<PAGE> 1
GOVERNMENT & AGENCY
PORTFOLIO
------------------------------------------------------------------------
Institutional Class
Government & Agency Portfolio seeks to maximize current income
consistent with the preservation of capital and the maintenance of
liquidity.
PROSPECTUS
DECEMBER 29, 2000
This prospectus contains important
information about the Institutional
Class of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
There can be no assurance that the
fund will be able to maintain a
stable net asset value of $1.00 per
share.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 2
----------------------------------
GOVERNMENT & AGENCY PORTFOLIO
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TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Return 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-1
Taxes A-2
STATEMENT OF ADDITIONAL INFORMATION B-1
- - - - - - - - - - - - - - - - - - - - - - - - -
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM Internet
Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 3
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GOVERNMENT & AGENCY PORTFOLIO
----------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
--------------------------------------------------------------------------------
The fund's investment objective is to maximize current income consistent with
the preservation of capital and maintenance of liquidity. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund attempts to meet its objective by investing, normally, at least 65%
of its total assets in direct obligations of the U.S. Treasury, and other
securities issued or guaranteed as to principal and interest by the U.S.
Government or its agencies and instrumentalities (agency securities), as well as
repurchase agreements secured by those obligations. Agency securities may be
supported by:
- the full faith and credit of the U.S. Treasury;
- the right of the issuer to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; or
- the credit of the agency or instrumentality.
The fund will maintain a weighted average maturity of 90 days or less. The
fund invests in compliance with Rule 2a-7 under the Investment Company Act of
1940. Any percentage limitations with respect to assets of the fund are applied
at the time of purchase.
The portfolio managers focus on securities they believe have favorable
prospects for current income consistent with the preservation of capital and the
maintenance of liquidity. The portfolio managers usually hold portfolio
securities to maturity, but may sell a particular security when they deem it
advisable, such as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash. As a result, the fund may not achieve
its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
--------------------------------------------------------------------------------
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature or are sold, and the proceeds are reinvested in securities with
different interest rates.
The following factors could reduce the fund's income and/or share price:
- sharply rising or falling interest rates; and
- downgrades of credit ratings or defaults of any of the fund's holdings.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from a decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.
1
<PAGE> 4
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GOVERNMENT & AGENCY PORTFOLIO
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PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURN
--------------------------------------------------------------------------------
The following bar chart shows the performance of the Institutional Class
shares. The Institutional Class shares are not subject to sales loads.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
----------- ------
<S> <C>
1999.................................... 5.14%
</TABLE>
The Institutional Class shares' year-to-date total return as of September 30,
2000 was 4.71%.
During the period shown in the bar chart, Institutional Class' highest
quarterly return was 1.37% (quarter ended December 31, 1999) and its lowest
quarterly return was 1.19% (quarter ended March 31, 1999).
PERFORMANCE TABLE
The following performance table reflects the performance of Institutional Class
shares over the periods indicated.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.14% -- -- 5.18% 09/01/98
------------------------------------------------------------------------------------------------------
</TABLE>
Institutional Class shares' seven-day yield on December 31, 1999 was 5.01%. For
the current seven-day yield, call (800) 659-1005.
2
<PAGE> 5
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GOVERNMENT & AGENCY PORTFOLIO
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FEE TABLE AND EXPENSE EXAMPLE
--------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) INSTITUTIONAL CLASS
-------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is
less) None
-------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) INSTITUTIONAL CLASS
-------------------------------------------------
<S> <C>
Management Fees 0.10%
Distribution and/or
Service (12b-1) Fees None
Other Expenses 0.07
Total Annual Fund
Operating Expenses(1) 0.17
-------------------------------------------------
</TABLE>
(1) The investment advisor has agreed to limit Total Annual Fund Operating
Expenses, excluding interest, taxes, extraordinary items and indirect
expenses resulting from expense offset arrangements (if any), to 0.08%. This
expense limitation can be terminated any time.
You may also be charged a transaction or other fee by the financial institution
managing your account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Institutional Class of the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Class $17 $55 $96 $217
----------------------------------------------------------------
</TABLE>
3
<PAGE> 6
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GOVERNMENT & AGENCY PORTFOLIO
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FUND MANAGEMENT
--------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended August 31, 2000, the advisor received no
compensation.
OTHER INFORMATION
--------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Institutional Class of the fund is intended for use by banks and other
financial institutions, investing for themselves or in a fiduciary, advisory,
agency, custodial or other similar capacity. Shares of the Institutional Class
may not be purchased directly by individuals, although institutions may purchase
the Institutional Class for accounts maintained for individuals. Prospective
investors should determine if an investment in the Institutional Class is
consistent with the investment objectives of an account and with applicable
federal and state laws and regulations.
The Institutional Class is designed to be a convenient and economical way to
invest short-term cash reserves in an open-end diversified money market fund. It
is anticipated that most institutions will perform their own subaccounting.
Investors in the Institutional 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 diversification, economies
of scale and same-day liquidity. 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 Institutional Class.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
dividends monthly. A business day is any day on which both the Federal Reserve
Bank of New York and The Bank of New York, the fund's custodian, are open for
business.
Dividends are paid on settled shares of the fund as of 5:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 5:00 p.m. Eastern time and shareholders whose redemption proceeds have
not been wired to them on any business day are eligible to receive dividends on
that business day. The dividend declared on any day preceding a non-business day
of the fund will include the income accrued on such non-business day. Dividends
and distributions are paid in cash unless the shareholder has elected to have
such dividends and distributions reinvested in the form of additional full and
fractional shares at net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains (including net
short-term capital gains), if any, annually. The fund does not expect to realize
any long-term capital gains and losses.
4
<PAGE> 7
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GOVERNMENT & AGENCY PORTFOLIO
----------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Institutional Class. Certain information reflects financial
results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The information for fiscal year 2000 has been audited by Tait, Weller & Baker,
whose report, along with the fund's financial statements, is included in the
fund's Statement of Additional Information, which is available upon request.
Information prior to fiscal year 2000 was audited by KPMG LLP. For more
information regarding the change in independent auditors of the fund, see the
Statement of Additional Information.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
---------------------
YEAR ENDED AUGUST 31,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.05
====================================================================================
Less distributions from net investment income (0.06) (0.05)
====================================================================================
Net asset value, end of period $ 1.00 $ 1.00
____________________________________________________________________________________
====================================================================================
Total return 6.03% 5.07%
____________________________________________________________________________________
====================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $399,390 $139,860
____________________________________________________________________________________
====================================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 0.07%(a) 0.06%
------------------------------------------------------------------------------------
Without fee waivers and reimbursements 0.17%(a) 0.20%
____________________________________________________________________________________
====================================================================================
Ratio of net investment income to average net assets 6.02%(a) 4.91%
____________________________________________________________________________________
====================================================================================
</TABLE>
(a)Ratios are based on average net assets of $301,527,098.
5
<PAGE> 8
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GOVERNMENT & AGENCY PORTFOLIO
----------------------------------
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
The fund currently offers six classes of shares all of which share a common
investment objective and portfolio of investments. The six classes differ only
with respect to distribution arrangements for different categories of investors.
PURCHASING SHARES
The minimum initial investment in the Institutional Class is $1 million. No
minimum amount is required for subsequent investments in the fund, nor are
minimum balances required.
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 transfer agent
prior to 5:00 p.m. Eastern time on a business day of the fund. Purchase orders
received after such time will be processed at the next day's net asset value.
You may purchase shares by submitting an Account Application to the fund's
transfer agent, A I M Fund Services, Inc. (transfer agent) at P.O. Box 0843,
Houston, Texas 77001-0843 prior to your initial purchase of shares. A purchase
order is considered received at the time The Bank of New York receives federal
funds (member bank deposits with a Federal Reserve Bank) for the order, provided
the transfer agent has received notice of your order. Subsequent purchases of
shares of the fund may also be made via AIM LINK--Registered Trademark-- Remote,
a personal computer application software product.
We may request that an institution maintain separate master accounts in the
fund for shares held by the institution (a) for its own account, for the account
of other institutions and for accounts for which the institution acts as a
fiduciary; and (b) for accounts for which the institution acts in some other
capacity. An institution may aggregate its master accounts and subaccounts to
satisfy the minimum investment requirement.
REDEEMING SHARES
You may redeem any or all of your shares at the net asset value next determined
after receipt of a redemption request in proper form by the fund. There is no
charge for redemption.
You may request a redemption by calling the transfer agent at (800) 659-1005,
or by using AIM LINK--Registered Trademark-- Remote. Payment for redeemed shares
is normally made by Federal Reserve wire to the commercial bank account
designated in your Account Application. You may also request that payment be
made by check. We use reasonable procedures to confirm that instructions
communicated by telephone are genuine and are not liable for telephone
instructions that are reasonably believed to be genuine. Such reasonable
procedures may include recordings of telephone transactions maintained for a
reasonable period of time.
Payment for redemption orders received prior to 5:00 p.m. Eastern time will
normally be made on the same day. Payment for shares redeemed by mail and
payment for telephone redemptions in amounts of less than $1,000 may be made by
check mailed within seven days after receipt of the redemption request in proper
form. The fund may make payment for telephone redemptions in excess of $1,000 by
check when it is considered to be in the fund's best interest to do so.
Dividends payable up to the date of redemption on redeemed shares will
normally be paid on the next dividend payment date. However, if all of the
shares in your account are redeemed, you will receive dividends payable up to
the date of redemption with the proceeds of the redemption.
REDEMPTIONS BY THE FUND
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem the account and distribute the proceeds to you.
--------------------------------------------------------------------------------
THE FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF THE FUND; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
--------------------------------------------------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each of the fund's shares is the fund's net asset value per share.
The fund determines the net asset value of its shares as of 5:00 p.m. Eastern
time on each day on which both the Federal Reserve Bank of New York and The Bank
of New York are open for business (business day). The fund values portfolio
securities on the basis of amortized cost, which approximates market value.
TIMING OF ORDERS
The fund prices purchase and redemption orders at the net asset value calculated
after the transfer agent receives an order in good form. If the transfer agent
receives a redemption request on a business day prior to 5:00 p.m. Eastern time,
the fund will normally wire redemption proceeds on that day. If the transfer
agent receives a redemption request after 5:00 p.m. Eastern time on a business
day of the fund, the redemption will be processed at the net asset value next
determined and the fund will normally wire proceeds on the next business day.
Shareholders will accrue dividends until the day the fund wires redemption
proceeds. The fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading. The fund
reserves the right to change the time for which purchase and redemption orders
must be submitted to and received by the transfer agent for execution on the
same day on any day when the primary government securities dealers are either
closed for business or close early, or trading in money market securities is
limited due to national holidays.
A-1
<PAGE> 9
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GOVERNMENT & AGENCY PORTFOLIO
----------------------------------
SHAREHOLDER INFORMATION (continued)
--------------------------------------------------------------------------------
TAXES
Dividends and distributions received are taxable as ordinary income or long-term
capital gains for federal income tax purposes, whether reinvested in additional
shares or taken in cash. Distributions are taxable at different rates depending
on the length of time the fund holds its assets. Every year, information will be
sent showing the amount of dividends and distributions received from the fund
during the prior year.
Any long-term or short-term capital gains realized from redemptions of the
fund shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in the fund may
differ materially from the federal income tax consequences described above.
Shareholders should consult their tax advisor before investing.
A-2
<PAGE> 10
STATEMENT OF
ADDITIONAL INFORMATION
SHORT-TERM INVESTMENTS TRUST
GOVERNMENT & AGENCY PORTFOLIO
(CASH MANAGEMENT CLASS)
(INSTITUTIONAL CLASS)
(PERSONAL INVESTMENT CLASS)
(PRIVATE INVESTMENT CLASS)
(RESERVE CLASS)
(RESOURCE CLASS)
11 GREENWAY PLAZA
SUITE 100
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
CLASSES OF THE GOVERNMENT & AGENCY PORTFOLIO,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 100, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 659-1005
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 29, 2000
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE
GOVERNMENT & AGENCY PORTFOLIO:
CASH MANAGEMENT CLASS PROSPECTUS DATED DECEMBER 29, 2000,
INSTITUTIONAL CLASS PROSPECTUS DATED DECEMBER 29, 2000,
PERSONAL INVESTMENT CLASS PROSPECTUS DATED DECEMBER 29, 2000,
PRIVATE INVESTMENT CLASS PROSPECTUS DATED DECEMBER 29, 2000,
RESERVE CLASS PROSPECTUS DATED DECEMBER 29, 2000
AND RESOURCE CLASS PROSPECTUS DATED DECEMBER 29, 2000
B-1
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Introduction................................................ B-3
General Information about the Trust......................... B-3
The Trust and Its Shares............................... B-3
Portfolio Transactions and Brokerage........................ B-5
General Brokerage Policy............................... B-5
Allocation of Portfolio Transactions................... B-6
Section 28(e) Standards................................ B-6
Share Purchases and Redemptions............................. B-7
Purchases and Redemptions.............................. B-7
Redemptions by the Portfolio........................... B-7
Net Asset Value Determination.......................... B-7
Distribution Agreement................................. B-8
Distribution Plan...................................... B-8
Banking Regulations.................................... B-10
Performance Information................................ B-10
Investment Program and Restrictions......................... B-11
Investment Program..................................... B-11
Investment Policies.................................... B-12
Investment Restrictions................................ B-13
Management.................................................. B-15
Trustees and Officers.................................. B-15
Remuneration of Trustees............................... B-17
Investment Advisor..................................... B-19
Administrative Services................................ B-20
Expenses............................................... B-20
Transfer Agent and Custodian........................... B-21
Sub-Accounting......................................... B-21
Principal Holders of Securities........................ B-22
Dividends, Distributions and Tax Matters.................... B-30
Dividends and Distributions............................ B-30
Tax Matters............................................ B-30
Qualification as a Regulated Investment Company........ B-30
Excise Tax on Regulated Investment Companies........... B-31
Portfolio Distributions................................ B-31
Sale or Redemption of Shares........................... B-32
Foreign Shareholders................................... B-32
Effect of Future Legislation; Local Tax
Considerations........................................ B-32
Miscellaneous............................................... B-33
Legal Matters.......................................... B-33
Independent Public Accountants......................... B-33
Financial Statements........................................ FS
</TABLE>
B-2
<PAGE> 12
INTRODUCTION
The Government & Agency 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 Cash Management Class Prospectus dated December
29, 2000, the Institutional Class Prospectus dated December 29, 2000, the
Personal Investment Class Prospectus dated December 29, 2000, the Private
Investment Class Prospectus dated December 29, 2000, the Reserve Class
Prospectus dated December 29, 2000 and the Resource Class Prospectus dated
December 29, 2000 (each a "Prospectus"). Additional copies of each Prospectus
and 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 100, 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 the Trust and 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 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 Amended and Restated Agreement and Declaration of Trust (the
"Declaration of Trust") establishing the Trust is on file with the SEC. 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 each Prospectus under
the caption "Redeeming Shares."
