<PAGE>
As filed with the Securities and Exchange Commission on March 24, 2000
Registration No. 2-58286
Investment Company Act No. 811-2731
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ____ ___
Post-Effective Amendment No. 28 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 29
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(Check appropriate box or boxes.)
TAX-FREE INVESTMENTS CO.
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(Exact name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
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Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046
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(Name and Address of Agent for Service)
Copy to:
Stephen I. Winer, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public As soon as practicable after
Offering: the effective date of this Registration
Statement
It is proposed that this filing will become effective (check appropriate box)
______ immediately upon filing pursuant to paragraph (b) of Rule 485
______ on (date) pursuant to paragraph (b) of Rule 485
----
______ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
X on May 24, 2000 pursuant to paragraph (a)(1) of Rule 485
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______ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
______ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following:
______ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
______ Title of Securities Being Registered: Common Stock
<PAGE>
CASH RESERVE PORTFOLIO
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CASH MANAGEMENT CLASS
Cash Reserve Portfolio seeks to provide as high a level of tax-exempt income as
is consistent with the preservation of capital and maintenance of liquidity.
PROSPECTUS
MAY 24, 2000
This prospectus contains important
information about the Cash
Management 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 APPEARS HERE --Registered Trademark--
<PAGE>
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|CASH RESERVE PORTFOLIO|
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
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PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
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PERFORMANCE INFORMATION 2
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Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
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Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
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The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
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Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
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SHAREHOLDER INFORMATION 6
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Distribution and Service (12b-1) Fees 6
Purchasing Shares 6
Redeeming Shares 6
Pricing of Shares 7
Taxes 7
OBTAINING ADDITIONAL INFORMATION BACK COVER
</TABLE>
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The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com,
La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor 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>
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|CASH RESERVE PORTFOLIO|
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INVESTMENT OBJECTIVE AND STRATEGIES
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The fund's investment objective is to provide as high a level of tax-exempt
income as is consistent with the preservation of capital and maintenance of
liquidity. The investment objective of the fund may be changed by the Board of
Directors without shareholder approval.
The fund seeks to meet its objective by investing in high quality short-term
(remaining maturities of 397 days or less) municipal obligations, the interest
on which is excluded from gross income for federal income tax purposes and does
not constitute an item of preference for purposes of the alternative minimum
tax. The fund will invest its assets so that at least 80% of the fund's income
will be exempt from federal income taxes. The fund attempts to invest its
assets so that all of the fund's annual interest income will be tax-exempt. The
fund will limit its purchase of municipal securities to those (1) rated in the
highest rating category by two nationally recognized statistical rating
organizations (NRSRO); (2) rated by only one NRSRO, if they are rated in the
highest category by that NRSRO; and (3) that are unrated and are deemed to be
of comparable quality by the portfolio manager. Any percentage limitations with
respect to assets of the fund are applied at the time of purchase.
Municipal securities include debt obligations of varying maturities issued by
or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies,
authorities and instrumentalities. Municipal lease obligations, synthetic
municipal securities and certain types of industrial revenue bonds are treated
as municipal securities.
The fund's portfolio managers focus on securities that they believe have
favorable prospects for current income, consistent with their concerns for
preservation of capital and liquidity. The portfolio managers usually hold
portfolio securities to maturity, but consider whether to 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, money market instruments or debt
securities. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
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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;
. downgrades of credit ratings or defaults of any of the fund's holdings; or
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
Synthetic municipal securities are short-term securities created by banks or
other financial institutions that are collateralized by longer-term municipal
securities. The tax-exempt character of the interest paid on synthetic
municipal securities is based on the tax-exempt income stream from the
collateral. The Internal Revenue Service has not ruled on this issue and could
deem income derived from synthetic municipal securities to be taxable.
1
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|CASH RESERVE PORTFOLIO|
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PERFORMANCE INFORMATION
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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 RETURNS
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The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. Neither the Cash Management Class shares nor
the Institutional Class shares are subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURNS
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1990 5.86%
1991 4.56%
1992 2.88%
1993 2.32%
1994 2.73%
1995 3.73%
1996 3.34%
1997 3.55%
1998 3.34%
1999 3.14%
The returns shown are those of the fund's Institutional Class shares, which
are not offered in this prospectus. Cash Management Class shares would have
lower annual returns because, although the shares are invested in the same
portfolio of securities, the Cash Management Class has higher expenses.
The Institutional Class and the Cash Management Class shares' year-to-date
total return as of March 31, 2000 was % and %, respectively.
During the periods shown in the bar chart, Institutional Class' highest
quarterly return was 1.47% (quarter ended December 31, 1990) and its lowest
quarterly return was 0.54% (quarter ended March 31, 1993).
PERFORMANCE TABLE
The following performance table reflects the performance of the Institutional
Class and Cash Management Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
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<TABLE>
<CAPTION>
(for the periods
ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
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<S> <C> <C> <C> <C> <C>
Institutional Class 3.14% 3.42% 3.54% 4.21% 04/18/83
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Cash Management Class -- -- -- 3.06% 01/04/99
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</TABLE>
Cash Management Class shares' seven-day yield on December 31, 1999 was 4.25%.
For the current seven-day yield of Cash Management Class shares, call
(800) 877-7745.
2
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|CASH RESERVE PORTFOLIO|
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FEE TABLE AND EXPENSE EXAMPLE
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FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
SHAREHOLDER FEES
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<TABLE>
<CAPTION>
(fees paid directly from
your investment) CASH MANAGEMENT CLASS
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<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
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ANNUAL FUND OPERATING EXPENSES
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(expenses that are deducted
from fund assets) CASH MANAGEMENT CLASS
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Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 0.10
Other Expenses 0.06
Total Annual Fund
Operating Expenses 0.38
Fee Waiver(1) 0.10
Net Expenses 0.28
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</TABLE>
(1) The distributor has contractually agreed to waive 0.02% of the Cash
Management Class shares' Rule 12b-1 distribution plan payments. The
investment advisor has contractually agreed to limit net expenses (exclusive
of Rule 12b-1 distribution plan payments) to 0.20%.
You should also consider the effect of any account fees charged by the
financial institution managing your account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Cash
Management 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
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<S> <C> <C>
Cash Management Class $39 $122
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</TABLE>
3
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|CASH RESERVE PORTFOLIO|
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FUND MANAGEMENT
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THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended March 31, 1999, the advisor received compensation
of 0.14% of average daily net assets.
OTHER INFORMATION
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SUITABILITY FOR INVESTORS
The Cash Management Class of the fund is intended for use primarily by
customers of banks, certain broker-dealers and other institutions
(institutions). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an institution may invest in shares of the
Cash Management Class. Each institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Cash Management Class. Such services include, among other things, establishment
and maintenance of shareholder accounts and records; assistance in processing
purchase and redemption transactions in shares of the Cash Management Class;
providing periodic statements showing a client's account balance in shares of
the Cash Management Class; distribution of fund proxy statements, annual
reports and other communications to shareholders whose accounts are serviced by
the institution; and such other services as the fund may reasonably request.
Institutions will be required to certify to the fund that they comply with
applicable state law regarding registration as broker-dealers, or that they are
exempt from such registration.
The Cash Management Class is designed to be a convenient and economical way to
invest in an open-end diversified money market fund, whose income is excluded
from gross income for purposes of federal income taxes. An investment in the
fund may relieve the institution of many of the investment and administrative
burdens encountered when investing in municipal securities directly. These
include: selection of portfolio investments; surveying the market for the best
price at which to buy and sell; valuation of portfolio securities; selection
and scheduling of maturities; receipt, delivery and safekeeping of securities;
and portfolio recordkeeping. It is anticipated that most investors will perform
their own subaccounting.
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 dividends,
if any, monthly. A business day is any day on which member banks of 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 3:00 p.m. Eastern time.
Shareholders whose purchase orders have been received by the fund prior to 3:00
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, if any, annually.
The fund does not expect to realize any long-term capital gains and losses.
4
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|CASH RESERVE PORTFOLIO|
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FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you understand the financial
performance of the Cash Management 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 the six month period ended September 30, 1999 is
unaudited. The information for the period January 4, 1999 through March 31,
1999 has been audited by KPMG LLP, whose report, along with the fund's
financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CASH MANAGEMENT CLASS
---------------------------------
FOR THE PERIOD FOR THE PERIOD
APRIL 1, 1999 JANUARY 4, 1999
THROUGH THROUGH
SEPTEMBER 30, 1999 MARCH 31, 1999
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<S> <C> <C>
Net asset value, beginning of period $1.00 $ 1.00
Income from investment operations:
Net investment income 0.02 0.01
Less distributions:
Dividends from net investment income (0.02) (0.01)
Net asset value, end of period $1.00 $ 1.00
Total return(a) 1.51% 0.64%
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Ratios/supplemental data:
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Net assets, end of period (000s omitted) $5,525 $7,139
Ratio of expenses to average net assets(b) 0.28%(c) 0.28%(d)
Ratio of net investment income to average
net assets(e) 2.99%(c) 3.08%(d)
- ------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.37%(annualized) and 0.38% (annualized).
(c) Ratios are annualized and based on average net assets of $5,208,488.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.90% (annualized) and 2.98% (annualized).
5
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|CASH RESERVE PORTFOLIO|
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SHAREHOLDER INFORMATION
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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.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Cash Management Class
that allows the fund to pay distribution and service fees of 0.10% per annum to
Fund Management Company (distributor) for the sale and distribution of its
shares and for services provided to shareholders. Because the fund pays these
fees out of its assets on an ongoing basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
PURCHASING SHARES
The minimum initial investment in the Cash Management Class is $1 million. No
minimum amount is required for subsequent investments in the fund, nor are
minimum balances required.
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. You must
open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds for the order, provided the
transfer agent has received notice of the order. You may obtain an Account
Application from the distributor. 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.
An institution may have a "sweep" program under which a portion of your
account with such institution may be automatically invested in the Cash
Management Class. If you propose to open a fund account with an institution,
you should consult with a representative of such institution to obtain a
description of the rules governing such an account. A statement with regard to
your investment in the Cash Management Class is supplied periodically, and
confirmations of all transactions for your account are provided by the
institution promptly upon request. In addition, proxies, periodic reports and
other information from the institution with regard to your shares of the Cash
Management Class will be sent to you.
You may place an order for the purchase of shares of the Cash Management Class
with the institution. The institution is responsible for the prompt
transmission of the order to the transfer agent. The fund is normally required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Cash Management Class purchased by institutions on behalf of
their clients must be in federal funds. If an order to purchase shares is paid
for other than in federal funds, the order may be delayed up to two business
days while the institution completes the conversion into federal funds.
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. Redemption requests with respect to shares of the Cash
Management Class are normally made through your institution.
You may request a redemption by calling the transfer agent at (800) 877-7745,
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.
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 by wire transfer 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.
6
<PAGE>
CASH RESERVE PORTFOLIO
SHAREHOLDER INFORMATION (CONTINUED)
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------------------------------------
| |
|The fund reserves 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 12:30 p.m. and 3:00
p.m. Eastern time on each day on which member banks of 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 the
first net asset value determination, the fund will normally wire redemption
proceeds on that day. If the transfer agent receives a redemption request
between the first and second net asset value determinations, 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.
TAXES
You will not be required to include the "exempt-interest" portion of dividends
paid by the fund in your gross income for federal income tax purposes. You will
be required to report the receipt of exempt-interest dividends and other tax-
exempt interest on your federal income tax return. Exempt-interest dividends
from the fund may be subject to state and local income taxes, may give rise to
a federal alternative minimum tax liability, may affect the amount of social
security benefits subject to federal income tax, may affect the deductibility
of interest on certain indebtedness, and may have other collateral federal
income tax consequences for you. The fund intends to avoid investment in
municipal securities the interest on which constitutes an item of tax
preference and could give rise to a federal alternative minimum tax liability
for you. The fund will try to avoid investments that result in taxable
dividends.
To the extent that dividends paid by the fund are derived from taxable
investments or realized capital gains. The percentage of dividends that
constitutes exempt-interest dividends will be determined annually. This
percentage may differ from the actual percentage of exempt interest received by
the fund for the particular days in which you hold shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the fund
to pay exempt-interest dividends might be adversely affected.
7
<PAGE>
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|CASH RESERVE PORTFOLIO|
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OBTAINING ADDITIONAL INFORMATION
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More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds --Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
By Mail: A I M Fund Services, Inc.
P. O. Box 0843
Houston, TX 77001-0843
By Telephone: (800) 877-7745
By E-Mail: [email protected]
- --------------------------------------------------------------------------------
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, D.C.; 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, D.C. 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.
------------------------------------
|Cash Reserve Portfolio |
|SEC 1940 Act file number: 811-2731|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
CASH RESERVE PORTFOLIO
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INSTITUTIONAL CLASS
Cash Reserve Portfolio seeks to provide as high a level of tax-exempt income as
is consistent with the preservation of capital and maintenance of liquidity.
PROSPECTUS
MAY 24, 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 APPEARS HERE --Registered Trademark--
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION 6
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Purchasing Shares 6
Redeeming Shares 6
Pricing of Shares 6
Taxes 7
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 LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor 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>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of tax-exempt
income as is consistent with the preservation of capital and maintenance of
liquidity. The investment objective of the fund may be changed by the Board of
Directors without shareholder approval.
The fund seeks to meet its objective by investing in high quality short-term
(remaining maturities of 397 days or less) municipal obligations, the interest
on which is excluded from gross income for federal income tax purposes and does
not constitute an item of preference for purposes of the alternative minimum
tax. The fund will invest its assets so that at least 80% of the fund's income
will be exempt from federal income taxes. The fund attempts to invest its
assets so that all of the fund's annual interest income will be tax-exempt. The
fund will limit its purchase of municipal securities to those (1) rated in the
highest rating category by two nationally recognized statistical rating
organizations (NRSRO); (2) rated by only one NRSRO, if they are rated in the
highest category by that NRSRO; and (3) that are unrated and are deemed to be
of comparable quality by the portfolio manager. Any percentage limitations with
respect to assets of the fund are applied at the time of purchase.
Municipal securities include debt obligations of varying maturities issued by
or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies,
authorities and instrumentalities. Municipal lease obligations, synthetic
municipal securities and certain types of industrial revenue bonds are treated
as municipal securities.
The fund's portfolio managers focus on securities that they believe have
favorable prospects for current income, consistent with their concerns for
preservation of capital and liquidity. The portfolio managers usually hold
portfolio securities to maturity, but consider whether to 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, money market instruments or debt
securities. 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;
. downgrades of credit ratings or defaults of any of the fund's holdings; or
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
Synthetic municipal securities are short-term securities created by banks or
other financial institutions that are collateralized by longer-term municipal
securities. The tax-exempt character of the interest paid on synthetic
municipal securities is based on the tax-exempt income stream from the
collateral. The Internal Revenue Service has not ruled on this issue and could
deem income derived from synthetic municipal securities to be taxable.
1
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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 RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. Institutional Class shares are not subject to
sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1990 5.86%
1991 4.56%
1992 2.88%
1993 2.32%
1994 2.73%
1995 3.73%
1996 3.34%
1997 3.55%
1998 3.34%
1999 3.14%
The Institutional Class shares' year-to-date total return as of March 31, 2000
was [ ]%.
During the periods shown in the bar chart, the highest quarterly return was
1.47% (quarter ended December 31, 1990) and the lowest quarterly return was
0.54% (quarter ended March 31, 1993).
PERFORMANCE TABLE
The following performance table reflects the performance of the Institutional
Class shares over the periods indicated.
Average Annual Total Returns
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(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 3.14% 3.42% 3.54% 4.21% 04/18/83
- ----------------------------------------------------------------
</TABLE>
Institutional Class shares' seven-day yield on December 31, 1999 was 4.33%. For
the current seven-day yield, call (800) 659-1005.
2
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(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
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) INSTITUTIONAL CLASS
- -----------------------------------------------------------
Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 0.00
Other Expenses 0.06
Total Annual Fund
Operating Expenses 0.28
Fee Waiver(1) 0.08
Net Expenses 0.20
- -----------------------------------------------------------
</TABLE>
(1) The investment advisor has contractually agreed to limit net expenses to
0.20%.
You should also consider the effect of any account fees charged 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 $29 $90 $157 $356
- ----------------------------------------------------
</TABLE>
3
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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 March 31, 1999, the advisor received compensation
of 0.14% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Institutional Class of the fund is intended for use by banks and other
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
state and federal laws and regulations.
The Institutional Class is designed to be a convenient and economical way to
invest in an open-end diversified money market fund, whose income is excluded
from gross income for purposes of federal income taxes. An investment in the
fund may relieve the institution of many of the investment and administrative
burdens encountered when investing in municipal securities directly. These
include: selection of portfolio investments; surveying the market for the best
price at which to buy and sell; valuation of portfolio securities; selection
and scheduling of maturities; receipt, delivery and safekeeping of securities;
and portfolio recordkeeping. It is anticipated that most investors will perform
their own subaccounting.
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 dividends,
if any, monthly. A business day is any day on which member banks of 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 3:00 p.m. Eastern time.
Shareholders whose purchase orders have been received by the fund prior to 3:00
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, if any, annually.
The fund does not expect to realize any long-term capital gains and losses.
4
<PAGE>
------------------------
|CASH RESERVE 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 the six-month period ended September 30, 1999 is
unaudited. The information for the years ended March 31, 1999, 1998, 1997, 1996
and 1995 has been audited by KPMG LLP, whose report, along with the fund's
financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
----------------------------------------------------------------------
FOR THE
PERIOD APRIL
1, 1999
THROUGH
SEPTEMBER 30, YEAR ENDED MARCH 31,
1999 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.02 0.03 0.03 0.03 0.04 0.03
Less distributions:
Dividends from net
investment income (0.02) (0.03) (0.03) (0.03) (0.04) (0.03)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 1.55% 3.23% 3.55% 3.33% 3.67% 3.06%
- ------------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- ------------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $968,609 $1,072,597 $896,904 $966,567 $1,009,039 $1,009,891
Ratio of expenses to
average net assets(b) 0.20%(c) 0.20% 0.20% 0.20% 0.20% 0.20%
Ratio of net investment
income to average net
assets(d) 3.07%(c) 3.16% 3.49% 3.27% 3.59% 3.01%
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.27% (annualized), 0.28%, 0.27%, 0.26%, 0.26%, and 0.26% for the periods
1999-1995, respectively.
(c) Ratios are annualized and based on average net assets of $1,020,357,949.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 3.00% annualized), 3.08%, 3.42%, 3.21%, 3.53% and 2.95%
for the periods 1999-1995, respectively.
5
<PAGE>
------------------------
|CASH RESERVE 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.
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 for the order, provided the transfer agent has received notice of the
order. You may obtain an Account Application from the distributor. 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.
Payment for shares redeemed by mail and payment for telephone redemptions in
amounts of less than $10,000 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 $10,000 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.
- --------------------------------------------------------------------------
|The fund reserves 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 12:30 p.m. and 3:00
p.m. Eastern time on each day on which member banks of 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 the
first net asset value determination, the fund will normally wire redemption
proceeds on that day. If the transfer agent receives a redemption request
between the first and second net asset value determinations, 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.
6
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
SHAREHOLDER INFORMATION (continued)
- --------------------------------------------------------------------------------
TAXES
You will not be required to include the "exempt-interest" portion of dividends
paid by the fund in your gross income for federal income tax purposes. You will
be required to report the receipt of exempt-interest dividends and other tax-
exempt interest on your federal income tax return. Exempt-interest dividends
from the fund may be subject to state and local income taxes, may give rise to
a federal alternative minimum tax liability, may affect the amount of social
security benefits subject to federal income tax, may affect the deductibility
of interest on certain indebtedness, and may have other collateral federal
income tax consequences for you. The fund intends to avoid investment in
municipal securities the interest on which constitutes an item of tax
preference and could give rise to a federal alternative minimum tax liability
for you. The fund will try to avoid investments that result in taxable
dividends.
To the extent that dividends paid by the fund are derived from taxable
investments or realized capital gains. The percentage of dividends that
constitutes exempt-interest dividends will be determined annually. This
percentage may differ from the actual percentage of exempt interest received by
the fund for the particular days in which you hold shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the fund
to pay exempt-interest dividends might be adversely affected.
7
<PAGE>
------------------------
|CASH RESERVE 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
- --------------------------------------------------------------------------------
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]
- --------------------------------------------------------------------------------
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, D.C.; 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, D.C. 20549-0102 or by sending an electronic mail request
to public [email protected]. Please call the SEC at 1-202-942-8090 for information
about the Public Reference Room.
------------------------------------
|Cash Reserve Portfolio |
|SEC 1940 Act file number: 811-2731|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
CASH RESERVE PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERSONAL INVESTMENT CLASS
Cash Reserve Portfolio seeks to provide as high a level of tax-
exempt income as is consistent with the preservation of capital and
maintenance of liquidity.
PROSPECTUS
MAY 24, 2000
This prospectus contains important
information about the Personal
Investment 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 APPEARS HERE --Registered Trademark--
<PAGE>
CASH RESERVE PORTFOLIO
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND
STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN
THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
SHAREHOLDER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service
(12b-1) Fees 5
Purchasing Shares 5
Redeeming Shares 5
Pricing of Shares 6
Taxes 6
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 LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor 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>
------------------------
| CASH RESERVE PORTFOLIO |
------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of tax-exempt
income as is consistent with the preservation of capital and maintenance of
liquidity. The investment objective of the fund may be changed by the Board of
Directors without shareholder approval.
The fund seeks to meet its objective by investing in high quality short-term
(remaining maturities of 397 days or less) municipal obligations, the interest
on which is excluded from gross income for federal income tax purposes and does
not constitute an item of preference for purposes of the alternative minimum
tax. The fund will invest its assets so that at least 80% of the fund's income
will be exempt from federal income taxes. The fund attempts to invest its
assets so that all of the fund's annual interest income will be tax-exempt. The
fund will limit its purchase of municipal securities to those (1) rated in the
highest rating category by two nationally recognized statistical rating
organizations (NRSRO); (2) rated by only one NRSRO, if they are rated in the
highest category by that NRSRO; and (3) that are unrated and are deemed to be
of comparable quality by the portfolio manager. Any percentage limitations with
respect to assets of the fund are applied at the time of purchase.
Municipal securities include debt obligations of varying maturities issued by
or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies,
authorities and instrumentalities. Municipal lease obligations, synthetic
municipal securities and certain types of industrial revenue bonds are treated
as municipal securities.
The fund's portfolio managers focus on securities that they believe have
favorable prospects for current income, consistent with their concerns for
preservation of capital and liquidity. The portfolio managers usually hold
portfolio securities to maturity, but consider whether to 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, money market instruments or debt
securities. 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;
. downgrades of credit ratings or defaults of any of the fund's holdings; or
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
Synthetic municipal securities are short-term securities created by banks or
other financial institutions that are collateralized by longer-term municipal
securities. The tax-exempt character of the interest paid on synthetic
municipal securities is based on the tax-exempt income stream from the
collateral. The Internal Revenue Service has not ruled on this issue and could
deem income derived from synthetic municipal securities to be taxable.
1
<PAGE>
--------------------------
| CASH RESERVE PORTFOLIO |
--------------------------
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 RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. Neither the Personal Investment Class shares
nor the Institutional Class shares are subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1990 5.86%
1991 4.56%
1992 2.88%
1993 2.32%
1994 2.73%
1995 3.73%
1996 3.34%
1997 3.55%
1998 3.34%
1999 3.14%
The returns shown are those of the fund's Institutional Class shares, which
are not offered in this prospectus. Personal Investment Class shares would have
lower annual returns because, although the shares will be invested in the same
portfolio of securities, the Personal Investment Class has higher expenses. As
of the date of this prospectus, the Personal Investment Class has not commenced
operations.
The Institutional Class and the Personal Investment Class shares' year-to-date
total return as of March 31, 2000 were % and %, respectively.
During the periods shown in the bar chart, Institutional Class' highest
quarterly return was 1.47% (quarter ended December 31, 1990) and its lowest
quarterly return was 0.54% (quarter ended March 31, 1993).
PERFORMANCE TABLE
The following performance table reflects the performance of the Institutional
Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(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 3.14% 3.42% 3.54% 4.21% 04/18/83
- ----------------------------------------------------------------------
Personal Investment Class -- -- -- -- --
- ----------------------------------------------------------------------
</TABLE>
Personal Investment Class shares' seven day yield on December 31, 1999 was
3.83%. For the current seven-day yield of Personal Investment Class shares,
call (800) 877-4744.
2
<PAGE>
-------------------------
| CASH RESERVE PORTFOLIO |
-------------------------
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:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) PERSONAL INVESTMENT 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
- ---------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) PERSONAL INVESTMENT CLASS
- ---------------------------------------------------------------------------
Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 0.75
Other Expenses 0.06
Total Annual Fund
Operating Expenses 1.03
Fee Waiver(1) 0.33
Net Expenses 0.70
- ---------------------------------------------------------------------------
</TABLE>
/1/The distributor has contractually agreed to waive 0.25% of the Personal
Investment Class shares' Rule 12b-1 distribution plan payments. The
investment advisor has contractually agreed to limit net expenses (exclusive
of Rule 12b-1 distribution plan payments) to 0.20%.
You should also consider the effect of any account fees charged by the
financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Personal Investment 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
- -----------------------------------------
<S> <C> <C>
Personal Investment Class $105 $328
- -----------------------------------------
</TABLE>
3
<PAGE>
------------------------
| CASH RESERVE PORTFOLIO |
------------------------
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
The advisor is to receive a fee from the portfolio calculated at the annual
rate of 0.25% of the first $500 million of average daily net assets and 0.20%
of assets over $500 million of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Personal Investment Class of the fund is intended for use primarily by
customers of banks, certain broker-dealers and other institutions
(institutions). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an institution may invest in shares of the
Personal Investment Class. Each institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Personal Investment Class. Such services include, among other things,
establishment and maintenance of shareholder accounts and records; assistance
in processing purchase and redemption transactions in shares of the Personal
Investment Class; providing periodic statements showing a client's account
balance in shares of the Personal Investment Class; distribution of fund proxy
statements, annual reports and other communications to shareholders whose
accounts are serviced by the institution; and such other services as the fund
may reasonably request. Institutions will be required to certify to the fund
that they comply with applicable state law regarding registration as broker-
dealers, or that they are exempt from such registration.
The Personal Investment Class is designed to be a convenient and economical
way to invest in an open-end diversified money market fund, whose income is
excluded from gross income for purposes of federal income taxes. An investment
in the fund may relieve the institution of many of the investment and
administrative burdens encountered when investing in municipal securities
directly. These include: selection of portfolio investments; surveying the
market for the best price at which to buy and sell; valuation of portfolio
securities; selection and scheduling of maturities; receipt, delivery and
safekeeping of securities; and portfolio recordkeeping. It is anticipated that
most investors will perform their own subaccounting.
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 dividends,
if any, monthly. A business day is any day on which member banks of 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 3:00 p.m. Eastern time.
Shareholders whose purchase orders have been received by the fund prior to 3:00
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 the net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains, if any, annually.
The fund does not expect to realize any long-term capital gains and losses.
4
<PAGE>
------------------------
| CASH RESERVE 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.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Personal Investment Class
that allows the fund to pay distribution and service fees of 0.75% per annum to
Fund Management Company (distributor) for the sale and distribution of its
shares and for services provided to shareholders. Because the fund pays these
fees out of its assets on an ongoing basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
PURCHASING SHARES
The minimum initial investment in the Personal Investment Class is $10,000. No
minimum amount is required for subsequent investments in the fund, nor are
minimum balances required.
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. You must
open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds for the order, provided the
transfer agent has received notice of the order. You may obtain an Account
Application from the distributor. 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.
An institution may have a "sweep" program under which a portion of your
account with such institution may be automatically invested in the Personal
Investment Class. If you propose to open a fund account with an institution,
you should consult with a representative of such institution to obtain a
description of the rules governing such an account. A statement with regard to
your investment in the Personal Investment Class is supplied periodically, and
confirmations of all transactions for your account are provided by the
institution promptly upon request. In addition, proxies, periodic reports and
other information from the institution with regard to your shares of the
Personal Investment Class will be sent to you.
You may place an order for the purchase of shares of the Personal Investment
Class with the institution. The institution is responsible for the prompt
transmission of the order to the transfer agent. The fund is normally required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Personal Investment Class purchased by institutions on behalf
of their clients must be in federal funds. If an order is paid for other than
in federal funds, the order may be delayed up to two business days while the
institution completes the conversion into federal funds.
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. Redemption requests with respect to shares of the
Personal Investment Class are normally made through your institution.
You may request a redemption by calling the transfer agent at (800) 877-4744,
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.
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 by wire transfer 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.
5
<PAGE>
------------------------
| CASH RESERVE PORTFOLIO |
------------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
------------------------------------
|The fund reserves 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 12:30 p.m. and 3:00
p.m. Eastern time on each day on which member banks of 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 the
first net asset value determination, the fund will normally wire redemption
proceeds on that day. If the transfer agent receives a redemption request
between the first and second net asset value determinations, 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.
TAXES
You will not be required to include the "exempt-interest" portion of dividends
paid by the fund in your gross income for federal income tax purposes. You will
be required to report the receipt of exempt-interest dividends and other tax-
exempt interest on your federal income tax return. Exempt-interest dividends
from the fund may be subject to state and local income taxes, may give rise to
a federal alternative minimum tax liability, may affect the amount of social
security benefits subject to federal income tax, may affect the deductibility
of interest on certain indebtedness, and may have other collateral federal
income tax consequences for you. The fund intends to avoid investment in
municipal securities the interest on which constitutes an item of tax
preference and could give rise to a federal alternative minimum tax liability
for you. The fund will try to avoid investments that result in taxable
dividends.
