,861
- ----------------------------------------------------------------------------------
Less expenses assumed by advisor (141,726)
- ----------------------------------------------------------------------------------
Net expenses 947,135
- ----------------------------------------------------------------------------------
Net investment income 22,487,304
- ----------------------------------------------------------------------------------
Net realized gain on sales of investments 55,902
- ----------------------------------------------------------------------------------
Net increase in net assets resulting from operations $22,543,206
==================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 22,487,304 $ 20,447,888
- ----------------------------------------------------------------------------------------------
Net realized gain on sales of investments 55,902 24,806
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 22,543,206 20,472,694
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (22,487,304) (20,447,888)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investments -- (12,244)
- ----------------------------------------------------------------------------------------------
Share transactions--net 57,341,150 (4,095,169)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 57,397,052 (4,082,607)
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 399,799,098 403,881,705
- ----------------------------------------------------------------------------------------------
End of period $457,196,150 $399,799,098
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $457,072,217 $399,731,067
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investments 123,933 68,031
- ----------------------------------------------------------------------------------------------
$457,196,150 $399,799,098
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series, diversified management
investment company. The Fund is organized as a Delaware business trust
consisting of two different portfolios, each of which offers separate series of
shares: the Treasury Portfolio and the Treasury TaxAdvantage Portfolio, with the
assets, liabilities and operations of each portfolio accounted for separately.
Information presented in these financial statements pertains only to the
Treasury TaxAdvantage Portfolio (the "Portfolio"). The Portfolio consists of two
different classes of shares: the Institutional Class and the Private Investment
Class. Matters affecting each class are voted on exclusively by such
shareholders. The Portfolio is a money market fund whose investment objective is
the maximization of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of these financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
A. Security Valuations--The Portfolio invests only in securities which have
maturities of 397 days or less. The securities are valued on the basis of
amortized cost which approximates market value. 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 premium.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the securities
sold. Interest income, adjusted for amortization of premiums and discounts on
investments, is accrued daily. Dividends to shareholders are declared daily
and are paid on the first business day of the following month.
C. Federal Income Taxes--The Portfolio 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.
D. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more than
one class, e.g., advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<S> <C>
NET ASSETS RATE
- ---------------------------------------------------------------------------------
First $250 million 0.20%
- ---------------------------------------------------------------------------------
Over $250 million to $500 million 0.15%
- ---------------------------------------------------------------------------------
Over $500 million 0.10%
- ---------------------------------------------------------------------------------
</TABLE>
The Fund has entered into a master distribution agreement with Fund Management
Company ("FMC") for the distribution of shares of the Institutional Class and
the Private Investment Class. The Company has also adopted a distribution plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the
Private Investment Class. The Plan provides that the Private Investment Class
may pay up to a 0.50% maximum annual rate of the Private Investment Class'
average daily net assets. Of this amount, the Fund may pay an asset-based sales
charge to FMC and the Portfolio may pay a service fee of 0.25% of the average
daily net assets of the Private Investment Class to selected banks,
broker-dealers and other financial institutions who offer continuing personal
shareholder
FS-6
<PAGE> 41
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES-continued
services to their customers who purchase and own shares of the Private
Investment Class. Any amounts not paid as a service fee under such Plan would
constitute an asset-based sales charge. The Plan also imposes a cap on the total
amount of sales charges, including asset-based sales charges, that may be paid
by the Portfolio with respect to the Private Investment Class. During the year
ended August 31, 1996, the Private Investment Class paid $52,922 as compensation
under the Plan.
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. During the year ended
August 31, 1996, AIM voluntarily waived advisory fees of $116,126 on the
Portfolio and assumed expenses of $25,600.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1996, the
Portfolio reimbursed AIM $30,056 for such services. During the year ended August
31, 1996, the Portfolio paid A I M Institutional Fund Services, Inc. ("AIFS")
$33,534 pursuant to a shareholder and transfer agency services agreement.
Certain officers and trustees of the Fund are officers and directors of AIM,
FMC and AIFS.
The Portfolio paid legal fees of $3,900 for services rendered by Kramer,
Levin, Naftalis & Frankel as counsel to the Board of Trustees. A member of that
firm is a trustee of the Fund.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Fund may invest trustees' fees, if so elected
by a trustee, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 4-SHARE INFORMATION
Changes in shares outstanding for the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 1,931,081,349 $ 1,931,081,349 1,566,228,552 $ 1,566,228,552
- ------------------------------------------------------------------- --------------------------------
Private Investment Class* 173,175,235 173,175,235 29,762,798 29,762,798
- ------------------------------------------------------------------- --------------------------------
Issued as reinvestment of
dividends:
Institutional Class 279,901 279,901 255,484 255,484
- ------------------------------------------------------------------- --------------------------------
Private Investment Class* 215,983 215,983 211,779 211,779
- ------------------------------------------------------------------- --------------------------------
Reacquired:
Institutional Class (1,918,562,346) (1,918,562,346) (1,576,001,520) (1,576,001,520)
- ------------------------------------------------------------------- --------------------------------
Private Investment Class* (128,848,972) (128,848,972) (24,552,262) (24,552,262)
- ------------------------------------------------------------------- --------------------------------
Net increase (decrease) 57,341,150 $ 57,341,150 (4,095,169) $ (4,095,169)
=================================================================== ================================
</TABLE>
* The Private Investment Class commenced operations on December 21, 1994.