The Trust offers on a continuous basis shares representing an interest in one
of three diversified portfolios: the Portfolio, the Treasury Portfolio and the
Government TaxAdvantage Portfolio (together, the "Portfolios"). The Portfolio
consists of the following six classes of shares: Cash Management Class,
Institutional Class, Personal Investment Class, Private Investment Class,
Reserve Class and Resource Class. Each class of shares is sold pursuant to a
separate Prospectus and this joint Statement of Additional Information. Each
such class has different shareholder qualifications and bears expenses
differently. This Statement of Additional Information relates to each class of
the Portfolio. The classes of the Treasury Portfolio and the Government
TaxAdvantage Portfolio are offered pursuant to separate prospectuses and
separate statements of additional information.
All shares of the Trust have equal rights with respect to voting, except that
the holders of shares of a particular class will have the exclusive right to
vote on matters pertaining to distribution plans or shareholder service plans,
if any such plans are adopted, relating solely to 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, any Portfolios 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 outstanding 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, each of its Portfolios and any
class thereof with respect to which there are fewer than 100 holders of record.
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.
Shares are fully assignable and subject to encumbrance by a shareholder. The
Board of Trustees may establish and designate and change in any manner any
portfolio or any classes or classes thereof, may fix or change the preferences,
voting rights, rights and privileges of any portfolio or classes thereof, and
may divide or combine the shares of any portfolio or classes thereof into a
greater or lesser number. The Board of Trustees also may classify or convert any
issued
B-3
<PAGE> 13
shares of any portfolio, or classes thereof, into a greater or lesser number.
Any such classification or reclassification will comply with the provisions of
the Investment Company Act of 1940, as amended (the "1940 Act").
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.
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 its respective classes 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. 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 further provides for
indemnification out of the property of the Portfolio for all losses and expenses
of any shareholder of the Portfolio 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 Portfolio
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 also provides that the trustees and officers will not
be personally liable for any act, omission or obligation of the Trust or any
trustee or officer. However, nothing in the Declaration of Trust protects a
trustee or officer against any liability to the Trust or to the shareholders to
which a trustee or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office with the Trust. The Declaration of
Trust provides for indemnification by the Trust of the trustees and the
officers, employees or agents of the Trust if it is determined that such person
acted in good faith and reasonably believed: (1) in the case of conduct in his
or her official capacity for the Trust, that his or her conduct was in the
Trust's best interests, (2) in all other cases, that his or her conduct was at
least not opposed to the Trust's best interest and (3) in a criminal proceeding,
that he or she had no reason to believe that his or her conduct was unlawful.
Such person may not be indemnified against any liability to the Trust or to the
Trust's shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office. The Declaration of Trust
also authorizes the purchase of liability insurance on behalf of trustees and
officers.
As described in each 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. 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 that purpose, which meeting shall be held upon written request of the
holders of not less than 10% of the outstanding shares of the Trust.
Except as otherwise disclosed in each Prospectus and in this Statement of
Additional Information, the trustees shall continue to hold office and may
appoint their successors.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
AIM makes decisions to buy and sell securities for the Portfolio, selects
broker-dealers, effects the Portfolio's investment portfolio transactions,
allocates brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. Since purchases and sales of portfolio
securities by the Portfolio are usually principal transactions, the Portfolio
incurs little or no brokerage commissions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate or spread (as applicable). While AIM seeks reasonable competitive
commission rates, the Portfolio may not pay the lowest commission or spread
available. See "Section 28(e) Standards" below.
In the event the Portfolio purchases securities traded in over-the-counter
markets, the Portfolio deals directly with dealers who make markets in the
securities involved, except when better prices are available elsewhere.
Portfolio transactions placed through dealers who are primary market makers are
effected at net prices without commissions, but which include compensation in
the form of a mark up or mark down.
AIM may determine target levels of commission business with various brokers on
behalf of its clients (including the Portfolio) over a certain time period. The
target levels will be based upon the following factors, among others: (1) the
execution services provided by the broker; (2) the research services provided by
the broker; and (3) the broker's interest in mutual funds in general and in the
Portfolio and other mutual funds advised by AIM or A I M Capital Management,
Inc. (collectively, the "AIM Funds") in particular, including sales of the
Portfolio and of the other AIM Funds. In connection with (3) above, the
Portfolio's trades may be executed directly by dealers which sell shares of the
AIM Funds or by other broker-dealers with which such dealers have clearing
arrangements. AIM will not use a specific formula in connection with any of
these considerations to determine the target levels.
The Portfolio may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of the Portfolio, provided the conditions of an exemptive order
received by the Portfolio from the SEC are met. In addition, the Portfolio may
purchase or sell a security from or to another AIM Fund or account provided the
Portfolio follows procedures adopted by the Board of Directors/Trustees of the
various AIM Funds, including the Trust. These inter-fund transactions do not
generate brokerage commissions but may result in custodial fees or taxes or
other related expenses.
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. 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, the high turnover rate
should not adversely affect the Portfolio's net income.
Under the 1940 Act, certain 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 certain persons
affiliated with the Trust are members 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 is 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.
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<PAGE> 15
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some of
these accounts may have investment objectives similar to the Portfolio.
Occasionally, identical securities will be appropriate for investment by the
Portfolio and by another fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Portfolio and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect the Portfolio's ability to obtain or dispose of the full amount of a
security which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to the Portfolio. In making such
allocations, AIM considers the investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the judgments of the persons
responsible for recommending the investment.
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM, under
certain circumstances, lawfully may cause an account to pay a higher commission
than the lowest available. Under Section 28(e), AIM must make a good faith
determination that the commissions paid are "reasonable in relation to the value
of the brokerage and research services provided . . . viewed in terms of either
that particular transaction or [AIM's] overall responsibilities with respect to
the accounts as to which it exercises investment discretion." The services
provided by the broker also must lawfully and appropriately assist AIM in the
performance of its investment decision-making responsibilities. Accordingly, in
recognition of research services provided to it, the Portfolio may pay a broker
higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own research
(and the research of its affiliates), and may include the following types of
information: statistical and background information on the U.S. and foreign
economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Trust's trustees with respect to the
performance, investment activities, and fees and expenses of other mutual funds.
Broker-dealers may communicate such information electronically, orally, in
written form or on computer software. Research services may also include the
providing of custody services, as well as the providing of equipment used to
communicate research information, the providing of specialized consultations
with AIM personnel with respect to computerized systems and data furnished to
AIM as a component of other research services, the arranging of meetings with
management of companies, and the providing of access to consultants who supply
research information.
The outside research assistance is useful to AIM since the broker-dealers used
by AIM tend to follow a broader universe of securities and other matters than
AIM's staff can follow. In addition, the research provides AIM with a diverse
perspective on financial markets. Research services provided to AIM by
broker-dealers are available for the benefit of all accounts managed or advised
by AIM or by its affiliates. Some broker-dealers may indicate that the provision
of research services is dependent upon the generation of certain specified
levels of commissions and underwriting concessions by AIM's clients, including
the Portfolio. However, the Portfolio is not under any obligation to deal with
any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the broker-dealer
providing them. In other cases, the research services may be obtainable from
alternative sources in return for cash payments. AIM believes that the research
services are beneficial in supplementing AIM's research and analysis and that
they improve the quality of AIM's investment advice. The advisory fee paid by
the Portfolio is not reduced because AIM receives such services. However, to the
extent that AIM would have purchased research services had they not been
provided by broker-dealers, the expenses to AIM could be considered to have been
reduced accordingly.
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SHARE PURCHASES AND REDEMPTIONS
PURCHASES AND REDEMPTIONS
A complete description of the manner by which shares of a particular class may
be purchased or redeemed appears in each Prospectus under the headings
"Purchasing Shares" and "Redeeming Shares."
Prior to the initial purchase of Portfolio shares, an investor must complete
and send an Account Application to AFS at P.O. Box 0843, Houston, Texas
77001-0843. An Account Application may be obtained from the distributor. An
investor may make changes to the information provided in the Account Application
by submitting such changes in writing to the transfer agent or by completing and
submitting to the transfer agent a new Account Application.
The Trust reserves the right to reject any purchase order and to withdraw all
or any part of the offering made by a Prospectus. Any funds received with
respect to an order which is not accepted by the Trust and any funds received
for which an order has not been received will be promptly returned to an
investor. Any request for correction to a transaction of Portfolio shares must
be submitted in writing to AFS. AFS reserves the right to reject any such
request. When a correction results in a dividend adjustment, the institution
must agree in writing to reimburse the Portfolio for any loss resulting from the
correction. Failure to deliver purchase proceeds on the requested settlement
date may result in a claim against the institution for an amount equal to the
overdraft charge incurred by the Portfolio.
An investor may terminate his or her relationship with an institution at any
time, in which case an account in the investor's name will be established
directly with the Portfolio and the investor will become a shareholder of
record. In such case, however, the investor will not be able to purchase
additional shares of the Cash Management Class, Personal Investment Class,
Private Investment Class, Reserve Class or the Resource Class directly, except
through reinvestment of dividends and distributions.
Payment for redeemed shares of the Portfolio is normally made by Federal
Reserve wire to the commercial bank account designated in the shareholder's
Account Application on the day specified below, but may be remitted by check
upon request by a shareholder. 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
trust company (which may include the shareholder). Additional documentation may
be required when deemed appropriate by the Portfolio or AFS.
The Trust may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading.
A "Business Day" of the Trust is any day on which member banks of the Federal
Reserve Bank of New York and The Bank of New York are open for business. If AFS
receives a redemption request on a Business Day prior to 3:00 p.m. Eastern time,
the redemption will be effected at the net asset value of the Portfolio
determined as of 3:00 p.m. Eastern time and the Trust will normally wire
redemption proceeds on that day. A redemption request received by AFS after 3:00
p.m. Eastern time will be effected at the net asset value of the Portfolio
determined as of 3:00 p.m. Eastern time on the next Business Day and proceeds
will normally be wired on the next Business Day. If proceeds are not wired on
the same day, shareholders will accrue dividends until the day the proceeds are
wired. The Trust, however, reserves the right to change the time for which
purchase and redemption orders must be submitted to and received by the transfer
agent for execution on the same day on any day when the primary government
securities dealers are either closed for business or close early, or trading in
money market securities is limited due to national holidays.
Any request for correction to a redemption transaction of Portfolio shares
must be submitted in writing to AFS.
REDEMPTIONS BY THE PORTFOLIO
If the Trust determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
Trust may, at its discretion, redeem the account and distribute the proceeds to
you.
NET ASSET VALUE DETERMINATION
The net asset value per share of each class the Portfolio is determined as of
3:00 p.m. Eastern time on each Business Day of the Trust. For the purpose of
determining the price at which all shares of the Portfolio are issued and
redeemed, the net asset value per share is calculated by: (a) valuing all
securities and instruments of the Portfolio as set forth below; (b) adding other
assets of the Portfolio, if any; (c) deducting the liabilities of the Portfolio;
(d) dividing the resulting amount by the number of shares outstanding of the
Portfolio; and (e) rounding such per share net asset value to the nearest whole
cent. Among other items, the Portfolio's liabilities include accrued expenses
and dividends payable, and its total assets include portfolio securities valued
at their market value as well as income accrued but not yet received.
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<PAGE> 17
The debt instruments held in the Portfolio are valued on the basis of
amortized cost. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. 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 Trust would receive if it sold the entire
portfolio.