To the extent that dividends paid by the fund are derived from taxable
investments or realized capital gains. The percentage of dividends that
constitutes exempt-interest dividends will be determined annually. This
percentage may differ from the actual percentage of exempt interest received by
the fund for the particular days in which you hold shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the fund
to pay exempt-interest dividends might be adversely affected.
6
<PAGE>
--------------------------
| CASH RESERVE 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
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 0843
Houston, TX 77001-0843
BY TELEPHONE: (800) 877-4744
BY E-MAIL: [email protected]
- --------------------------------------------------------------------------------
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, D.C.; 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, D.C. 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.
------------------------------------
|Cash Reserve Portfolio |
|SEC 1940 Act file number: 811-2731|
------------------------------------
www.aimfunds.com
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE --Registred Trademark--
<PAGE>
CASH RESERVE PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRIVATE INVESTMENT CLASS
Cash Reserve Portfolio seeks to provide as high a level of tax-
exempt income as is consistent with the preservation of capital and
maintenance of liquidity.
PROSPECTUS
MAY 24, 2000
This prospectus contains important
information about the Private
Investment 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 APPEARS HERE --Registered Trademark--
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN
THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION 6
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service (12b-1) Fees 6
Purchasing Shares 6
Redeeming Shares 6
Pricing of Shares 7
Taxes 7
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 LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor 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>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of tax-exempt
income as is consistent with the preservation of capital and maintenance of
liquidity. The investment objective of the fund may be changed by the Board of
Directors without shareholder approval.
The fund seeks to meet its objective by investing in high quality short-term
(remaining maturities of 397 days or less) municipal obligations, the interest
on which is excluded from gross income for federal income tax purposes and does
not constitute an item of preference for purposes of the alternative minimum
tax. The fund will invest its assets so that at least 80% of the fund's income
will be exempt from federal income taxes. The fund attempts to invest its
assets so that all of the fund's annual interest income will be tax-exempt. The
fund will limit its purchase of municipal securities to those (1) rated in the
highest rating category by two nationally recognized statistical rating
organizations (NRSRO); (2) rated by only one NRSRO, if they are rated in the
highest category by that NRSRO; and (3) that are unrated and are deemed to be
of comparable quality by the portfolio manager. Any percentage limitations with
respect to assets of the fund are applied at the time of purchase.
Municipal securities include debt obligations of varying maturities issued by
or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies,
authorities and instrumentalities. Municipal lease obligations, synthetic
municipal securities and certain types of industrial revenue bonds are treated
as municipal securities.
The fund's portfolio managers focus on securities that they believe have
favorable prospects for current income, consistent with their concerns for
preservation of capital and liquidity. The portfolio managers usually hold
portfolio securities to maturity, but consider whether to 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, money market instruments or debt
securities. 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;
. downgrades of credit ratings or defaults of any of the fund's holdings; or
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
Synthetic municipal securities are short-term securities created by banks or
other financial institutions that are collateralized by longer-term municipal
securities. The tax-exempt character of the interest paid on synthetic
municipal securities is based on the tax-exempt income stream from the
collateral. The Internal Revenue Service has not ruled on this issue and could
deem income derived from synthetic municipal securities to be taxable.
1
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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 RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Private
Investment Class shares from year to year. Private Investment Class shares are
not subject to sales loads.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1990 5.86%
1991 4.56
1992 2.88
1993 2.32
1994 2.73
1995 3.73
1996 3.34
1997 3.55
1998 3.34
1999 3.14
The Private Investment Class shares' year-to-date total return as of March 31,
2000 was %.
During the periods shown in the bar chart, the highest quarterly return was
0.92% (quarter ended June 30, 1995) and the lowest quarterly return was 0.48%
(quarters ended March 31, 1993 and March 31, 1994).
PERFORMANCE TABLE
The following performance table reflects the performance of the Private
Investment Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private Investment Class 2.88% 3.16% -- 2.88% 04/01/92
- ---------------------------------------------------------------------
</TABLE>
Private Investment Class shares' seven-day yield on December 31, 1999 was
4.08%. For the current seven-day yield, call (800) 877-7748.
2
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from PRIVATE
your investment) INVESTMENT 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
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
(expenses that are deducted PRIVATE
from fund assets) INVESTMENT CLASS
- -----------------------------------------------------------
<S> <C>
Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 0.50
Other Expenses 0.06
Total Annual Fund
Operating Expenses 0.78
Fee Waiver(1) 0.33
Net Expenses 0.45
- -----------------------------------------------------------
</TABLE>
(1)The distributor has contractually agreed to waive 0.25% of the Private
Investment Class shares' Rule 12b-1 distribution plan payments. The investment
advisor has contractually agreed to limit net expenses (exclusive of Rule
12b-1 distribution plan payments) to 0.20%.
You should also consider the effect of any account fees charged by the
financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Private Investment 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>
Private Investment Class $80 $249 $433 $966
- ---------------------------------------------------------
</TABLE>
3
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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 March 31, 1999, the advisor received compensation
of 0.14% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Private Investment Class of the fund is intended for use primarily by
customers of banks, certain broker-dealers and other institutions
(institutions). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an institution may invest in shares of the
Private Investment Class. Each institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Private Investment Class. Such services include, among other things,
establishment and maintenance of shareholder accounts and records; assistance
in processing purchase and redemption transactions in shares of the Private
Investment Class; providing periodic statements showing a client's account
balance in shares of the Private Investment Class; distribution of fund proxy
statements, annual reports and other communications to shareholders whose
accounts are serviced by the institution; and such other services as the fund
may reasonably request. Institutions will be required to certify to the fund
that they comply with applicable state law regarding registration as broker-
dealers, or that they are exempt from such registration.
The Private Investment Class is designed to be a convenient and economical way
to invest in an open-end diversified money market fund, whose income is
excluded from gross income for purposes of federal income taxes. An investment
in the fund may relieve the institution of many of the investment and
administrative burdens encountered when investing in municipal securities
directly. These include: selection of portfolio investments; surveying the
market for the best price at which to buy and sell; valuation of portfolio
securities; selection and scheduling of maturities; receipt, delivery and
safekeeping of securities; and portfolio recordkeeping. It is anticipated that
most investors will perform their own subaccounting.
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 dividends,
if any, monthly. A business day is any day on which member banks of the Federal
Reserve Bank of New York and The Bank of New York, the fund's custodian, are
open for business.
Dividends are paid to settled shares of the fund as of 3:00 p.m. Eastern time.
Shareholders whose purchase orders have been received by the fund prior to 3:00
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 the net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains, if any, annually.
The fund does not expect to realize any long-term capital gains and losses.
4
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Private Investment 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 the six-month period ended September 30, 1999 is
unaudited. The information for the years ended March 31, 1999, 1998, 1997, 1996
and 1995 has been audited by KPMG LLP, whose report, along with the fund's
financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
PRIVATE INVESTMENT CLASS
----------------------------------------------------------------
FOR THE
PERIOD
APRIL 1, 1999
THROUGH
SEPTEMBER 30, YEAR ENDED MARCH 31,
1999 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.01 0.03 0.03 0.03 0.03 0.03
Less distributions:
Dividends from net
investment income (0.01) (0.03) (0.03) (0.03) (0.03) (0.03)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (a) 1.42% 2.98% 3.29% 3.07% 3.41% 2.80%
- ------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- ------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $ 88,679 $ 90,606 $ 80,462 $ 37,544 $ 35,139 $ 29,286
Ratio of expenses to
average net assets(b) 0.45%(c) 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment
income to average net
assets(d) 2.82%(c) 2.91% 3.24% 3.02% 3.35% 2.89%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.77% (annualized), 0.78%, 0.77%, 0.83%, 0.76% and 1.17% for the periods
1999-1995, respectively.
(c) Ratios are annualized and based on average net assets of $84,079,903.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.50% (annualized), 2.58%, 2.92%, 2.65%, 3.04% and
2.17% for the periods 1999-1995, respectively.
5
<PAGE>
-----------------------
|CASH RESERVE 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.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Private Investment Class
that allows the fund to pay distribution and service fees of 0.50% per annum to
Fund Management Company (distributor) for the sale and distribution of its
shares and for services provided to shareholders. Because the fund pays these
fees out of its assets on an ongoing basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
PURCHASING SHARES
The minimum initial investment in the Private Investment Class is $10,000. No
minimum amount is required for subsequent investments in the fund, nor are
minimum balances required.
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. You must
open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds for the order, provided the
transfer agent has received notice of the order. You may obtain an Account
Application from the distributor. 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.
An institution may have a "sweep" program under which a portion of your
account with such institution may be automatically invested in the Private
Investment Class. If you propose to open a fund account with an institution,
you should consult with a representative of such institution to obtain a
description of the rules governing such an account. A statement with regard to
your investment in the Private Investment Class is supplied periodically, and
confirmations of all transactions for your account are provided by the
institution promptly upon request. In addition, proxies, periodic reports and
other information from the institution with regard to your shares of the
Private Investment Class will be sent to you.
You may place an order for the purchase of shares of the Private Investment
Class with the institution. The institution is responsible for the prompt
transmission of the order to the transfer agent. The fund is normally required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Private Investment Class purchased by institutions on behalf
of their clients must be in federal funds. If an order to purchase shares is
paid for other than in federal funds, the order may be delayed up to two
business days while the institution completes the conversion into federal
funds.
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. Redemption requests with respect to shares of the
Private Investment Class are normally made through your institution.
You may request a redemption by calling the transfer agent at (800) 877-7748,
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.
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 by wire transfer 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.
6
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------
|The fund reserves 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 12:30 p.m. and 3:00
p.m. Eastern time on each day on which member banks of the Federal Reserve Bank
of New York and The Bank of New York are open for business (business days). 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 the
first net asset value determination, the fund will normally wire redemption
proceeds on that day. If the transfer agent receives a redemption request
between the first and second net asset value determinations, 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.
TAXES
You will not be required to include the "exempt-interest" portion of dividends
paid by the fund in your gross income for federal income tax purposes. You will
be required to report the receipt of exempt-interest dividends and other tax-
exempt interest on your federal income tax return. Exempt-interest dividends
from the fund may be subject to state and local income taxes, may give rise to
a federal alternative minimum tax liability, may affect the amount of social
security benefits subject to federal income tax, may affect the deductibility
of interest on certain indebtedness, and may have other collateral federal
income tax consequences for you. The fund intends to avoid investment in
municipal securities the interest on which constitutes an item of tax
preference and could give rise to a federal alternative minimum tax liability
for you. The fund will try to avoid investments that result in taxable
dividends.
To the extent that dividends paid by the fund are derived from taxable
investments or realized capital gains. The percentage of dividends that
constitutes exempt-interest dividends will be determined annually. This
percentage may differ from the actual percentage of exempt interest received by
the fund for the particular days in which you hold shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the fund
to pay exempt-interest dividends might be adversely affected.
7
<PAGE>
------------------------
|CASH RESERVE 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
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 0843
Houston, TX 77001-0843
BY TELEPHONE: (800) 877-7748
BY E-MAIL: [email protected]
- --------------------------------------------------------------------------------
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, D.C.; 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, D.C. 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.
-------------------------------------
|Cash Reserve Portfolio |
|SEC 1940 Act file number: 811-2731 |
-------------------------------------
www.aimfunds.com
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
CASH RESERVE PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
RESERVE CLASS
Cash Reserve Portfolio seeks to provide as high a level of tax-exempt income as
is consistent with the preservation of capital and maintenance of liquidity.
PROSPECTUS
MAY 24, 2000
This prospectus contains important
information about the Reserve 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 APPEARS HERE --Registered Trademark--
<PAGE>
-----------------------
|CASH RESERVE PORTFOLIO|
-----------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION 6
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service (12b-1) Fees 6
Purchasing Shares 6
Redeeming Shares 6
Pricing of Shares 7
Taxes 7
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 LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor 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>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of tax-exempt
income as is consistent with the preservation of capital and maintenance of
liquidity. The investment objective of the fund may be changed by the Board of
Directors without shareholder approval.
The fund seeks to meet its objective by investing in high quality short-term
(remaining maturities of 397 days or less) municipal obligations, the interest
on which is excluded from gross income for federal income tax purposes and does
not constitute an item of preference for purposes of the alternative minimum
tax. The fund will invest its assets so that at least 80% of the fund's income
will be exempt from federal income taxes. The fund attempts to invest its
assets so that all of the fund's annual interest income will be tax-exempt. The
fund will limit its purchase of municipal securities to those (1) rated in the
highest rating category by two nationally recognized statistical rating
organizations (NRSRO); (2) rated by only one NRSRO, if they are rated in the
highest category by that NRSRO; and (3) that are unrated and are deemed to be
of comparable quality by the portfolio manager. Any percentage limitations with
respect to assets of the fund are applied at the time of purchase.
Municipal securities include debt obligations of varying maturities issued by
or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies,
authorities and instrumentalities. Municipal lease obligations, synthetic
municipal securities and certain types of industrial revenue bonds are treated
as municipal securities.
The fund's portfolio managers focus on securities that they believe have
favorable prospects for current income, consistent with their concerns for
preservation of capital and liquidity. The portfolio managers usually hold
portfolio securities to maturity, but consider whether to 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, money market instruments or debt
securities. 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;
. downgrades of credit ratings or defaults of any of the fund's holdings; or
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
Synthetic municipal securities are short-term securities created by banks or
other financial institutions that are collateralized by longer-term municipal
securities. The tax-exempt character of the interest paid on synthetic
municipal securities is based on the tax-exempt income stream from the
collateral. The Internal Revenue Service has not ruled on this issue and could
deem income derived from synthetic municipal securities to be taxable.
1
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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 RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. Neither the Reserve Class shares nor the
Institutional Class shares are subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURNS
----------- --------
1990 5.86%
1991 4.56%
1992 2.88%
1993 2.32%
1994 2.73%
1995 3.73%
1996 3.34%
1997 3.55%
1998 3.34%
1999 3.14%
The returns shown are those of the fund's Institutional Class shares, which
are not offered in this prospectus. Reserve Class shares would have lower
annual returns because, although the shares are invested in the same portfolio
of securities, the Reserve Class has higher expenses.
The Institutional Class and the Reserve Class shares' year-to-date total
return as of March 31, 2000 was % and %, respectively.
During the periods shown in the bar chart, Institutional Class' highest
quarterly return was 1.47% (quarter ended December 31, 1990) and its lowest
quarterly return was 0.54% (quarter ended March 31, 1993).
PERFORMANCE TABLE
The following performance table reflects the performance of the Institutional
Class and Reserve Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(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 3.14% 3.42% 3.54% 4.21% 04/18/93
- ----------------------------------------------------------------
Reserve Class -- -- -- 2.50% 06/01/99
- ----------------------------------------------------------------
</TABLE>
Reserve Class shares' seven-day yield on December 31, 1999 was 3.53%.
For the current seven-day yield, call (800) 417-8837.
2
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) RESERVE 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
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) RESERVE CLASS
- -----------------------------------------------------------
Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 1.00
Other Expenses 0.06
Total Annual Fund
Operating Expenses 1.28
Fee Waiver(1) 0.28
Net Expenses 1.00
- -----------------------------------------------------------
</TABLE>
(1) The distributor has contractually agreed to waive 0.20% of the Reserve Class
shares' Rule 12b-1 distribution plan payments. The investment advisor has
contractually agreed to limit net expenses (exclusive of Rule 12b-1
distribution plan payments) to 0.20%.
You should also consider the effect of any account fees charged by the
financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Reserve 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
- -----------------------------
<S> <C> <C>
Reserve Class $130 $406
- -----------------------------
</TABLE>
3
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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
The advisor is to receive a fee from the portfolio calculated at the annual
rate of 0.25% of the first $500 million of average daily net assets and 0.20%
of assets over $500 million of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Reserve Class of the fund is intended for use primarily by customers of
banks, certain broker-dealers and other institutions (institutions).
Individuals, corporations, partnerships and other businesses that maintain
qualified accounts at an institution may invest in shares of the Reserve Class.
Each institution will render administrative support services to its customers
who are the beneficial owners of the shares of the Reserve Class. Such services
include, among other things, establishment and maintenance of shareholder
accounts and records; assistance in processing purchase and redemption
transactions in shares of the Reserve Class; providing periodic statements
showing a client's account balance in shares of the Reserve Class; distribution
of fund proxy statements, annual reports and other communications to
shareholders whose accounts are serviced by the institution; and such other
services as the fund may reasonably request. Institutions will be required to
certify to the fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.
The Reserve Class is designed to be a convenient and economical way to invest
in an open-end diversified money market fund, whose income is excluded from
gross income for purposes of federal income taxes. An investment in the fund
may relieve the institution of many of the investment and administrative
burdens encountered when investing in municipal securities directly. These
include: selection of portfolio investments; surveying the market for the best
price at which to buy and sell; valuation of portfolio securities; selection
and scheduling of maturities; receipt, delivery and safekeeping of securities;
and portfolio recordkeeping. It is anticipated that most investors will perform
their own subaccounting.
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 dividends,
if any, monthly. A business day is any day on which member banks of 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 3:00 p.m. Eastern time.
Shareholders whose purchase orders have been received by the fund prior to 3:00
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 the net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains, if any, annually.
The fund does not expect to realize any long-term capital gains and losses.
4
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Reserve 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 the six month period ended September 30, 1999 is
unaudited. The fund's financial statements are included in the fund's
semiannual report, which is available upon request.
<TABLE>
<CAPTION>
RESERVE CLASS
--------------
FOR THE PERIOD
JUNE 1, 1999
THROUGH
SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.01
Less distributions:
Dividends from net investment income (0.01)
Net asset value, end of period $ 1.00
Total return(a) 1.14%
- ---------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------
Net assets, end of period (000s omitted) $25,358
Ratio of expenses to average net assets(b) 1.00%(c)
Ratio of net investment income to average net assets(d) 2.27%(c)
- ---------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.27%(annualized).
(c) Ratios are annualized and based on average net assets of $17,520,938.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 2.00% (annualized).
5
<PAGE>
------------------------
|CASH RESERVE 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.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Reserve Class that allows
the fund to pay distribution and service fees of 1.00% per annum to Fund
Management Company (distributor) for the sale and distribution of its shares
and for services provided to shareholders. Because the fund pays these fees out
of its assets on an ongoing basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.
PURCHASING SHARES
The minimum initial investment in the Reserve Class is $10,000. No minimum
amount is required for subsequent investments in the fund, nor are minimum
balances required.
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. You must
open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds for the order, provided the
transfer agent has received notice of the order. You may obtain an Account
Application from the distributor. 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.
An institution may have a "sweep" program under which a portion of your
account with such institution may be automatically invested in the Reserve
Class. If you propose to open a fund account with an institution, you should
consult with a representative of such institution to obtain a description of
the rules governing such an account. A statement with regard to your investment
in the Reserve Class is supplied periodically, and confirmations of all
transactions for your account are provided by the institution promptly upon
request. In addition, proxies, periodic reports and other information from the
institution with regard to your shares of the Reserve Class will be sent to
you.
You may place an order for the purchase of shares of the Reserve Class with
the institution. The institution is responsible
for the prompt transmission of the order to the transfer agent. The fund is
normally required to make immediate settlement in federal funds (member bank
deposits with a Federal Reserve Bank) for portfolio securities purchased.
Accordingly, payment for shares of the Reserve Class purchased by institutions
on behalf of their clients must be in federal funds. If an order to purchase
shares is paid for other than in federal funds, the order may be delayed up to
two business days while the institution completes the conversion into federal
funds.
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. Redemption requests with respect to shares of the
Reserve Class are normally made through your institution.
You may request a redemption by calling the transfer agent at (800) 417-8837,
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.
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 by wire transfer 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.
6
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
----------------------------------------------------------
| |
|The fund reserves 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 12:30 p.m. and 3:00
p.m. Eastern time on each day on which member banks of 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 the
first net asset value determination, the fund will normally wire redemption
proceeds on that day. If the transfer agent receives a redemption request
between the first and second net asset value determinations, 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.
TAXES
You will not be required to include the "exempt-interest" portion of dividends
paid by the fund in your gross income for federal income tax purposes. You will
be required to report the receipt of exempt-interest dividends and other tax-
exempt interest on your federal income tax return. Exempt-interest dividends
from the fund may be subject to state and local income taxes, may give rise to
a federal alternative minimum tax liability, may affect the amount of social
security benefits subject to federal income tax, may affect the deductibility
of interest on certain indebtedness, and may have other collateral federal
income tax consequences for you. The fund intends to avoid investment in
municipal securities the interest on which constitutes an item of tax
preference and could give rise to a federal alternative minimum tax liability
for you. The fund will try to avoid investments that result in taxable
dividends.
To the extent that dividends paid by the fund are derived from taxable
investments or realized capital gains. The percentage of dividends that
constitutes exempt-interest dividends will be determined annually. This
percentage may differ from the actual percentage of exempt interest received by
the fund for the particular days in which you hold shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the fund
to pay exempt-interest dividends might be adversely affected.
7
<PAGE>
------------------------
|CASH RESERVE 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
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 0843
Houston, TX 77001-0843
BY TELEPHONE: (800) 417-8837
BY E-MAIL: [email protected]
- --------------------------------------------------------------------------------
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, D.C.; 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, D.C. 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.
------------------------------------
|Cash Reserve Portfolio |
|SEC 1940 Act file number: 811-2731|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
CASH RESERVE PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
RESOURCE CLASS
Cash Reserve Portfolio seeks to provide as high a level of tax-
exempt income as is consistent with the preservation of capital and
maintenance of liquidity.
PROSPECTUS
MAY 24, 2000
This prospectus contains important
information about the Resource 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 APPEARS HERE --Registered Trademark--
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND
STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN
THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION 6
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service
(12b-1) Fees 6
Purchasing Shares 6
Redeeming Shares 6
Pricing of Shares 7
Taxes 7
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 LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor 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>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of tax-exempt
income as is consistent with the preservation of capital and maintenance of
liquidity. The investment objective of the fund may be changed by the Board of
Directors without shareholder approval.
The fund seeks to meet its objective by investing in high quality short-term
(remaining maturities of 397 days or less) municipal obligations, the interest
on which is excluded from gross income for federal income tax purposes and does
not constitute an item of preference for purposes of the alternative minimum
tax. The fund will invest its assets so that at least 80% of the fund's income
will be exempt from federal income taxes. The fund attempts to invest its
assets so that all of the fund's annual interest income will be tax-exempt. The
fund will limit its purchase of municipal securities to those (1) rated in the
highest rating category by two nationally recognized statistical rating
organizations (NRSRO); (2) rated by only one NRSRO, if they are rated in the
highest category by that NRSRO; and (3) that are unrated and are deemed to be
of comparable quality by the portfolio manager. Any percentage limitations with
respect to assets of the fund are applied at the time of purchase.
Municipal securities include debt obligations of varying maturities issued by
or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies,
authorities and instrumentalities. Municipal lease obligations, synthetic
municipal securities and certain types of industrial revenue bonds are treated
as municipal securities.
The fund's portfolio managers focus on securities that they believe have
favorable prospects for current income, consistent with their concerns for
preservation of capital and liquidity. The portfolio managers usually hold
portfolio securities to maturity, but consider whether to 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, money market instruments or debt
securities. 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;
. downgrades of credit ratings or defaults of any of the fund's holdings; or
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
Synthetic municipal securities are short-term securities created by banks or
other financial institutions that are collateralized by longer-term municipal
securities. The tax-exempt character of the interest paid on synthetic
municipal securities is based on the tax-exempt income stream from the
collateral. The Internal Revenue Service has not ruled on this issue and could
deem income derived from synthetic municipal securities to be taxable.
1
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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 RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. Neither the Resource Class shares nor the
Institutional Class shares are subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1990 5.86%
1991 4.56%
1992 2.88%
1993 2.32%
1994 2.73%
1995 3.73%
1996 3.34%
1997 3.55%
1998 3.34%
1999 3.14%
The returns shown are those of the fund's Institutional Class shares, which
are not offered in this prospectus. Resource Class shares would have lower
annual returns because, although the shares are invested in the same portfolio
of securities, the Resource Class has higher expenses.
The Institutional Class and the Resource Class shares' year-to-date total
return as of March 31, 2000 was % and %, respectively.
During the periods shown in the bar chart, Institutional Class' highest
quarterly return was 1.47% (quarter ended December 31, 1990) and its lowest
quarterly return was 0.54% (quarter ended March 31, 1993).
PERFORMANCE TABLE
The following performance table reflects the performance of the Institutional
Class and Resource Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(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 3.14% 3.42% 3.54% 4.21% 04/18/83
- -------------------------------------------------------------------
Resource Class -- -- -- 3.17% 04/06/99
- -------------------------------------------------------------------
</TABLE>
Resource Class shares' seven-day yield on December 31, 1999 was 4.17%. For the
current seven-day yield, call (800) 825-6858.
2
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) RESOURCE 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
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) RESOURCE CLASS
- -----------------------------------------------------------
Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 0.20
Other Expenses 0.06
Total Annual Fund
Operating Expenses 0.48
Fee Waiver(1) 0.12
Net Expenses 0.36
- -----------------------------------------------------------
</TABLE>
(1) The distributor has contractually agreed to waive 0.04% of the Resource
Class shares' Rule 12b-1 distribution plan payments. The investment advisor
has contractually agreed to limit net expenses (exclusive of Rule 12b-1
distribution plan payments) to 0.20%.
You should also consider the effect of any account fees charged by the
financial institution managing your account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Resource 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
- ------------------------------
<S> <C> <C>
Resource Class $49 $154
- ------------------------------
</TABLE>
3
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
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
The advisor is to receive a fee from the portfolio calculated at the annual
rate of 0.25% of the first $500 million of average daily net assets and 0.20%
of assets over $500 million of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Resource Class of the fund is intended for use primarily by customers of
banks, certain broker-dealers and other institutions (institutions).
Individuals, corporations, partnerships and other businesses that maintain
qualified accounts at an institution may invest in shares of the Resource
Class. Each institution will render administrative support services to its
customers who are the beneficial owners of the shares of the Resource Class.
Such services include, among other things, establishment and maintenance of
shareholder accounts and records; assistance in processing purchase and
redemption transactions in shares of the Resource Class; providing periodic
statements showing a client's account balance in shares of the Resource Class;
distribution of fund proxy statements, annual reports and other communications
to shareholders whose accounts are serviced by the institution; and such other
services as the fund may reasonably request. Institutions will be required to
certify to the fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.
The Resource Class is designed to be a convenient and economical way to invest
in an open-end diversified money market fund, whose income is excluded from
gross income for purposes of federal income taxes. An investment in the fund
may relieve the institution of many of the investment and administrative
burdens encountered when investing in municipal securities directly. These
include: selection of portfolio investments; surveying the market for the best
price at which to buy and sell; valuation of portfolio securities; selection
and scheduling of maturities; receipt, delivery and safekeeping of securities;
and portfolio recordkeeping. It is anticipated that most investors will perform
their own subaccounting.
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 dividends,
if any, monthly. A business day is any day on which member banks of the Federal
Reserve Bank of New York and The Bank of New York, the fund's custodian, are
open for business.
Dividends are paid to settled shares of the fund as of 3:00 p.m. Eastern time.
Shareholders whose purchase orders have been received by the fund prior to 3:00
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 the net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains, if any, annually.
The fund does not expect to realize any long-term capital gains and losses.
4
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Resource 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 the six month period ended September 30, 1999 is
unaudited. The fund's financial statements are included in the fund's
semiannual report, which is available upon request.
<TABLE>
<CAPTION>
RESOURCE CLASS
--------------
FOR THE PERIOD
APRIL 6, 1999
THROUGH
SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.01
Less distributions:
Dividends from net investment income (0.01)
Net asset value, end of period $ 1.00
Total return(a) 1.47%
- ---------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------
Net assets, end of period (000s omitted) $ 215
Ratio of expenses to average net assets(b) 0.36%(c)
Ratio of net investment income to average net assets(d) 2.91%(c)
- ---------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
0.47%(annualized).
(c) Ratios are annualized and based on average net assets of $461,337.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 2.80% (annualized).
5
<PAGE>
------------------------
|CASH RESERVE 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.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Resource Class that
allows the fund to pay distribution and service fees of 0.20% per annum to Fund
Management Company (distributor) for the sale and distribution of its shares
and for services provided to shareholders. Because the fund pays these fees out
of its assets on an ongoing basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges.
PURCHASING SHARES
The minimum initial investment in the Resource Class is $10,000. No minimum
amount is required for subsequent investments in the fund, nor are minimum
balances required.
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. You must
open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds for the order, provided the
transfer agent has received notice of the order. You may obtain an Account
Application from the distributor. 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.
An institution may have a "sweep" program under which a portion of your
account with such institution may be automatically invested in the Resource
Class. If you propose to open a fund account with an institution, you should
consult with a representative of such institution to obtain a description of
the rules governing such an account. A statement with regard to your investment
in the Resource Class is supplied periodically, and confirmations of all
transactions for your account are provided by the institution promptly upon
request. In addition, proxies, periodic reports and other information from the
institution with regard to your shares of the Resource Class will be sent to
you.