FS-7
<PAGE> 42
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Institutional Class during each of the years in the six-year period ended
August 31, 1996 and the period August 17, 1990 (date operations commenced)
through August 31, 1990.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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 0.05 0.05 0.03 0.03 0.04 0.07 0.003
- --------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.03) (0.03) (0.04) (0.07) (0.003)
- --------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===================== ======== ======== ======== ======== ======== ======== ========
Total return 5.19% 5.35% 3.29% 2.96% 4.32% 6.70% 7.79%(a)
===================== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $407,218 $394,376 $403,882 $434,693 $573,283 $403,846 $ 16,201
===================== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets 0.20%(b)(c) 0.20%(c) 0.20%(c) 0.20% 0.17%(e) 0.14%(e) 0.10%(a)(e)
===================== ======== ======== ======== ======== ======== ======== ========
Ratio of net
investment income
to average net
assets 5.06%(b)(d) 5.21%(d) 3.23%(d) 2.93% 4.16%(f) 6.16%(f) 7.74%(a)(f)
===================== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $424,432,042.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
were 0.23% for the periods 1996-1994, respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees were 5.04%, 5.18% and 3.20% for the periods 1996-1994,
respectively.
(e) Ratios of expenses to average net assets prior to waiver of advisory fees
and/or expense reimbursements were 0.21%, 0.25% and 1.24% for the periods
1992-1990, respectively.
(f) Ratios of net investment income to average net assets prior to waiver of
advisory fees and/or expense reimbursements were 4.13%, 6.04% and 6.60% for
the periods 1992-1990, respectively.
Shown below are the condensed financial highlights for a share outstanding of
the Private Investment Class for the year ended August 31, 1996 and the period
December 21, 1994 (date operations commenced) through August 31, 1995.
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05 0.04
- --------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.05) (0.04)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00
==================================================================================================
Total return 4.93% 5.32%(a)
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $49,978 $5,423
==================================================================================================
Ratio of expenses to average net assets(b) 0.45%(c) 0.45%(a)
==================================================================================================
Ratio of net investment income to average net assets(b) 4.72%(c) 5.21%(a)
==================================================================================================
</TABLE>
(a) Annualized.
(b) After waiver of advisory fees, distribution fees and expense reimbursements.
Ratios of expenses and net investment income to average net assets prior to
waivers and expense reimbursements were 0.85% and 4.32% for 1996 and 1.02%
and 4.64% for 1995.
(c) Ratios are based on average net assets of $21,111,080.
FS-8
<PAGE> 43
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders
Short-Term Investments Trust:
We have audited the accompanying statement of assets and liabilities of the
Treasury TaxAdvantage Portfolio (a series portfolio of Short-Term Investments
Trust), including the schedule of investments, as of August 31, 1996, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the six-year period then
ended and the period August 17, 1990 (date operations commenced) through August
31, 1990. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996, 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 the
Treasury TaxAdvantage Portfolio as of August 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the six-year period then ended and the period August 17,
1990 (date operations commenced) through August 31, 1990 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-9
<PAGE> 44
<TABLE>
========================================== ====================================
<S> <C>
SHORT-TERM INVESTMENTS TRUST PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 659-1005 December 30, 1996
INVESTMENT ADVISOR
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 SHORT-TERM
(713) 626-1919 INVESTMENTS TRUST
DISTRIBUTOR
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 ---------------------
(800) 659-1005
TREASURY TAXADVANTAGE
AUDITORS PORTFOLIO
KPMG PEAT MARWICK LLP
NationsBank Building ---------------------
700 Louisiana Building
Houston, Texas 77002
CUSTODIAN INSTITUTIONAL CLASS
THE BANK OF NEW YORK
90 Washington Street
11th Floor
New York, New York 10286
TABLE OF CONTENTS
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. <CAPTION>
11 Greenway Plaza, Suite 1919 PAGE
Houston, Texas 77046-1173 Summary..................... 2
Table of Fees and Expenses.. 4
Financial Highlights........ 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE Suitability For Investors... 6
ANY INFORMATION OR TO MAKE ANY Investment Program.......... 6
REPRESENTATIONS NOT CONTAINED IN THIS Purchase of Shares.......... 8
PROSPECTUS IN CONNECTION WITH THE OFFERING Redemption of Shares........ 8
MADE BY THE PROSPECTUS, AND IF GIVEN OR Dividends................... 9
MADE, SUCH INFORMATION OR REPRESENTATIONS Taxes....................... 9
MUST NOT BE RELIED UPON AS HAVING BEEN Net Asset Value............. 10
AUTHORIZED BY THE TRUST OR THE Yield Information........... 10
DISTRIBUTOR. THIS PROSPECTUS DOES NOT Reports to Shareholders..... 11
CONSTITUTE AN OFFER IN ANY JURISDICTION Management of the Trust..... 11
TO ANY PERSON TO WHOM SUCH OFFERING MAY General Information......... 12
NOT LAWFULLY BE MADE. Appendix.................... A-1
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