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, which require the Trust to adhere to certain conditions. The Portfolio
will invest only in "Eligible Securities" as defined in Rule 2a-7 under the 1940
Act, which the Board of Trustees has determined present minimal credit risks.
Rule 2a-7 also requires, among other things, that the Portfolio maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase only
U.S. dollar-denominated instruments having remaining maturities of 397 calendar
days or less.
The Board of Trustees has established 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 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 sales 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 (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 100, Houston, Texas
77046-1173. Mail addressed to FMC should be sent to P.O. Box 4497, Houston,
Texas 77210-4497. 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 the 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.
The Distribution Agreement will continue in effect from year to year 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. The Trust or FMC may
terminate the Distribution Agreement on 60 days' written notice, without
penalty. The Distribution Agreement will terminate automatically in the event of
its "assignment," as defined in the 1940 Act.
FMC may, from time to time, at its expense, pay a bonus or other consideration
or incentive to dealers or institutions who sell a minimum dollar amount of the
shares of a particular class during a specific period of time. In some
instances, these incentives may be offered only to certain dealers or
institutions who have sold or may sell significant amounts of shares. The total
amount of such additional bonus or payments or other consideration shall not
exceed 0.05% 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 or the amount received as proceeds from such sales. Dealers
or institutions may not use sales of the shares to qualify for any incentives to
the extent that such incentives may be prohibited by the laws of any
jurisdiction.
DISTRIBUTION PLAN
The Trust has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act, with respect to the Portfolio's Cash Management Class,
Personal Investment Class, Private Investment Class, Reserve Class and Resource
Class. The Plan provides that the Trust may compensate FMC in connection with
the distribution of shares of the Portfolio. Such compensation may be expended
when and if authorized by the Board of Trustees and may be used to finance such
distribution-related services as expenses of organizing and conducting sales
seminars, printing of prospectuses and statements of additional information (and
supplements thereto) and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature and
costs of administering the Plan.
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<PAGE> 18
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
Cash Management Class, Personal Investment Class, Private Investment Class,
Reserve Class and Resource Class of the Portfolio. These services may include
among other things: (a) answering customer inquiries regarding the shares of
these classes and the Portfolio; (b) assisting customers in changing dividend
options, account designations and addresses; (c) performing sub-accounting; (d)
establishing and maintaining shareholder accounts and records; (e) processing
purchase and redemption transactions; (f) automatic investment of customer cash
account balances in the shares of these classes; (g) 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; (h) arranging for bank wires; and (i) such other services
as the Trust may request on behalf of the shares of these classes, 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.
The Plan does not obligate the Trust to reimburse FMC for the actual expenses
FMC may incur in fulfilling its obligations under the Plan. Thus, even if FMC's
actual expenses exceed the fee payable to FMC thereunder at any given time, the
Trust will not be obligated to pay more than that fee. If FMC's expenses are
less than the fee it receives, FMC will retain the full amount of the fee.
FMC may from time to time waive or reduce any portion of its 12b-1 fee for
Cash Management Class, Personal Investment Class, Private Investment Class,
Reserve Class and Resource Class shares. Voluntary fee waivers or reductions may
be rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions, FMC will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions set forth in the Fee Table in a Prospectus may not be
terminated or amended to the Portfolio's detriment during the period stated in
the agreement between FMC and the Trust.
The Plan requires the officers of the Trust to provide the Board of Trustees
at least quarterly with a written report of the amounts expended pursuant to the
Plan and the purposes for which such expenditures were made. The Board of
Trustees shall review these reports in connection with their decisions with
respect to the Plan.
For the fiscal year ended August 31, 2000, FMC received compensation pursuant
to the Distribution Plan in the amount of $118,320, or an amount equal to 0.08%
of the average daily net assets of the Cash Management Class, $20,071, or an
amount equal to 0.50% of the average daily net assets of the Personal Investment
Class, $193,084, or an amount equal to 0.30% of the average daily net assets of
the Private Investment Class, $167,395, or an amount equal to 0.16% of the
average daily net assets of the Resource Class, and $7,632, or an amount equal
to 0.80% of the average daily net assets of the Reserve Class. With respect to
the Cash Management Class, $118,320 of such amount (or an amount equal to 0.08%
of the average daily net assets of the class) was paid to dealers and financial
institutions and $0 (or an amount equal to 0.0% of the average daily net assets
of the class) was retained by FMC. With respect to the Personal Investment
Class, $16,057 of such amount (or an amount equal to 0.40% of the average daily
net assets of the class) was paid to dealers and financial institutions and
$4,014 (or an amount equal to 0.10% of the average daily net assets of the
class) was retained by FMC. With respect to the Private Investment Class,
$184,770 of such amount (or an amount equal to 0.29% of the average daily net
assets of the class) was paid to dealers and financial institutions and $8,314
(or an amount equal to 0.01% of the average daily net assets of the class) was
retained by FMC. With respect to the Resource Class, $167,395 of such amount (or
an amount equal to 0.16% of the average daily net assets of the class) was paid
to dealers and financial institutions and $0 (or an amount equal to 0.0% of the
average daily net assets of the class) was retained by FMC. With respect to the
Reserve Class, $6,912 of such amount (or an amount equal to 0.72% of the average
daily net assets of the class) was paid to dealers and financial institutions
and $720 (or an amount equal to 0.08% of the net average daily net assets of the
class) was retained by FMC.
As required by Rule 12b-1 under the 1940 Act, the Plan has been approved by
the Board of Trustees, including a majority of the trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Trustees"). In approving the Plan in
accordance with the requirements of Rule 12b-1, the trustees considered various
factors and determined that there is a reasonable likelihood that the Plan would
benefit the Trust and the holders of shares of the applicable classes of the
Portfolio. Anticipated benefits that may result from the Plan are: (i) FMC,
brokerage firms and financial institutions will provide a shareholder with rapid
access to his or her account for the purpose of effecting executions of purchase
and redemption orders; (ii) FMC and shareholder service agents will provide
prompt, efficient and reliable responses to shareholder inquiries concerning
account status; (iii) a well-developed, dependable network of shareholder
service agents may help to curb sharp fluctuations in rates of redemptions and
sales, thereby reducing the chance that an unanticipated increase in net
redemptions could adversely affect the performance of the Portfolio; and (iv) a
successful distribution effort will assist FMC in maintaining and increasing the
organizational strength needed to service the Portfolio.
The Plan complies with the Conduct Rules of the National Association of
Securities Dealers, Inc. and provides for payment of a service fee to dealers
and other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own shares of each applicable class
of the Portfolio, in amounts of up to 0.25% of the average net assets of
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<PAGE> 19
such class of the Portfolio attributable to the customers of such dealers or
financial institutions. Payments to dealers and other financial institutions in
excess of such amount would be characterized as an asset-based sales charge
pursuant to the amended Plan. 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 each applicable class.
The Plan, unless sooner terminated in accordance with its terms, shall
continue in effect as to each applicable class from year to year as long as such
continuance is specifically approved at least annually by the Board of Trustees,
including a majority of the Qualified Trustees.
FMC is a wholly owned subsidiary of AIM, an indirect wholly owned subsidiary
of AMVESCAP PLC. Robert H. Graham, Trustee, Chairman and President of the Trust,
owns shares of AMVESCAP PLC.
The Plan may be terminated as to a particular class of the Portfolio by vote
of a majority of the Qualified Trustees, or by vote of a majority of the holders
of the outstanding voting securities of such class. Any change in the Plan that
would increase materially the distribution expenses paid by an applicable class
requires shareholder approval; otherwise, the Plan may be amended by the
trustees, including a majority of the Qualified Trustees, by vote cast in person
at a meeting called for the purpose of voting upon such amendment. As long as
the Plan is in effect, the selection or nomination of the Qualified Trustees is
committed to the discretion of the Qualified Trustees.
BANKING REGULATIONS
On November 12, 1999, the Gramm-Leach-Bliley Act of 1999 was signed into law.
This Act removed the regulatory barriers previously established between banks
and bank holding companies, and insurance companies and broker-dealers. Various
provisions of this Act became effective immediately, and others will become
effective through May 2001. While the ultimate effect of such legislation is
unclear, financial holding companies and their affiliated bank and financial
subsidiaries will be able to participate in the distribution of mutual fund
shares.
PERFORMANCE INFORMATION
As stated under the caption "Performance Information -- Performance Table" in
each Prospectus, yield information for the shares of each class of the Portfolio
may be obtained by calling the telephone number set forth in the Prospectus for
that class. Performance will vary from time to time and past results are not
necessarily indicative of future results. Investors should understand that
performance is a function of the type and quality of the Portfolio's investments
as well as its operating expenses and market conditions. Performance information
for the shares of the Portfolio may not provide a basis for comparison with
investments which pay fixed rates of interest for a stated period of time, with
other investments or with investment companies which use a different method of
calculating performance. A shareholder's investment in the Portfolio is not
insured or guaranteed. These factors should be carefully considered by the
investor before making an investment in the Portfolio.
Calculations of yield will take into account the total income received by the
Portfolio. To the extent that different classes of shares bear different
expenses, the yields of such classes will vary. To the extent that institutions
charge fees in connection with services provided in conjunction with the Trust,
the yield will be lower for those beneficial owners paying such fees.
The current yields quoted will be the net average annualized yield for an
identified period, such as seven consecutive calendar days or a month. Yields
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 any realized gains and losses or unrealized appreciation
or depreciation and income other than investment income) 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 yields that assumes the reinvestment of
dividends for a 365 day year and a return for the entire year equal to the
average annualized yields for the period, which will be computed by compounding
the unannualized current yields for the period by adding 1 to the unannualized
current yields, 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.
From time to time, AIM or its affiliates may waive all or a portion of their
fees and/or assume certain expenses of the Portfolio. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
a Prospectus may not be terminated or amended to the Portfolio's detriment
during the period stated in the agreement between AIM and the Trust. Fee waivers
or reductions or commitments to reduce expenses will have the effect of
increasing the Portfolio's yield and total return.
For the seven-day period ended August 31, 2000, the current and effective
yields for the Cash Management Class were 6.47% and 6.68%, respectively. For the
seven-day period ended August 31, 2000, the current and effective yields for the
Institutional
B-10
<PAGE> 20
Class were 6.55% and 6.76%, respectively. For the seven-day period ended August
31, 2000, the current and effective yields for the Personal Investment Class
were 6.05% and 6.23%, respectively. For the seven-day period ended August 31,
2000, the current and effective yields for the Private Investment Class were
6.25% and 6.45%, respectively. For the seven-day period ended August 31, 2000,
the current and effective yields for the Reserve Class were 5.75% and 5.91%,
respectively. For the seven-day period ended August 31, 2000, the current and
effective yields for the Resource Class were 6.39% and 6.59%, respectively.
These yields are quoted for illustration purposes only. The yields for any other
seven-day period may be substantially different from the yields quoted above.
The Trust may compare the performance of a class or the performance of
securities in which it may invest to:
- iMoneyNet, Inc., formerly IBC Financial Data, Inc., 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 or by Lipper, Inc., a widely recognized independent service,
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 the yield of a class 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 securities of the respective investment
companies 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.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
Information concerning the Portfolio's investment objective is set forth in
each Prospectus under the heading "Investment Objective and Strategies." The
principal features of the Portfolio's investment program and the primary risks
associated with that investment program are also discussed in each Prospectus.
There can be no assurance that the Portfolio will achieve its objective. The
values of the securities in which the Portfolio invests fluctuate based upon
interest rates, the financial stability of the issuer and market factors.
Set forth in this section is a description of the Portfolio's investment
policies, strategies and practices. The investment objective of the Portfolio is
non-fundamental and may be changed by the Board of Trustees without shareholder
approval. The Portfolio's investment policies, strategies and practices are also
non-fundamental. The Board of Trustees of the Trust reserves the right to change
any of these non-fundamental investment policies, strategies or practices
without shareholder approval. However, shareholders will be notified before any
material change in the investment policies becomes effective. The Portfolio has
adopted certain investment restrictions, some of which are fundamental and
cannot be changed without shareholder approval. See "Investment Program and
Restrictions -- Investment Restrictions" in this Statement of Additional
Information. Any percentage limitations with respect to assets of the Portfolio
will be applied at the time of purchase. A later change in percentage resulting
from changes in asset values will not be considered a violation of the
percentage limitations. The percentage limitations applicable to borrowings will
be applied in accordance with applicable provisions of the 1940 Act and the
rules and regulations promulgated thereunder which specifically limit the
Portfolio's borrowing abilities.
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 in direct obligations of the U.S. Treasury, which include
Treasury bills, notes and bonds and repurchase agreements relating to such
securities. In addition, the Portfolio invests in securities issued or
guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities, and repurchase agreements relating to such
securities. Under normal circumstances, the Portfolio will invest at least 65%
of its total assets in the foregoing securities.