You may place an order for the purchase of shares of the Resource Class with
the institution. The institution is responsible for the prompt transmission of
the order to the transfer agent. The fund is normally required to make
immediate settlement in federal funds (member bank deposits with a Federal
Reserve Bank) for portfolio securities purchased. Accordingly, payment for
shares of the Resource Class purchased by institutions on behalf of their
clients must be in federal funds. If an order to purchase shares is paid for
other than in federal funds, the order may be delayed up to two business days
while the institution completes the conversion into federal funds.
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. Redemption requests with respect to shares of the
Resource Class are normally made through your institution.
You may request a redemption by calling the transfer agent at (800) 825-6858,
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.
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 by wire transfer 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.
6
<PAGE>
------------------------
|CASH RESERVE PORTFOLIO|
------------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
------------------------------------
|The fund reserves 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 12:30 p.m. and 3:00
p.m. Eastern time on each day on which member banks of 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 the
first net asset value determination, the fund will normally wire redemption
proceeds on that day. If the transfer agent receives a redemption request
between the first and second net asset value determinations, 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.
TAXES
You will not be required to include the "exempt-interest" portion of dividends
paid by the fund in your gross income for federal income tax purposes. You will
be required to report the receipt of exempt-interest dividends and other tax-
exempt interest on your federal income tax return. Exempt-interest dividends
from the fund may be subject to state and local income taxes, may give rise to
a federal alternative minimum tax liability, may affect the amount of social
security benefits subject to federal income tax, may affect the deductibility
of interest on certain indebtedness, and may have other collateral federal
income tax consequences for you. The fund intends to avoid investment in
municipal securities the interest on which constitutes an item of tax
preference and could give rise to a federal alternative minimum tax liability
for you. The fund will try to avoid investments that result in taxable
dividends.
To the extent that dividends paid by the fund are derived from taxable
investments or realized capital gains. The percentage of dividends that
constitutes exempt-interest dividends will be determined annually. This
percentage may differ from the actual percentage of exempt interest received by
the fund for the particular days in which you hold shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the fund
to pay exempt-interest dividends might be adversely affected.
7
<PAGE>
------------------------
|CASH RESERVE 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
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 0843
Houston, TX 77001-0843
BY TELEPHONE: (800) 825-6858
BY E-MAIL: [email protected]
- --------------------------------------------------------------------------------
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, D.C.; 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, D.C. 20549-0102 or by sending an electronic mail request
to public [email protected]. Please call the SEC at 1-202-942-8090 for information
about the Public Reference Room.
------------------------------------
|Cash Reserve Portfolio |
|SEC 1940 Act file number: 811-2731|
------------------------------------
www.aimfunds.com
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
TAX-FREE INVESTMENTS CO.
CASH RESERVE 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 CASH RESERVE 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 MAY 24, 2000
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF CASH RESERVE
PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED MAY 24, 2000, INSTITUTIONAL
CLASS PROSPECTUS DATED MAY 24, 2000, PERSONAL INVESTMENT CLASS PROSPECTUS
DATED MAY 24, 2000, PRIVATE INVESTMENT CLASS PROSPECTUS DATED MAY 24, 2000,
RESERVE CLASS PROSPECTUS DATED MAY 24, 2000 AND RESOURCE CLASS PROSPECTUS
DATED MAY 24, 2000
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction......................................................... 3
General Information about the Company................................ 3
The Company and Its Shares......................................... 3
Performance Information............................................ 4
Portfolio Transactions and Brokerage................................. 5
General Brokerage Policy........................................... 5
Allocation of Portfolio Transactions............................... 6
Section 28(e) Standards............................................ 6
Investment Program and Restrictions.................................. 7
Investment Program................................................. 7
Municipal Securities............................................... 7
Maturities......................................................... 8
Diversification Requirements....................................... 8
Investment Ratings................................................. 9
When-Issued Securities and Delayed Delivery Transactions........... 13
Margin Transactions and Short Sales................................ 13
Illiquid Securities................................................ 13
Lending of Portfolio Securities.................................... 13
Interfund Loans.................................................... 14
Investment in Other Investment Companies........................... 14
Variable or Floating Rate Instruments.............................. 14
Synthetic Municipal Instruments.................................... 14
Other Considerations............................................... 15
Fundamental Investment Restrictions................................ 15
Non-Fundamental Investment Restrictions............................ 16
Management........................................................... 17
Directors and Officers............................................. 17
Remuneration of Directors.......................................... 19
AIM Funds Retirement Plan for Eligible Directors/Trustees.......... 19
Deferred Compensation Agreements................................... 20
The Investment Advisor............................................. 20
Administrator...................................................... 21
Expenses........................................................... 22
Transfer Agent and Custodian....................................... 22
Legal Matters...................................................... 22
Reports............................................................ 23
Sub-Accounting..................................................... 23
Principal Holders of Securities.................................... 23
Share Purchases and Redemptions...................................... 25
Purchases and Redemptions.......................................... 25
Redemptions by the Portfolio....................................... 25
Net Asset Value Determination...................................... 25
The Distribution Agreement......................................... 26
Distribution Plan.................................................. 26
Banking Regulations................................................ 28
Dividends, Distributions and Tax Matters............................. 28
Dividends and Distributions........................................ 28
Tax Matters........................................................ 28
Qualification as a Regulated Investment Company.................... 29
Excise Tax on Regulated Investment Companies....................... 29
Distributions...................................................... 29
Foreign Shareholders............................................... 30
Effect of Future Legislation; Local Tax Considerations............. 31
Financial Statements................................................. FS
</TABLE>
2
<PAGE>
INTRODUCTION
Tax-Free Investments Co. (the "Company") is a mutual fund organized with one
portfolio, the Cash Reserve Portfolio (the "Portfolio"), which has six classes
of shares. The rules and regulations of the Securities and Exchange Commission
(the "SEC") require all mutual funds to furnish prospective investors with
certain information concerning the activities of the fund being considered for
investment. This information is included in the Cash Management Class
Prospectus dated May 24, 2000, the Institutional Class Prospectus dated May
24, 2000, the Personal Investment Class Prospectus dated May 24, 2000, the
Private Investment Class Prospectus dated May 24, 2000, the Reserve Class
Prospectus dated May 24, 2000 and the Resource Class Prospectus dated May 24,
2000 (each a "Prospectus"). Copies of each Prospectus and additional copies of
this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Company'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 Company 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 COMPANY
THE COMPANY AND ITS SHARES
The Company is an open-end, diversified, series, management investment
company initially organized as a corporation under the laws of the State of
Maryland on January 24, 1977. The Company was reorganized as a business trust
under the laws of the Commonwealth of Massachusetts on August 30, 1985 and was
reorganized as a Maryland corporation on May 1, 1992. Shares of common stock
of the Company are redeemable at the net asset value thereof at the option of
the shareholder or at the option of the Company in certain circumstances. For
information concerning the methods of redemption, investors should consult
each Prospectus under the caption "Redeeming Shares."
The Company offers shares of the Portfolio. The Portfolio consists of six
classes of shares, each having different shareholder qualifications and
bearing expenses differently. 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.
This Statement of Additional Information relates to each class of the
Portfolio.
As used in each Prospectus, the term "majority of the outstanding shares" of
the Company, the Portfolio or a particular class means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Company, the Portfolio
or such class present at a meeting of the Company's shareholders, if the
holders of more than 50% of the outstanding shares of the Company, the
Portfolio or such class are present or represented by proxy, or (ii) more than
50% of the outstanding shares of the Company, the Portfolio or such class.
Shareholders of the Company do not have cumulative voting rights, and
therefore the holders of a majority of a quorum of the outstanding shares of
the Company voting together for election of directors may elect all of the
members of the Board of Directors of the Company. In such event, the remaining
holders cannot elect any members of the Board of Directors of the Company.
There are no preemptive or conversion rights applicable to any of the
Company's shares. The Company'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 Directors may classify or reclassify any unissued
shares of any class or classes in addition to those already authorized by
setting or changing in any one or more respects, from time to time, prior to
the issuance of such shares, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act").
The Board of Directors may classify or reclassify any unissued shares of any
class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the 1940 Act.
The Articles of Incorporation of the Company authorize the issuance of
30,100,000,000 shares of common stock at $.001 par value each, of which
22,100,000,000, represent interest in the Portfolio (or class thereof). A
share of the Portfolio (or class) represents an equal proportionate interest
in the Portfolio (or class) with each other share of the Portfolio (or class)
and is entitled to a proportionate interest in the dividends and distributions
from the Portfolio (or class).
3
<PAGE>
The Articles of Incorporation further provide that the directors will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Articles of Incorporation protects a director against any liability to
which a director would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in
the conduct of his office. The Articles of Incorporation provide for
indemnification by the Company of the directors and the officers of the
Company except with respect to any matter as to which any such person did not
act in good faith and in the reasonable belief that his action was in or not
opposed to the best interests of the Company. Such person may not be
indemnified against any liability to the Company or the Company'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 Articles of Incorporation
also authorize the purchase of liability insurance on behalf of the Company's
directors and officers.
The Company will not normally hold annual shareholders' meetings. A special
meeting shall be held upon written request of the holders of not less than 10%
of the outstanding shares of the Company. At such time as less than a majority
of the directors have been elected by the shareholders, the directors then in
office will call a shareholders' meeting for the election of directors. In
addition, directors may be removed from office by a written consent signed by
the holders of two-thirds of the outstanding shares of the Company and filed
with the Company's transfer agent or by a vote of the holders of two-thirds of
the outstanding shares at a meeting duly called for the purpose. Upon written
request by ten or more shareholders, who have been such for at least six
months and who hold shares constituting 1% of the outstanding shares, stating
that such shareholders wish to communicate with the other shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a director, the Company will provide a list of shareholders to the
requesting shareholders or disseminate appropriate materials (at the expense
of the requesting shareholders).
Except as otherwise disclosed in each Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
The overall management of the business and affairs of the Company is vested
with its Board of Directors. The Board of Directors approves all significant
agreements between the Company and persons or companies furnishing services to
the Company, including agreements with the Company's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Company are delegated to the Company's officers and to A I M Advisors, Inc.
("AIM"), subject always to the objective and policies of the Company and to
the general supervision of the Company's Board of Directors. Certain directors
and officers of the Company are affiliated with AIM and A I M Management Group
Inc. ("AIM Management"), the parent corporation of AIM.
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 Company at the number referred to 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. 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.
Comparative performance information using data from industry publications
maybe used from time to time in advertising or marketing the Portfolio's
shares.
Calculations of yield will take into account the total income received by
the Portfolio, including taxable income, if any; however, the Company intends
to invest its assets so that 100% of its annual interest income will be tax-
exempt. 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 Company, 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, usually seven consecutive calendar days. 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
Company 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.
In addition, the Company may furnish a tax equivalent yield which is the
rate an investor would have to earn from a fully taxable investment in order
to equal the share's yield after taxes. Tax equivalent yields are calculated
by dividing the share's yield by one minus the stated federal or combined
federal and state tax rate (if only a portion of the share's yield was tax-
exempt, only that portion is adjusted in the calculation).
4
<PAGE>
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 Company. Fee waivers or reductions or commitments to reduce expenses
will have the effect of the increasing the Portfolio's yield and total return.
The performance of the Portfolio will vary from time to time and past
results are not necessarily indicative of future results. The Portfolio's
performance is a function of its portfolio management in selecting the type
and quality of portfolio securities and is affected by operating expenses of
the Portfolio and market conditions. 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.
For the seven-day period ended September 30, 1999, the current and effective
yields for the Private Investment Class were 3.24% % and 3.29%, respectively.
For the seven-day period ended September 30, 1999, the current and effective
yields for the Institutional Class were 3.49% and 3.55%, respectively. For the
seven-day period ended September 30, 1999, the current and effective yields
for the Cash Management Class were 3.41% and 3.46%, respectively. For the
seven-day period ended September 30, 1999, the current and effective yields
for the Reserve Class were 2.69% and 2.72%, respectively. For the seven-day
period ended September 30, 1999, the current and effective yields for the
Resource Class were 3.33% and 3.38%, 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.
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 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 commission. AIM's primary
consideration in effecting a security transaction is to obtain the most
favorable execution of the order, which includes the best price on the
security and a low commission rate or spread (as applicable). While AIM seeks
reasonably 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 over-the-counter, 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 Company. 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.
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Under the 1940 Act, certain persons affiliated with the Company are
prohibited from dealing with the Company 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 Company from purchasing
a security being publicly underwritten by a syndicate of which certain persons
affiliated with the Company are members except in accordance with certain
conditions. These conditions may restrict the ability of the Portfolio to
purchase municipal securities being publicly underwritten by such 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 Company may, from time to time, serve as placement
agent or financial advisor to an issuer of Municipal Securities and be paid a
fee by such issuer. The Portfolio may purchase such Municipal Securities
directly from the issuer, provided that the purchase is reviewed by the
Company's Board of Directors and a determination is made that the placement
fee or other remuneration paid by the issuer to a person affiliated with the
Company is fair and reasonable in relation to the fees charged by others
performing similar services. During the fiscal years ended March 31, 1999,
1998 and 1997, no securities or instruments were purchased by the Portfolio
from issuers who paid placement fees or other compensation to a broker
affiliated with the Portfolio.
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 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 Company's directors 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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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 Directors without
shareholder approval. The Portfolio's investment policies, strategies and
practices are also non-fundamental. The Board of Directors of the Company
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.
The Portfolio will limit its purchases of municipal 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. This standard
applies at the time of purchase of a security. Since the Portfolio invests in
securities backed by banks and other financial institutions, changes in the
credit quality of these institutions could cause losses to the Portfolio and
affect its share price. 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 advisor 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 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 Service, Inc., Thomson Bankwatch,
One, Duff and Phelps, Inc., Fitch IBCA, 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.
Subsequent to its purchase by the Portfolio, an issue of Municipal
Securities may cease to be a First Tier security. Subject to certain
exceptions set forth in Rule 2a-7, such an event will not require the
elimination of the security from the Portfolio, but AIM will consider such an
event to be relevant in its determination of whether the Portfolio should
continue to hold the security. To the extent that the ratings applied by an
NRSRO to Municipal Securities may change as a result of changes in these
rating systems, the Company will attempt to use comparable ratings as
standards for its investments in Municipal Securities in accordance with the
investment policies described herein.
The Portfolio may, from time to time, invest in taxable short-term
investments ("Temporary Investments") consisting of obligations of the U.S.
Government, its agencies or instrumentalities, and repurchase agreements
(instruments under which the seller agrees to repurchase the security at a
specified time and price) relating thereto; commercial paper rated within the
highest rating category by a recognized rating agency; and certificates of
deposit of domestic banks with assets of $1.5 billion or more as of the date
of their most recently published financial statements. The Portfolio may
invest in Temporary Investments, for example, due to market conditions or
pending the investment of proceeds from the sale of shares of the Portfolio or
proceeds from the sale of portfolio securities or in anticipation of
redemptions. Although interest earned from such Temporary Investments will be
taxable as ordinary income, the Portfolio intends to minimize taxable income
through investment, when possible, on short-term tax-exempt securities, which
may include shares of other investment companies whose dividends are tax-
exempt. It is the Company's present intention to invest the Portfolio's assets
so that 100% of the Portfolio's annual interest income will be tax-exempt.
Accordingly, the Portfolio may hold cash reserves pending the investment of
such reserves in Municipal Securities.
MUNICIPAL SECURITIES
"Municipal Securities" include debt obligations issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Securities may be issued include the refunding of
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In addition,
certain types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, airport, mass
transit, industrial, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. The interest paid on such bonds
may be exempt from federal income tax, although current federal tax laws place
substantial limitations on the size and purpose of such issues. Such
obligations are considered to be Municipal Securities provided that the
interest paid thereon, in
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the opinion of bond counsel, qualifies as exempt from federal income tax.
However, interest on Municipal Securities may give rise to a federal
alternative minimum tax liability and may have other collateral federal income
tax consequences. See "Dividends, Distributions and Tax Matters--Tax Matters"
in this Statement of Additional Information.
The two major classifications of Municipal Securities are bonds and notes.
Bonds may be further categorized as "general obligation" or "revenue" issues.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of principal and interest. Revenue
bonds are payable from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise
or other specific revenue source, but not from the general taxing power. Tax-
exempt industrial development bonds are in most cases revenue bonds and do not
generally carry the pledge of the credit of the issuing municipality. Notes
are short-term instruments. Most notes are general obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. There are, of course,
variations in the risks associated with Municipal Securities, both within a
particular classification and between classifications. The Portfolio's assets
may consist of any combination of general obligation bonds, revenue bonds,
industrial revenue bonds and notes. The percentage of such Municipal
Securities in the Portfolio will vary from time to time.
The yields on Municipal Securities are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions of the Municipal Securities market, size of a particular offering,
maturity of the obligation, and rating of the issue. The yield realized by
holders of a class of a Portfolio will be the yield realized by the Portfolio
on its investments reduced by the general expenses of the Company and those
expenses attributable to such class. The market values of the Municipal
Securities held by the Portfolio will be affected by changes in the yields
available on similar securities. If yields increase following the purchase of
a Municipal Security the market value of such Municipal Security will
generally decrease. Conversely, if yields on such Municipal Security decrease,
the market value of such security will generally increase.
MATURITIES
Consistent with its objective of stability of principal, the Portfolio
attempts to maintain a constant net asset value per share of $1.00 and, to
this end, values its assets by the amortized cost method and rounds the per
share net asset value of its shares in compliance with Rule 2a-7, as amended
from time to time. Accordingly, the Portfolio invests only in Municipal
Securities having remaining maturities of 397 days or less and maintains a
dollar weighted average portfolio maturity of 90 days or less.
The maturity of a security held by the Portfolio is determined in compliance
with applicable rules and regulations. Certain securities bearing interest at
rates that are adjusted prior to the stated maturity of the instrument or are
subject to demand features or that are subject to repurchase agreements are
deemed to have maturities shorter than their stated maturities.
DIVERSIFICATION REQUIREMENTS
As a money market fund, the Portfolio is subject to the diversification
requirements of Rule 2a-7 under the 1940 Act. This Rule sets forth two
different diversification requirements: one applicable to the issuer of
Municipal Securities (provided that such securities are not subject to a
demand feature or a guarantee), and one applicable to Municipal Securities
with demand features or guarantees.
The issuer diversification requirement provides that the Portfolio may not
invest in the securities of any issuer if, as a result, more than 5% of its
total assets would be invested in securities issued by such issuer. If the
securities are subject to a demand feature or guarantee, however, they are not
subject to this requirement. Moreover, for purposes of this requirement, the
issuer of a security is not always the nominal issuer. Instead, in certain
circumstances, the underlying obligor of a security is deemed to be the issuer
of the security. Such circumstances arise for example when another political
subdivision agrees to be ultimately responsible for payments of principal and
interest on a security or when the assets and revenues of a non-governmental
user of the facility financed with the Municipal Securities secures repayment
of such securities.
The diversification requirement applicable to Municipal Securities subject
to a demand feature or guarantee provides that, with respect to 75% of its
total assets, the Portfolio may not invest more than 10% of its total assets
in securities issued by or subject to demand features or guarantees from the
same entity. A demand feature permits the Portfolio to sell a Municipal
Security at approximately its amortized cost value plus accrued interest at
specified intervals upon no more than 30 days' notice. A guarantee includes a
letter of credit, bond insurance and an unconditional demand feature (provided
the demand feature is not provided by the issuer of the security.)
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INVESTMENT RATINGS
The following is a description of the factors underlying the tax-exempt debt
ratings of Moody's, S&P and Fitch IBCA, Inc. ("Fitch"):
MOODY'S MUNICIPAL BOND RATINGS
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.
Note: Bonds in the Aa group which Moody's believes possess the strongest
investment attributes are designated by the symbol Aa1.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in the Aa group
when assigning ratings to: industrial development bonds; and bonds secured by
either a letter of credit or bond insurance. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.
MOODY'S DUAL RATINGS
In the case of securities with a demand feature, two ratings are assigned;
one representing an evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other representing an evaluation of
the degree of risk associated with the demand feature.
MOODY'S SHORT-TERM LOAN RATINGS
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade (or MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand feature
(i.e., a variable rate demand obligation or VRDO). Short-term ratings on
issues with demand features may be differentiated by the use of the VMIG
symbol to reflect such characteristics as payment upon periodic demand rather
than fixed maturity dates, and payment relying on external liquidity.
Additionally, the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is not
met.
A VMIG rating may be assigned to commercial paper programs. Such programs
are characterized as having variable short-term maturities but having neither
a variable rate nor demand feature.
Gradations of investment quality are indicated by rating symbols, with each
symbol representing a group in which the quality characteristics are broadly
the same.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated broad based
access to the market for refinancing.
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months.
Moody's employs the following two designations, each judged to be investment
grade, to indicate the relative repayment capacity of rated issuers.
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PRIME-1
Issuers (or related supporting institutions) rated Prime-1 (P-1) have a
superior capacity for repayment of short-term promissory obligations. P-1
repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in
earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity.
Note: A Moody's commercial paper rating may also be assigned as an
evaluation of the demand feature of a short-term or long-term security with a
put option.
S&P MUNICIPAL BOND RATINGS
A S&P municipal bond rating is a current assessment of the creditworthiness
of an obligor with respect to a specific obligation. This assessment may take
into consideration obligors such as guarantors, insurers, or lessees.
The ratings are based, in varying degrees, on the following considerations:
likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; nature of and provisions of the obligation; and
protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in a small degree.
Note: Ratings within the AA and A major rating categories may be modified by
the addition of a plus (+) sign or minus (-) sign to show relative standing.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the demand feature (e.g.,
AAA/A-1+). With short-term demand debt, the note rating symbols are used with
the commercial paper rating symbols (e.g., SP-1+/A-l+).
S&P MUNICIPAL NOTE RATINGS
A S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note); and source of
payment (the more dependent the issue is on the market for its refinancing,
the more likely it will be treated as a note).
The highest note rating symbol is as follows:
SP-1
Category denotes very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
S&P COMMERCIAL PAPER RATINGS
S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
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The highest rating category is as follows:
A-1
This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
FITCH BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations
of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guarantees unless otherwise indicated.
Bonds that have the same ratings are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect
small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
LONG-TERM CREDIT RATINGS
INVESTMENT GRADE
AAA
Highest credit quality. "AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely
to be adversely affected by foreseeable events.
AA
Very high credit quality. "AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A
High credit quality. "A' ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB
Good credit quality. "BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
SPECULATIVE GRADE
BB
Speculative, "BB' ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
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B
Highly speculative. "B' ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC, C
High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon sustained, favorable business or
economic developments. A "CC' rating indicates that default of some kind
appears probable. "C' ratings signal imminent default.
DDD, DD, AND D
Default. The ratings of obligations in this category are based on their
prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD' obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest. "DD' indicates
potential recoveries in the range of 50%-90%, and "D' the lowest recovery
potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD' have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD' and "D' are generally undergoing a formal
reorganization or liquidation process; those rated "DD' are likely to satisfy
a higher portion of their outstanding obligations, while entities rated "D'
have a poor prospect of repaying all obligations.
FITCH SHORT-TERM CREDIT RATINGS
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F-1
Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F-2
Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F-3
Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
B
Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C
High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.
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D
Default. Denotes actual or imminent payment default.
NOTES:
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the "AAA' long-term
rating category, to categories below "CCC', or to short-term ratings other
than "F-1'.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS
The Portfolio may purchase Municipal Securities on a "when-issued" basis,
that is, the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued (normally
within forty-five days after the date of the transaction). The Portfolio may
purchase or sell Municipal Securities on a delayed delivery basis. The payment
obligation and the interest rate that will be received on the when-issued
securities are fixed at the time the buyer enters into the commitment. The
Portfolio will only make commitments to purchase when-issued or delayed
delivery Municipal Securities with the intention of actually acquiring such
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable. No additional when-issued or delayed delivery
commitments will be made if more than 25% of the Portfolio's net assets would
thereby become so committed.
If the Portfolio purchases a when-issued or delayed delivery security, the
Company will direct its custodian bank to collateralize the when-issued or
delayed delivery commitment by segregating liquid assets of a dollar value
sufficient at all times to make payment for the when-issued or delayed
delivery securities. Such segregated liquid assets will be marked-to-market,
and the amount segregated will be increased if necessary to maintain adequate
coverage of the Portfolio's when-issued or delayed delivery commitments.
Securities purchased on a when-issued or delayed delivery basis and the
other securities held in the Portfolio are subject to changes in market value
based upon the public's perception of the creditworthiness of the issuer and
changes in the level of interest rates (which will generally result in all of
those securities changing in value in the same way, i.e., experiencing
appreciation when interest rates fall). Therefore, if in order to achieve
higher interest income the Portfolio remains substantially fully invested at
the same time that it has purchased securities on a when-issued or delayed
delivery basis, there is a possibility that the Portfolio will experience
greater fluctuation in the market value of its assets.
Furthermore, when the time comes for the Portfolio to meet its obligations
under when-issued or delayed delivery commitments, the Portfolio will do so by
use of its then available cash, by the sale of segregated liquid assets, by
the sale of other securities or, although it would not normally expect to do
so, by directing the sale of the when-issued or delayed delivery securities
themselves (which may have a market value greater or less than the Portfolio's
payment obligation thereunder). The sale of securities to meet such
obligations carries with it a greater potential for the realization of net
short-term capital gains, which are not exempt from federal income taxes. The
value of when-issued or delayed delivery securities on the settlement date may
be more or less than the purchase price.
In a delayed delivery transaction, the Portfolio relies on the other party
to complete the transaction. If the transaction is not completed, the
Portfolio may miss a price or yield considered to be advantageous.
MARGIN TRANSACTIONS AND SHORT SALES
The Portfolio does not intend to engage in margin transactions or short
sales of securities. The Portfolio will not sell securities short or purchase
any securities 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.
ILLIQUID SECURITIES
The Portfolio may invest up to 10% of its net assets in securities that are
illiquid. Illiquid securities include securities that cannot be disposed of
promptly (within seven days) in the normal course of business at a price at
which they are valued. Illiquid securities also include repurchase agreements
with remaining maturities in excess of seven days.
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 respective total assets. Such loans would be callable at any time
and will be continuously secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or
13
<PAGE>
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 and to the extent that the market value of the securities
loaned were to increase and the lender did not increase the collateral
accordingly.
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 others. 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.
INVESTMENT 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
currently 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. The Portfolio has obtained an
exemptive order from the SEC allowing it to invest uninvested cash balances
and cash collateral received in connection with securities lending in money
market funds that have AIM or an affiliate of AIM as an investment adviser
(the "Affiliated Money Market Funds"), provided that, with respect to
uninvested cash balances, investments in Affiliated Money Market Funds do not
exceed 25% of the total assets of the Portfolio.
VARIABLE OR FLOATING RATE INSTRUMENTS
The Portfolio may invest in Municipal Securities which have variable or
floating interest rates which are readjusted on set dates (such as the last
day of the month or calendar quarter) in the case of variable rates or
whenever a specified interest rate change occurs in the case of a floating
rate instrument. Such readjustment may be based either upon a predetermined
standard, such as a bank prime rate or the U.S. Treasury bill rate, or upon
prevailing market conditions. Variable or floating interest rates generally
reduce changes in the market price of Municipal Securities from their original
purchase price because, upon readjustment, such rates approximate market
rates. Accordingly, as interest rates decrease or increase, the potential for
capital appreciation or depreciation is less for variable or floating rate
Municipal Securities than for fixed rate obligations. Rule 2a-7 under the 1940
Act provides special rules for calculating the maturity date of variable and
floating rate securities for purposes of determining whether such securities
qualify as "Eligible Securities."
Many Municipal Securities with variable or floating interest rates purchased
by the Portfolio are subject to payment of principal and accrued interest
(usually within seven days) on the Portfolio's demand. The terms of such
demand instruments require payment of principal and accrued interest from the
issuer, a guarantor and/or a liquidity provider. Frequently such obligations
include letters of credit or other credit support arrangements provided by
financial institutions. All variable or floating rate instruments will meet
the quality standards of the Portfolio. AIM will monitor the pricing, quality
and liquidity of the variable or floating rate Municipal Securities held by
the Portfolio.
SYNTHETIC MUNICIPAL INSTRUMENTS
AIM believes that certain synthetic municipal instruments provide
opportunities for mutual funds to invest in high credit quality securities
providing attractive returns, even in market conditions where the supply of
short-term tax-exempt instruments may be limited. Synthetic municipal
instruments (sometimes referred to as "derivative municipal instruments") are
securities the value of and return on which are derived from underlying
municipal securities. Synthetic municipal instruments comprise a large
percentage of tax-exempt securities eligible for purchase by tax-exempt money
market funds. The types of synthetic municipal instruments in which the
Portfolio may invest involve the deposit into a trust or custodial account of
one or more long-term tax-exempt bonds or notes ("Underlying Bonds"), and the
sale of certificate evidencing interests in the trust or custodial account to
investors such as the Portfolio. The trustee or custodian receives the long-
term fixed rate interest payments on the Underlying Bonds, and pays
certificate holders short-term floating or variable interest rates which are
reset periodically. Synthetic municipal instruments typically are created by a
bank, broker-dealer or other financial institution ("Sponsor"). Typically, a
portion of the interest paid on the Underlying bonds which exceeds the
interest paid to the certificate holders is paid to the Sponsor or other
investors.