As set forth in each Prospectus, the Portfolio will limit its purchases of
securities to U.S. dollar-denominated securities which are "First Tier"
securities, as such term is defined from time to time in Rule 2a-7 under the
1940 Act. A First Tier Security is generally a security that: (i) has received a
short-term rating, or is subject to a guarantee that has received a short-term
rating, or, in either case, is issued by an issuer with a short-term rating from
the Requisite NRSROs in the highest short-term rating category for debt
obligations; (ii) is an unrated security that the Portfolio's investment adviser
has determined is of comparable quality to a rated security described in (i);
(iii) is a security issued by a registered investment company that is a money
B-11
<PAGE> 21
market fund; or (iv) is a Government security. The term "Requisite NRSROs" means
(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 issuer at the time the Portfolio acquires the security, that NRSRO.
At present, the NRSROs are; Standard & Poor's Corp.; Moody's Investors Services,
Inc.; Thomson Bankwatch, One; Duff and Phelps, Inc.; Fitch Investors Services,
Inc. and; with regard to certain types of securities, IBCA Ltd and its
subsidiary; IBCA, Inc. Subcategories or gradations in ratings (such as "+" or
"-") do not count as rating categories.
INVESTMENT POLICIES
GOVERNMENT OBLIGATIONS. The Portfolio may invest in securities issued or
guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the full
faith and credit of the U.S. Treasury (as in the case of Government National
Mortgage Association Certificates), (b) by the right of the issuer to borrow
from the U.S. Treasury (as in the case of obligations of the Federal Home Loan
Bank), (c) by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality (as in the case of the Federal
National Mortgage Association), or (d) only by the credit of the agency or
instrumentality itself (as in the case of obligations of the Federal Farm Credit
Bank). No assurance can be given that the U.S. Government will provide financial
support to such U.S. Government sponsored agencies or instrumentalities in the
future, and it is not obligated by law to renew, grant or extend future
financial support.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above and which at the date of purchase are "First Tier" securities as defined
in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time.
A repurchase agreement is an instrument under which the Portfolio acquires
ownership of a debt security and the seller agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed-upon time and price, thereby
determining the yield during the Portfolio's holding period. Repurchase
transactions are limited to a term not to exceed 365 days. The Portfolio may
enter into repurchase agreements only with institutions believed by the Trust's
Board of Trustees to present minimal credit risk. With regard to repurchase
transactions, in the event of a bankruptcy or other default of a seller or a
repurchase agreement (such as the seller's failure to repurchase the obligation
in accordance with the terms of the agreement), the Portfolio could experience
both delays in liquidating the underlying securities and losses, including: (a)
a possible decline in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible subnormal
levels of income and lack of access to income during this period, and (c)
expenses of enforcing its rights. Repurchase agreements are considered to be
loans under the 1940 Act.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
INTERFUND LOANS. The Portfolio may lend up to 33 1/3% of its total assets to
another AIM Fund, on such terms and conditions as the SEC may require in an
exemptive order. An application for exemptive relief has been filed with the SEC
on behalf of the Portfolio and other AIM Funds. The Portfolio may also borrow
from another AIM Fund to satisfy redemption requests or to cover unanticipated
cash shortfalls due to a delay in the delivery of cash to the Portfolio's
custodian or improper delivery instructions by a broker effectuating a
transaction. It is anticipated that the Portfolio would not participate as a
borrower in the interfund lending facility because it would rarely need to
borrow cash to meet redemptions; however, it is anticipated that the Portfolio
will be a lender to other AIM Funds under the interfund lending facility.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may invest 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.
The following restrictions apply to investments in other investment companies:
(i) the Portfolio may not purchase more than 3% of the total outstanding voting
stock of another investment company; (ii) the Portfolio may not invest more than
5% of its total assets in securities issued by another investment company; and
(iii) the Portfolio may not invest more than 10% of its total assets in
securities issued by other investment companies. With respect to the Portfolio's
purchase of shares of another investment company, the Portfolio will indirectly
bear its proportionate share of the advisory fees and other operating expenses
of such investment company.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements the Portfolio may lend its portfolio securities (principally to
broker-dealers) to the extent of one-third of its total assets. Such loans would
be callable at any time and would be continuously secured by collateral equal to
no less than the market value, determined daily, of the loaned securities. Such
collateral will be cash, letters of credit or debt securities issued or
guaranteed by the U.S. Government or any of its agencies. The Portfolio would
continue to receive the income on loaned securities and would, at the same time,
earn interest on the loan collateral or on the investment of the loan collateral
if it were cash. Any cash collateral pursuant to these loans would be invested
in short-term money market instruments or affiliated money market funds. Where
voting or consent rights with respect to loaned securities pass to the borrower,
the Portfolio will follow the policy of calling the loan, in whole or in part as
may be appropriate, to permit the exercise of such voting or consent rights if
the matters involved are expected to have a material effect on the Portfolio's
investment in the loaned securities. Lending securities entails a risk of loss
to the Portfolio if
B-12
<PAGE> 22
and to the extent that the market value of the securities loaned were to
increase and the lender did not increase the collateral accordingly.
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 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. 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. In addition, AIM will continually monitor the creditworthiness of
issuers whose securities are held by the Portfolio, and securities held by the
Portfolio may be disposed of prior to maturity as a result of a revised credit
evaluation of the issuer or other circumstances or considerations. 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, the high
turnover rate should not adversely affect the Portfolio's net income.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. 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 thereafter. In some cases, the Portfolio may agree to purchase
such securities at stated prices and yields (in such cases, these securities are
considered "delayed delivery" securities when traded in the secondary market or
"when-issued" securities if they are an initial issuance of securities). 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 or
when-issued securities involved may not exceed the estimated amount of funds
available for investment on the settlement date. Until the settlement date,
liquid assets of the Portfolio with a dollar value sufficient at all times to
make payment for the delayed delivery or when-issued securities will be set
aside in a segregated account (the total amount of liquid assets in the
segregated account 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, and the when-issued securities will be recorded as an asset of
the Portfolio and will be subject to the risks of market value fluctuations. The
repurchase price of the delayed delivery or when-issued securities will be
recorded as a liability of the Portfolio until settlement. AIM may also transact
sales of securities on a "forward commitment" basis. In such a transaction, AIM
agrees to sell portfolio securities at a future date at specified prices and
yields. Securities subject to sale on a forward commitment basis will continue
to accrue interest until sold and will be subject to the risks of market value
fluctuations. Absent extraordinary circumstances, the Portfolio's right to
acquire delayed delivery and when-issued securities or its obligation to sell
securities on a forward-commitment basis will not be divested prior to the
settlement date.
MARGIN TRANSACTIONS, SHORT SALES AND OPTIONS. The Portfolio does not intend to
engage in short sales or to purchase or sell put or call options. The Portfolio
will not purchase any security on margin, except that it may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of portfolio securities.
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
beneficial interest of the Trust.
INVESTMENT RESTRICTIONS
Fundamental Restrictions
The Portfolio is subject to the following fundamental restrictions, which may
be changed only by a vote of the lesser of (i) 67% or more of the Portfolio's
shares present at a meeting if the holders of more than 50% of the outstanding
shares are present in person or represented by proxy, or (ii) more than 50% of
the Portfolio's outstanding shares.
(1) The Portfolio is a "diversified company" as defined in the 1940
Act. The Portfolio will not purchase the securities of any issuer if, as a
result, the Portfolio would fail to be a diversified company within the
meaning of the 1940 Act, and the rules and regulations promulgated
thereunder, as such statute, rules and regulations are amended from time to
time or are interpreted from time to time by the SEC staff (collectively,
the "1940 Act Laws and Interpretations") or except to the extent that the
Portfolio may be permitted to do so by exemptive order or similar relief
(collectively, with the 1940 Act Laws and Interpretations, the "1940 Act
Laws, Interpretations and Exemptions"). In complying with this restriction,
however, the Portfolio may purchase securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(2) The Portfolio may not borrow money or issue senior securities,
except as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Portfolio may not underwrite the securities of other issuers.
This restriction does not prevent the Portfolio from engaging in
transactions involving the acquisition, disposition or resale of its
portfolio securities, regardless of whether the Portfolio may be considered
to be an underwriter under the Securities Act of 1933.
B-13
<PAGE> 23
(4) The Portfolio will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act
Laws, Interpretations and Exemptions) of its investments in the securities
of issuers primarily engaged in the same industry. This restriction does
not limit the Portfolio's investments in (i) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, (ii)
tax-exempt obligations issued by governments or political subdivisions of
governments, or (iii) bank instruments. In complying with this restriction,
the Portfolio will not consider a bank-issued guaranty or financial
guaranty insurance as a separate security.
(5) The Portfolio may not purchase real estate or sell real estate
unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Portfolio from investing
in issuers that invest, deal, or otherwise engage in transactions in real
estate or interests therein, or investing in securities that are secured by
real estate or interests therein.
(6) The Portfolio may not purchase physical commodities or sell
physical commodities unless acquired as a result of ownership of securities
or other instruments. This restriction does not prevent the Portfolio from
engaging in transactions involving futures contracts and options thereon or
investing in securities that are secured by physical commodities.
(7) The Portfolio may not make personal loans or loans of its assets
to persons who control or are under common control with the Portfolio,
except to the extent permitted by 1940 Act Laws, Interpretations and
Exemptions. This restriction does not prevent the Portfolio from, among
other things, purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker-dealers or institutional
investors, or investing in loans, including assignments and participation
interests.
(8) The Portfolio may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the securities
of a single open-end management investment company with substantially the
same fundamental investment objectives, policies and restrictions as the
Portfolio.
The investment restrictions set forth above provide the Portfolio with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Portfolio has this flexibility, the Board of
Trustees of the Trust has adopted non-fundamental restrictions for the Portfolio
relating to certain of these restrictions which the advisor must follow in
managing the Portfolio. Any changes to these non-fundamental restrictions, which
are set forth below, require the approval of the Board of Trustees.
Non-Fundamental Restrictions
The following non-fundamental investment restrictions apply to the Portfolio.
They may be changed without approval of the Portfolio's voting securities. Any
percentage limitations with regard to assets of the Portfolio are applied at the
time the Portfolio purchases or sells securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Portfolio will not, with respect to 100% of its total
assets, purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Portfolio's
total assets would be invested in the securities of that issuer, except as
permitted by Rule 2a-7 under the 1940 Act, or (ii) the Portfolio would hold
more than 10% of the outstanding voting securities of that issuer. The
Portfolio may (i) purchase securities of other investment companies as
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in
securities of other money market funds and lend money to other investment
companies and their series portfolios that have AIM or an affiliate of AIM
as an investment advisor (an "AIM Advised Fund"), subject to the terms and
conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Portfolio may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The Portfolio may
borrow from banks, broker-dealers or an AIM Advised Fund. The Portfolio may
not borrow for leveraging, but may borrow for temporary or emergency
purposes, in anticipation of or in response to adverse market conditions,
or for cash management purposes. The Portfolio may not purchase additional
securities when any borrowings from banks exceed 5% of the Portfolio's
total assets.
(3) In complying with the fundamental restriction regarding industry
concentration, the Portfolio may invest up to 25% of its total assets in
the securities of issuers whose principal business activities are in the
same industry.
(4) In complying with the fundamental restriction with regard to
making loans, the Portfolio may lend up to 33 1/3% of its total assets and
may lend money to another AIM Advised Fund, on such terms and conditions as
the SEC may require in an exemptive order.
(5) Notwithstanding the fundamental restriction on investing all
assets in an open-end fund, the Portfolio may not invest all of its assets
in the securities of a single open-end management investment company with
the same fundamental investment objectives, policies and restrictions as
the Portfolio.
B-14
<PAGE> 24
MANAGEMENT
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 A I M Advisors, Inc. ("AIM"), subject always to the
objective and policies of the Trust and to the general supervision of the
Trust's Board of Trustees. Certain trustees and officers of the Trust are
affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the
parent corporation of AIM.
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations during
at least the last five years are set forth below. Unless otherwise indicated,
the address of each trustee and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5 YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (54) Trustee Director, President and Chief Executive Officer,
Chairman and A I M Management Group Inc.; Director and President,
President A I M Advisors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company; and Director and Chief
Executive Officer, Managed Products, AMVESCAP PLC.
-----------------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (56) Trustee Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer,
McLean, VA 22102 COMSAT Corporation; and Chairman, Board of Governors
of INTELSAT (international communications company).
-----------------------------------------------------------------------------------------------------------------------
OWEN DALY II (76) Trustee Formerly, Director, The Cortland Trust (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life
Baltimore, MD 21210 Insurance Company and Monumental General Insurance
Company; and Chairman of the Board of Equitable
Bancorporation.
-----------------------------------------------------------------------------------------------------------------------
ALBERT R. DOWDEN (59) Trustee Chairman of the Board of Directors, The Cortland
1815 Central Park Drive Trust (investment company) and DHJ Media, Inc.; and
P.O. Box 774000-PMB #222 Director, Magellan Insurance Company. Formerly,
Steamboat Springs, CO 80477 Director, President and Chief Executive Officer,
Volvo Group North America, Inc.; Senior Vice
President, AB Volvo; and Director, The Hertz
Corporation, Genmar Corporation (boat manufacturer),
National Media Corporation and Annuity and Life Re
(Holdings), Ltd.