All such instruments must meet the minimum quality standards required for
the Portfolio's investments and must present minimal credit risks. In
selecting synthetic municipal instruments for the Portfolio, AIM considers the
creditworthiness of the issuer of the Underlying Bond, the Sponsor and the
party providing certificate holders with a conditional right to sell their
certificates at stated times and prices (a demand feature). Typically, a
certificate
14
<PAGE>
holder cannot exercise the demand feature upon the occurrence of certain
conditions, such as where the issuer of the Underlying Bond defaults on
interest payments. Moreover, because synthetic municipal instruments involve a
trust or custodial account and a third party conditional demand feature, they
involve complexities and potential risks that may not be present where a
municipal security is owned directly.
The tax-exempt character of the interest paid to certificate holders is
based on the assumption that the holders have an ownership interest in the
Underlying Bonds; however, the Internal Revenue Service has not issued a
ruling addressing this issue. In the event the Internal Revenue Service issues
an adverse ruling or successfully litigates this issue, it is possible that
the interest paid to the Portfolio on certain synthetic municipal instruments
would be deemed to be taxable. The Portfolio relies on opinions of special tax
counsel on this ownership question and opinions of bond counsel regarding the
tax-exempt character of interest paid on the Underlying Bonds.
OTHER CONSIDERATIONS
The ability of the Portfolio to achieve its investment objectives depends
upon the continuing ability of the issuers or guarantors of Municipal
Securities held by the Portfolio to meet their obligations for the payment of
interest and principal when due. Because the Portfolio invests in securities
backed by banks and other financial institutions, changes in the credit
quality of these institutions could cause losses to the Portfolio and affect
its share price. The securities in which the Portfolio invests may not yield
as high a level of current income as longer term or lower grade securities,
which generally have less liquidity and greater fluctuation in value. The net
asset value per share of each class of the Portfolio will normally remain
constant at $1.00, although there can be no assurance that such net asset
value will not change.
FUNDAMENTAL INVESTMENT RESTRICTIONS
The Portfolio is subject to the following investment restrictions, which may
be changed only by a vote of a majority of the Portfolio's outstanding shares.
Fundamental restrictions 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. Any
investment restriction that involves a maximum or minimum percentage of
securities or assets shall not be considered to be violated unless an excess
over or a deficiency under the percentage occurs immediately after, and is
caused by, an acquisition or disposition of securities or utilization of
assets by the Portfolio.
(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.
(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
15
<PAGE>
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.
(9) The Portfolio will limit its purchases of municipal securities to
"First Tier" securities, as such term is defined from time to time in Rule
2a-7 under the 1940 Act.
(10) The Portfolio's assets will be invested so that at least 80% of the
Portfolio's income will be exempt from federal income taxes.
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
Directors of the Company 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
Directors.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
The following non-fundamental investment restrictions apply to the Portfolio.
They may be changed without approval of the Portfolio's voting 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 or their series portfolios that have AIM or an affiliate of AIM as
an investment advisor (an "AIM Advised Fund"), subject to the terms and
conditions of any exemptive orders issued by the SEC.
(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 with regard to 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.
The Portfolio will not invest 25% or more of its assets in: (i) securities
whose issuers are located in the same state; (ii) securities the interest upon
which is paid from revenues of similar type projects; and (iii) industrial
development bonds. The policy described in (ii) does not apply, however, if
the securities are subject to a guarantee. For securities subject to a
guarantee, the Portfolio does not intend to purchase any such security if,
after giving effect to the purchase, 25% or more of the Portfolio's assets
would be invested in securities issued or guaranteed by entities in a
particular industry. Securities issued or guaranteed by a bank or subject to
financial guaranty insurance are not subject to the limitations set forth in
the preceding sentence.
16
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and executive officers of the Company and their principal
occupations during at least the last five years are set forth below. Unless
otherwise indicated, the address of each director and executive officer is 11
Greenway Plaza, Suite 100, Houston, Texas 77046.
<TABLE>
<CAPTION>
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
========================================================================================================
<C> <C> <S>
*CHARLES T. BAUER (81) Director and Chairman Chairman of the Board of Directors, A I
M Management Group Inc., 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; and Executive Vice
Chairman and Director, AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (56) Director Director, ACE Limited (insurance
906 Frome Lane company). Formerly, Director, President
McLean, VA 22102 and Chief Executive Officer, COMSAT
Corporation; and
Chairman, Board of Governors of INTELSAT
(international communications company).
- --------------------------------------------------------------------------------------------------------
OWEN DALY II (75) Director Formerly, Director, Cortland Trust Inc.
Six Blythewood Road (investment company), CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
- --------------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (64) Director Chairman of the Board of Directors,
2 Hopkins Plaza, 8th Floor, Suite 805 Mercantile Mortgage Corp. Formerly, Vice
Baltimore, MD 21201 Chairman of the Board of Directors,
President and Chief Operating Officer,
Mercantile--Safe Deposit & Trust Co.;
and President, Mercantile Bankshares.
- --------------------------------------------------------------------------------------------------------
JACK FIELDS (48) Director Chief Executive Officer, Texana Global,
Jetero Plaza, Suite E Inc. (foreign trading company) and
8810 Will Clayton Pkwy. Twenty First Century Group, Inc. (a
Humble, TX 77338 governmental affairs company); and
Director, Telscape International and
Administaff. Formerly, Member of the
U.S. House of Representatives.
- --------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (63) Director Partner, Kramer Levin Naftalis & Frankel
919 Third Avenue LLP (law firm).
New York, NY 10022
- --------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (53) Director and President Director, President and Chief Executive
Officer, A I M Management Group Inc.;
Director and 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.
- --------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Director Chief Executive Officer, YWCA of the
350 Fifth Avenue, Suite 301 U.S.A.
New York, NY 10118
- --------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Director Partner, Pennock & Cooper, (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
- --------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Director Executive Vice President, Development
The Williams Tower, 50th Floor and Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
========================================================================================================
</TABLE>
- -------
* A director who is an "interested person" of the Company and AIM as defined
in the 1940 Act.
** A director who is an "interested person" of the Company as defined in the
1940 Act.
17
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
========================================================================================
<C> <C> <S>
GARY T. CRUM (52) Senior Vice President Director and President, A I M Capital
Management, Inc.; Director and Executive
Vice President, A I M Management Group
Inc.; Director and Senior Vice
President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and
AMVESCAP PLC.
- ----------------------------------------------------------------------------------------
CAROL F. RELIHAN (45) Senior Vice President Director, Senior Vice President, General
and Secretary Counsel and Secretary, A I M Advisors,
Inc.; Senior Vice President, General
Counsel and Secretary, A I M Management
Group Inc.; Director, Vice President and
General Counsel, Fund Management
Company; Vice President,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; and Vice President
and General Counsel, A I M Fund
Services, Inc.
- ----------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President Vice President and Fund Controller, A I
and Treasurer M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
- ----------------------------------------------------------------------------------------
STUART W. COCO (44) Vice President Senior Vice President, A I M Capital
Management, Inc.; and Vice President,
A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------
MELVILLE B. COX (56) 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
Advisors, Inc. and A I M Management
Group Inc.
========================================================================================
</TABLE>
The Board of Directors has an Audit Committee, a Capitalization Committee,
an Investments Committee and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's
recommendations of independent accountants for the Company and evaluating such
accountants' performance, costs and financial stability, (ii) with AIM,
reviewing and coordinating audit plans prepared by the Company's independent
accountants and management's internal audit staff; and (iii) reviewing
financial statements contained in periodic reports to shareholders with the
Company's independent accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for: (i)
increasing or decreasing the aggregate number of shares of any class of the
Company's common stock by classifying and reclassifying the Company's
authorized but unissued shares of common stock, up to the Company's authorized
capital; (ii) fixing the terms of such classified or reclassified shares of
common stock; and (iii) issuing such classified or reclassified shares of
common stock upon the terms set forth in the Portfolio's prospectus, up to the
Company's authorized capital.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly,
Dunn, Fields, Frischling, Pennock and 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 of Directors, 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, Dunn, Fields, Pennock and Sklar and Dr. Mathai-
Davis. The Nominating and Compensation Committee is responsible for: (i)
considering and nominating individuals to stand for election as
18
<PAGE>
independent directors as long as the Company 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 directors; and (iii) making
recommendations to the Board of Directors regarding matters related to
compensation, including deferred compensation plans and retirement plans for
the independent directors.
The Nominating and Compensation Committee will consider nominees recommended
by a shareholder to serve as directors, 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 directors will be elected, and
(ii) that the Nominating and Compensation Committee or the Board of Directors,
as applicable, shall make the final determination of persons to be nominated.
All of the Company's directors also serve as directors or trustees of some
or all of the other investment companies managed or advised by AIM. All of the
Company's executive officers hold similar offices with some or all of such
investment companies.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board of Directors or any committee thereof. The directors of
the Company who do not serve as officers of the Company 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 AIM Funds. Each such
director receives a fee, allocated among the AIM Funds for which he or she
serves as a director or trustee, which consists of an annual retainer
component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued for
each director of the Company:
<TABLE>
<CAPTION>
================================================================================
AGGREGATE RETIREMENT TOTAL
COMPENSATION BENEFITS ACCRUED COMPENSATION
FROM BY FROM ALL AIM
DIRECTOR COMPANY(1) ALL AIM FUNDS(2) FUNDS(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer................... -0- -0- -0-
- --------------------------------------------------------------------------------
Bruce L. Crockett.................. $1,521 $ 37,485 $103,500
- --------------------------------------------------------------------------------
Owen Daly II....................... $1,521 $122,898 $103,500
- --------------------------------------------------------------------------------
Edward K. Dunn, Jr................. $1,496 $ 55,565 $103,500
- --------------------------------------------------------------------------------
Jack M. Fields..................... $1,513 $ 15,826 $101,500
- --------------------------------------------------------------------------------
Carl Frischling(/4/)............... $1,513 $ 97,791 $103,500
- --------------------------------------------------------------------------------
Robert H. Graham................... -0- -0- -0-
- --------------------------------------------------------------------------------
John F. Kroeger(/5/)............... $ 715 $ 40,461 -0-
- --------------------------------------------------------------------------------
Prema Mathai-Davis................. $ 877 $ 11,870 $101,500
- --------------------------------------------------------------------------------
Lewis F. Pennock................... $1,513 $ 45,766 $103,500
- --------------------------------------------------------------------------------
Ian W. Robinson(/6/)............... $1,496 $ 94,442 $ 25,000
- --------------------------------------------------------------------------------
Louis S. Sklar..................... $1,506 $ 90,232 $101,500
- --------------------------------------------------------------------------------
</TABLE>
- -------
(1) The total amount of compensation deferred by all directors of the Company
during the fiscal year ended March 31, 1999, including earnings thereon,
was $8,899.
(2) During the fiscal year ended March 31, 1999, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$6,883. Data reflects compensation for the calendar year ended December
31, 1999. Accruals for 1999 are based on actuarial projections from 1999.
(3) Each director serves as a director or trustee of at least 12 registered
investment companies advised by AIM. Data reflects total compensation for
the calendar year ended December 31, 1999.
(4) During the fiscal year ended March 31, 1999, the Company paid $5,333 in
legal fees to Mr. Frischling's law firm, Kramer Levin Naftalis & Frankel
LLP for services rendered to the independent directors of the company. Mr.
Frischling, a director of the Company, is a partner in such firm.
(5) Mr. Kroeger was a director until June 11, 1998, when he resigned. On that
date, he became a consultant to the Company. Of the amount listed above,
$256 was for compensation for services as a director and the remainder as
a consultant. 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."
(6) Mr. Robinson was a director 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 (the "Plan"), each director (who is not a 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 Directors. Pursuant to
the Plan, a director becomes eligible to retire and to 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
19
<PAGE>
"Applicable AIM Funds"). Each eligible director 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 director during the twelve-month period
immediately preceding the director's retirement (including amounts deferred
under a separate agreement between the Applicable AIM Funds and the director)
and based on the number of such director'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 director in quarterly
installments. If an eligible director dies after attaining the normal
retirement date but before receipt of all benefits under the Plan, the
director's surviving spouse (if any) shall receive a quarterly survivor's
benefit equal to 50% of the amount payable to the deceased director for no
more than ten years beginning the first day of the calendar quarter following
the date of the director'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 director 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 and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18, 11, 10
and 1 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
NUMBER OF YEARS ANNUAL RETIREMENT
OF SERVICE WITH COMPENSATION PAID BY ALL
APPLICABLE AIM FUNDS APPLICABLE AIM FUNDS
-------------------- ------------------------
<S> <C>
10...................................... $67,500
9...................................... $60,750
8...................................... $54,000
7...................................... $47,250
6...................................... $40,500
5...................................... $33,750
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Directors") have each executed
a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Directors
may elect to defer receipt of up to 100% of their compensation payable by the
Company, and such amounts are placed into a deferral account. Currently, the
Deferring Directors may select various AIM Funds in which all or part of their
deferral accounts shall be deemed to be invested. Distributions from the
Deferring Directors' deferral accounts will be paid in cash, in generally
equal quarterly installments over a period of five (5) or ten (10) years
(depending on the Compensation Agreement) beginning on the date the Deferring
Director's retirement benefits commence under the Plan. The Board of
Directors, in its sole discretion, may accelerate or extend the distribution
of such deferral accounts after the Deferring Director's termination of
service as a director of the Company. If a Deferring Director dies prior to
the distribution of amounts in his or her deferral account, the balance of the
deferral account will be distributed to his or her designated beneficiary in a
single lump sum payment as soon as practicable after such Deferring Director's
death. The Compensation Agreements are not funded and, with respect to the
payments of amounts held in the deferral accounts, the Deferring Directors
have the status of unsecured creditors of the Company and of each other AIM
Fund from which they are deferring compensation.
During the fiscal year ended March 31, 1999, $15,376 in directors' fees and
expenses were allocated to the Portfolio.
THE 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. The address of
AIM is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM was
organized in 1976, and, together with its subsidiaries, advises, manages or
administers over 120 investment portfolios encompassing a broad range of
investment objectives. 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 Company and
their affiliations are shown under "Directors 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 Company 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
20
<PAGE>
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 Directors 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 Company has entered into a Master Investment Advisory Agreement dated
May 24, 2000 (the "Advisory Agreement") with AIM. A prior investment advisory
agreement with similar terms to the Advisory Agreement was in effect prior to
May 24, 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 Company's Board of Directors and by the
affirmative vote of a majority of the directors who are not parties to the
agreement or "interested persons" of any such party by votes cast in person at
a meeting called for such purpose. The Company 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: supervises all aspects
of the Company's operations and provides investment advisory services to the
Portfolio. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the Portfolio.
AIM shall not be liable to the Company or its shareholders for any act or
omission by AIM or for any loss sustained by the Company or its shareholders,
except in the case of AIM's willful misfeasance, bad faith, gross negligence
or reckless disregard of duty.
As compensation for its advisory services under the Advisory Agreement, AIM
receives a fee from the Company with respect to the Portfolio, calculated
daily and paid monthly, at the annual rate of 0.25% of the first $500 million
of the Portfolio's aggregate average daily net assets, plus 0.20% of the
Portfolio's aggregate average daily net assets in excess of $500 million.
Pursuant to investment advisory agreements in effect prior to May 24, 2000
which provided for the same level of compensation to AIM as is provided for
under the Advisory Agreement, for the fiscal years ended March 31, 1999, 1998
and 1997, the fees paid by the Company to AIM with respect to the Portfolio
were $1,646,048, $1,670,427 and $1,720,635, respectively (after giving effect
to fee waivers for the fiscal years ended March 31, 1999, 1998 and 1997 of
$809,773, $683,910 and $625,513, 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 Company.
AIM has undertaken to limit Institutional Class expenses at a rate of 0.20%
of the average daily net assets until June 30, 2000. AIM has undertaken to
limit Cash Management Class, Personal Investment Class, Private Investment
Class, Reserve Class and Resource Class expenses (exclusive of 12b-1 fees) at
a rate of 0.20% of the average daily net assets until June 30, 2000.
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 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 of Directors; (d) preparing appropriate periodic reports for, and
seeking appropriate approvals from, the Board of Directors with respect to
securities lending activities; (e) responding to agent inquires; 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, the Portfolio will
pay AIM a fee equal to 25% of the net monthly interest or fee income retained
or paid to the Portfolio from such activities. AIM currently intends to waive
such fee, and has agreed to seek the Board of Directors' approval prior to its
receipt of all or a portion of such fee.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement between AIM and the Company (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
reimbursed for any personnel and other costs (including applicable office
space, facilities and equipment) of furnishing the services of a principal
financial officer of the Company and of persons working under her supervision
21
<PAGE>
for maintaining the financial accounts and books and records of the Company,
including calculation of the Portfolio's daily net asset value, and preparing
tax returns and financial statements for the Portfolio. The method of
calculating such reimbursements must be annually approved, and the amounts
paid will be periodically reviewed, by the Company's Board of Directors.
Pursuant to the administrative services agreements in effect prior to May
24, 2000, AIM received reimbursements for the fiscal years ended March 31,
1999, 1998 and 1997 in the amounts of $86,020, $66,515 and $70,077,
respectively, by the Portfolio.
EXPENSES
AIM and FMC furnish, without cost to the Company, the services of the
President, Secretary and one or more Vice Presidents of the Company and such
other personnel as are required for the proper conduct of the Company's
affairs and to carry out their obligations under the Advisory Agreement and
the Distribution Agreement. AIM maintains, at its expense and without cost to
the Company, a trading function in order to carry out its obligations to place
orders for the purchase and sale of portfolio securities for the Company. 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) 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 shares of the Class.
The Company pays, or causes to be paid, all other expenses of the Company,
including, without limitation, the fees paid to AIM; the charges and expenses
of any registrar, any custodian or depository appointed by the Company for the
safekeeping of cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents; brokers' commissions in
connection with portfolio securities transactions of the Company; all taxes,
including securities issuance and transfer taxes, and fees payable to federal,
state or other governmental agencies; the costs and expenses of engraving or
printing share certificates; all costs and expenses in connection with
registration and maintenance of registration with the SEC and various states
and other jurisdictions (including filing fees, legal fees and disbursements
of counsel); the costs and expenses of printing, including typesetting, and
distributing proxy statements, reports to shareholders, prospectuses and
statements of additional information of the Company and supplements thereto
(except reports to shareholders and prospectuses distributed to potential
shareholders of the Company which are paid for by FMC); expenses of
shareholders' and directors' meetings; fees and travel expenses of directors
or director members of any advisory board or committee; expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether
in shares or in cash; charges and expenses of any outside pricing service;
fees and expenses of legal counsel and of independent accountants; membership
dues of industry associations; interest payable on borrowings; postage;
insurance premiums on property or personnel (including officers and directors)
of the Company; extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto); and all other charges and costs of the Company's operations unless
otherwise explicitly assumed by AIM or FMC.
Expenses of the Company except those stated below are pro-rated among the
classes of the Company based upon the relative net assets of each class.
Distribution expenses of a class are charged against the income available for
distribution as dividends to such class.
TRANSFER AGENT AND CUSTODIAN
A I M Fund Services, Inc. ("AFS"), a wholly owned subsidiary of AIM, serves
as transfer agent and dividend disbursing agent for the shares of all classes
of the Portfolio pursuant to a Transfer Agency and Service Agreement. AFS
receives an annual fee from the Company for its services in such capacity in
the amount of 0.015% of average daily net assets of the Company, payable
monthly. Such compensation may be changed from time to time as is agreed to by
AFS and the Company. The address of AFS is P.O. Box 0843, Houston, Texas
77001-0843. 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 Company's portfolio
securities and cash. BONY receives such compensation from the Company for its
services in such capacity as is agreed to from time to time by BONY and the
Company. 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.
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania serves as counsel to the Company, and passes upon legal matters
for the Company.
22
<PAGE>
REPORTS
The Company furnishes shareholders with semi-annual reports containing
information about the Company and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Company's independent auditors. The
Board of Directors has selected KPMG LLP, Bank of America Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
SUB-ACCOUNTING
The Company 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 Company or FMC for
these sub-accounting services. In addition, shareholders utilizing certain
versions of AIM LINK(R) Remote, a personal computer application software
product, may receive sub-accounting services via such software.
PRINCIPAL HOLDERS OF SECURITIES
To the best of the knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of March 1, 2000, and the percentage of the Portfolio's amount of
outstanding shares owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
NAME AND ADDRESS OWNED OF RECORD AND
OF RECORD OWNER RECORD ONLY(A) BENEFICIALLY
---------------- -------------- ------------
CASH MANAGEMENT CLASS
---------------------
<S> <C> <C>
HERITAGE ASSET MANAGEMENT INC. ................. 72.28% -0-
P.O. Box 33022
St. Petersburg, FL 33733-8022
HUNTINGTON INVESTMENT 112....................... 13.73% -0-
135 North Pennsylvania Suite 800
Indianapolis, IN 46204
EVEREN CLEARING CORP ........................... 13.40% -0-
111 East Kilbourn Ave.
Milwaukee, WI 53202
<CAPTION>
INSTITUTIONAL CLASS
-------------------
<S> <C> <C>
BANK OF AMERICA, N.A. .......................... 19.91% -0-
1401 Elm Street, 11th Floor
P.O. Box 831000
Dallas, TX 75202-2911
FROST NATIONAL BANK TX ......................... 13.93% -0-
Muir & Co.
c/o Frost
P.O. Box 2479
San Antonio, TX 78298-2479
CHASE BANK OF TEXAS FBO OBIE & CO. ............. 10.64% -0-
18 HCB 340
P.O. Box 2558
Houston, TX 77252-2558
TRUST COMPANY BANK ............................. 10.60% -0-
Center 3139
P.O. Box 105504
Atlanta, GA 30348
</TABLE>
- -------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
23
<PAGE>
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
NAME AND ADDRESS OWNED OF RECORD AND
OF RECORD OWNER RECORD ONLY(A) BENEFICIALLY
---------------- -------------- ------------
PERSONAL INVESTMENT CLASS
-------------------------
<S> <C> <C>
NONE
<CAPTION>
PRIVATE INVESTMENT CLASS
------------------------
<S> <C> <C>
CULLEN/FROST DISCOUNT BROKERS................... 39.33% -0-
P.O. Box 2358
San Antonio, TX 78299
THE BANK OF NEW YORK............................ 13.65% -0-
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
UNION BANK OF CALIFORNIA........................ 8.74% -0-
530 B Street, Suite 204
San Diego, CA 92101
NEW HAVEN SAVINGS BANK TRUST DEPARTMENT......... 7.93% -0-
Trust Department
P.O. Box 302
New Haven, CT 06502
BANK ONE TRUST COMPANY.......................... 7.80% -0-
1111 Polaris Parkway
Columbus, OH 43240
HAMBRECHT & QUIST LLC........................... 6.56% -0-
1100 Newport Center Drive, Second Floor
Newport Beach, CA 92660
CIBC WORLD MARKETS.............................. 5.46% -0-
200 Liberty Street
World Financial Center
New York, NY 10281
<CAPTION>
RESERVE CLASS
-------------
<S> <C> <C>
BANK OF NEW YORK................................ 100% -0-
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
<CAPTION>
RESOURCE CLASS
--------------
<S> <C> <C>
EVEREN CLEARING CORP. .......................... 69.79% -0-
111 East Kilbourn Ave.
Milwaukee, WI 53202
MCDONALD & COMPANY.............................. 25.11% -0-
800 Superior Avenue, Suite 2100
Cleveland, OH 44114-2603
HAMBRECHT & QUIST LLC........................... 5.10% -0-
1100 Newport Center Drive, Second Floor
Newport Beach, CA 92660
</TABLE>
- -------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
To the best of the knowledge of the Company, as of March 1, 2000, the
directors and officers of the Company as a group beneficially owned less than
1% of the outstanding shares of each class of the Portfolio.
24
<PAGE>
SHARE PURCHASES AND REDEMPTIONS
PURCHASES AND REDEMPTIONS
A complete description of the manner by which the 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 Company 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 Company 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 Company.
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 Company 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 Company 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 the
12:30 p.m. Eastern time net asset value determination, the redemption will be
effected at the net asset value of the Portfolio determined as of 12:30 p.m.
Eastern time and the Company will normally wire redemption proceeds on that
day. A redemption request received by AFS between 12:30 p.m. Eastern time and
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 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. If
AFS receives a redemption request on a Business Day after 3:00 p.m. Eastern
time, the redemption will be effected at the net asset value of the Portfolio
determined as of 12:30 p.m. Eastern time on the next Business Day of such
Portfolio, and the Company will normally wire redemption proceeds on such next
Business Day. The Portfolio, 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 Portfolio determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
Portfolio may, at its discretion, redeem the account and distribute the
proceeds to you.
NET ASSET VALUE DETERMINATION
The net asset value of the shares of each class of the Portfolio is
determined twice daily as of the times shown in each Prospectus on each
Business Day of the Company, as defined in each Prospectus. 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
25
<PAGE>
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.
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 Company 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 Company to adhere to certain conditions. The
Portfolio will invest only in "Eligible Securities," as defined in Rule 2a-7
of the 1940 Act, which the Board of Directors has determined present minimal
credit risks. Rule 2a-7 also requires, among other things, that the portfolio
maintain a dollar-weighted 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 Directors has established procedures designed to stabilize, to
the extent reasonably possible, the Portfolio's price per share at $1.00 as
computed for the purpose of sales and redemptions. Such procedures include
review of the portfolio holdings by the Board of Directors, 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 purchasers or
existing holders of any class of shares of the Portfolio. In the event the
Board of Directors determines that such a deviation exists for any class of
shares of the Portfolio, it will take such corrective action as the Board of
Directors deems necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
the average portfolio maturity; the withholding of dividends; the redemption
of shares in kind; or the establishment of a net asset value per share by
using available market quotations.
THE DISTRIBUTION AGREEMENT
The Company has entered into a 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 "Directors and Officers" and "The Investment Advisor"
for information as to the affiliation of certain directors and officers of the
Company 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,
except as may otherwise be provided in a distribution plan pursuant to Rule
12b-1 adopted by the Company's Board of Directors, 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 Company
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 from year to year, provided that it
is specifically approved at least annually by the Company's Board of Directors
and the affirmative vote of the directors 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 Company 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 Company 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 Company 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 Directors 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.
26
<PAGE>
Pursuant to the Plan, the Company may enter into Shareholder Service
Agreements ("Service Agreements") with selected broker-dealers, banks, other
financial institutions or their affiliates. Such firms may receive
compensation from the Portfolio for servicing investors as beneficial owners
of 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: (i) answering customer inquiries
regarding shares of these classes and the Portfolio; (ii) assisting customers
in changing dividend options, account designations and addresses; (iii)
performing sub-accounting; (iv) establishing and maintaining shareholder
accounts and records; (v) processing purchase and redemption transactions;
(vi) automatic investment of customer cash account balances in shares of these
classes; (vii) providing periodic statements showing a customer's account
balance and integrating such statements with those of other transactions and
balances in the customer's other accounts serviced by such firm; (viii)
arranging for bank wires; and (ix) such other services as the Company may
request on behalf of 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 Company 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 Company 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 Company.
The Plan requires the officers of the Company to provide the Board of
Directors 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 Directors shall review these reports in connection with their
decisions with respect to the Plan.
With respect to the Cash Management Class, Institutional Class and Private
Investment Class, the amount paid to dealers and financial institutions
pursuant to the Plan for the fiscal year ended March 31, 1999 was $1,888,
$[ ] and $214,727, respectively, (or an amount equal to 0.08%, [ ]% and
0.25% of the average daily net assets of Cash Management Class, Institutional
Class and Private Investment Class, respectively). With respect to the Cash
Management Class, Institutional Class and Private Investment Class, FMC
received no compensation pursuant to the Plan for the fiscal year ended March
31, 1999.
As required by Rule 12b-1 under the 1940 Act, the Plan has been approved by
the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have
no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("Qualified Directors"). In approving the
Plan in accordance with the requirements of Rule 12b-1, the directors
considered various factors and determined that there is a reasonable
likelihood that the Plan would benefit the Company 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, 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
Directors, including a majority of the Qualified Directors.
FMC is a wholly owned subsidiary of AIM, an indirect wholly owned subsidiary
of AMVESCAP PLC. Charles T. Bauer, a Director and Chairman of the Company, and
Robert H. Graham, a Director and President of the Company, own 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 Directors, 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 directors, including a majority of the Qualified Directors, 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 Directors is committed to the discretion of the Qualified
Directors.
27
<PAGE>
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
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 and payments to FMC 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.
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 November 2000. 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.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and
financial institutions may be required to register as dealers pursuant to
state law.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends with respect to each class of the Portfolio are declared to
shareholders of record immediately after 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 12:30 p.m. Central 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 5:00 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's pro rata share of the total shares outstanding which relate to the
Portfolio, less (b) Company 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 Company 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 Directors 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 Directors 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 the Portfolio or its shareholders, and the discussion
here and in each Prospectus is not intended as a substitute for careful tax
planning.
28
<PAGE>
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 (a) 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) and (b) 90% of its tax-exempt income (net of allocable expenses
and amortized bond premium) 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 of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies.
In addition to satisfying the requirements described above, the Portfolio
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of the Portfolio's assets
must consist of cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and securities of other issuers (as to
which the Portfolio has not invested more than 5% of the value of the
Portfolio's total assets in securities of such issuer and as to which the
Portfolio does not hold more than 10% of the outstanding voting securities of
such issuer), and no more than 25% of the value of its total assets may be
invested in the securities of any one 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. The
balance of such income must be distributed during the next calendar year.
Undistributed tax-exempt interest on Municipal Securities is not subject to
the excise tax. 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.
DISTRIBUTIONS
The Portfolio intends to qualify to pay exempt-interest dividends by
satisfying the requirement that at the close of each quarter of the
Portfolio's taxable year at least 50% of the Portfolio's total assets consists
of Municipal Securities, which are exempt from federal income tax.
Distributions from the Portfolio will constitute exempt-interest dividends to
the extent of the Portfolio's tax-exempt interest income (net of allocable
expenses and amortized bond premium). Exempt-interest dividends distributed to
shareholders of the Portfolio are excluded from gross income for federal
income tax purposes. However, shareholders required to file a federal income
tax return will be required to report the receipt of exempt-interest dividends
on their returns. Moreover, while exempt-interest dividends are excluded from
gross income for federal income tax purposes, they may be subject to
alternative minimum tax ("AMT") in certain circumstances and may have other
collateral tax consequences as discussed below. Distributions by the Portfolio
of any investment company taxable income or of any net capital gain will be
taxable to shareholders as discussed below.
AMT is imposed in addition to, but only to the extent it exceeds, the
regular tax and is computed at a maximum rate of 28% for noncorporate
taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's
alternative minimum taxable income ("AMTI") over an exemption amount. Exempt-
interest dividends derived from certain "private activity" Municipal
Securities issued after August 7, 1986 will generally constitute an item of
tax preference includable in AMTI for both corporate and noncorporate
taxpayers. In addition, exempt-interest dividends derived from all Municipal
29
<PAGE>
Securities, regardless of the date of issue, must be included in adjusted
current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMT net operating loss deduction)) includable in AMTI. Pursuant to the
Taxpayer Relief Act of 1997, certain small corporations are wholly exempt from
the AMT.
Exempt-interest dividends must be taken into account in computing the
portion, if any, of social security or railroad retirement benefits that must
be included in an individual shareholder's gross income subject to federal
income tax. Further, a shareholder of the Portfolio is denied a deduction for
interest on indebtedness incurred or continued to purchase or carry shares of
the Portfolio. Moreover, a shareholder who is (or is related to) a
"substantial user" of a facility financed by industrial development bonds held
by the Portfolio will likely be subject to tax on dividends paid by the
Portfolio which are derived from interest on such bonds. Receipt of exempt-
interest dividends may result in other collateral federal income tax
consequences to certain taxpayers, including financial institutions, property
and casualty insurance companies and foreign corporations engaged in a trade
or business in the United States. Prospective investors should consult their
own tax advisers as to such consequences.
The Portfolio anticipates distributing substantially all of its investment
company taxable income, if any, 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 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. Realized market discount on Municipal
Securities purchased after April 30, 1993, will be treated as ordinary income
and not as capital gain.
Distributions by the Portfolio that do not constitute ordinary income
dividends, exempt-interest 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 the Portfolio (or of another AIM Fund). Shareholders
electing to reinvest a distribution in additional shares will be treated as
receiving a distribution in an amount equal to the net asset value of the
shares acquired, 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.
The Portfolio will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, if
any, and the proceeds of redemption of shares, paid to any shareholder (1) who
has provided either an incorrect tax identification number or no number at
all, (2) who is subject to backup withholding by the Internal Revenue Service
for failure to report the receipt of interest or dividend income properly, or
(3) who has failed to certify to the Portfolio that it is not subject to
backup withholding or that it is a corporation or other "exempt recipient."
Shareholders will be advised annually as to the federal income tax status of
distributions made during the year. Shareholders are advised to consult with
their tax advisors concerning the impact of the Code on their investments in
the Company, and concerning the application of state, local and foreign taxes
to investments in the Company, which may differ significantly from the federal
income tax consequences described above.
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, ordinary income
dividends (including short-term capital gains) and return of capital
distributions will be subject to U.S. withholding tax at the rate of 30% (or
lower treaty rate) upon the gross amount of the dividend. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Portfolio, capital gain dividends (if
any) and exempt-interest dividends.
30
<PAGE>
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 (if any) 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
(other than exempt-interest dividends) that are otherwise exempt from
withholding tax (or taxable at a reduced treaty rate) 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.
Recently proposed regulations may change information provided here. 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 March
15, 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, exempt-
interest 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 Portfolio.
31
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
SCHEDULE OF INVESTMENTS
September 30, 1999
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
SHORT-TERM MUNICIPAL OBLIGATIONS - 100.93%
ALABAMA - 1.00%
Birmingham (City of)(YMCA-Birmingham);
Public Park and Recreation Board
Variable Rate Demand Series 1996 RB
(LOC-Amsouth Bank of Alabama)
3.85%, 06/01/16(b) -- VMIG-1 $ 3,065 $ 3,065,000
- -----------------------------------------------------------------------------
Marshall (County of); Special Obligation
School Refunding Series 1994 Wts.
(LOC-First Alabama Bank)
3.85%, 02/01/12(b) A-1 -- 2,695 2,695,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, Jefferson
(County of) Sewer Imp.; Floating Rate
Trust Certificates Series 124 1999
Wts. RB
3.85%, 02/01/36(b)(c)(d) A-1c -- 5,100 5,100,000
- -----------------------------------------------------------------------------
10,860,000
- -----------------------------------------------------------------------------
ALASKA - 0.48%
Valdez Marine (BP Pipelines Inc.
Project); Floating Rate Treasury Series
1999 A28 Reg D Term RB
3.95%, 12/01/25(b)(d) -- VMIG-1 5,275 5,275,000
- -----------------------------------------------------------------------------
ARIZONA - 1.90%
Maricopa (County of) Pollution Control
Corp. (Arizona Public Service Co.);
Refunding Variable Rate Demand Series
1994 A PCR
3.75%, 05/01/29(b) A-1+ P-1 5,300 5,300,000
- -----------------------------------------------------------------------------
Mesa Industrial Development Authority
(Discovery Health Systems); Variable
Rate Demand Series 1999 B RB
3.80%, 01/01/29(b)(c) A-1+ VMIG-1 2,700 2,700,000
- -----------------------------------------------------------------------------
Pinal (County of) Industrial Development
Authority (Magma Copper Company
Project); Series 1984 PCR (LOC-National
Westminster)
2.95%, 12/01/09(b) A-1+ P-1 4,700 4,700,000
- -----------------------------------------------------------------------------
Salt River Project Agricultural
Improvement and Power District;
Promissory Notes
3.40%, 11/10/99 A-1+ P-1 7,970 7,970,000
- -----------------------------------------------------------------------------
20,670,000
- -----------------------------------------------------------------------------
ARKANSAS - 0.59%
Arkansas Hospital Equipment Financing
Authority (Baptist Health Project);
Hospital Equipment Series 1995 RB
3.85%, 11/01/10(b)(c) A-1+ VMIG-1 6,400 6,400,000
- -----------------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
CALIFORNIA - 0.50%
Huntington Beach (City of) (Seabridge
Villas Project); Floating Rate
Multifamily Housing Series 1985 A RB
4.00%, 02/01/10(b) -- VMIG-1 $ 3,000 $ 3,000,000
- -------------------------------------------------------------------------------
Student Loan Marketing Corporation;
Student Loan Revenue Refunding Series
1993 A RB (LOC-Dresdner Bank AG)
3.20%, 11/01/02(b)(e) -- VMIG-1 2,500 2,500,000
- -------------------------------------------------------------------------------
5,500,000
- -------------------------------------------------------------------------------
COLORADO - 1.20%
Eagle Ranch Metro District Golf Course;
Variable Rate Series 1999 B RB (LOC-
Societe Generale)
3.80%, 10/15/18(b) A-1+ -- 3,900 3,900,000
- -------------------------------------------------------------------------------
Pitkin (County of) Industrial Development
(Aspen Skiing Company Project); Refunding
Series 1994 A IDR (LOC-First National Bank)
2.95%, 04/01/16(b) A-1+ -- 3,000 3,000,000
- -------------------------------------------------------------------------------
Platte River Power Authority; Adjustable
Tender (Subordinate Lien) Electric Series
S-1 RB
3.50%, 12/01/99(b) A-1+ VMIG-1 6,200 6,200,000
- -------------------------------------------------------------------------------
13,100,000
- -------------------------------------------------------------------------------
CONNECTICUT - 1.63%
Connecticut (State of) (Transportation
Infrastructure Purpose S-1); Special Tax
Obligation RB
3.75%, 12/01/10(b) A-1+ VMIG-1 2,178 2,178,000
- -------------------------------------------------------------------------------
Connecticut (State of) Development
Authority (Corporation for Independent
Living Project); Health Care Variable
Rate Demand Series 1990 RB (LOC-Chase
Manhattan Bank)
3.65%, 07/01/15(b) -- VMIG-1 1,669 1,669,000
- -------------------------------------------------------------------------------
Connecticut (State of) Health &
Educational Facilities Authority (Yale
University); Variable Rate Demand Series
1997 T-2 RB
3.70%, 07/01/29(b) A-1+ VMIG-1 1,914 1,914,000
- -------------------------------------------------------------------------------
JP Morgan Putter TE Receipt; Connecticut
(State of) Special Tax Obligation Series
114 1999 A RB
3.88%, 10/01/09(b)(d) -- VMIG-1 11,980 11,980,000
- -------------------------------------------------------------------------------
17,741,000
- -------------------------------------------------------------------------------
DELAWARE - 0.47%
University of Delaware; Variable Rate
Demand Series 1998 RB
3.75%, 11/01/23(b) A-1+ -- 3,173 3,173,000
- -------------------------------------------------------------------------------
Wilmington (City of); Unlimited Tax Series
1990 GO
6.75%, 05/15/00(c) AAA Aaa 1,815 1,889,372
- -------------------------------------------------------------------------------
5,062,372
- -------------------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
FLORIDA - 9.18%
Broward (County of) Housing Finance
Authority (Landings Inverrary
Apartments); Multifamily Variable Rate
Demand Housing Series 1985 RB
4.00%, 06/01/13(b) -- VMIG-1 $10,000 $ 10,000,000
- -----------------------------------------------------------------------------
Collier (County of) Health Facilities
Authority (Cleveland Clinic Health
System); Hospital Series 1999 RB
3.80%, 01/01/33(b) A-1+ VMIG-1 18,200 18,200,000
- -----------------------------------------------------------------------------
Florida (State of) (Gas Project No. 1);
Series 1998 RB
4.25%, 12/01/99(c) AAA Aaa 4,515 4,520,791
- -----------------------------------------------------------------------------
Gulf Breeze (City of) (Florida Municipal
Bond Fund); Variable Rate Demand Series
1996 A RB (LOC-Bank of America N.A.)
3.85%, 03/31/21(b) A-1+ -- 3,585 3,585,000
- -----------------------------------------------------------------------------
Gulf Breeze (City of) Healthcare
Facilities (Heritage Health Care
Project); Variable Rate Demand Series
1999 RB
3.92%, 01/01/24(b)(c) -- VMIG-1 7,000 7,000,000
- -----------------------------------------------------------------------------
Gulf Breeze (City of) (Local Government
Loan Program); Floating Rate Series
1985 B RB
3.75%, 12/01/15(b)(c) A-1+ VMIG-1 2,060 2,060,000
- -----------------------------------------------------------------------------
Jacksonville (City of) (The River City
Renaissance Program); Commercial Paper
Notes Series 1993
3.25%, 10/15/99 A-1 P-1 6,000 6,000,000
- -----------------------------------------------------------------------------
Lee (County of) Housing Finance
Authority (Forestwood Apartments
Project); Refunding Housing Series 1995
A RB
3.75%, 06/15/25(b) A-1+ -- 624 624,000
- -----------------------------------------------------------------------------
Lee (County of) Industrial Development
Authority (Shell Point Village
Project); Variable Rate Demand Series
1999 B IDR (LOC-Bank of America N.A.)
3.80%, 11/01/29(b) A-1+ -- 10,000 10,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, (Board of
Education Lottery); Floating Rate Trust
Certificate Series 57 1998 RB
3.85%, 07/01/15(b)(c)(d) A-1c -- 15,000 15,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, Orange
(County of) School Board; Floating Rate
Trust Certificates Series 85 1999 COP
3.85%, 08/01/22(b)(c)(d) -- VMIG-1 8,135 8,135,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, Tampa Bay
(City of) Water Utility System;
Floating Rate Trust Certificates Series
112 1999 RB
3.08%, 10/01/27(b)(c)(d) A-1c A1 4,995 4,995,000
- -----------------------------------------------------------------------------
Nassau (County of) (Solid Waste System);
Refunding Series 1999 RB (LOC-First
Union National Bank)
3.80%, 07/01/13(b) A-1 -- 4,000 4,000,000
- -----------------------------------------------------------------------------
Putnam (County of) Development Authority
(Seminole Electric Cooperative, Inc.
Project); National Rural Utilities
Guaranteed Semiannual Variable Pooled
Series 1984 H-4 PCR
3.00%, 03/15/00(b)(e) A-1+ P-1 3,600 3,600,000
- -----------------------------------------------------------------------------
Tampa (City of); Refunding Gtd.
Entitlement Series 1991 RB
6.50%, 10/01/99(c) AAA Aaa 2,205 2,205,000
- -----------------------------------------------------------------------------
99,924,791
- -----------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA - 4.07%
Clarke (County of) Georgia School
District (School Sales Tax); Unlimited
Tax Series 1997 GO
4.55%, 03/01/00(c) AAA Aaa $ 2,150 $ 2,163,584
- -------------------------------------------------------------------------------
Cobb (County of) Development Authority
(Institute of Nuclear Power Operations);
Variable Rate Demand Series 1998 IDR
(LOC-Suntrust Bank)
3.80%, 02/01/13(b) -- Aa3 5,265 5,265,000
- -------------------------------------------------------------------------------
Cobb (County of) Kennestone Hospital
Authority (Equipment Pool Project);
Variable Rate Anticipation Certificates
Series 1999 RB
3.90%, 04/01/26(b) A-1+ VMIG-1 15,000 15,000,000
- -------------------------------------------------------------------------------
Decatur County Bainbridge Industrial
Development Authority (Kaiser
Agriculture Chemical Inc. Project);
Series 1985 IDR (LOC-Harris Trust &
Savings Bank)
3.80%, 12/01/02(b) -- -- 2,100 2,100,000
- -------------------------------------------------------------------------------
Dekalb (County of) Private Hospital
Authority (Egleston Childrens Hospital
at Emory University); Variable Rate
Demand Series 1994 A RAN (LOC-Suntrust
Bank)
3.65%, 03/01/24(b) A-1+ VMIG-1 1,665 1,665,000
- -------------------------------------------------------------------------------
Fayette (County of) Development Authority
Educational Facilities (Catholic School
Properties Inc. Project); Variable Rate
Demand Series 1999 RB (LOC-Wachovia
Bank)
3.80%, 04/01/24(b) -- Aa2 5,000 5,000,000
- -------------------------------------------------------------------------------
Floyd (County of) Development Authority
(Shorter College Project); Variable Rate
Demand Series 1998 RB (LOC-Suntrust
Bank)
3.85%, 06/01/17(b) A-1+ -- 4,000 4,000,000
- -------------------------------------------------------------------------------
Georgia (State of); Refunding Unlimited
Tax Series 1998 E GO
4.00%, 02/01/00 AAA Aaa 5,600 5,615,687
- -------------------------------------------------------------------------------
Gwinnett (County of) Housing Authority
(Post Chase Project); Variable Rate
Demand Multifamily Housing Series 1997 RB
3.80%, 06/01/25(b) A-1+ -- 3,500 3,500,000
- -------------------------------------------------------------------------------
44,309,271
- -------------------------------------------------------------------------------
IDAHO - 0.28%
Idaho (State of); Unlimited Tax Series
1999 TAN
4.25%, 06/30/00 SP-1+ MIG-1 3,000 3,018,377
- -------------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
ILLINOIS - 8.62%
Bear Stearns Municipal Securities Trust
Certificates (Illinois Sales Tax); Series
1998-25 Class A RB (LOC-Bear Stearns
Capital Markets)
3.82%, 03/15/07(b)(d) A-1 Aa3 $10,000 $ 10,000,000
- -------------------------------------------------------------------------------
Chicago (City of); Limited Tax Series 1998
GO (LOC-Morgan Guaranty Trust)
2.85%, 01/31/00(b) A-1+ VMIG-1 4,000 4,000,000
- -------------------------------------------------------------------------------
Chicago (City of) Metro Water District
(Greater Chicago Reclamation); Refunding
Unlimited Tax Series 1992 GO
5.15%, 12/01/99 AA Aa2 5,000 5,013,766
- -------------------------------------------------------------------------------
Chicago (City of) O'Hare International
Airport (American Airlines); Variable
Rate Demand Series 1983 B RB (LOC-Royal
Bank of Canada)
3.00%, 12/01/17(b) -- P-1 5,600 5,600,000
- -------------------------------------------------------------------------------
East Peoria (City of) (Radnor/East Peoria
Partnership Project); Multifamily Housing
Series 1983 RB (LOC-Bank of Nova Scotia)
4.00%, 06/01/08(b) -- Aa3 5,085 5,085,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(American College of Surgeons Project);
Tax Exempt Series 1996 RB (LOC-Northern
Trust Company)
3.90%, 08/01/26(b) A-1+ -- 4,821 4,821,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Chicago Commons Project); Variable Rate
Demand Series 1999 RB (LOC-Bank of America)
3.80%, 01/01/29(b) A-1+ -- 5,500 5,500,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Jewish Charities Program) Variable Rate
Demand Series 1999 A RAN (LOC-Harris
Trust & Savings Bank)
3.85%, 06/30/00(b) A-1+ -- 5,390 5,390,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Local Government Financing Project);
Variable Rate Demand Series 1999 A RB
3.80%, 09/01/29(b)(c) -- VMIG-1 10,000 10,000,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Northwestern Memorial Hospital);
Variable Rate Demand Series 1995 RB
2.95%, 08/15/25(b) A-1+ VMIG-1 9,000 9,000,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Resurrection Health Care); Variable Rate
Demand Series 1999 A RB
3.00%, 05/15/29(b) AAA VMIG-1 3,600 3,600,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority;
Revolving Fund Pooled Series 1985 D RB
(LOC-First National Bank)
3.80%, 08/01/15(b) A-1+ VMIG-1 4,829 4,829,000
- -------------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Illinois - (continued)
Illinois Health Facilities Authority
(The Methodist Medical Center);
Refunding Series 1998 RB
4.50%, 11/15/99(c) AAA Aaa $ 2,090 $ 2,093,520
- -----------------------------------------------------------------------------
Illinois Health Facilities Authority
(Swedish Covenant Hospital); Refunding
Variable Rate Demand Series 1998 A RB
3.85%, 08/15/27(b) A-1+ VMIG-1 2,100 2,100,000
- -----------------------------------------------------------------------------
Illinois (State of) Regional
Transportation Authority (Cook Dupage
Lake Co.); Refunding Unlimited Tax
Series 1999 GO
5.00%, 06/01/00(c) AAA Aaa 4,990 5,033,564
- -----------------------------------------------------------------------------
Illinois (State of) Toll Highway
Authority;
Series 1998 A Municipal Securities
Trust Certificates
3.82%, 02/15/12(b)(c)(d) A-1 Aaa 11,700 11,700,000
- -----------------------------------------------------------------------------
93,765,850
- -----------------------------------------------------------------------------
INDIANA - 1.16%
Auburn (City of) (Sealed Power Corp.
Project); Variable Rate Demand
Economic Development Series 1985 RB
(LOC-NBD Bank)
3.50%, 07/01/10(b) -- VMIG-1 1,200 1,200,000
- -----------------------------------------------------------------------------
Indianapolis (City of); Local Public
Improvement Bond Bank RB Series 1995 B
5.00%, 02/01/00 AAA Aaa 1,500 1,509,097
- -----------------------------------------------------------------------------
Indianapolis (City of); Local Public
Improvement Bond Bank RB Notes Series
1999 B
4.00%, 01/10/00 SP-1+ -- 7,900 7,916,074
- -----------------------------------------------------------------------------
Indianapolis (City of) Economic
Development Authority (Jewish
Community Campus Project); Variable
Rate Series 1995 RB
3.75%, 04/01/05(b) -- VMIG-1 1,995 1,995,000
- -----------------------------------------------------------------------------
12,620,171
- -----------------------------------------------------------------------------
IOWA - 1.29%
Iowa Higher Education Loan Authority;
Private College Facility RB
3.85%, 12/01/15(b)(c) A-1+ VMIG-1 12,000 12,000,000
- -----------------------------------------------------------------------------
Iowa School Corporations (Iowa School
Cash Anticipation Program); Warrant
Certificates Series 1999 A
4.00%, 06/23/00(c) SP-1+ MIG-1 2,000 2,010,829
- -----------------------------------------------------------------------------
14,010,829
- -----------------------------------------------------------------------------
KANSAS - 0.15%
Olathe (City of); Unlimited Tax Series
194 1999 GO
3.75%, 04/01/00(c) AAA Aaa 1,660 1,664,440
- -----------------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
KENTUCKY - 2.60%
Kentucky Asset/Liability Commission;
Project Notes General Fund Series 1998 A
RB (LOC-Landesbank Hessen-Thuringen
Girozentrale)
3.40%, 06/30/01(b) -- VMIG-1 $10,000 $ 10,000,000
- -------------------------------------------------------------------------------
Kentucky Interlocal School Transport
Association; Series 1999 TRAN
4.00%, 06/30/00 SP-1+ MIG-1 14,000 14,046,963
- -------------------------------------------------------------------------------
Trimble (County of) (Louisville Gas and
Electric Company Project); Series 1992 A
PCR
3.45%, 09/01/17(b) A-1 VMIG-1 4,300 4,300,000
- -------------------------------------------------------------------------------
28,346,963
- -------------------------------------------------------------------------------
LOUISIANA - 2.54%
Louisiana Public Facilities Authority
(Christus Health); Series 1999 B RB
3.40%, 07/01/29(b)(c) A-1+ VMIG-1 10,000 10,000,000
- -------------------------------------------------------------------------------
Louisana Public Facilities Authority
(Tiger Athletic Foundation Project);
Variable Rate Demand Series 1999 RB
(LOC-Hibernia National Bank)
3.80%, 09/01/28(b) A-1+ -- 13,000 13,000,000
- -------------------------------------------------------------------------------
New Orleans (City of); Aviation Board
Variable Refunding Series B RB
3.75%, 08/01/16(b)(c) A-1+ VMIG-1 4,635 4,635,000
- -------------------------------------------------------------------------------
27,635,000
- -------------------------------------------------------------------------------
MASSACHUSETTS - 0.27%
Massachusetts (State of); Limited Tax
Series 1993 B GO
4.60%, 11/01/99 AA- Aa3 2,890 2,893,957
- -------------------------------------------------------------------------------
MICHIGAN - 2.25%
Detroit (City of) Sewer District; Bear
Stearns Municipal Trust Certificates
Variable Rate Demand Series 1999-81
Class A RB
(LOC-Bear Stearns Capital Markets)
3.83%, 10/01/02(d) A-1+c Aaa 15,000 15,000,000
- -------------------------------------------------------------------------------
Grand Rapids (City of); Water Supply
Series 1990 RB
7.25%, 01/01/00(e)(f) AAA AAA 3,000 3,089,714
- -------------------------------------------------------------------------------
Jackson County Economic Development Corp.
(Sealed Power Corp.); Economic
Development Refunding Variable Rate
Demand Series 1984 RB (LOC-NBD Bank)
3.50%, 10/01/19(b) -- VMIG-1 1,000 1,000,000
- -------------------------------------------------------------------------------
Michigan (State of); Municipal Bond
Authority RB Series 1999 B-1
4.25%, 08/25/00 SP-1+ -- 2,000 2,011,267
- -------------------------------------------------------------------------------
Michigan Strategic Fund (260 Brown St.
Associates Project); Convertible
Variable Rate Demand Limited Obligation
Series 1985 RB (LOC-Comerica Bank)
3.30%, 10/01/15(b) -- VMIG-1 3,400 3,400,000
- -------------------------------------------------------------------------------
24,500,981
- -------------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MINNESOTA - 0.04%
Mankato (City of) (Northern States
Power Co. Project); Floating
Collateralized Series 1985 PCR
3.85%, 03/01/11(b) AA Aa3 $ 500 $ 500,000
- -----------------------------------------------------------------------------
MISSISSIPPI - 0.92%
Morgan Stanley Float Program,
Mississippi (State of) Development
Bank Special Obligation; Floating Rate
Trust Certificates Series 160 1999 RB
3.85%, 07/01/24(b)(c)(d) A-1c -- 10,000 10,000,000
- -----------------------------------------------------------------------------
MISSOURI - 3.86%
Missouri (State of) (Health Care
System); Bear Stearns Municipal Trust
Certificates; Variable Rate Demand
Series 1998 Class A RB
3.87%, 08/01/05(b)(c)(d) A-1+c -- 13,835 13,835,000
- -----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (Deaconess Long
Term Care-A); Variable Rate Demand
Health Facilities Series 1996 RB
3.80%, 12/01/16(b) A-1+ VMIG-1 10,785 10,785,000
- -----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (Missouri Pooled
Hospital Loan Program); Variable Rate
Demand Series 1999 A RB
3.80%, 08/01/29(b) A-1+ -- 14,000 14,000,000
- -----------------------------------------------------------------------------
Missouri Rural Water Financing Corp.
(Public Project); Construction Series
1998 Notes
4.50%, 11/15/99 -- MIG-1 3,370 3,375,052
- -----------------------------------------------------------------------------
41,995,052
- -----------------------------------------------------------------------------
NEW MEXICO - 0.92%
New Mexico (State of); Series 1999 TRAN
4.00%, 06/30/00 SP-1+ MIG-1 10,000 10,055,572
- -----------------------------------------------------------------------------
NEW YORK - 18.38%
Eagle Tax Exempt Trust; Class A COP(d)
3.84%, Series 1993 E 08/01/06(b) A-1+c -- 15,000 15,000,000
- -----------------------------------------------------------------------------
3.84%, Series 1993 F 08/01/06(b) A-1+c -- 20,850 20,850,000
- -----------------------------------------------------------------------------
3.84%, Series 943802 05/01/07(b)(c) A-1+c -- 17,800 17,800,000
- -----------------------------------------------------------------------------
3.84%, Series 943901 06/15/07(b)(c) A-1+c -- 15,175 15,175,000
- -----------------------------------------------------------------------------
3.84%, Series 950901 06/01/21(b)(f) A-1+c -- 13,315 13,315,000
- -----------------------------------------------------------------------------
3.84%, Series 97C4702 01/01/20(b) A-1+c -- 9,900 9,900,000
- -----------------------------------------------------------------------------
3.87%, Series 964703 07/01/11(b)(c) A-1+c -- 5,870 5,870,000
- -----------------------------------------------------------------------------
3.87%, Series 97C4703 01/01/01(b)(f) A-1+c -- 11,295 11,295,000
- -----------------------------------------------------------------------------
</TABLE>
FS-8
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
New York - (continued)
Eagle Tax Exempt Trust (Colorado
Housing and Finance Authority); Series
94C0601 Class A COP
3.84%, 10/01/23(b)(d) A-1+c AAA $10,000 $ 10,000,000
- -----------------------------------------------------------------------------
Eagle Tax Exempt Trust (Houston Water
and Sewer); Series 974305 Class A COP
3.84%, 12/01/27(b)(c)(d) A-1+c AAA 14,005 14,005,000
- -----------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington
State); Series 984701 Class A COP
3.84%, 05/01/18(b)(d) A-1+c -- 14,400 14,400,000
- -----------------------------------------------------------------------------
Long Island Power Authority;
Subordinated RB (LOC-Bayerische
Landesbank Girozentrale)
2.85%, Series 1999 4 11/17/99(b) A-1+ VMIG-1 11,000 11,000,000
- -----------------------------------------------------------------------------
3.20%, Series 1998 2 04/01/25(b) A-1+ VMIG-1 11,750 11,750,000
- -----------------------------------------------------------------------------
New York (State of) Medical Facilities
Finance Agency (St.Lukes-Roosevelt
Hospital Center); Merrill Lynch Group
Float Program Floating Option Tax-
Exempt Receipts Series PA-113 1996 A
Mortgage RB
3.05%, 02/15/29(b)(d) A-1+c -- 9,700 9,700,000
- -----------------------------------------------------------------------------
New York (State of); Variable Rate
Demand Series 1998 A GO (LOC-Morgan
Guaranty Trust Co. of New York)
3.45%, 12/02/99(b) A-1+ P-1 20,000 20,000,000
- -----------------------------------------------------------------------------
200,060,000
- -----------------------------------------------------------------------------
NORTH CAROLINA - 1.29%
North Carolina Medical Care Commission
Retirement Community (Adult
Communities Total Services Inc.);
Variable Rate Demand Series 1996 RB
(LOC-Lasalle National Bank)
3.75%, 11/15/09(b) A-1+ -- 5,655 5,655,000
- -----------------------------------------------------------------------------
North Carolina Medical Care Commission
(The Givens Estates Inc. Project);
Health Care Facilities Variable Rate
Demand Series 1997 RB (LOC-First Union
National Bank)
3.00%, 12/01/26(b) -- VMIG-1 3,000 3,000,000
- -----------------------------------------------------------------------------
North Carolina Medical Care Commission
(The Moses H. Cone Memorial Hospital
Project); Hospital Series 1995 RB
3.85%, 09/01/02(b) A-1+ -- 5,400 5,400,000
- -----------------------------------------------------------------------------
14,055,000
- -----------------------------------------------------------------------------
</TABLE>
FS-9
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OHIO - 3.34%
Clermont County Hospital (Catholic Health
Care-Mercy Health System); Variable Rate
Demand Series 1994 B RB
3.90%, 09/01/21(b) A-1+ VMIG-1 $ 9,100 $ 9,100,000
- -------------------------------------------------------------------------------
Clinton (County of) Hospital (Ohio
Hospital Capital Inc.); Variable Rate
Demand Series 1999 RB (LOC-Fifth Third
Bank)
3.80%, 07/01/29(b) A-1+ -- 10,000 10,000,000
- -------------------------------------------------------------------------------
Franklin (County of) (Bricker & Eckler
Building Co. Project); Floating Rate
Series 1984 IDR (LOC-Bank One Cleveland
N.A.)