-----------------------------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (65) Trustee Formerly, Chairman of the Board of Directors,
2 Hopkins Plaza, 8th Floor Mercantile Mortgage Corp., Vice Chairman of the Board
Suite 805 of Directors, President and Chief Operating Officer,
Baltimore, MD 21201 Mercantile-Safe Deposit & Trust Co.; and President,
Mercantile Bankshares.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------
* A trustee who is an "interested person" of the Trust and AIM as defined in
the 1940 Act.
B-15
<PAGE> 25
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5 YEARS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
JACK M. FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc. (foreign
434 New Jersey Avenue, S.E. trading company) and Twenty First Century Group, Inc.
Washington, D.C. 20003 (a governmental affairs company). Formerly,
Member of the U.S. House of Representatives.
-----------------------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (63) Trustee Partner, Kramer Levin Naftalis & Frankel, LLP (law
919 Third Avenue firm).
New York, NY 10022
-----------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS(50) Trustee Formerly, Chief Executive Officer, YWCA of the USA.
370 East 76th Street
New York, NY 10021
-----------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (58) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
-----------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (61) Trustee Executive Vice President, Development and Operations,
The Williams Tower, 50th Floor Hines Interests Limited Partnership (real estate
2800 Post Oak Blvd. development).
Houston, TX 77056
-----------------------------------------------------------------------------------------------------------------------
GARY T. CRUM (53) Senior Vice Director and President, A I M Capital Management,
President Inc.; Director and Executive Vice President, A I M
Management Group Inc.; Director and Senior Vice
President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC.
-----------------------------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (46) Senior Vice Director, Senior Vice President, General Counsel and
President and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary, A I M
Management Group Inc.; Director, Vice President and
General Counsel, Fund Management Company; General
Counsel and Vice President, A I M Fund Services,
Inc.; and Vice President, A I M Capital Management,
Inc. and A I M Distributors, Inc.
-----------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President Vice President and Fund Controller, A I M Advisors,
and Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
-----------------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (57) Vice President 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. and
Fund Management Company.
-----------------------------------------------------------------------------------------------------------------------
KAREN DUNN KELLEY (40) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
-----------------------------------------------------------------------------------------------------------------------
J. ABBOTT SPRAGUE (45) Vice President Director and President, Fund Management Company;
Director, A I M Fund Services, Inc.; and Senior Vice
President, A I M Management Group Inc. and A I M
Advisors, Inc.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------
** A trustee who is an "interested person" of the Trust as defined in the 1940
Act.
B-16
<PAGE> 26
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. Crockett, Daly, Dowden, Dunn
(Chairman), Fields, Frischling, Pennock, Sklar and Dr. Mathai-Davis. The Audit
Committee is responsible for: (i) considering management's recommendations of
independent accountants for each Portfolio and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Portfolios' independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Portfolio's independent
accountants and management.
The members of the Investments Committee are Messrs. Crockett, Daly, Dowden,
Dunn, Fields, Frischling, Pennock, Sklar (Chairman) and Dr. Mathai-Davis. The
Investments Committee is responsible for: (i) overseeing AIM's
investment-related compliance systems and procedures to ensure their continued
adequacy; and (ii) considering and acting, on an interim basis between meetings
of the full Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs. Crockett
(Chairman), Daly, Dowden, Dunn, Fields, Pennock, Sklar and Dr. Mathai-Davis. The
Nominating and Compensation Committee is responsible for: (i) considering and
nominating individuals to stand for election as independent Trustees as long as
the Trust maintains a distribution plan pursuant to Rule 12b-1 under the 1940
Act; (ii) reviewing from time to time the compensation payable to the
independent trustees; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent trustees.
The Nominating and Compensation Committee will consider nominees recommended
by a shareholder to serve as trustees, provided (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which the trustees will be elected,
and (ii) that the Nominating and Compensation Committee or the Board, as
applicable, shall make the final determination of persons to be nominated.
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 AIM. 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. The trustees of the
Trust who do not serve as officers of the Trust are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates. Each such trustee
receives a fee, allocated among such investment companies for which he or she
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
BENEFITS
AGGREGATE ACCRUED TOTAL
COMPENSATION BY ALL COMPENSATION
FROM AIM FROM ALL
TRUSTEE TRUST(1) FUNDS(2) AIM FUNDS(3)
------- ------------ ---------- ------------
<S> <C> <C> <C>
Charles T. Bauer(4)............................. $ 0 $ 0 $ 0
Bruce L. Crockett............................... 4,757 37,485 103,500
Owen Daly II.................................... 4,757 122,898 103,500
Edward K. Dunn, Jr.............................. 4,757 55,565 103,500
Jack Fields..................................... 4,653 15,826 101,500
Carl Frischling(5).............................. 4,757 97,791 103,500
Robert H. Graham................................ 0 0 0
John F. Kroeger(6).............................. 0 40,461 0
Prema Mathai-Davis.............................. 4,657 11,870 101,500
Lewis F. Pennock................................ 4,757 45,766 103,500
Ian W. Robinson(7).............................. 0 94,442 25,000
Louis S. Sklar.................................. 4,636 90,232 101,500
</TABLE>
---------------
(1) The total amount of compensation deferred by all trustees of the Trust
during the fiscal year ended August 31, 2000, including interest earned
thereon, was $42,448.
B-17
<PAGE> 27
(2) During the fiscal year ended August 31, 2000, the total amount of expenses
allocated to the Trust with respect of such retirement benefits was $24,919.
Data reflects compensation for the calendar year ended December 31, 1999.
(3) Each trustee serves as a trustee or director of a total of 12 registered
investment companies advised by AIM. Data reflects compensation for the
calendar year ended December 31, 1999.
(4) Mr. Bauer was a Trustee and officer until September 30, 2000, when he
retired.
(5) The Trust paid the law firm of Kramer Levin Naftalis & Frankel, LLP $4,153
in legal fees for services provided to the Portfolio during the fiscal year
ended August 31, 2000. Mr. Frischling, a trustee of the Trust, is a partner
in such firm.
(6) Mr. Kroeger was a trustee until June 11, 1998. Mr. Kroeger passed away on
November 26, 1998. Mr. Kroeger's widow will receive his pension as described
below under "AIM Funds Retirement Plan for Eligible Directors/Trustees".
(7) Mr. Robinson was a trustee until March 12, 1999, when he retired.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (for purposes of this paragraph only, the "Plan"), each
trustee (who is not an employee of any of the AIM Funds, AIM Management or any
of their affiliates) may be entitled to certain benefits upon retirement from
the Board of Trustees. Pursuant to the Plan, a trustee becomes eligible to
retire and receive full benefits under the Plan when he or she has attained age
65 and has completed at least five years of continuous service with one or more
of the regulated investment companies managed, administered or distributed by
AIM or its affiliates (the "Applicable AIM Funds"). Each eligible trustee is
entitled to receive an annual benefit from the Applicable AIM Funds commencing
on the first day of the calendar quarter coincident with or following his or her
date of retirement equal to a maximum of 75% of the annual retainer paid or
accrued by the Applicable AIM Funds for such trustee during the twelve-month
period immediately preceding the trustee's retirement (including amounts
deferred under a separate agreement between the Applicable AIM Funds and the
trustee) and based on the number of such trustee's years of service (not in
excess of 10 years of service) completed with respect to any of the Applicable
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 all benefits under the Plan, 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 Applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable to
an eligible trustee upon retirement assuming the retainer amount reflected below
and various years of service. The estimated credited years of service for
Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock, Robinson,
Sklar and Dr. Mathai-Davis are 14, 14, 2, 3, 23, 20, 19, 11, 11 and 2 years,
respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
NUMBER OF
YEARS OF
SERVICE WITH ESTIMATED
APPLICABLE ANNUAL BENEFITS
AIM FUNDS UPON RETIREMENT
------------ ---------------
<S> <C>
10................................................ $75,000
9................................................ $67,500
8................................................ $60,000
7................................................ $52,500
6................................................ $45,000
5................................................ $37,500
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Trustees") have each executed a
Deferred Compensation Agreement (collectively, the "Compensation Agreements").
Pursuant to the Compensation Agreements, the Deferring Trustees 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 (5) or ten (10) years (depending on the
Compensation Agreement) 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
B-18
<PAGE> 28
distribution of amounts in his or her deferral account, the balance of the
deferral account will be distributed to his or her designated beneficiary in a
single lump sum payment as soon as practicable after such Deferring Trustee's
death. The Compensation Agreements are not funded and, with respect to the
payments of amounts held in the deferral accounts, the Deferring Trustees have
the status of unsecured creditors of the Trust and of each other AIM Fund from
which they are deferring compensation.
During the fiscal year ended August 31, 2000, $8,934 in trustees' fees and
expenses were allocated to the Portfolio.
INVESTMENT ADVISOR
AIM is a wholly owned subsidiary of AIM Management, a holding company that has
been engaged in the financial services business since 1976. AIM, together with
its subsidiaries advises, manages or administers over 120 investment portfolios
encompassing a broad range of investment objectives. The address of AIM is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM Management is an
indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London
EC2M 4YR, United Kingdom. AMVESCAP PLC and its subsidiaries are an independent
investment management group engaged in institutional investment management and
retail fund businesses in the United States, Europe and the Pacific Region.
Certain of the directors and officers of AIM are also executive officers of the
Trust and their affiliations are shown under "Trustees and Officers."
FMC is a registered broker-dealer and wholly owned subsidiary of AIM. FMC acts
as distributor of the shares of the Portfolio.
AIM and the Trust have adopted a Code of Ethics which requires investment
personnel and certain other employees to (a) pre-clear all personal securities
transactions subject to the Code of Ethics; (b) file reports regarding such
transactions; (c) 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 (subject to a de minimis
exception), and (iii) transactions involving securities being considered for
investment by an AIM Fund (subject to the de minimis exception); and (d) abide
by certain other provisions of the Code of Ethics. The de minimis exception
under the Code of Ethics covers situations where there is no material conflict
of interest because of the large market capitalization of a security and the
relatively small number of shares involved in a personal transaction. The Code
of Ethics also generally prohibits AIM employees from purchasing securities in
initial public offerings. Personal trading reports are periodically reviewed by
AIM, and the Board of Trustees reviews quarterly and annual reports (which
summarize any significant violations of the Code of Ethics). Sanctions for
violating the Code of Ethics may include censure, monetary penalties, suspension
or termination of employment.
The Trust has entered into a Master Investment Advisory Agreement, dated June
1, 2000 (the "Advisory Agreement") with AIM. A prior investment advisory
agreement with similar terms to the Advisory Agreement was in effect prior to
June 1, 2000. The Advisory Agreement will remain in effect until June 30, 2001
and continue from year to year, only if such continuance 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' written notice without penalty. The Advisory Agreement terminates
automatically in the event of its assignment, as defined in the 1940 Act.
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.
As compensation for its advisory services with respect to the Portfolio, AIM
receives a monthly fee which is calculated by applying a maximum annual rate of
0.10% to the average daily net assets of the Portfolio.
Pursuant to the advisory agreement in effect prior to June 1, 2000 and the
current Advisory Agreement, which provide for the same level of compensation,
AIM received fees (net of waivers, if any) from the Trust for the fiscal year
ended August 31, 2000 and 1999, with respect to the Portfolio in the amount of
$0 and $232,220, respectively. For the fiscal year ended August 31, 2000 and
1999, AIM waived fees with respect to the Portfolio in the amount of $623,378
and $232,220, respectively.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus
may not be terminated or amended to the Portfolio's detriment during the period
stated in the agreement between AIM and the Trust.
In addition, if the Portfolio engages in securities lending, AIM will provide
the Portfolio investment advisory services and related administrative services.
The Advisory Agreement describes the administrative services to be rendered by
AIM if the
B-19
<PAGE> 29
Portfolio engages in securities lending activities, as well as the compensation
AIM may receive for such administrative services. Services to be provided
include: (a) overseeing participation in the securities lending program to
ensure compliance with all applicable regulatory and investment guidelines; (b)
assisting the securities lending agent or principal (the agent) in determining
which specific securities are available for loan; (c) monitoring the agent to
ensure that securities loans are effected in accordance with AIM's instructions
and with procedures adopted by the Board; (d) preparing appropriate periodic
reports for, and seeking appropriate approvals from, the Board with respect to
securities lending activities; (e) responding to agent inquiries; and (f)
performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the fund from such activities. AIM currently intends to waive such fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
ADMINISTRATIVE SERVICES
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement between AIM and the Trust (the "Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM performs, or arranges for the
performance of, accounting and other administrative services for the Portfolio.
As full compensation for the performance of such services, AIM is paid 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 her 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 payments must be
annually approved, and the amounts paid will be periodically reviewed, by the
Trust's Board of Trustees.
Pursuant to a prior administrative services agreement and the current
Administrative Services Agreement, AIM was paid in the amount of $150,815 and
$58,583, respectively, for fund accounting services to the Portfolio for the
fiscal year ended August 31, 2000 and 1999.
EXPENSES
In addition to fees paid to AIM pursuant to the Advisory 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 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.
B-20
<PAGE> 30
TRANSFER AGENT AND CUSTODIAN
A I M Fund Services, Inc., ("AFS"), a wholly owned subsidiary of AIM, P.O. Box
0843, Houston, Texas 77001-0843, acts as transfer agent for the shares of all
classes of the Portfolio pursuant to a Transfer Agency and Service Agreement.