3.85%, 11/01/14(b) -- P-1 8,100 8,100,000
- -------------------------------------------------------------------------------
Loraine (County of) (Catholic Healthcare
Partners); Variable Rate Demand Series
1998 A RB
3.15%, 12/01/27(e) A-1+ P-1 7,000 7,000,000
- -------------------------------------------------------------------------------
Marion (County of) (Pooled Lease
Program); Variable Rate Demand Hospital
Improvement Series 1992 RB (LOC-Bank One
Akron N.A.)
3.83%, 10/01/22(b) A-1+ -- 1,165 1,165,000
- -------------------------------------------------------------------------------
Ohio Housing Financing Agency (Kenwood
Congregate Retirement Community
Project); Variable Rate Demand
Multifamily Housing Series 1985 RB (LOC-
Morgan Guaranty Trust)
3.65%, 12/01/15(b) -- VMIG-1 956 956,000
- -------------------------------------------------------------------------------
36,321,000
- -------------------------------------------------------------------------------
OKLAHOMA - 2.76%
Oklahoma Development Financing Authority
(Oklahoma Hospital Association);
Variable Rate Demand Series 1999 A RB
3.80%, 06/01/29(b) A-1+ -- 20,000 20,000,000
- -------------------------------------------------------------------------------
Oklahoma Water Resources Board (State
Loan Program); Series 1999 RB
3.60%, 03/01/00(b)(e) A-1+c -- 3,000 3,000,000
- -------------------------------------------------------------------------------
Oklahoma Water Resources Board (State
Loan Program); Variable Rate Demand
Series 1995 RB
3.60%, 03/01/00(b)(e) A-1+ -- 7,000 7,000,000
- -------------------------------------------------------------------------------
30,000,000
- -------------------------------------------------------------------------------
OREGON - 0.46%
Oregon State Housing & Community Services
Department; Single Family Mortgage
Series 1999 C RB
3.15%, 04/13/00 -- MIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
</TABLE>
FS-10
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
PENNSYLVANIA - 1.51%
Delaware County Industrial Development
Authority (Henderson-Radnor Joint Venture
Project); Limited Obligation Series 1985
IDR (LOC-Corestates Bank)
4.00%, 04/01/15(b) -- Aa3 $ 765 $ 765,000
- -------------------------------------------------------------------------------
Luzerne County Convention Center
Authority; Hotel Room Rent Series 1998 A
RB (LOC-First Union National Bank)
3.80%, 09/01/28(b) A-1 -- 7,790 7,790,000
- -------------------------------------------------------------------------------
Philadelphia (City of) Parking Authority;
Parking Series 1999 RB
4.00%, 02/01/00(c) AAA Aaa 1,290 1,294,065
- -------------------------------------------------------------------------------
York (City of) General Authority; Variable
Rate Pooled Financing Series 1996 RB
(LOC-First Union National Bank)
3.85%, 09/01/26(b) A-1 -- 6,609 6,609,000
- -------------------------------------------------------------------------------
16,458,065
- -------------------------------------------------------------------------------
TENNESSEE - 6.28%
Industrial Development Board of the
Metropolitan Government of Nashville and
Davidson County (Amberwood, Ltd.
Project); Multifamily Housing Refunding
IDR (LOC-Commerzbank A.G.)
4.07%, Series 1993 A, 07/01/13(b) A-1+ VMIG-1 2,095 2,095,000
- -------------------------------------------------------------------------------
4.00%, Series 1993 B, 07/01/13(b) A-1 VMIG-1 1,790 1,790,000
- -------------------------------------------------------------------------------
Industrial Development Board of the
Metropolitan Government of Nashville &
Davidson County (Chimney Top II);
Multifamily Variable Rate Demand Series
1984 RB (LOC-Bank of America N.A.)
3.85%, 09/01/06(b) -- VMIG-1 2,100 2,100,000
- -------------------------------------------------------------------------------
Knox (County of) Health Education and
Housing Facilities Board (Solutions
Group, Inc. Project); Variable Rate
Demand Series 1999 RB
3.80%, 05/01/29(b) A-1+ -- 40,000 40,000,000
- -------------------------------------------------------------------------------
Montgomery (County of) Public Building
Authority (Tennessee County Loan Pool);
Pooled Financing Variable Rate Demand
(LOC-Bank of America N.A.)
3.80%, Series 1997 RB 11/01/27(b) -- VMIG-1 5,200 5,200,000
- -------------------------------------------------------------------------------
3.80%, Series 1999 RB 09/01/29(b) -- VMIG-1 15,000 15,000,000
- -------------------------------------------------------------------------------
Shelby (County of); Refunding Unlimited
Tax Series 1993 A GO
4.65%, 03/01/00 AA+ Aa3 2,160 2,172,684
- -------------------------------------------------------------------------------
68,357,684
- -------------------------------------------------------------------------------
</TABLE>
FS-11
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS - 13.56%
Austin (City of) (Travis & Williamson
Counties); Combined Utility Systems
Series 1998 A Commercial Paper Notes
3.45%, 11/02/99 A-1+ P-1 $ 7,551 $ 7,551,000
- -------------------------------------------------------------------------------
Bexar (County of) Texas Housing Finance
Authority (Fountainhead Apartments);
Refunding Variable Rate Demand
Multifamily Series 1996 RB
3.75%, 09/15/26(b) A-1+ -- 8,361 8,361,000
- -------------------------------------------------------------------------------
Dallas Area Rapid Transit (DART); Sales
Tax Revenue Commercial Paper Notes Series
C (LOC-Westdeutsche Landesbank
Girozentrale)
3.30%, 10/20/99 A-1+ P-1 5,200 5,200,000
- -------------------------------------------------------------------------------
Dallas (City of) (Equipment Acquisition
Contractual Obligation); Limited Tax
Series 1998 GO
4.00%, 02/15/00 AAA Aaa 2,765 2,773,216
- -------------------------------------------------------------------------------
Fort Worth (City of); Series B General
Purpose Commercial Paper Notes
3.35%, 11/17/99 A-1+ P-1 6,000 6,000,000
- -------------------------------------------------------------------------------
Grand Prairie (City of) Texas Housing
Finance Corporation (Windridge Grand
Prairie Associates); Multifamily Housing
Refunding Series 1993 RB
3.85%, 06/01/10(b) A-1+ -- 4,500 4,500,000
- -------------------------------------------------------------------------------
Gulf Coast Waste Disposal Authority (Amoco
Oil Company Project); Texas Environmental
Improvement Series 1986 RB
3.10%, 03/01/09(b) A-1+ P-1 7,000 7,000,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp.; ACES Greater Houston
Pooled Health Series 1985 A RB (LOC-Chase
Bank of Texas N.A.)
3.85%, 11/01/25(b) A-1 -- 2,300 2,300,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Gulf Coast Regional
Blood Center Project); Blood Center
Series 1992 RB (LOC-Texas Commerce Bank
N.A.)
3.90%, 04/01/17(b) A-1 -- 3,250 3,250,000
- -------------------------------------------------------------------------------
Harris (County of) Toll Road; Refunding
Sub Lien Unlimited Tax Series 1995 A GO
6.00%, 08/15/00 AA VMIG-1 2,470 2,518,788
- -------------------------------------------------------------------------------
Hockley (County of) Industrial Development
Corporation (Amoco Project); Variable
Rate Demand Series 1983 PCR
3.60%, 03/01/14(b) A-1+ Aa1 3,500 3,500,000
- -------------------------------------------------------------------------------
Houston (City of) Water and Sewer Systems;
Series A
Commercial Paper Notes
3.35%, 09/01/13(b) A-1 P-1 20,000 20,000,000
- -------------------------------------------------------------------------------
Houston (City of) Water and Sewer Systems;
Floating Rate Treasury Series A29 1999
Reg D RB
3.90%, 12/01/15(b)(d) -- VMIG-1 4,300 4,300,000
- -------------------------------------------------------------------------------
</TABLE>
FS-12
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Texas - (continued)
Katy (City of) Independent School
District; Refunding Limited Tax Series
1998 A GO
4.25%, 02/15/00 AAA Aaa $ 1,935 $ 1,942,373
- -------------------------------------------------------------------------------
North Central Texas Health Facilities
Development Corp. (Methodist Hospitals
of Dallas); Flexible Rate Hospital
Series 1998 RB
3.30%, 10/12/99(b)(c) A-1+ VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
3.35%, 10/19/99(b)(c) A-1+ VMIG-1 10,000 10,000,000
- -------------------------------------------------------------------------------
Plano Texas Health Facilities Development
Corporation (Childrens-Presbyterian
Health Center); Hospital Series 1989 RB
3.55%, 01/01/19(c) A-1+ VMIG-1 10,000 10,000,000
- -------------------------------------------------------------------------------
San Antonio (City of); Limited Tax Series
1998 A COP
4.00%, 02/01/00 AA+ Aa2 1,450 1,453,915
- -------------------------------------------------------------------------------
San Antonio (City of); Refunding Series
1992 RB
5.90%, 05/15/00(c) AAA Aaa 2,050 2,079,160
- -------------------------------------------------------------------------------
Tarrant (County of) Texas Health
Facilities Authority (Adventist Health
System); Variable Rate Demand Series
1997 A RB (LOC-Suntrust Bank Central
Florida)
3.80%, 11/15/27(b) A-1+ -- 8,775 8,775,000
- -------------------------------------------------------------------------------
Texas (State of); Series 1999 TRAN
4.50%, 08/31/00 SP-1+ MIG-1 24,000 24,169,463
- -------------------------------------------------------------------------------
Texas (State of) (Texas Water Financing
Assistance); JP Morgan Putter 118 Series
1999 GO
3.90%, 08/01/23(b)(d) Aar -- 4,755 4,755,000
- -------------------------------------------------------------------------------
Trinity River Industrial Development
Authority (Radiation Sterilizers, Inc.
Project); Variable Rate Demand IDR (LOC-
Comerica Bank)
3.60%, Series 1985 A 11/01/05(b) A-1 -- 500 500,000
- -------------------------------------------------------------------------------
3.60%, Series 1985 B 11/01/05(b) A-1 -- 1,650 1,650,000
- -------------------------------------------------------------------------------
147,578,915
- -------------------------------------------------------------------------------
UTAH - 0.46%
Central Utah Water Conservation District;
Refunding Variable Rate Demand Limited
Tax Series 1998 E GO
3.75%, 04/01/27(b)(c) A-1+ VMIG-1 4,000 4,000,000
- -------------------------------------------------------------------------------
Utah Associated Municipal Power System
(The Hunter Project); Refunding Series
1994 RB
4.35%, 07/01/00(c) AAA Aaa 1,000 1,005,440
- -------------------------------------------------------------------------------
5,005,440
- -------------------------------------------------------------------------------
VERMONT - 0.88%
Vermont Educational and Health Building
Finance Authority (Middlebury College
Project); Variable Rate Demand Series
1988 A RB
3.10%, 11/01/27(b)(c) A-1+ Aa 1,500 1,500,000
- -------------------------------------------------------------------------------
</TABLE>
FS-13
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Vermont - (continued)
Vermont Educational and Health Building
Finance Authority (VHA New England);
Variable Rate Hospital RB
3.85%, Series 1985 B 12/01/25(b)(c) A-1+ -- $ 1,000 $ 1,000,000
- -------------------------------------------------------------------------------
3.85%, Series 1985 E 12/01/25(b)(c) A-1+ -- 2,500 2,500,000
- -------------------------------------------------------------------------------
3.85%, Series 1985 F 12/01/25(b)(c) A-1+ -- 2,100 2,100,000
- -------------------------------------------------------------------------------
3.85%, Series 1985 G 12/01/25(b)(c) A-1+ -- 2,500 2,500,000
- -------------------------------------------------------------------------------
9,600,000
- -------------------------------------------------------------------------------
VIRGINIA - 1.43%
Manassa Park Virginia; Variable Rate
Demand Series 1999 BAN (LOC-Wachovia
Bank N.A.)
3.80%, 01/01/03(b) -- Aa2 10,000 10,000,000
- -------------------------------------------------------------------------------
Norfolk (City of) (Pooled Financing
Program-Sentara Health System Group);
Commercial Paper Revenue Notes
3.40%, 11/01/99 A-1+ P-1 5,600 5,600,000
- -------------------------------------------------------------------------------
15,600,000
- -------------------------------------------------------------------------------
WASHINGTON - 1.82%
Port of Seattle; Subordination Lien
Series 1999 A RB (LOC-Commerzbank AG)
3.35%, 10/05/99 A-1+ VMIG-1 10,000 10,000,000
- -------------------------------------------------------------------------------
Washington State Public Power Supply
(Nuclear Project No. 3); Series B Pre
Refunded RB
7.40%, 01/01/00(e) AAA AAA 9,500 9,775,473
- -------------------------------------------------------------------------------
19,775,473
- -------------------------------------------------------------------------------
WEST VIRGINIA - 0.60%
West Virginia Hospital Finance Authority
(VHA Mid-Atlantic States, Inc. Capital
Asset Financing Program); RB
3.85%, Series 1985 B 12/01/25(b)(c) A-1+ -- 3,000 3,000,000
- -------------------------------------------------------------------------------
3.85%, Series 1985 C 12/01/25(b)(c) A-1+ -- 3,500 3,500,000
- -------------------------------------------------------------------------------
6,500,000
- -------------------------------------------------------------------------------
WISCONSIN - 1.70%
Milwaukee (County of); Unlimited Tax
Series 1995 A GO
5.125%, 12/01/99 AA- Aa3 2,275 2,283,194
- -------------------------------------------------------------------------------
Racine (City of); Promissory Notes
Unlimited Tax Series 1998 B GO
3.70%, 12/01/99 SP-1+ MIG-1 2,290 2,291,854
- -------------------------------------------------------------------------------
Wasau (City of) School District; Series
1999 BAN
3.45%, 06/01/00 -- MIG-1 5,000 5,003,704
- -------------------------------------------------------------------------------
Wisconsin (State of) Transportation;
Commercial Paper Notes Series 1997 (LOC-
Bayerische Landesbank Girozentrale)
3.25%, 10/12/99 A-1+ P1 8,893 8,893,000
- -------------------------------------------------------------------------------
18,471,752
- -------------------------------------------------------------------------------
</TABLE>
FS-14
<PAGE>
<TABLE>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WYOMING - 0.54%
Uinta (County of) (Amoco Project);
Refunding Variable Rate Demand Series
1998 PCR
2.85%, 07/01/26(b) A-1+ Aa1 $ 5,900 $ 5,900,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.93% 1,098,532,955(g)
- -------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.93%) (10,146,711)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $1,088,386,244
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
BAN Bond Anticipation Note PCR Pollution Control Revenue Bonds
COP Certifiates of Participation RAN Revenue Anticipation Notes
GO General Obligation Bonds RB Revenue Bonds
Gtd Guaranteed TAN Tax Anticipation Notes
IDR Industrial Development Revenue Bond TRAN Tax and Revenue Anticipation Notes
IDR Industrial Development Revenue Bonds WTS Warrants
LOC Letter of Credit
Ltd. Limited
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P").
(b) Demand security: payable upon demand by the Fund at specified intervals no
greater than thirteen months. Interest rates are redetermined periodically.
Rates shown are the rates in effect on 09/30/99.
(c) Secured by bond insurance provided by one of the following companies:
AMBAC, FGIC, FSA or MBIA.
(d) The Fund may invest in synthetic municipal instruments the value of and
return on which are derived from underlying securities. The types of
synthetic municipal instruments in which the Fund may invest include
variable rate instruments. These instruments involve the deposit into a
trust of one or more long-term tax-exempt bonds or notes ("Underlying
Bonds"), and the sale of certificates evidencing interests in the trust to
investors such as the Fund. The trustee receives the long-term fixed rate
interest payments on the Underlying Bonds, and pays certificate holders
short-term floating or variable interest rates which are reset
periodically. A "variable rate trust certificate" evidences an interest in
a trust entitling the certificate holder to receive variable rate interest
based on prevailing short-term interest rates and also typically providing
the certificate holder with the conditional right to put its certificate at
par value plus accrued interest. Because synthetic municipal instruments
involve a trust and a third party conditional put feature, they involve
complexities and potential risks that may not be present where a municipal
security is owned directly.
(e) Subject to an irrevocable call or mandatory put by the issuer. Par value
and maturity date reflect such call or put.
(f) Secured by an escrow fund of U.S. Treasury obligations.
(g) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $1,098,532,955
- ------------------------------------------------------------------------
Cash 7,406,769
- ------------------------------------------------------------------------
Receivables for:
Investments sold 3,030,000
- ------------------------------------------------------------------------
Interest 6,481,011
- ------------------------------------------------------------------------
Investment for deferred compensation plan 43,928
- ------------------------------------------------------------------------
Other assets 162,194
- ------------------------------------------------------------------------
Total assets 1,115,656,857
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 24,022,762
- ------------------------------------------------------------------------
Dividends 2,969,695
- ------------------------------------------------------------------------
Deferred compensation 43,928
- ------------------------------------------------------------------------
Accrued administrative services fees 14,000
- ------------------------------------------------------------------------
Accrued advisory fees 120,275
- ------------------------------------------------------------------------
Accrued directors' fees 2,525
- ------------------------------------------------------------------------
Accrued transfer agent fees 29,115
- ------------------------------------------------------------------------
Accrued distribution fees 33,376
- ------------------------------------------------------------------------
Accrued operating expenses 34,937
- ------------------------------------------------------------------------
Total liabilities 27,270,613
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,088,386,244
========================================================================
NET ASSETS:
Institutional Class $ 968,609,455
========================================================================
Private Investment Class $ 88,678,984
========================================================================
Cash Management Class $ 5,524,759
========================================================================
Reserve Class $ 25,358,267
========================================================================
Resource Class $ 214,779
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class:
Authorized 3,000,000,000
- ------------------------------------------------------------------------
Outstanding 968,605,347
========================================================================
Private Investment Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 88,677,372
========================================================================
Cash Management Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 5,524,625
========================================================================
Reserve Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 25,357,583
========================================================================
Resource Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 215,053
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-16
<PAGE>
STATEMENT OF OPERATIONS
For the six months ended September 30, 1999
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $18,462,258
- ------------------------------------------------------------------
EXPENSES:
Advisory fees 1,254,939
- ------------------------------------------------------------------
Administrative services fees 64,785
- ------------------------------------------------------------------
Transfer agent fees 93,476
- ------------------------------------------------------------------
Custody fees 28,262
- ------------------------------------------------------------------
Directors' fees 7,499
- ------------------------------------------------------------------
Distribution fees (Note 2) 300,870
- ------------------------------------------------------------------
Other expenses 97,206
- ------------------------------------------------------------------
Total expenses 1,847,037
- ------------------------------------------------------------------
Less: Fees waived and expenses assumed (513,563)
- ------------------------------------------------------------------
Net expenses 1,333,474
- ------------------------------------------------------------------
Net investment income 17,128,784
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $17,128,784
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended September 30, 1999 and the year ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,128,784 $ 34,628,129
- -----------------------------------------------------------------------------
Net realized gain on sales of investments -- 8,745
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 17,128,784 34,636,874
- -----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (15,657,100) (32,079,516)
- -----------------------------------------------------------------------------
Private Investment Class (1,188,991) (2,486,438)
- -----------------------------------------------------------------------------
Cash Management Class (77,611) (62,175)
- -----------------------------------------------------------------------------
Reserve Class (198,244) --
- -----------------------------------------------------------------------------
Resource Class (6,838) --
- -----------------------------------------------------------------------------
Capital stock transactions - net:
Institutional Class (103,986,706) 175,685,921
- -----------------------------------------------------------------------------
Private Investment Class (1,927,463) 10,142,224
- -----------------------------------------------------------------------------
Cash Management Class (1,614,107) 7,138,732
- -----------------------------------------------------------------------------
Reserve Class 25,357,583 --
- -----------------------------------------------------------------------------
Resource Class 215,053 --
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets (81,955,640) 192,975,622
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,170,341,884 977,366,262
- -----------------------------------------------------------------------------
End of period $1,088,386,244 $1,170,341,884
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in):
Institutional Class $ 968,681,636 $1,072,668,342
- -----------------------------------------------------------------------------
Private Investment Class 88,683,814 90,611,277
- -----------------------------------------------------------------------------
Cash Management Class 5,525,387 7,139,494
- -----------------------------------------------------------------------------
Reserve Class 25,357,583 --
- -----------------------------------------------------------------------------
Resource Class 215,053 --
- -----------------------------------------------------------------------------
Undistributed realized gain (loss) on sales
of investments (77,229) (77,229)
- -----------------------------------------------------------------------------
$1,088,386,244 $1,170,341,884
=============================================================================
</TABLE>
See Notes to Financial Statements.
FS-18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Tax-Free Investments Co. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. The Company is organized as a Maryland
corporation consisting of one portfolio, the Cash Reserve Portfolio (the
"Fund"). The Fund currently offers six different classes of shares, the
Institutional Class ("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 investment objective of the Fund is to generate
as high a level of tax-exempt income as is consistent with preservation of
capital and maintenance of liquidity.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter, assumes a
constant amortization to maturity of any discount or premiums.
B. Securities Transactions and Investment Income - Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and,
when appropriate, discounts on investments, is earned from settlement date
and is recorded on the accrual basis. Interest income is allocated to each
class daily, based upon each class' pro rata share of the total shares of
the Fund outstanding. Discounts, other than original issue, on short-term
obligations are amortized to unrealized appreciation for financial reporting
purposes.
C. Dividends and Distributions to Shareholders - It is the policy of the Fund
to declare daily dividends from net investment income. Such dividends are
paid monthly. Net realized capital gains (including net short-term capital
gains and market discounts), if any, are distributed annually.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $77,230 (which may be carried forward to offset future
taxable gains, if any) which expires, if not previously utilized, through
the year 2004. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized. In addition, the Fund
intends to invest in sufficient municipal securities to allow it to qualify
to pay "exempt interest dividends," as defined in the Internal Revenue Code,
to shareholders.
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 between the classes.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.25% of
the first $500 million of the Fund's average daily net assets plus 0.20% of the
Fund's average daily net assets in excess of $500 million.
AIM has contractually agreed to limit the Fund's expenses (exclusive of 12b-1
fees, interest, taxes, brokerage commissions, extraordinary expenses and
federal registration fees) to the maximum annual rate of 0.20% of the average
daily net assets of the Fund's Private Investment Class, Personal Investment
Class, Cash Management Class, Reserve Class and Resource Class. During the six
months ended September 30, 1999, AIM waived its advisory fees of $390,329.
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. During the six months ended September 30,
1999, AIM was paid $64,785 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-19
<PAGE>
Class, the Personal Investment Class, the Cash Management Class, the Reserve
Class, and the Resource Class pay up to a 0.50%, 0.75%, 0.10%, 1.00%, and
0.20%, respectively, maximum annual rate of the average daily net assets
attributable to such class. Of this amount, the Fund may pay an asset-based
sales charge to FMC and the Fund may pay a service fee of (a) 0.25% of the
average daily net assets of each of the Private Investment Class, 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 Fund with respect to each class. During the six months ended
September 30, 1999, the Private Investment Class, the Cash Management Class,
the Reserve Class and the Resource Class paid $105,100, $2,083, $70,084 and
$369, respectively, as compensation to FMC under the Plan. FMC waived fees of
$123,234 during the same period.
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 agent and
shareholder services to the Fund. During the six months ended September 30,
1999, the Fund paid AFS $68,240 for such services.
During the six months ended September 30, 1999, the Fund paid legal fees of
$3,129 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as
counsel to the Board of Directors. A member of that firm is a director of the
Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to directors who are not
an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended September 30,
1999 and the year ended March 31, 1999 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 3,455,035,959 $3,455,035,959 7,257,933,597 $ 7,257,933,597
- ------------------------------------------------------------------------------------------
Private Investment
Class 182,810,242 182,810,242 580,913,749 580,913,749
- ------------------------------------------------------------------------------------------
Cash Management Class* 8,463,343 8,463,343 13,152,591 13,152,591
- ------------------------------------------------------------------------------------------
Reserve Class** 94,830,488 94,830,488 -- --
- ------------------------------------------------------------------------------------------
Resource Class*** 14,857,101 14,857,101 -- --
- ------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 973,207 973,207 1,929,870 1,929,870
- ------------------------------------------------------------------------------------------
Private Investment
Class 1,002,097 1,002,097 2,254,362 2,254,362
- ------------------------------------------------------------------------------------------
Cash Management Class* 78,890 78,890 41,812 41,812
- ------------------------------------------------------------------------------------------
Reserve Class** 148,035 148,035 -- --
- ------------------------------------------------------------------------------------------
Resource Class*** 5,187 5,187 -- --
- ------------------------------------------------------------------------------------------
Redeemed:
Institutional Class (3,559,995,872) (3,559,995,872) (7,084,177,546) (7,084,177,546)
- ------------------------------------------------------------------------------------------
Private Investment
Class (185,739,802) (185,739,802) (573,025,887) (573,025,887)
- ------------------------------------------------------------------------------------------
Cash Management Class* (10,156,340) (10,156,340) (6,055,671) (6,055,671)
- ------------------------------------------------------------------------------------------
Reserve Class** (69,620,940) (69,620,940) -- --
- ------------------------------------------------------------------------------------------
Resource Class*** (14,647,235) (14,647,235) -- --
- ------------------------------------------------------------------------------------------
Net increase (decrease) (81,955,640) $ (81,955,640) 192,966,877 $ 192,966,877
- ------------------------------------------------------------------------------------------
</TABLE>
* The Cash Management Class commenced sales on January 4, 1999.
** The Reserve Class commenced sales on June 1, 1999.
*** The Resource Class commenced sales on April 6, 1999.
FS-20
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Cash Management Class
capital stock outstanding during the six months ended September 30, 1999, and
the period January 4, 1999 (date sales commenced) through March 31, 1999.
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
------------- ---------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- --------------------------------------------- ------ ------
Income from investment operations:
Net investment income 0.02 0.01
- --------------------------------------------- ------ ------
Less distributions:
Dividends from net investment income (0.02) (0.01)
- --------------------------------------------- ------ ------
Net asset value, end of period $ 1.00 $ 1.00
- --------------------------------------------- ------ ------
Total return 1.51% 0.64%
- --------------------------------------------- ------ ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,525 $7,139
- --------------------------------------------- ------ ------
Ratio of expenses to average net assets(a) 0.28%(b) 0.28%(c)
- --------------------------------------------- ------ ------
Ratio of net investment income to average net
assets(d) 2.99%(b) 3.08%(c)
- --------------------------------------------- ------ ------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
0.37% (annualized) and 0.38% (annualized).
(b) Ratios are annualized and based on average net assets of $5,208,488.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements are 2.90% (annualized) and 2.98% (annualized).
FS-21
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Institutional Class
capital stock outstanding during the six months ended September 30, 1999 and
for each of the years in the five-year period ended March 31, 1999.
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, ------------------------------------------------------
1999 1999 1998 1997 1996 1995
------------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------- -------- ---------- -------- -------- ---------- ----------
Income from investment
operations:
Net investment income 0.02 0.03 0.03 0.03 0.04 0.03
- ----------------------- -------- ---------- -------- -------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.02) (0.03) (0.03) (0.03) (0.04) (0.03)
- ----------------------- -------- ---------- -------- -------- ---------- ----------
Net asset value, end of
period $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------- -------- ---------- -------- -------- ---------- ----------
Total return 1.55% 3.23% 3.55% 3.33% 3.67% 3.06%
- ----------------------- -------- ---------- -------- -------- ---------- ----------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $968,609 $1,072,597 $896,904 $966,567 $1,009,039 $1,009,891
- ----------------------- -------- ---------- -------- -------- ---------- ----------
Ratio of expenses to
average net assets(a) 0.20%(b) 0.20% 0.20% 0.20% 0.20% 0.20%
- ----------------------- -------- ---------- -------- -------- ---------- ----------
Ratio of net investment
income to average net
assets(c) 3.07%(b) 3.16% 3.49% 3.27% 3.59% 3.01%
- ----------------------- -------- ---------- -------- -------- ---------- ----------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.27% (annualized), 0.28%, 0.27%, 0.26%, 0.26% and 0.26% for the periods
1999-1995, respectively.
(b) Ratios are annualized and based on average net assets of $1,020,357,949.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 3.00% (annualized), 3.08%, 3.42%, 3.21%, 3.53% and
2.95% for the periods 1999-1995, respectively.