For services it provides to the Trust, AFS is entitled to receive a fee based on
the average daily net assets of the Trust, plus out-of-pocket expenses and
advances it has incurred. Such compensation may be changed from time to time as
is agreed to by AFS and the Trust. As transfer agent, AFS processes orders for
purchases, redemptions and exchanges of shares; prepares and transmits payments
for dividends and distributions declared by the Portfolio; maintains shareholder
accounts; and provides shareholders with information regarding the Portfolio and
its accounts.
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. BONY maintains the portfolio securities owned by the Portfolio,
administers the purchases and sales of portfolio securities, collects interest
and other distributions made on securities held by the Portfolio and performs
other ministerial duties.
SUB-ACCOUNTING
The Trust and FMC have arranged for AFS or the Portfolio to offer
sub-accounting services to shareholders of the Portfolio and to maintain
information with respect to the underlying beneficial ownership of the shares of
each class of the Portfolio. Investors who purchase shares of the Portfolio for
the account of others can make arrangements through the Trust or FMC for these
sub-accounting services. In addition, shareholders utilizing certain versions of
AIM LINK--Registered Trademark-- Remote, a personal computer application
software product, may receive sub-accounting services via such software.
B-21
<PAGE> 31
PRINCIPAL HOLDERS OF SECURITIES
GOVERNMENT & AGENCY 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 each class of the Government
& Agency Portfolio as of December 22, 2000, and the percentage of such shares
owned by such shareholders as of such date are as follows:
CASH MANAGEMENT CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Ferris, Baker Watts, Inc.................................. 35.89% --
1700 Pennsylvania Ave.
Washington, DC 20006
Fund Services Advisors, Inc............................... 33.58% --
1875 Century Park East -- Suite 1345
Los Angeles, CA 90067
Gardnyr Michael Capital, Inc.............................. 6.62% --
2281 Lee Road, Suite 104
Winter Park, FL 32789
Mayor And City Council of Baltimore....................... 5.39% --
100 Guilford Ave.
Baltimore, MD 21202
</TABLE>
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Bank of America N.A....................................... 16.09% --
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
Gardnyr Michael Capital, Inc.............................. 14.86% --
2281 Lee Road, Suite 104
Winter Park, FL 32789
A I M Advisors, Inc....................................... -- 14.78%(b)
AIM Fund of Funds Account
Money Market Portfolio Admin.
11 Greenway Plaza, Suite 100
Houston, TX 77046
Hambrecht & Quist LLC..................................... 8.94% --
230 Park Avenue, 19th Floor
New York, NY 10169
Mid Atlantic Institutional Shares, Inc.................... 6.57% --
336 Fourth Ave.
Pittsburgh, PA 15222
Invesco Retirement Plan Services.......................... 6.30% --
1201 Peachtree Street
Atlanta, GA 30361
</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)Represents shares held in a cash management account for the benefit of
certain AIM Funds. AIM has the power to direct the disposition of such
shares, and thus is deemed to be a beneficial owner of the shares. Shares
have been acquired in accordance with an exemptive order issued by the SEC.
B-22
<PAGE> 32
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Waukesha County........................................... 5.05% --
Finance Division, Dept Of Admin.
1320 Pewaukee Road, Suite 310
Waukesha, WI 53188-3878
</TABLE>
PERSONAL INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Bank of Springfield Government Sweep Investment........... 81.16% --
3400 West Wabash
Springfield, IL 62707
Bancorp South Investments................................. 7.27% --
525 E. Capital Street
Jackson, MS 39201
STAR Financial Bank....................................... 5.86% --
1900 W. 50th Street
Marion, IN 46953
Deposit Guaranty National Bank............................ 5.65% --
210 E. Capitol Street
Jackson, MS 39201
</TABLE>
PRIVATE INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Fund Services Advisors, Inc............................... 50.55% --
1875 Century Park East, Suite 1345
Los Angeles, CA 90067
First Union Subaccounts................................... 22.22% --
8739 Research Drive
Charlotte, NC 28262-0675
Huntington Capital Corp................................... 12.06% --
41 S. High Street, Ninth Floor
Columbus, OH 43287
Huntington Investment..................................... 6.86% --
135 North Pennsylvania, Suite 800
Indianapolis, IN 46204
</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-23
<PAGE> 33
RESERVE CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
STAR Financial Bank....................................... 29.57% --
1900 W. 50th Street
Marion, IN 46953
Community Bank............................................ 23.68% --
500 S. Morgan
Granbury, TX 76048
Signal Securities Inc..................................... 19.94% --
700 Throckmorton Street
Fort Worth, TX 76102
Marc Drake & Denese Drake................................. -- 14.21%
124 Mont Blanc
Heath, TX 75032
First National Banker's Bank.............................. 12.59% --
P.O. Drawer 80579
Baton Rouge, LA 70898
</TABLE>
RESOURCE CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Sovereign Bank............................................ 30.01% --
280 Trumbull Street
Hartford, CT 06103
City of Chicago........................................... 26.33% --
121 North LaSalle Street
Chicago, IL 60603
City of Chicago G.O. Bonds for City Colleges.............. 25.32% --
121 North LaSalle Street
Chicago, IL 60603
Craigie Incorporated...................................... 5.05% --
P.O. Box 29715
Richmond, VA 23242
</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-24
<PAGE> 34
GOVERNMENT 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 each class of the Government
TaxAdvantage Portfolio as of December 22, 2000 and the percentage of such shares
owned by such shareholders as of such date are as follows:
CASH MANAGEMENT CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- -------- -------------
<S> <C> <C>
CIBC World Markets........................................ 54.45% --
200 Liberty Street
New York, NY 10281
Harvey & Brenda Erp....................................... -- 35.60%
2950 SW 53rd Street
Ocula, FL 34474
Woodforest Sweep Account.................................. 7.22% --
3101 West Davis
Conroe, TX 77304
</TABLE>
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- -------- -------------
<S> <C> <C>
Hambrecht & Quist LLC..................................... 53.42% --
230 Park Avenue, 19th Floor
New York, NY 10169
Frost National Bank....................................... 12.30% --
P.O. Box 2479
San Antonio, TX 78298-2479
First Trust / Var & Co.................................... 8.06% --
180 East Fifth Street
St. Paul, MN 55101
Bank of America N.A....................................... 6.69% --
1401 Elm Street, 11th Floor
P.O. Box 831000
Dallas, TX 75202 2911
The Trust Company of Oklahoma............................. 6.64% --
P.O. Box 3688
Tulsa, OK 74101 3688
</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-25
<PAGE> 35
PRIVATE INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- -------- -------------
<S> <C> <C>
Bank of New York.......................................... 60.57%(b) --
One Wall Street
5th Floor
New York, NY 10286
First Union Securities, Inc............................... 29.54% --
8739 Research Drive
Charlotte, NC 28262-0675
Huntington Capital Corp................................... 6.63% --
41 S High St., Ninth Floor
Columbus, OH 43287
</TABLE>
RESERVE CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Morgan Stanley Dean Witter................................ 100.00%(b) --
1 Piermont Plaza, 7th Floor
Brooklyn, NY 11201
</TABLE>
RESOURCE CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Morgan Stanley Dean Witter................................ 84.30%(b) --
1 Piermont Plaza, 7th Floor
Brooklyn, NY 11201
First Union Securities, Inc............................... 13.80% --
8739 Research Drive
Charlotte, NC 28262-0675
</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 owns 25% or more of the outstanding shares of a Portfolio
may be presumed to be in "control" of such Portfolio as defined in the 1940
Act.
B-26
<PAGE> 36
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 each class of the Treasury
Portfolio as of December 22, 2000 and the percentage of such shares owned by
such shareholders as of such date are as follows:
CASH MANAGEMENT CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Bank of New York.......................................... 44.34% --
One Wall Street
5th Floor
New York, NY 10286
Bank of Oklahoma.......................................... 14.52% --
P.O. Box 2180
Tulsa, OK 74101
Chase Bank of Texas....................................... 11.80% --
600 Travis Street, 8th Fl
Houston, TX 77252-8009
CIBC World Markets........................................ 7.11% --
200 Liberty Street
New York, NY 10281
Huntington Capital Corp................................... 6.17% --
41 S. High Street, Ninth Floor
Columbus, OH 43287
Fund Services Advisors, Inc............................... 5.05% --
1875 Century Park East -- Suite 1345
Los Angeles, CA 90067
</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-27
<PAGE> 37
INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
City of New York Deferred Compensation Plan............... 8.92% --
40 Rector Street, 3rd Floor
New York, NY 10006
State Street Bank & Trust................................. 7.38% --
108 Myrtle Street
North Quincy, MA 02171
Star Trust................................................ 7.26% --
425 Walnut St.
Mail Location 7155
Cincinnati, OH 45202
Trust Company Bank........................................ 7.25% --
Center 3139
P.O. Box 105504
Atlanta, GA 30348
Trustmark National Bank................................... 5.33% --
Trust Department
248 East Capitol
Jackson, MS 39205
Texas Commerce Bank National Association.................. 5.24% --
1585 Broadway
New York, NY 10036
Chase Bank of Texas, National Association................. 5.24% --
600 Travis, 9th Floor
Houston, TX 77002
The Illinois Funds Money Market Account................... 5.24% --
300 West Jefferson
Springfield, IL 62702
Weststar Bank Trust Dept.................................. 5.24% --
P.O. Box 1156
Bartlesville, OK 74005-1156
</TABLE>
PERSONAL INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT
OWNED OF PERCENT OWNED
NAME AND ADDRESS RECORD OF RECORD AND
OF RECORD OWNER ONLY (a) BENEFICIALLY
---------------- ------------ -------------
<S> <C> <C>
Cullen/Frost Discount Brokers............................. 85.04% --
P.O. Box 2358
San Antonio, TX 78299
Kinco & Co. C/O Rnb Securities............................ 5.64% --
1 Hanson Pl., Lower Level
Brooklyn, NY 11243
</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-28
<PAGE> 38
PRIVATE INVESTMENT CLASS
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY (a) BENEFICIALLY
---------------- --------------- -------------
<S> <C> <C>
Bank of New York........................................ 46.37% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
TRA Rights Trust........................................ 7.23% --
101 Canyon Crest Drive
Alpine, UT 84004
Huntington Capital Corp................................. 7.01% --
41 S. High Street, Ninth Floor
Columbus, OH 43287
Zions First National Bank (NV).......................... 6.45% --
P.O. Box 30880
Salt Lake City, UT 84130
Zions First National Bank (Co).......................... 5.45% --
P.O. Box 30880
Salt Lake City, UT 84130
Bank One Trust Company.................................. 5.20% --
1111 Polaris Parkway
Columbus, OH 43240
</TABLE>
RESERVE CLASS
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY (a) BENEFICIALLY
---------------- --------------- -------------
<S> <C> <C>
Bank of New York........................................ 99.61% --
440 Mamoroneck, 5th Floor
Harrison, NY 10528
</TABLE>
RESOURCE CLASS
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY (a) BENEFICIALLY
---------------- --------------- -------------
<S> <C> <C>
First Union Subaccounts................................. 65.69% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
City of Chicago G.O. Bonds for City Colleges............ 10.44% --
121 North LaSalle Street
Room 204
Chicago, IL 60603
Mellon Bank NA.......................................... 8.76% --
P.O. Box 710
Pittsburgh, PA 15230-0710
</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.
To the best of the knowledge of the Trust, as of December 22, 2000, the
trustees and officers of the Trust as a group beneficially owned less than 1% of
the outstanding shares of each class of each Portfolio of the Trust.
B-29
<PAGE> 39
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends with respect to each class of the Portfolio are declared to
shareholders of record as of 3:00 p.m. Eastern time on the date of declaration.
Accordingly, dividends accrue on the first day that a purchase order for shares
of a particular class is effective, provided that the purchase order has been
accepted prior to 3:00 p.m. Eastern time and payment in the form of federal
funds wired has been received by AFS. Dividends do not accrue on the day that a
redemption order is effective, unless the redemption is effective after 3:00
p.m. Eastern time on that day and redemption proceeds have not been wired to the
shareholder on the same day. Thus, if a purchase order is accepted prior to 3:00
p.m. Eastern time, the shareholder will receive its pro rata share of dividends
beginning with those declared on that day.
Dividends and distributions are paid in cash unless the shareholder has
elected to have such dividends and distributions reinvested in the form of
additional full and fractional shares at the net asset value thereof. Such
election, or any revocation thereof, must be made in writing and sent by the
shareholder to the AFS at P.O. Box 0843, Houston, Texas 77001-0843. Such
election or revocation will be effective with dividends paid after it is
received by the transfer agent.
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.
If a shareholder redeems all the shares in his 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. Information concerning
the amount of the dividends declared on any particular day will normally be
available by 4:00 p.m. Eastern time on that day.
The dividend accrued and paid for each class of shares of the Portfolio will
consist of: (a) interest accrued and original issue discount earned less
amortization of premiums, if any, for the Portfolio, allocated based upon such
class' pro rata share of the total shares outstanding which relate to the
Portfolio, less (b) Trust expenses accrued for the applicable dividend period
attributable to the Portfolio, such as custodian fees and accounting expenses,
allocated based upon each such class' pro rata share of the net assets of the
Portfolio, less (c) expenses directly attributable to each class which are
accrued for the applicable dividend period, such as distribution expenses, if
any.
Should the Trust incur or anticipate any unusual expense, loss or
depreciation, which would adversely affect the net asset value per share of the
Portfolio or the net income per share of a class of the Portfolio for a
particular period, the Board of Trustees would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of then prevailing circumstances. For example, if the net asset value per share
of the Portfolio were reduced, or were anticipated to be reduced, below $1.00,
the Board of Trustees might suspend further dividend payments on shares of the
Portfolio until the net asset value returns to $1.00. Thus, such expense or loss
or depreciation might result in a shareholder receiving no dividends for the
period during which it held shares of the Portfolio and/or in its receiving upon
redemption a price per share lower than that which it paid.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
each Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each 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 (a) must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated invest-
B-30
<PAGE> 40
ment 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 (b) must satisfy an
asset diversification test in order to qualify for tax purposes as a regulated
investment company (the "Asset Diversification Test"). Under the Asset
Diversification 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.
The Portfolio may either retain or distribute to shareholders its net capital
gain (net long-term capital gain over net short-term capital loss), if any, for
each taxable year. The Portfolio currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Portfolio prior to the date on which the
shareholder acquired his shares.
Distributions by the Portfolio that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares.
Distributions by 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 a class of the Portfolio (or of another AIM Fund).
Shareholders receiving a distribution in the form of additional shares will be
treated as receiving a distribution in an amount equal to the fair market value
of the shares received, determined as of the reinvestment date.
Ordinarily, shareholders are required to take distributions by the Portfolio
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Portfolio) on December
31 of such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the Internal Revenue
Service.
The Portfolio will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of dividends, and the proceeds of redemption shares, paid to
any shareholder (1) who has provided either an incorrect tax identification
number or no num-
B-31
<PAGE> 41
ber 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 loss so recognized may be disallowed if the shareholder purchases
other shares of the Portfolio 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 (taxable at a maximum rate of
20% for noncorporate shareholders) 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 gain 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.
Foreign persons who file a United States tax return 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 transfer agent.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on December
29, 2000. 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. Shareholders are urged to
consult their tax advisers as to the consequences of these and other state and
local tax rules affecting investment in the Trust.
B-32
<PAGE> 42
MISCELLANEOUS
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania serves as counsel to the Trust, and passes upon legal matters for
the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The Trust will furnish 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 will be audited by the Trust's independent auditors. Due to
an investment in the Portfolio, which KPMG LLP represented to the Trust was
inadvertent, and new SEC rules regarding auditor independence, KPMG LLP resigned
as independent public accountants for the Trust as of December 28, 2000. The
Board of Trustees of the Trust has selected Tait, Weller & Baker, Eight Penn
Center Plaza, Philadelphia, Pennsylvania 19103, as independent public
accountants to audit the financial statements of the Portfolio.
B-33
<PAGE> 43
FINANCIAL STATEMENTS
FS
<PAGE> 44
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
Government & Agency Portfolio (a series portfolio of Short-Term Investments
Trust), including the schedule of investments, as of August 31, 2000, and the
related statement of operations, the statement of changes in net assets, and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The financial statements and financial
highlights for the period ended August 31, 1999 were audited by other auditors
whose report dated October 1, 1999 expressed an unqualified opinion on such
financial statements and financial highlights.
We conducted our audit 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, 2000, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Government & Agency Portfolio as of August 31, 2000, the results of its
operations, the changes in its net assets, and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
December 29, 2000
Philadelphia, Pennsylvania
FS-1
<PAGE> 45
SCHEDULE OF INVESTMENTS
August 31, 2000
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY DISCOUNT NOTES(a) - 25.05%
FEDERAL HOME LOAN MORTGAGE CORP.(b) - 7.75%
6.06% 09/08/00 $10,000 $ 9,988,217
-------------------------------------------------------------------------------
6.12% 09/20/00 7,515 7,490,726
-------------------------------------------------------------------------------
6.41% 12/15/00 20,000 19,626,083
-------------------------------------------------------------------------------
6.45% 01/04/01 10,000 9,776,042
-------------------------------------------------------------------------------
6.45% 01/05/01 10,000 9,774,250
-------------------------------------------------------------------------------
6.40% 01/10/01 10,000 9,767,111
-------------------------------------------------------------------------------
6.45% 01/31/01 10,000 9,727,667
-------------------------------------------------------------------------------
76,150,096
-------------------------------------------------------------------------------
MEDIUM TERM NOTES - 1.02%
6.88% 08/28/01 10,000 10,000,000
-------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.28%
6.06% 09/14/00 15,000 14,967,175
-------------------------------------------------------------------------------
6.07% 09/21/00 20,000 19,932,555
-------------------------------------------------------------------------------
6.17% 09/28/00 10,000 9,953,725
-------------------------------------------------------------------------------
6.14% 10/05/00 10,000 9,942,011
-------------------------------------------------------------------------------
6.17% 10/05/00 10,000 9,941,775
-------------------------------------------------------------------------------
6.16% 10/12/00 10,000 9,929,844
-------------------------------------------------------------------------------
6.17% 10/19/00 10,000 9,917,733
-------------------------------------------------------------------------------
6.22% 10/19/00 10,000 9,917,067
-------------------------------------------------------------------------------
6.65% 11/22/00 10,000 9,848,528
-------------------------------------------------------------------------------
6.55% 12/07/00 25,000 24,558,785
-------------------------------------------------------------------------------
6.50% 12/21/00 11,914 11,675,224
-------------------------------------------------------------------------------
6.47% 01/11/01 10,000 9,762,767
-------------------------------------------------------------------------------
6.45% 01/25/01 10,000 9,738,619
-------------------------------------------------------------------------------
160,085,808
-------------------------------------------------------------------------------
Total U.S. Government Agency Discount Notes (Cost
$246,235,904) 246,235,904
===============================================================================
Total Investments (excluding Repurchase
Agreements) 246,235,904
===============================================================================
</TABLE>
FS-2
<PAGE> 46
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS(b) - 75.48%
Banc One Capital Markets, Inc.
6.67%(c) 09/01/00 $ 47,000 $ 47,000,000
------------------------------------------------------------------------
Barclays Capital Inc.
6.68%(d) 09/01/00 47,000 47,000,000
------------------------------------------------------------------------
BNP Capital Markets, LLC
6.68%(e) 09/01/00 242,000 242,000,000
------------------------------------------------------------------------
Dean Witter Reynolds, Inc.
6.67%(f) 09/01/00 47,000 47,000,000
------------------------------------------------------------------------
First Union Capital Markets Corp.
6.67%(g) 09/01/00 47,000 47,000,000
------------------------------------------------------------------------
Salomon Smith Barney Inc.
6.67%(h) -- 41,000 41,000,000
------------------------------------------------------------------------
SG Cowen Securities Corp.
6.68%(i) 09/01/00 242,000 242,000,000
------------------------------------------------------------------------
Westdeutsche Landesbank Girozentrale
6.67%(j) 09/01/00 29,066 29,066,462
------------------------------------------------------------------------
Total Repurchase Agreements (Cost
$742,066,462) 742,066,462
------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.53% (COST
$988,302,366)(k) 988,302,366
------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.53)% (5,213,950)
========================================================================
NET ASSETS - 100.00% $983,088,416
========================================================================
</TABLE>
FS-3
<PAGE> 47
NOTES TO SCHEDULE OF INVESTMENTS:
(a) U.S. Agency Discount Notes 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) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Portfolio upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value is at least 102% of the
sales price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 08/31/00 with a maturing value of
$250,046,319. Collateralized by $261,934,000 U.S. Government obligations,
0% due 10/06/00 to 03/01/01 with an aggregate market value at 08/31/00 of
$255,003,949.
(d) Joint repurchase agreement entered into 08/31/00 with a maturing value of
$337,904,727. Collateralized by $344,076,000 U.S. Government obligations,
5.47% to 7.63% due 02/15/02 to 09/15/09 with an aggregate market value at
08/31/00 of $344,599,443.
(e) Joint repurchase agreement entered into 08/31/00 with a maturing value of
$500,092,778. Collateralized by $649,836,000 U.S. Government obligations,
0% to 7.13% due 09/01/00 to 11/15/21 with a market value at 08/31/00 of
$510,000,646.
(f) Joint repurchase agreement entered into 08/31/00 with a maturing value of
$150,027,792. Collateralized by $154,491,000 U.S. Government obligations,
0% to 7.75% due 09/01/00 to 05/23/11 with an aggregate market value at
08/31/00 of $153,000,708.
(g) Joint repurchase agreement entered into 08/31/00 with a maturing value of
$200,037,056. Collateralized by $204,839,000 U.S. Government obligations,
0% to 8.25% due 10/02/00 to 04/01/36 with an aggregate market value at
08/31/00 of $204,000,606.
(h) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $1,014,955,000 U.S Government obligations, 0% to 9.375%
due 09/01/00 to 05/15/30 with an aggregate market value at 08/31/00 of
$935,151,358.
(i) Joint repurchase agreement entered into 08/31/00 with a maturing value of
$500,092,778. Collateralized by $520,898,000 U.S. Government obligations,
0% to 8.88% due 06/21/01 to 08/15/17 with an aggregate market value at
08/31/00 of $510,240,768.
(j) Joint repurchase agreement entered into 08/31/00 with a maturing value of
$75,013,896. Collateralized by $77,459,000 U.S. Government obligations,
5.13% to 7.63% due 03/15/02 to 10/15/08 with a market value at 08/31/00 of
$76,500,286.
(k) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-4
<PAGE> 48
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements at value (amortized
cost) $246,235,904
------------------------------------------------------------------------------
Repurchase agreements (amortized cost) 742,066,462
------------------------------------------------------------------------------
Interest receivable 145,170
------------------------------------------------------------------------------
Investment for deferred compensation plan 11,826
------------------------------------------------------------------------------
Other assets 46
------------------------------------------------------------------------------
Total assets 988,459,408
------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 5,246,338
------------------------------------------------------------------------------
Deferred compensation plan 11,826
------------------------------------------------------------------------------
Accrued advisory fees 1,806
------------------------------------------------------------------------------
Accrued administrative services fees 13,975
------------------------------------------------------------------------------
Accrued distribution fees 80,538
------------------------------------------------------------------------------
Accrued trustees' fees 1,454
------------------------------------------------------------------------------
Accrued transfer agent fees 11,100
------------------------------------------------------------------------------
Accrued operating expenses 3,955
------------------------------------------------------------------------------
Total liabilities 5,370,992
------------------------------------------------------------------------------
Net assets applicable to shares outstanding $983,088,416
==============================================================================
NET ASSETS:
Institutional Class $399,390,022
==============================================================================
Private Investment Class $109,496,204
==============================================================================
Personal Investment Class $ 14,425,600
==============================================================================
Cash Management Class $223,494,784
==============================================================================
Reserve Class $ 2,661,843
==============================================================================
Resource Class $233,619,963
==============================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Institutional Class 399,389,878
==============================================================================
Private Investment Class 109,496,235
==============================================================================
Personal Investment Class 14,425,600
==============================================================================
Cash Management Class 223,494,913
==============================================================================
Reserve Class 2,661,839
==============================================================================
Resource Class 233,619,951
==============================================================================
Net asset value, offering and redemption price per share for all
classes $1.00
==============================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 49
STATEMENT OF OPERATIONS
For the year ended August 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $37,950,109
------------------------------------------------------------------
EXPENSES:
Advisory fees 623,378
------------------------------------------------------------------
Administrative services fee 150,815
------------------------------------------------------------------
Custodian fees 29,754
------------------------------------------------------------------
Distribution fees:
Private Investment Class 321,807
------------------------------------------------------------------
Personal Investment Class 30,106
------------------------------------------------------------------
Cash Management Class 147,900
------------------------------------------------------------------
Resource Class 209,243
------------------------------------------------------------------
Reserve Class 9,540
------------------------------------------------------------------
Transfer agent fees 102,586
------------------------------------------------------------------
Trustees' fees 8,934
------------------------------------------------------------------
Other 137,547
------------------------------------------------------------------
Total expenses 1,771,610
------------------------------------------------------------------
Less: Fee waiver and expense reimbursement (843,100)
------------------------------------------------------------------
Net expenses 928,510
------------------------------------------------------------------
Net investment income 37,021,599
------------------------------------------------------------------
Net increase in net assets resulting from operations $37,021,599
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 50
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 2000 and 1999
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31,
2000 1999
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 37,021,599 $ 11,215,411
------------------------------------------------------------------------------
Net increase in net assets resulting from opera-
tions 37,021,599 11,215,411
------------------------------------------------------------------------------
Distributions to shareholders from net investment
income:
Institutional Class (17,899,952) (5,533,351)
------------------------------------------------------------------------------
Private Investment Class (3,672,868) (1,913,875)
------------------------------------------------------------------------------
Personal Investment Class (240,085) --
------------------------------------------------------------------------------
Cash Management Class (8,847,397) (3,191,932)
------------------------------------------------------------------------------
Reserve Class (52,966) --
------------------------------------------------------------------------------
Resource Class (6,308,331) (576,253)
------------------------------------------------------------------------------
Share transactions - net:
Institutional Class 259,529,935 139,859,943
------------------------------------------------------------------------------
Private Investment Class 66,968,191 42,528,044
------------------------------------------------------------------------------
Personal Investment Class 14,425,600 --
------------------------------------------------------------------------------
Cash Management Class 138,381,530 85,113,383
------------------------------------------------------------------------------
Reserve Class 2,661,839 --
------------------------------------------------------------------------------
Resource Class 221,936,209 11,683,742
------------------------------------------------------------------------------
Net increase in net assets 703,903,304 279,185,112
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 279,185,112 --
------------------------------------------------------------------------------
End of year $983,088,416 $279,185,112
==============================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $983,088,416 $279,185,112
------------------------------------------------------------------------------
$983,088,416 $279,185,112
==============================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS
August 31, 2000
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 three portfolios, each of which offers separate series of shares:
the Treasury Portfolio, the Government & Agency Portfolio and the Government
TaxAdvantage Portfolio (formerly the Treasury TaxAdvantage Portfolio). The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Government & Agency Portfolio (the "Portfolio"). The Portfolio consists
of six separate classes of shares: the Institutional Class, the Private
Investment Class, the Personal Investment Class, the Cash Management Class, the
Reserve Class and the Resource Class. Matters affecting each class are voted on
exclusively by the shareholders of each class. The Portfolio is a money market
fund whose investment objective is to maximize current income consistent with
the preservation of capital and the maintenance of liquidity.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Portfolio in the preparation of
its financial statements.