FS-22
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Private Investment
Class capital stock outstanding during the six months ended September 30, 1999
and for each of the years in the five-year period ended March 31, 1999.
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, -------------------------------------------
1999 1999 1998 1997 1996 1995
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.01 0.03 0.03 0.03 0.03 0.03
- ----------------------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.01) (0.03) (0.03) (0.03) (0.03) (0.03)
- ----------------------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------- ------- ------- ------- ------- ------- -------
Total return 1.42% 2.98% 3.29% 3.07% 3.41% 2.80%
- ----------------------- ------- ------- ------- ------- ------- -------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $88,679 $90,606 $80,462 $37,544 $35,139 $29,286
- ----------------------- ------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets(a) 0.45%(b) 0.45% 0.45% 0.45% 0.45% 0.45%
- ----------------------- ------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets(c) 2.82%(b) 2.91% 3.24% 3.02% 3.35% 2.89%
- ----------------------- ------- ------- ------- ------- ------- -------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.77% (annualized), 0.78%, 0.77%, 0.83%, 0.76% and 1.17% for the periods
1999-1995, respectively.
(b) Ratios are annualized and based on average net assets of $84,079,903.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.50% (annualized), 2.58%, 2.92%, 2.65%, 3.04% and
2.17% for the periods 1999-1995, respectively.
FS-23
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Reserve Class capital
stock outstanding during the period June 1, 1999 (date sales commenced) through
September 30, 1999.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Net asset value, beginning of period $ 1.00
- ------------------------------------------------------- -------
Income from investment operations:
Net investment income 0.01
- ------------------------------------------------------- -------
Less distributions:
Dividends from net investment income (0.01)
- ------------------------------------------------------- -------
Net asset value, end of period $ 1.00
- ------------------------------------------------------- -------
Total return 1.14%
- ------------------------------------------------------- -------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,358
- ------------------------------------------------------- -------
Ratio of expenses to average net assets(a) 1.00%(b)
- ------------------------------------------------------- -------
Ratio of net investment income to average net assets(c) 2.27%(b)
- ------------------------------------------------------- -------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
1.27% (annualized).
(b) Ratios are annualized and based on average net assets of $17,520,938.
(c) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements are 2.00% (annualized).
FS-24
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Resource Class capital
stock outstanding during the period April 6, 1999 (date sales commenced)
through September 30, 1999.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Net asset value, beginning of period $ 1.00
- ------------------------------------------------------- ------
Income from investment operations:
Net investment income 0.01
- ------------------------------------------------------- ------
Less distributions:
Dividends from net investment income (0.01)
- ------------------------------------------------------- ------
Net asset value, end of period $ 1.00
- ------------------------------------------------------- ------
Total return 1.47%
- ------------------------------------------------------- ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 215
======================================================= ======
Ratio of expenses to average net assets(a) 0.36%(b)
======================================================= ======
Ratio of net investment income to average net assets(c) 2.91%(b)
======================================================= ======
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
0.47% (annualized).
(b) Ratios are annualized and based on average net assets of $461,337.
(c) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements are 2.80% (annualized).
FS-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Tax-Free Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Cash Reserve Portfolio (a Portfolio of Tax-Free Investments Co.), including the
schedule of investments, as of March 31, 1999, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with 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
March 31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Cash Reserve Portfolio as of March 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
May 7, 1999
FS-26
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1999
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS - 103.47%
ALABAMA - 0.50%
Birmingham (City of) (YMCA-Birmingham);
Public Park and Recreation Board RB
3.15%, 06/01/16(b)(c) -- VMIG-1 $ 3,165 $ 3,165,000
- -------------------------------------------------------------------------------
Marshall (County of); Special Obligation
School Refunding Series 1994 Warrants
3.05%, 02/01/12(b)(c) A-1+ -- 2,695 2,695,000
- -------------------------------------------------------------------------------
5,860,000
- -------------------------------------------------------------------------------
ALASKA - 0.40%
Alaska Housing Finance Corp.; General
Mortgage Series 1991 A RB
2.95%, 06/01/26(b) A-1+ VMIG-1 4,636 4,636,000
- -------------------------------------------------------------------------------
ARIZONA - 3.67%
Maricopa (County of) Arizona Pollution
Control Corp. (El Paso Electric Co.
Project A); Series 1994 PCR
3.00%, 07/01/14(b)(c) -- P-1 20,000 20,000,000
- -------------------------------------------------------------------------------
Phoenix (City of); Series 95A-2 GO
3.25%, 06/01/20(b) A-1+ VMIG-1 7,800 7,800,000
- -------------------------------------------------------------------------------
Phoenix (City of) Industrial Development
Authority (Southwest Villages Project);
Multifamily Housing Variable Rate
Demand Series 1985 A RB
3.00%, 12/01/06(b)(c) A-1+ -- 4,000 4,000,000
- -------------------------------------------------------------------------------
Salt River Project Agricultural
Improvement and Power District;
Series B Promissory Notes
2.85%, 06/17/99 A-1+ P-1 11,100 11,100,000
- -------------------------------------------------------------------------------
42,900,000
- -------------------------------------------------------------------------------
CALIFORNIA - 1.75%
California Health Facilities Authority
(St. Francis Medical Center);
Series 1995 F RB
2.70%, 07/10/10(b)(d) A-1+ VMIG-1 15,000 15,000,000
- -------------------------------------------------------------------------------
Huntington Beach (City of) (Seabridge
Villas Project); Floating Rate
Multifamily Housing Series 1985 A RB
4.00%, 02/01/10(b)(c) -- VMIG-1 3,000 3,000,000
- -------------------------------------------------------------------------------
Student Loan Marketing Corporation;
Student Loan Revenue Refunding
Series 1993 A RB
3.00%, 11/01/99(c)(e) -- VMIG-1 2,500 2,500,000
- -------------------------------------------------------------------------------
20,500,000
- -------------------------------------------------------------------------------
</TABLE>
FS-27
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
COLORADO - 0.89%
Colorado (State of) General Fund;
Series 1998 A TRAN
4.00%, 06/25/99 SP-1+ -- $ 5,000 $ 5,004,712
- -------------------------------------------------------------------------------
Colorado Housing Finance Authority
(Coventry Village Project); Multifamily
Housing Refunding Series 1996 B RB
3.00%, 10/15/16(b)(c) A-1+ -- 5,370 5,370,000
- -------------------------------------------------------------------------------
10,374,712
- -------------------------------------------------------------------------------
CONNECTICUT - 0.60%
Connecticut (State of) (Transportation
Infrastructure Purpose S-1); Special Tax
Obligation RB
2.90%, 12/01/10(b)(c) A-1+ VMIG-1 4,262 4,262,000
- -------------------------------------------------------------------------------
Connecticut (State of) Development
Authority (Corporation for Independent
Living Project); Health Care Series
1990 RB
2.80%, 07/01/15(b)(c) -- VMIG-1 2,750 2,750,000
- -------------------------------------------------------------------------------
7,012,000
- -------------------------------------------------------------------------------
DELAWARE - 0.96%
Delaware (State of) Economic Development
Authority (Hospital Billing); Adjustable
Rate Series C RB
3.10%, 12/01/15(b)(d) A-1+ VMIG-1 5,500 5,500,000
- -------------------------------------------------------------------------------
University of Delaware; Variable Rate
Demand Series 1998 RB
3.00%, 11/01/23(b) A-1+ -- 5,711 5,711,000
- -------------------------------------------------------------------------------
11,211,000
- -------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 0.40%
District of Columbia Housing Finance
Agency (Livingston Manor Apts Project);
Multifamily Variable Rate Housing
Mortgage RB
3.05%, 07/01/21(b)(c) A-1 -- 4,630 4,630,000
- -------------------------------------------------------------------------------
FLORIDA - 6.17%
Broward (County of) Housing Finance
Authority (Welleby Apartments Project);
Multifamily Variable Rate Demand Housing
Series 1984 RB
2.95%, 12/01/06(b)(c) -- MIG-1 5,350 5,350,000
- -------------------------------------------------------------------------------
Eustis (City of) Health Facility
Authority (Florida Hospital/Waterman
Inc. Project); Series 1992 RB
2.95%, 12/01/15(b)(c) -- VMIG-1 3,525 3,525,000
- -------------------------------------------------------------------------------
Gulf Breeze (City of) (Florida Muncipal
Bond Fund); Variable Rate Demand
Series 1996 A RB
3.10%, 03/31/21(b)(c) A-1+ -- 3,595 3,595,000
- -------------------------------------------------------------------------------
Gulf Breeze (City of) (Local Government
Loan Program); Floating Rate
Series 1985 B RB
3.05%, 12/01/15(b)(d) A-1+ VMIG-1 3,700 3,700,000
- -------------------------------------------------------------------------------
</TABLE>
FS-28
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
FLORIDA - (CONTINUED)
Lee (County of) Housing Finance
Authority (Forestwood Apartments
Project); Housing Series 1995 A RB
3.00%, 06/15/25(b)(c) A-1+ -- $ 3,800 $ 3,800,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, (Board
of Education Lottery); Floating Rate
Trust Certificate Series 57 1998 RB
3.08%, 01/01/07(b)(d)(f) A-1c -- 15,000 15,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program,
Jacksonville (City of) Health
Facilities Authority; Floating Rate
Trust Certificates Series 49 1998 RB
3.08%,02/15/07(b)(d)(f) A-1c -- 12,980 12,980,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, Orange
(County of) School Board; Floating Rate
Trust Certificates Series 1997 A RB
3.08%, 08/01/06(b)(d)(f) -- VMIG-1 8,135 8,135,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, Tampa Bay
(City of) Water Utility System;
Floating Rate Trust Certificates Series
1998 B RB
3.08%, 10/01/18(b)(d)(f) A-1c -- 4,995 4,995,000
- -----------------------------------------------------------------------------
Putnam County Development Authority
(Seminole Electric Cooperative, Inc.
Project); National Rural Utilities
Guaranteed Semiannual Adjustable
Pooled PCR
3.00%, Series 1984 H-3, 09/15/99(c)(e) A-1+ MIG-1 4,400 4,400,000
- -----------------------------------------------------------------------------
3.00%, Series 1984 H-4, 09/15/99(c) A-1+ P-1 3,600 3,600,000
- -----------------------------------------------------------------------------
St. John's (County of) Housing Finance
Authority (Anastasia Project);
Mutifamily Housing Series 1996 RB
3.00%, 11/01/14(b)(c) A-1+ -- 3,100 3,100,000
- -----------------------------------------------------------------------------
72,180,000
- -----------------------------------------------------------------------------
GEORGIA - 4.96%
Clark (County of) Georgia School
District (School Sales Tax);
Series 1997 GO
4.55%, 03/01/00(d) AAA Aaa 2,150 2,179,938
- -----------------------------------------------------------------------------
Cobb (County of) Housing Authority
(Greenhouse Frey Apartment Project);
Multifamily Housing RB
3.00%, 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -----------------------------------------------------------------------------
Decatur County Bainbridge Industrial
Development Authority
(Kaiser Agriculture Chemical Inc.
Project); Series 1985 IDR
3.00%, 12/01/02(b)(c) A-1+ -- 2,100 2,100,000
- -----------------------------------------------------------------------------
Dekalb (County of) Housing Authority
(Clairmont Crest Project); Multifamily
Housing Refunding Series 1995 RB
3.05%, 06/15/25(b)(c) A-1+ -- 6,400 6,400,000
- -----------------------------------------------------------------------------
Dekalb Private Hospital Authority
(Egleston Childrens Hospital at
Emory University); Variable Rate Demand
Series 1994 A RAN
2.90%, 03/01/24(b)(c) A-1+ VMIG-1 1,558 1,558,000
- -----------------------------------------------------------------------------
</TABLE>
FS-29
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA - (CONTINUED)
Development Authority of Cobb County
(Institute of Nuclear Power Operations
Project); Series 1998 RB
3.10%, 02/01/13(b)(c) -- Aa3 $ 8,855 $ 8,855,000
- -------------------------------------------------------------------------------
Development Authority of Floyd County
(Shorter College Project);
Series 1998 RB
3.15%, 06/01/17(b)(c) A-1+ -- 4,000 4,000,000
- -------------------------------------------------------------------------------
Fulton (County of) Housing Authority
(Spring Creek Crossing Project);
Multifamily Housing Refunding Series RB
3.00%, 10/01/24(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Georgia (State of) Municipal Gas
Authority (Agency Project);
Gas Series 1996 A RB
3.05%, 11/01/06(b)(c) A-1+ -- 3,900 3,900,000
- -------------------------------------------------------------------------------
Gwinnett (County of) Housing Authority
(Greens Apartment Project); Variable
Rate Demand Multifamily Housing Series
1995 RB
3.05%, 06/15/25(b)(c) A-1+ -- 10,300 10,300,000
- -------------------------------------------------------------------------------
Gwinnett (County of) Housing Authority
(Post Chase Project); Variable Rate
Demand Multifamily Housing Series 1997
RB
3.00%, 06/01/25(b)(c) A-1+ -- 3,500 3,500,000
- -------------------------------------------------------------------------------
Roswell (City of) Housing Development
Authority (Azalea Project);
Multifamily Housing Refunding
Series 1996 RB
3.00%, 06/15/25(b)(c) A-1+ -- 5,200 5,200,000
- -------------------------------------------------------------------------------
57,992,938
- -------------------------------------------------------------------------------
IDAHO - 0.17%
Idaho (State of); Series 1998 TAN
4.50%, 06/30/99 SP-1+ MIG-1 2,000 2,004,283
- -------------------------------------------------------------------------------
ILLINOIS - 11.24%
Burbank (City of) (Service Merchandise
Co. Inc. Project); Floating Rate Monthly
Demand Industrial Building
Series 1984 RB
3.25%, 09/15/24(b)(c) A-1+ -- 2,800 2,800,000
- -------------------------------------------------------------------------------
Chicago (City of); Series 1998 GO
2.85%, 10/28/99(c)(e) A-1+ VMIG-1 4,000 4,000,000
- -------------------------------------------------------------------------------
East Peoria (City of) (Radnor/East Peoria
Partnership Project); Multifamily
Housing Series 1983 RB
3.25%, 06/01/08(b)(c) -- Aa3 5,445 5,445,000
- -------------------------------------------------------------------------------
Illinois (State of); Refunding Series GO
4.70%, 06/01/99 AA Aa2 3,000 3,007,609
- -------------------------------------------------------------------------------
Illinois (State of); Series 1998 GO
4.25%, 06/01/99(d) AAA Aaa 7,000 7,007,601
- -------------------------------------------------------------------------------
</TABLE>
FS-30
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS - (CONTINUED)
Illinois Development Finance Authority
(American College of Surgeons Project);
Tax Exempt Series 1996 RB
3.10%, 08/01/26(b)(c) A-1+ -- $ 6,551 $ 6,551,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Jewish Charities Revenue Anticipation
Note Progam); Variable Rate Demand RAN
3.15%, Series 1998-1999 A 06/30/99(b)(c) A-1+ -- 5,600 5,600,000
- -------------------------------------------------------------------------------
3.15%, Series 1998-1999 B 06/30/99(b)(c) A-1+ -- 3,000 3,000,000
- -------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(Northwestern University); Adjustable
Rate Series 1988 RB
3.00%, 03/01/28(b) A-1+ VMIG-1 6,450 6,450,000
- -------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(Pooled Financing Program); Commercial
Paper
3.00%, 04/06/99 A-1+ -- 10,000 10,000,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority;
Revolving Fund Pooled
Series D RB
2.95%, 08/01/15(b)(c) A-1+ VMIG-1 3,654 3,654,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Chicago Hospitals); Variable Rate Demand
Series 1998 RB
3.10%, 08/01/26(b)(d) A-1+ VMIG-1 15,000 15,000,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Northwestern Memorial Hospital);
Variable Rate Demand Series 1995 RB
3.10%, 08/15/25(b) A-1+ VMIG-1 8,000 8,000,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority (The
Methodist Medical Center); Revenue
Refunding Series 1998 RB
4.50%, 11/15/99(d) AAA Aaa 2,090 2,107,835
- -------------------------------------------------------------------------------
Illinois (State of) Toll Highway
Authority; Refunding Series 1993 B RB
3.30%, 01/01/10(b)(d) A-1+ VMIG-1 3,360 3,360,000
- -------------------------------------------------------------------------------
Illinois (State of) Toll Highway
Authority; Refunding Series 1998 B RB
3.05%, 01/01/16(b)(c) -- VMIG-1 8,800 8,800,000
- -------------------------------------------------------------------------------
Morgan Stanley Float Program, Chicago
School Reform Board of Trustees of Board
of Education (Dedicated Tax Revenues);
Floating Rate Trust Certificates Series
1997 A RB
3.13%, 06/01/07(b)(d)(f) A-1c -- 24,280 24,280,000
- -------------------------------------------------------------------------------
Village of Lisle (Four Lakes Project
Phase Five); Multifamily Housing
Revenue Refunding Series 1996 RB
3.00%, 09/15/26(b)(c) A-1+ -- 8,300 8,300,000
- -------------------------------------------------------------------------------
Village of Sauget; Variable Rate Demand
Series 1997 GO
2.95%, 02/01/16(b)(c) A-1+ -- 4,200 4,200,000
- -------------------------------------------------------------------------------
131,563,045
- -------------------------------------------------------------------------------
INDIANA - 2.20%
Auburn (City of) (Sealed Power Corp.
Project); Variable Rate Demand
Economic Development Series 1985 RB
3.00%, 07/01/10(b)(c) -- VMIG-1 1,200 1,200,000
- -------------------------------------------------------------------------------
</TABLE>
FS-31
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
INDIANA - (CONTINUED)
Indiana Development Finance Authority
(USX Corporation Project); Variable
Rate Environmental Improvement
Refunding Series 1998 RB
3.00%, 08/05/99(b)(c)(e) A-1+ -- $ 7,500 $ 7,500,000
- -----------------------------------------------------------------------------
Indianapolis (City of); Local
Improvement Bond Bank
Series 1995 B RB
5.00%, 02/01/00 AAA Aaa 1,500 1,522,632
- -----------------------------------------------------------------------------
Indianapolis (City of) (Jewish
Community Campus Project);
Variable Rate Economic Development RB
2.95%, 04/01/05(b)(c) -- VMIG-1 1,995 1,995,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program, Indiana
Health Facility Financing Authority
(Sisters of St. Francis Health
Services Inc.); Floating Rate Trust
Certificates Series 89 1999 A RB
3.13%, 05/01/07(b)(d)(f) A-1c -- 7,495 7,495,000
- -----------------------------------------------------------------------------
Petersburg (City of) (Indianapolis
Power and Light Co. Project);
Adjustable Rate Tender Securities
Series 1995 B PCR
3.05%, 01/01/23(b)(d) A-1+ VMIG-1 6,000 6,000,000
- -----------------------------------------------------------------------------
25,712,632
- -----------------------------------------------------------------------------
IOWA - 1.64%
Iowa Higher Education Loan Authority;
Private College Facility RB
3.15%, 12/01/15(b)(d) A-1+ VMIG-1 10,700 10,700,000
- -----------------------------------------------------------------------------
Iowa School Corporations (Iowa School
Cash Anticipation Program); Warrant
Certificates Series 1998-1999 A TRAN
4.50%, 06/25/99(c) SP-1+ MIG-1 8,500 8,516,232
- -----------------------------------------------------------------------------
19,216,232
- -----------------------------------------------------------------------------
KANSAS - 0.43%
Mission (City of) (Silverwood Apartment
Project); Multifamily RB
3.00%, 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -----------------------------------------------------------------------------
KENTUCKY - 6.89%
Clark (County of) (East Kentucky
Power); Series 1984-J2 PCR
3.10%, 04/15/99(c) A-1+ P-1 3,100 3,100,000
- -----------------------------------------------------------------------------
Kentucky Asset/Liability Commission;
General Fund TRAN
4.00%, Series 1998 B 06/25/99 SP-1+ MIG-1 2,000 2,003,049
- -----------------------------------------------------------------------------
4.50%, Series 1998 A 06/25/99 SP-1+ MIG-1 5,000 5,010,453
- -----------------------------------------------------------------------------
Kentucky Asset/Liability Commission;
Project Notes General Fund Series 1998
A RB
2.85%, 08/12/99(b)(c) -- VMIG-1 8,000 8,000,000
- -----------------------------------------------------------------------------
2.90%, 08/12/99(b)(c) -- VMIG-1 15,000 15,000,000
- -----------------------------------------------------------------------------
Kentucky Economic Development Finance
Authority (Catholic Healthcare
Project); Hospital Facilities
Series 1998 A RB
3.00%, 12/01/27(b)(c) A-1+ VMIG-1 21,200 21,200,000
- -----------------------------------------------------------------------------
</TABLE>
FS-32
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
KENTUCKY - (CONTINUED)
Kentucky Interlocal School Transport
Association; Series 1998 TRAN
3.90%, 06/30/99 SP-1+ -- $22,000 $ 22,043,538
- -------------------------------------------------------------------------------
Trimble (County of) (Louisville Gas
and Electric Company Project);
Series 1992 A PCR
2.85%, 06/17/99 A-1 VMIG-1 4,300 4,300,000
- -------------------------------------------------------------------------------
80,657,040
- -------------------------------------------------------------------------------
LOUISIANA - 2.18%
Louisana Public Facilities Authority
(Tiger Athletic Foundation Project);
Series 1999 RB
3.20%, 09/01/28(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
New Orleans (City of); Aviation Board
Series B RB
3.00%, 08/01/16(b)(d) A-1+ VMIG-1 4,935 4,935,000
- -------------------------------------------------------------------------------
New Orleans International Airport;
Aviation Board Refunding
Series 1995 A RB
3.00%, 08/01/15(b)(d) A-1+ VMIG-1 15,635 15,635,000
- -------------------------------------------------------------------------------
25,570,000
- -------------------------------------------------------------------------------
MAINE - 0.10%
Maine Health and Higher Educational
Facilities Authority;
Series 1998 B RB
3.70%, 07/01/99(c) AAA -- 1,120 1,120,000
- -------------------------------------------------------------------------------
MASSACHUSETTS - 1.46%
Massachusetts (State of); Series
1993 B GO
4.60%, 11/01/99 AA- Aa3 2,890 2,917,315
- -------------------------------------------------------------------------------
Massachusetts Health & Educational
Facilities Authority (Harvard University
Issue); Variable Rate Option Series I RB
2.85%, 08/01/17(b) A-1+ VMIG-1 5,245 5,245,000
- -------------------------------------------------------------------------------
Massachusetts Muni Wholesale Copower
Supply System;
Series 1999 A RB
4.30%, 07/01/99(d) AAA Aaa 1,450 1,454,635
- -------------------------------------------------------------------------------
Massachusetts State Health & Educational
Facilities Authority
(Partners Health Care Systems P-2); RB
2.95%, 07/01/27(b)(c) A-1+ VMIG-1 7,500 7,500,000
- -------------------------------------------------------------------------------
17,116,950
- -------------------------------------------------------------------------------
MICHIGAN - 1.55%
Grand Rapids (City of); Water Supply
Series 1990 RB
7.25%, 01/01/00(g) AAA Aaa 3,000 3,147,517
- -------------------------------------------------------------------------------
Jackson County Economic Development Corp.
(Sealed Power Corp.); Economic
Development Variable Refunding RB
3.00%, 10/01/19(b)(c) -- VMIG-1 1,000 1,000,000
- -------------------------------------------------------------------------------
</TABLE>
FS-33
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MICHIGAN - (CONTINUED)
Michigan (State of); Municipal Bond
Authority RB
4.25%, Series 1998 D-1, 08/27/99 SP-1+ -- $ 3,500 $ 3,509,168
- -----------------------------------------------------------------------------
4.25%, Series 1998 D-2, 08/27/99(c) SP-1+ -- 7,000 7,027,576
- -----------------------------------------------------------------------------
Michigan Strategic Fund (260 Brown St.
Associates Project); Convertible
Variable Rate Demand Limited
Obligation Series 1985 RB
3.20%, 10/01/15(b)(c) -- VMIG-1 3,500 3,500,000
- -----------------------------------------------------------------------------
18,184,261
- -----------------------------------------------------------------------------
MINNESOTA - 0.72%
Bloomington (City of) Port Authority
(Mall of America Project); Special Tax
Revenue Series 1996 B RB
3.10% 02/01/13(b)(c) A-1+ VMIG-1 300 300,000
- -----------------------------------------------------------------------------
Mankato (City of) (Northern States
Power Co. Project); Floating
Collateralized Series 1985 PCR
3.15%, 03/01/11(b)(d) AA- Aa3 3,400 3,400,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program (Northern
Municipal Power Agency); Electric
System Floating Rate Trust Receipts
Refunding Series 1998 RB
3.08%, 01/01/16(b)(c)(f) A-1c -- 3,515 3,515,000
- -----------------------------------------------------------------------------
Red Wing (City of) Industrial
Development Authority (Northern States
Power Co.); Floating Rate
Collateralized Series 1985 PCR
3.15%, 03/01/11(b)(d) AA- A1 1,200 1,200,000
- -----------------------------------------------------------------------------
8,415,000
- -----------------------------------------------------------------------------
MISSISSIPPI - 0.43%
Mississippi (State of) (Four Lane
Highway Program); Series 1998 GO
3.50%, 07/01/99 SP-1+ MIG-1 5,000 5,007,360
- -----------------------------------------------------------------------------
MISSOURI - 6.56%
Independence (City of) Industrial
Development Authority (The Groves and
Graceland College Nursing Arts Center
Project); Variable Rate Demand Series
1997 A IDR
3.15%, 11/01/27(b)(c) A-1+ -- 5,000 5,000,000
- -----------------------------------------------------------------------------
Kansas City Industrial Development
Authority (Sleepy Hollow Apartment
Project); Multifamily Housing
Series 1996 RB
3.00%, 09/15/26(b)(c) A-1+ -- 7,500 7,500,000
- -----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (Deaconess Long
Term Care - A); Variable Rate Demand
Health Facilities Series 1996 RB
3.05%, 12/01/16(b)(c) A-1+ VMIG-1 10,955 10,955,000
- -----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (Sister of
Mercy); Variable Rate Health Facility
Series 1995 RB
3.00%, 12/01/16(b) A-1+ VMIG-1 7,300 7,300,000
- -----------------------------------------------------------------------------
</TABLE>
FS-34
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MISSOURI - (CONTINUED)
Missouri Health & Educational
Facilities Authority (Stowers
Institute for Medical Research);
Series 1998 RB
2.95%, 04/01/38(b)(c) A-1+ -- $ 41,000 $ 41,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Float Program,
(University of Missouri Health System);
Floating Rate Trust Certificates
Series 1998 40 RB
3.13%, 11/01/28(b)(d)(f) -- VMIG-1 4,995 4,995,000
- -----------------------------------------------------------------------------
76,750,000
- -----------------------------------------------------------------------------
NEVADA - 1.28%
Las Vegas (City of) Valley Water
District; Series A Commercial Paper
2.85%, 07/21/99(c) A-1+ P-1 15,000 15,000,000
- -----------------------------------------------------------------------------
NEW HAMPSHIRE - 0.46%
New Hampshire Housing Finance
Authority (EQR-Bond Partnership-
Manchester Project); Multifamily
Housing Refunding Series 1996 RB
3.00%, 09/15/26(b)(c) -- VMIG-1 5,000 5,000,000
- -----------------------------------------------------------------------------
New Hampshire Industrial Development
Authority (Bangor Hydro-Electric Co.