A. Security Valuations - The Portfolio's securities are valued on the basis of
amortized cost which approximates market value as permitted under Rule 2a-7
of the 1940 Act. This method values a security at its cost on the date of
purchase and thereafter assumes a constant amortization to maturity of any
discount or premium.
B. Securities Transactions and Investment Income - 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 recorded on the accrual basis from settlement date.
C. Distributions - It is the policy of the Portfolio to declare dividends from
net investment income daily and pay on the first business day of the
following month.
D. 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.
E. Expenses - Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2 - INVESTMENT 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 investment advisory
agreement, AIM receives a monthly fee with respect to the Portfolio at the
annual rate of 0.10% of the average daily net assets of the Portfolio. During
the year ended August 31, 2000, AIM waived fees of $623,378 and reimbursed
expenses of $7,628.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended August 31, 2000, AIM was
paid $150,815 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended, August 31, 2000, AFS was
paid $77,911 for such services.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan ("the Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, the Cash Management Class, the
Reserve Class and the Resource Class of the Portfolio. The Plan provides that
the Private Investment
FS-8
<PAGE> 52
Class, the Personal Investment Class, the Cash Management Class, the Reserve
Class and the Resource Class pay up to the maximum annual rate of 0.50%, 0.75%,
0.10%, 1.00% and 0.20%, respectively, of the average daily net assets
attributable to such class. Of this amount, the Fund may pay a service fee of
(a) 0.25% of the average daily net assets of each of the Private Investment
Class, the Personal Investment Class and the Reserve Class, (b) 0.10% of the
average daily net assets of the Cash Management Class and (c) 0.20% of the
average daily net assets of the Resource Class, to selected banks, broker-
dealers and other financial institutions who offer continuing personal
shareholder services to their customers who purchase and own shares of the
Private Investment Class, the Personal Investment Class, the Cash Management
Class, the Reserve Class or the Resource 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 each
class. Currently, FMC has elected to waive a portion of its compensation
payable by the Fund such that compensation paid pursuant to the Plan with
respect to the Private Investment Class, the Personal Investment Class, the
Cash Management Class, the Reserve Class and the Resource Class equals the
maximum annual rate of 0.30%, 0.50%, 0.08%, 0.80% and 0.16%, respectively, of
the average daily net assets attributable to such class. During the year ended
August 31, 2000, the Private Investment Class, the Personal Investment Class,
the Cash management Class, the Reserve Class and the Resource Class paid
$193,084, $20,071, $118,320, $7,632 and $167,395, respectively, as compensation
under the Plan and FMC waived fees of $212,094.
Certain officers and trustees of the Fund are officers of AIM, FMC, and AFS.
During the year ended August 31, 2000, the Portfolio paid legal fees of $4,153
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Board of Trustees. A member of that firm is a trustee of the Fund.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are 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 during the years ended August 31, 2000 and 1999
were as follows:
<TABLE>
<CAPTION>
2000 1999
------------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 5,049,011,141 $ 5,049,011,141 596,607,970 $ 596,607,970
-------------------------------------------------------------------------------------
Private Investment
Class 223,917,108 223,917,108 101,447,592 101,447,592
-------------------------------------------------------------------------------------
Personal Investment
Class* 30,148,500 30,148,500 -- --
-------------------------------------------------------------------------------------
Cash Management Class 606,494,133 606,494,133 281,678,849 281,678,849
-------------------------------------------------------------------------------------
Reserve Class* 14,985,036 14,985,036 -- --
-------------------------------------------------------------------------------------
Resource Class 743,203,426 743,203,426 167,590,664 167,590,664
-------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 9,186,364 9,186,364 3,376,023 3,376,023
-------------------------------------------------------------------------------------
Private Investment
Class 3,099,686 3,099,686 1,572,109 1,572,109
-------------------------------------------------------------------------------------
Personal Investment
Class* 2,529 2,529 -- --
-------------------------------------------------------------------------------------
Cash Management Class 7,900,071 7,900,071 2,457,651 2,457,651
-------------------------------------------------------------------------------------
Reserve Class* 40,333 40,333 -- --
-------------------------------------------------------------------------------------
Resource Class 1,269,456 1,269,456 383,792 383,792
-------------------------------------------------------------------------------------
Reacquired:
Institutional Class (4,798,667,570) (4,798,667,570) (460,124,050) (460,124,050)
-------------------------------------------------------------------------------------
Private Investment
Class (160,048,603) (160,048,603) (60,491,657) (60,491,657)
-------------------------------------------------------------------------------------
Personal Investment
Class* (15,725,429) (15,725,429) -- --
-------------------------------------------------------------------------------------
Cash Management Class (476,012,674) (476,012,674) (199,023,117) (199,023,117)
-------------------------------------------------------------------------------------
Reserve Class* (12,363,530) (12,363,530) -- --
-------------------------------------------------------------------------------------
Resource Class (522,536,673) (522,536,673) (156,290,714) (156,290,714)
-------------------------------------------------------------------------------------
703,903,304 $ 703,903,304 279,185,112 $ 279,185,112
=====================================================================================
</TABLE>
* The Personal Investment Class and Reserve Class commenced sales on
January 31, 2000 and January 26, 2000, respectively.
FS-9
<PAGE> 53
NOTE 5 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Cash
Management Class outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
CASH MANAGEMENT
CLASS
--------------------
YEAR ENDED
AUGUST 31,
--------------------
2000 1999
-------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
---------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.05
---------------------------------------------------------------------------
Less distributions from net investment income (0.06) (0.05)
---------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00
===========================================================================
Total return 5.95% 4.98%
===========================================================================
Ratios/supplemental data:
Net assets, end of year (000s omitted) $223,495 $85,113
===========================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 0.15%(a) 0.14%
---------------------------------------------------------------------------
Without fee waivers and reimbursements 0.27%(a) 0.30%
===========================================================================
Ratio of net investment income to average net assets 5.94%(a) 4.83%
===========================================================================
</TABLE>
(a) Ratios are based on average net assets of $147,900,468.
FS-10
<PAGE> 54
NOTE 5 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the
Institutional Class outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
INSTITUTIONAL
CLASS
---------------------
YEAR ENDED
AUGUST 31,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.05
----------------------------------------------------------------------------
Less distributions from net investment income (0.06) (0.05)
----------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00
============================================================================
Total return 6.03% 5.07%
============================================================================
Ratios/supplemental data:
Net assets, end of year (000s omitted) $399,390 $139,860
============================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 0.07%(a) 0.06%
----------------------------------------------------------------------------
Without fee waivers and reimbursements 0.17%(a) 0.20%
============================================================================
Ratio of net investment income to average net assets 6.02%(a) 4.91%
============================================================================
</TABLE>
(a) Ratios are based on average net assets of $301,527,098.
FS-11
<PAGE> 55
NOTE 5 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the
Personal Investment Class outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
PERSONAL
INVESTMENT CLASS
----------------
JANUARY 31, 2000
(DATE SALES
COMMENCED) TO
AUGUST 31, 2000
----------------
<S> <C>
Net asset value, beginning of year $ 1.00
----------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03
----------------------------------------------------------------------
Less distributions from net investment income (0.03)
----------------------------------------------------------------------
Net asset value, end of year $ 1.00
======================================================================
Total return(a) 3.38%
======================================================================
Ratios/supplemental data:
Net assets, end of year (000s omitted) $14,426
======================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 0.57%(b)
----------------------------------------------------------------------
Without fee waivers and reimbursements 0.92%(b)
======================================================================
Ratio of net investment income to average net assets 5.52%(b)
======================================================================
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $6,865,271.
FS-12
<PAGE> 56
NOTE 5 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Private
Investment Class outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
PRIVATE
INVESTMENT CLASS
--------------------
YEAR ENDED
AUGUST 31,
--------------------
2000 1999
-------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
---------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.05
---------------------------------------------------------------------------
Less distributions from net investment income (0.06) (0.05)
---------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00
===========================================================================
Total return 5.71% 4.75%
===========================================================================
Ratios/supplemental data:
Net assets, end of year (000s omitted) $109,496 $45,528
===========================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 0.37%(a) 0.36%
---------------------------------------------------------------------------
Without fee waivers and reimbursements 0.67%(a) 0.70%
===========================================================================
Ratio of net investment income to average net assets 5.72%(a) 4.62%
===========================================================================
</TABLE>
(a) Ratios are based on average net assets of $64,361,329.
FS-13
<PAGE> 57
NOTE 5 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Reserve
Class outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
RESERVE CLASS
----------------
JANUARY 26, 2000
(DATE SALES
COMMENCED) TO
AUGUST 31, 2000
----------------
<S> <C>
Net asset value, beginning of period $ 1.00
--------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03
--------------------------------------------------------------------------
Less distributions from net investment income (0.03)
--------------------------------------------------------------------------
Net asset value, end of period $ 1.00
==========================================================================
Total return(a) 3.27%
==========================================================================
Ratios/supplemental data:
Net assets, end of year (000s omitted) $2,662
==========================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 0.87%(b)
--------------------------------------------------------------------------
Without fee waivers and reimbursements 1.17%(b)
==========================================================================
Ratio of net investment income to average net assets 5.22%(b)
==========================================================================
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $1,594,301.
FS-14
<PAGE> 58
NOTE 5 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the
Resource Class outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
RESOURCE CLASS
--------------------
YEAR ENDED
AUGUST 31,
--------------------
2000 1999
-------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
---------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.05
---------------------------------------------------------------------------
Less distributions from net investment income (0.06) (0.05)
---------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00
===========================================================================
Total return 5.86% 4.90%
===========================================================================
Ratios/supplemental data:
Net assets, end of year (000s omitted) $233,620 $11,684
===========================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 0.23%(a) 0.22%
---------------------------------------------------------------------------
Without fee waivers and reimbursements 0.37%(a) 0.40%
===========================================================================
Ratio of net investment income to average net assets 5.86%(a) 4.75%
===========================================================================
</TABLE>
(a) Ratios are based on average net assets of $104,621,640.
FS-15
<PAGE> 59
NOTE 6 -- CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP was previously the independent public accountants for the Portfolio.
Due to an investment in the Portfolio, which KPMG LLP represented to the Fund
was inadvertent, and new SEC rules regarding auditor independence, KPMG LLP
resigned as of December 28, 2000. The Board of Trustees of the Fund, upon
recommendation of its Audit Committee, accepted the resignation of KPMG LLP and
appointed Tait, Weller & Baker as independent public accountants to audit the
financial statements of the Portfolio. KPMG LLP had served as independent public
accountants for the year ended August 31, 1999. The audit report of KPMG LLP on
the financial statements of the Portfolio for the year ended August 31, 1999 did
not contain any adverse opinion or disclaimer of opinion, nor was it qualified
or modified as to uncertainty, audit scope, or accounting principles. In
connection with the audit for the year ended August 31, 1999, and the subsequent
period through December 28, 2000, there were no disagreements with KPMG LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements if not resolved
to their satisfaction would have caused them to make reference in connection
with their opinion to the subject matter of the disagreement. Neither the
Portfolio nor anyone on its behalf consulted with Tait, Weller & Baker at any
time prior to their engagement with respect to the application of accounting
principles to a specified transaction, either completed or proposed or the type
of audit opinion that might be rendered on the Portfolio's financial statements.
FS-16
<PAGE> 60
----------------------------------
GOVERNMENT & AGENCY PORTFOLIO
----------------------------------
OBTAINING ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services,
Inc.
P. O. Box 0843
Houston, TX 77001-0843
BY TELEPHONE: (800) 659-1005
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-----------------------------------
Government & Agency Portfolio
SEC 1940 Act file number: 811-2729
-----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