Project); Variable Rate Demand Series
1983 PCR
3.05%, 01/01/09(b)(c) A-1+ -- 400 400,000
- -----------------------------------------------------------------------------
5,400,000
- -----------------------------------------------------------------------------
NEW MEXICO - 0.85%
New Mexico (State of); TRAN
3.75%, Series 1998-1999 A, 06/30/99 SP-1+ MIG-1 5,000 5,009,356
- -----------------------------------------------------------------------------
4.25%, Series 1998-1999, 06/30/99 SP-1+ MIG-1 5,000 5,007,736
- -----------------------------------------------------------------------------
10,017,092
- -----------------------------------------------------------------------------
NEW YORK - 16.66%
Eagle Tax Exempt Trust; Class A COP(f)
3.06%, Series 943207 07/01/29(b)(c) A-1+c -- 14,850 14,850,000
- -----------------------------------------------------------------------------
3.09%, Series 97C4702 01/01/20(b) A-1+c -- 9,900 9,900,000
- -----------------------------------------------------------------------------
3.11%, Series 97C4703 01/01/01(b)(g) A-1+c -- 11,295 11,295,000
- -----------------------------------------------------------------------------
3.11%, Series 1993 E 08/01/06(b)(d) A-1+c -- 15,000 15,000,000
- -----------------------------------------------------------------------------
3.11%, Series 1993 F 08/01/06(b)(d) A-1+c -- 20,850 20,850,000
- -----------------------------------------------------------------------------
3.11%, Series 943802 05/01/07(b)(d) A-1+c -- 17,800 17,800,000
- -----------------------------------------------------------------------------
3.11%, Series 943901 06/15/07(b)(c) A-1+c -- 15,175 15,175,000
- -----------------------------------------------------------------------------
3.11%, Series 950901 06/01/21(b)(g) A-1+c -- 13,315 13,315,000
- -----------------------------------------------------------------------------
</TABLE>
FS-35
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK - (CONTINUED)
Eagle Tax Exempt Trust (Colorado
Housing and Finance Authority); Series
94C0601 Class A COP
3.11%, 10/01/23(b)(f) A-1+c -- $10,000 $ 10,000,000
- -----------------------------------------------------------------------------
Eagle Tax Exempt Trust (Houston Water
and Sewer); Series 974305 RB
Class A COP
3.11%, 12/01/27(b)(c)(f) A-1+c -- 14,005 14,005,000
- -----------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington
Public Power Supply System Project
No. 2); Series 964703 Class A COP
3.11%, 07/01/11(b)(c)(f) A-1+c -- 5,870 5,870,000
- -----------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington
State); Series 984701 Class A COP
3.09%, 05/01/18(b)(f) A-1+c -- 14,400 14,400,000
- -----------------------------------------------------------------------------
Long Island Power Authority;
Subordinated Series 1998 4 RB
3.00%, 04/08/99(c) A-1+ VMIG-1 13,000 13,000,000
- -----------------------------------------------------------------------------
2.85%, 08/19/99(c) A-1+ VMIG-1 3,000 3,000,000
- -----------------------------------------------------------------------------
Merrill Lynch Group Float Program,
New York State Medical Facilities
Finance Agency (St.Lukes-Roosevelt
Hospital Center); Floating Option
Tax-Exempt Receipts Series PA-113
1993 A Mortgage RB
3.05%, 02/15/29(b)(c)(f) A-1+c -- 9,700 9,700,000
- -----------------------------------------------------------------------------
Merrill Lynch Group Float Program,
New York State Mortgage Agency;
Floating Option Tax-Exempt Receipts
Series PT 158 RB
3.05%, 04/01/12(b)(c)(f) -- VMIG-1 1,100 1,100,000
- -----------------------------------------------------------------------------
New York (City of); Variable Rate
Demand Series 1993, Subseries E-5 GO
3.25%, 08/01/19(b)(c) A-1+c VMIG-1 5,800 5,800,000
- -----------------------------------------------------------------------------
195,060,000
- -----------------------------------------------------------------------------
NORTH CAROLINA - 1.94%
North Carolina Medical Care Commission
Retirement Community (Adult
Communities Total Services Inc.);
Variable Rate Demand Series 1996 RB
3.05%, 11/15/09(b)(c) A-1+ -- 5,655 5,655,000
- -----------------------------------------------------------------------------
North Carolina Medical Care Commission
(The Moses H. Cone Memorial Hospital
Project); Hospital RB
3.10%, Series 1995, 09/01/02(b)(c) A-1+ -- 5,400 5,400,000
- -----------------------------------------------------------------------------
3.10%, Series 1993, 10/01/23(b)(c) A-1+ -- 5,700 5,700,000
- -----------------------------------------------------------------------------
Raleigh Durham Airport Authority
(American Airlines Project);
Special Facilities Series 1995 B-1 RB
3.20%, 11/01/15(b)(c) A-1+ -- 5,950 5,950,000
- -----------------------------------------------------------------------------
22,705,000
- -----------------------------------------------------------------------------
</TABLE>
FS-36
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OHIO - 0.90%
Franklin (County of) (Bricker & Eckler
Building Co. Project); Variable Rate
Demand Series 1984 IDR
3.25%, 11/01/14(b)(c) -- P-1 $ 8,200 $ 8,200,000
- -----------------------------------------------------------------------------
Marion (County of) (Pooled Lease
Program); Hospital RB
3.10%, 10/01/22(b)(c) A-1+ -- 1,355 1,355,000
- -----------------------------------------------------------------------------
Ohio Housing Finance Agency (Kenwood
Congregate Retirement Community
Project); Variable Rate Demand
Multifamily Housing Series 1985 RB
3.00%, 12/01/15(b)(c) -- VMIG-1 956 956,000
- -----------------------------------------------------------------------------
10,511,000
- -----------------------------------------------------------------------------
OKLAHOMA - 0.43%
Oklahoma Water Resources Board (State
Loan Program); Series 1995 RB
2.95%, 09/01/99(b)(c) A-1+c -- 5,000 5,000,000
- -----------------------------------------------------------------------------
OREGON - 1.38%
Klamath Falls (City of) (Salt Caves
Hydroelectric Project);
Adjustable/Fixed Refunding Series
1986 D RB
3.80%, 05/03/99(e)(g) SP-1+ -- 5,670 5,670,331
- -----------------------------------------------------------------------------
Multnoma (County of) (Portland Public
School District); Series 1998 TRAN
4.25%, 06/30/99 SP-1+ MIG-1 2,600 2,603,710
- -----------------------------------------------------------------------------
Portland (City 0f) (South Park Block
Project); Multifamily Housing Variable
Rate Refunding Series 1988 A RB
3.00%, 12/01/11(b)(c) A-1+ -- 7,950 7,950,000
- -----------------------------------------------------------------------------
16,224,041
- -----------------------------------------------------------------------------
PENNSYLVANIA - 2.42%
Beaver County Industrial Development
Authority (Duquesne Light Company
Project); Refunding Series 1994 PCR
3.20%, 05/27/99(b) A-1+ VMIG-1 6,000 6,000,000
- -----------------------------------------------------------------------------
Delaware County Industrial Development
Authority (Henderson-Radnor Joint
Venture Project); Limited Obligation
Series 1985 IDR
3.35%, 04/01/15(b)(c) -- Aa3 765 765,000
- -----------------------------------------------------------------------------
Montour (County of) Geisinger Authority
Health System (Obligation Group);
Series A RB
5.30%, 07/01/99 AA Aa2 1,000 1,003,974
- -----------------------------------------------------------------------------
Philadelphia (City of) Parking
Authority; Parking Series 1999 RB
4.00%, 02/01/00(d) AAA Aaa 1,290 1,300,114
- -----------------------------------------------------------------------------
Philadelphia School District; TRAN
4.25%, Series 1998-1999 A, 06/30/99(c) SP-1 MIG-1 1,500 1,502,213
- -----------------------------------------------------------------------------
4.25%, Series 1998 B, 06/30/99(c) SP-1 MIG-1 10,000 10,027,622
- -----------------------------------------------------------------------------
</TABLE>
FS-37
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
PENNSYLVANIA - (CONTINUED)
York (City of) General Authority;
Adjustable Rate Pooled Financing
Series 1996 RB
3.10%, 09/01/26(b)(c) A-1 -- $ 7,785 $ 7,785,000
- -------------------------------------------------------------------------------
28,383,923
- -------------------------------------------------------------------------------
TENNESSEE - 1.17%
Industrial Development Board of the
Metropolitan Government of Nashville
and Davidson County (Amberwood, Ltd.
Project); Multifamily Housing RB
3.31%, Series 1993 A 07/01/13(b)(c) -- VMIG-1 2,135 2,135,000
- -------------------------------------------------------------------------------
3.31%, Series 1993 B 07/01/13(b)(c) A-1 VMIG-1 1,825 1,825,000
- -------------------------------------------------------------------------------
Knox (County of) Health Educational and
Housing Facility Authority (Catholic
Healthcare Partners); Healthcare Series
1998 A RB
3.00%, 12/01/27(b) A-1+ VMIG-1 9,700 9,700,000
- -------------------------------------------------------------------------------
13,660,000
- -------------------------------------------------------------------------------
TEXAS - 12.17%
Bexar (County of) Texas Housing Finance
Authority (Fountainhead Apt.);
Multifamily RB
3.00%, 09/15/26(b)(c) A-1+ -- 17,146 17,146,000
- -------------------------------------------------------------------------------
Fort Worth (City of) (General Purpose
Program); Series B Commercial Paper
Notes
2.85%, 07/14/99 A-1+ P-1 6,000 6,000,000
- -------------------------------------------------------------------------------
Grand Prairie (City of) Texas Housing
Finance Corporation (Windridge Grand
Prairie Associates); Multifamily
Housing Refunding RB
3.05%, 06/01/10(b)(c) A-1+ -- 4,500 4,500,000
- -------------------------------------------------------------------------------
Gulf Coast Waste Disposal Authority
(Amoco Oil Company Project); Refunding
Series 1992 PCR
3.10%, 10/01/17(b) A-1+ VMIG-1 7,000 7,000,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp.; ACES Greater
Houston Pooled Health Series 1985 A RB
3.10%, 11/01/25(b)(c) A-1 -- 2,300 2,300,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Gulf Coast Regional
Blood Center Project); Blood Center
Series 1992 RB
3.15%, 04/01/17(b)(c) A-1 -- 3,250 3,250,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (St. Lukes Episcopal
Hospital); Series 1997 B RB
3.10%, 02/15/27(b) A-1+ -- 5,700 5,700,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Texas Children's
Hospital); Series 1989 B-2 RB
3.05%, 10/01/19(b) -- VMIG-1 7,900 7,900,000
- -------------------------------------------------------------------------------
</TABLE>
FS-38
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS - (CONTINUED)
Hockley (County of) Industrial
Development Corporation
(Amoco Project); Adjustable Rate
Series 1983 PCR
2.90%, 09/01/99(e) A-1+ -- $ 3,500 $ 3,500,000
- -------------------------------------------------------------------------------
Houston (City of); Series 1998 TRAN
4.25%, 06/30/99 SP-1+ MIG-1 10,000 10,023,380
- -------------------------------------------------------------------------------
Houston (City of); Series A Commercial
Paper Notes
2.90%, 07/08/99 A-1+ P-1 5,000 5,000,000
- -------------------------------------------------------------------------------
Houston (City of); Series B GO
2.90%, 07/08/99 A-1+ P-1 2,000 2,000,000
- -------------------------------------------------------------------------------
Houston (City of) Water and Sewer;
Commercial Paper Notes
2.65%, Series A, 05/11/99 A-1 P-1 10,000 10,000,000
- -------------------------------------------------------------------------------
3.20%, Series B, 07/29/99 A-1 P-1 10,000 10,000,000
- -------------------------------------------------------------------------------
Lubbuck Health Facilities Development
Corporation (St. Joseph Health System);
Series 1998 RB
5.00%, 07/01/99 AA Aa3 4,000 4,018,355
- -------------------------------------------------------------------------------
Sabine River Authority (Texas Utilities
Project); Series A PCR
3.15%, 03/01/26(b)(d) A-1+c VMIG-1 4,250 4,250,000
- -------------------------------------------------------------------------------
San Antonio (City of) Electric & Gas
System; Series A Commercial Paper Notes
3.00%, 04/07/99 A-1+ P-1 8,000 8,000,000
- -------------------------------------------------------------------------------
Tarrant (County of) Texas Health
Facilities Authority (Adventist Health
System); Series 1997 A RB
3.05%, 11/15/27(b)(c) A-1+ -- 8,775 8,775,000
- -------------------------------------------------------------------------------
Texas (State of); Series 1998 TRAN
4.50%, 08/31/99 SP-1+ MIG-1 19,000 19,107,020
- -------------------------------------------------------------------------------
Texas Water Development Board; State
Revolving Fund Senior Lein Series RB
5.00%, 07/15/99 AAA Aa1 1,800 1,806,807
- -------------------------------------------------------------------------------
Trinity River Industrial Development
Authority (Radiation Sterilizers, Inc.
Project); Variable Rate Demand IDR
3.00%, Series 1985 A 11/01/05(b)(c) A-1 -- 500 500,000
- -------------------------------------------------------------------------------
3.00%, Series 1985 B 11/01/05(b)(c) A-1 -- 1,650 1,650,000
- -------------------------------------------------------------------------------
142,426,562
- -------------------------------------------------------------------------------
UTAH - 0.34%
Central Utah Water Conservation District;
Refunding Series 1998 E GO
3.05%, 04/01/27(b)(d) A-1+ VMIG-1 4,000 4,000,000
- -------------------------------------------------------------------------------
</TABLE>
FS-39
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
VERMONT - 0.82%
Vermont Educational and Health Building
Finance Authority (Middlebury College
Project A); Adjustable Rate Series
1988 RB
3.10%, 11/01/99(e) A-1+ -- $ 1,500 $ 1,500,000
- -------------------------------------------------------------------------------
Vermont Educational and Health Building
Finance Authority (VHA New England);
Variable Rate Hospital RB
3.15%, Series B 12/01/25(b)(d) A-1 -- 1,000 1,000,000
- -------------------------------------------------------------------------------
3.15%, Series E 12/01/25(b)(d) A-1 -- 2,500 2,500,000
- -------------------------------------------------------------------------------
3.15%, Series F 12/01/25(b)(d) A-1+ -- 2,100 2,100,000
- -------------------------------------------------------------------------------
3.15%, Series G 12/01/25(b)(d) A-1+ -- 2,500 2,500,000
- -------------------------------------------------------------------------------
9,600,000
- -------------------------------------------------------------------------------
VIRGINIA - 3.35%
Alexandria (City of) Virginia
Development and Housing Authority
(Goodwin Project); Residential Care
Facilities Series 1996 B RB
3.20%, 10/01/06(b)(c) A-1 -- 9,300 9,300,000
- -------------------------------------------------------------------------------
Industrial Development Authority of the
City of Lynchburg (VHA Mid-Atlantic
States, Inc.) Capital Asset Financing
Program; Variable Rate Hospital Series
1985 F RB
3.15%, 12/01/25(b)(d) A-1+ -- 6,700 6,700,000
- -------------------------------------------------------------------------------
Roanoke (City of) (Carillion Health
System); Hospital Series B RB
3.10%, 07/01/19(b)(c) A-1 VMIG-1 2,900 2,900,000
- -------------------------------------------------------------------------------
Virginia State Public School Authority;
School Financing Series 1998 RB
3.50%, 08/01/99 AA+ Aa1 5,225 5,235,399
- -------------------------------------------------------------------------------
Waynesboro (City of) Industrial
Development Authority (Residential
Care Facilities); RB
3.20%, 12/15/28(b)(c) A-1 -- 15,100 15,100,000
- -------------------------------------------------------------------------------
39,235,399
- -------------------------------------------------------------------------------
WASHINGTON - 0.88%
Industrial Development Corp. of Port
Townsend (Port Townsend Paper Corp.
Project); Variable Rate Refunding
Series 1988 A RB
3.00%, 03/01/09(b)(c) -- VMIG-1 3,100 3,100,000
- -------------------------------------------------------------------------------
Seattle (City of) Solid Waste Utility;
Series 1999 RB
4.75%, 08/01/99(c) AAA Aaa 3,835 3,858,551
- -------------------------------------------------------------------------------
Washington State Public Power Supply
(Nuclear Project No. 1); Series A Pre
Refunded RB
7.50%, 07/01/99(g) AAA Aaa 3,240 3,341,490
- -------------------------------------------------------------------------------
10,300,041
- -------------------------------------------------------------------------------
</TABLE>
FS-40
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WEST VIRGINIA - 1.24%
West Virginia Hospital Finance
Authority (VHA Mid-Atlantic
States, Inc. Capital Asset
Financing Program); RB
3.15%, Series 1985 B 12/01/25(b)(d) A-1+ -- $3,000 $ 3,000,000
- -------------------------------------------------------------------------------
3.15%, Series 1985 C 12/01/25(b)(d) A-1 + -- 3,500 3,500,000
- -------------------------------------------------------------------------------
3.15%, Series 1985 H 12/01/25(b)(d) A-1 -- 8,000 8,000,000
- -------------------------------------------------------------------------------
14,500,000
- -------------------------------------------------------------------------------
WISCONSIN - 1.31%
Milwaukee (County of); Series 1995 GO
5.125%, 12/01/99 AA- Aa3 2,275 2,307,774
- -------------------------------------------------------------------------------
Wisconsin (State of); TAN
4.50%, 06/15/99 SP-1+ MIG-1 13,000 13,024,607
- -------------------------------------------------------------------------------
15,332,381
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.47% 1,210,968,892 (h)
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -
(3.47%) (40,627,008)
- -------------------------------------------------------------------------------
NET ASSETS - 100% $1,170,341,884
- -------------------------------------------------------------------------------
</TABLE>
INVESTMENT ABBREVIATIONS:
<TABLE>
<S> <C>
COP--Certificates of Participation RAN--Revenue Anticipation Notes
GO--General Obligation Bonds/Notes RB--Revenue Bonds
IDR--Industrial Development Revenue Bonds TAN--Tax Anticipation Notes
PCR--Pollution Control Revenue Bonds TRAN--Tax and Revenue Anticipation Notes
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P"). Ratings are not covered by
Independent Auditors' Report.
(b) Demand security: payable upon demand by the Fund at specified intervals no
greater than thirteen months. Interest rates are redetermined periodically.
Rates shown are the rates in effect on 03/31/99.
(c) Secured by a letter of credit.
(d) Secured by bond insurance.
(e) Subject to an irrevocable call or mandatory put by the issuer. Par value
and maturity date reflect such call or put.
(f) The Fund may invest in synthetic municipal instruments of which the value
of and return on are derived from underlying securities. The types of
synthetic municipal instruments in which the Fund may invest include
variable rate instruments. These instruments involve the deposit into a
trust of one or more long-term tax-exempt bonds or notes ("Underlying
Bonds"), and the sale of certificates evidencing interests in the trust to
investors such as the Fund. The trustee receives the long-term fixed rate
interest payments on the Underlying Bonds, and pays certificate holders
short-term floating or variable interest rates which are reset
periodically. A "variable rate trust certificate" evidences an interest in
a trust entitling the certificate holder to receive variable rate interest
based on prevailing short-term interest rates and also typically providing
the certificate holder with the conditional right to put its certificate at
par value plus accrued interest. Because synthetic municipal instruments
involve a trust and a third party conditional put feature, they involve
complexities and potential risks they may not be present where a municipal
security is owned directly.
(g) Secured by an escrow fund of U.S. Treasury obligations.
(h) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-41
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $1,210,968,892
- ------------------------------------------------------------------------
Cash 1,930,982
- ------------------------------------------------------------------------
Receivables for:
Investments sold 10,915,099
- ------------------------------------------------------------------------
Interest 8,817,033
- ------------------------------------------------------------------------
Investment for deferred compensation plan 41,727
- ------------------------------------------------------------------------
Other assets 161,487
- ------------------------------------------------------------------------
Total assets 1,232,835,220
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 59,383,437
- ------------------------------------------------------------------------
Dividends 2,866,059
- ------------------------------------------------------------------------
Deferred compensation 41,727
- ------------------------------------------------------------------------
Accrued administrative services fees 7,600
- ------------------------------------------------------------------------
Accrued advisory fees 20,056
- ------------------------------------------------------------------------
Accrued directors' fees 3,388
- ------------------------------------------------------------------------
Accrued transfer agent fees 21,176
- ------------------------------------------------------------------------
Accrued distribution fees 19,336
- ------------------------------------------------------------------------
Accrued operating expenses 130,557
- ------------------------------------------------------------------------
Total liabilities 62,493,336
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,170,341,884
========================================================================
NET ASSETS:
Institutional Class $1,072,597,169
========================================================================
Private Investment Class $ 90,605,977
========================================================================
Cash Management Class $ 7,138,738
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class:
Authorized 3,000,000,000
- ------------------------------------------------------------------------
Outstanding 1,072,592,053
========================================================================
Private Investment Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 90,604,835
========================================================================
Cash Management Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 7,138,732
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-42
<PAGE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest income $37,106,069
- ------------------------------------------------------------------
EXPENSES:
Advisory fees 2,455,821
- ------------------------------------------------------------------
Administrative services fees 86,020
- ------------------------------------------------------------------
Transfer agent fees 148,166
- ------------------------------------------------------------------
Custody fees 46,422
- ------------------------------------------------------------------
Directors' fees 15,376
- ------------------------------------------------------------------
Distribution fees (Note 2) 430,870
- ------------------------------------------------------------------
Other expenses 319,765
- ------------------------------------------------------------------
Total expenses 3,502,440
- ------------------------------------------------------------------
Less: Fees waived and expenses assumed (1,024,500)
- ------------------------------------------------------------------
Net expenses 2,477,940
- ------------------------------------------------------------------
Net investment income 34,628,129
- ------------------------------------------------------------------
Net realized gain on sales of investments 8,745
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $34,636,874
==================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 34,628,129 $ 36,533,922
- -----------------------------------------------------------------------------
Net realized gain on sales of investments 8,745 9,664
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 34,636,874 36,543,586
- -----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (32,079,516) (34,792,247)
- -----------------------------------------------------------------------------
Private Investment Class (2,486,438) (1,741,675)
- -----------------------------------------------------------------------------
Cash Management Class (62,175) --
- -----------------------------------------------------------------------------
Capital stock transactions - net:
Institutional Class 175,685,921 (69,673,016)
- -----------------------------------------------------------------------------
Private Investment Class 10,142,224 42,918,457
- -----------------------------------------------------------------------------
Cash Management Class 7,138,732 --
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets 192,975,622 (26,744,895)
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 977,366,262 1,004,111,157
- -----------------------------------------------------------------------------
End of period $1,170,341,884 $ 977,366,262
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in):
Institutional Class $1,072,668,342 $ 896,906,132
- -----------------------------------------------------------------------------
Private Investment Class 90,611,277 80,462,611
- -----------------------------------------------------------------------------
Cash Management Class 7,139,494 --
- -----------------------------------------------------------------------------
Undistributed realized gain (loss) on sales
of investments (77,229) (2,481)
- -----------------------------------------------------------------------------
$1,170,341,884 $ 977,366,262
=============================================================================
</TABLE>
See Notes to Financial Statements.
FS-43
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Tax-Free Investments Co. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. The Company is organized as a Maryland
corporation consisting of one portfolio, the Cash Reserve Portfolio (the
"Fund"). The Fund currently offers six different classes of shares, the
Institutional Class ("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 investment objective of the Fund is to generate
as high a level of tax-exempt income as is consistent with preservation of
capital and maintenance of liquidity.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Securities Valuations - The Fund uses the amortized cost method of valuing
investment portfolio securities which has been determined by the Board of
Directors of the Company to represent the fair value of the Fund's
investments.
B. Securities Transactions and Investment Income - Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and,
when appropriate, discounts on investments, is earned from settlement date
and is recorded on the accrual basis. Interest income is allocated to each
class daily, based upon each class' pro rata share of the total shares of
the Fund outstanding. Discounts, other than original issue, on short-term
obligations are amortized to unrealized appreciation for financial reporting
purposes. On March 31, 1999, paid in capital was increased by $83,493 and
undistributed net realized gains was decreased by $83,493 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the fund were
unaffected by the reclassifications discussed above.
C. Dividends and Distributions to Shareholders - It is the policy of the Fund
to declare daily dividends from net investment income. Such dividends are
paid monthly. Net realized capital gains (including net short-term capital
gains and market discounts), if any, are distributed annually.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $77,230 (which may be carried forward to offset future
taxable gains, if any) which expires, if not previously utilized, through
the year 2004. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized. In addition, the Fund
intends to invest in sufficient municipal securities to allow it to qualify
to pay "exempt interest dividends," as defined in the Internal Revenue Code,
to shareholders.
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 between the classes.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.25% of
the first $500 million of the Fund's average daily net assets plus 0.20% of the
Fund's average daily net assets in excess of $500 million.
AIM has voluntarily agreed to reduce its fee from the Fund to the extent
necessary so that the amount of ordinary expenses of the Institutional Class
(excluding interest, taxes, brokerage commissions, directors' fees,
extraordinary expenses and federal registration fees) paid or incurred by the
Institutional Class does not exceed 0.20% of the Institutional Class' average
daily net assets. As a result, AIM's advisory fee on the Private Investment
Class and the Cash Management Class, are reduced in the same proportion as the
Institutional Class. For the year ended March 31, 1999, AIM reduced its
advisory fee from the Fund by $809,773.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended March 31, 1999, the Fund
reimbursed AIM $86,020 for such services.
FS-44
<PAGE>
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 Class, the Personal Investment Class, the Cash
Management Class, the Reserve Class, and the Resource Class pay up to a 0.50%,
0.75%, 0.10%, 1.00%, and 0.20%, respectively, maximum annual rate of the
average daily net assets attributable to such class. Of this amount, the Fund
may pay an asset-based sales charge to FMC and the Fund may pay a service fee
of (a) 0.25% of the average daily net assets of each of the Private Investment
Class, 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 Fund with respect to each class.
During the year ended March 31, 1999, the Private Investment Class and the Cash
Management Class paid $214,255 and $1,888, respectively, as compensation to FMC
under the Plan. FMC waived fee of $214,727 during the same period.
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 agent and
shareholder services to the Fund. During the year ended March 31, 1999, the
Fund paid AFS $97,188 for such services.
During the year ended March 31, 1999, the Fund paid legal fees of $5,333 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended March 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------------- -------------------------------
Shares Amount Shares Amount
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 7,257,933,597 $ 7,257,933,597 5,302,472,459 $ 5,302,472,459
- -------------------------------------------------------------------------------------------
Private Investment
Class 580,913,749 580,913,749 484,657,926 484,657,926
- -------------------------------------------------------------------------------------------
Cash Management Class* 13,152,591 13,152,591 -- --
- -------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 1,929,870 1,929,870 2,107,154 2,107,154
- -------------------------------------------------------------------------------------------
Private Investment
Class 2,254,362 2,254,362 1,514,378 1,514,378
- -------------------------------------------------------------------------------------------
Cash Management Class* 41,812 41,812 -- --
- -------------------------------------------------------------------------------------------
Redeemed:
Institutional Class (7,084,177,546) (7,084,177,546) (5,374,252,629) (5,374,252,629)
- -------------------------------------------------------------------------------------------
Private Investment
Class (573,025,887) (573,025,887) (443,253,847) (443,253,847)
- -------------------------------------------------------------------------------------------
Cash Management Class* (6,055,671) (6,055,671) -- --
- -------------------------------------------------------------------------------------------
Net increase
(decrease) 192,966,877 $ 192,966,877 (26,754,559) $ (26,754,559)
- -------------------------------------------------------------------------------------------
</TABLE>
* The Cash Management Class commenced sales on January 1, 1999.
FS-45
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Cash Management Class
capital stock outstanding during the period January 1, 1999 (date sales
commenced) through March 31, 1999.
<TABLE>
<CAPTION>
March 31,
1999
---------
<S> <C>
Net asset value, beginning of period $ 1.00
- ------------------------------------------------------- ------
Income from investment operations:
Net investment income 0.01
- ------------------------------------------------------- ------
Less distributions:
Dividends from net investment income (0.01)
- ------------------------------------------------------- ------
Net asset value, end of period $ 1.00
- ------------------------------------------------------- ------
Total return 0.64%
- ------------------------------------------------------- ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,139
- ------------------------------------------------------- ------
Ratio of expenses to average net assets(a) 0.28%(b)
- ------------------------------------------------------- ------
Ratio of net investment income to average net assets(c) 3.08%(b)
- ------------------------------------------------------- ------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
0.38% (annualized).
(b) Ratios are annualized and based on average net assets of $2,359,815.
(c) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements are 2.98% (annualized).
FS-46
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Institutional Class
capital stock outstanding during each of the years in the five-year period
ended March 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------- ---------- -------- -------- ---------- ----------
Income from investment
operations:
Net investment income 0.03 0.03 0.03 0.04 0.03
- ----------------------- ---------- -------- -------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.03) (0.03) (0.03) (0.04) (0.03)
- ----------------------- ---------- -------- -------- ---------- ----------
Net asset value, end of
period $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------- ---------- -------- -------- ---------- ----------
Total return 3.23% 3.55% 3.33% 3.67% 3.06%
- ----------------------- ---------- -------- -------- ---------- ----------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $1,072,597 $896,904 $966,567 $1,009,039 $1,009,891
- ----------------------- ---------- -------- -------- ---------- ----------
Ratio of expenses to
average net assets(a) 0.20%(b) 0.20% 0.20% 0.20% 0.20%
- ----------------------- ---------- -------- -------- ---------- ----------
Ratio of net investment
income to average net
assets(c) 3.16%(b) 3.49% 3.27% 3.59% 3.01%
- ----------------------- ---------- -------- -------- ---------- ----------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.28%, 0.27%, 0.26%, 0.26% and 0.26% for the periods 1999-1995,
respectively.
(b) Ratios are based on average net assets of $1,014,848,955.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 3.08%, 3.42%, 3.21%, 3.53% and 2.95% for the periods
1999-1995, respectively.
FS-47
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Private Investment
Class capital stock outstanding during each of the years in the five-year
period ended March 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------ ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.03 0.03 0.03 0.03 0.03
- ------------------------------ ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.03) (0.03) (0.03) (0.03) (0.03)
- ------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $ 1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------ ------- ------- ------- ------- -------
Total return 2.98% 3.29% 3.07% 3.41% 2.80%
- ------------------------------ ------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $90,606 $80,462 $37,544 $35,139 $29,286
- ------------------------------ ------- ------- ------- ------- -------
Ratio of expenses to average
net assets(a) 0.45%(b) 0.45% 0.45% 0.45% 0.45%
- ------------------------------ ------- ------- ------- ------- -------
Ratio of net investment income
to average net assets(c) 2.91%(b) 3.24% 3.02% 3.35% 2.89%
- ------------------------------ ------- ------- ------- ------- -------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.78%, 0.77%, 0.83%, 0.76% and 1.17% for the periods 1999-1995,
respectively.
(b) Ratios are based on average net assets of $85,701,917.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.58%, 2.92%, 2.65%, 3.04% and 2.17% for the periods
1999-1995, respectively.
FS-48
<PAGE>
PART C
OTHER INFORMATION
Item 23 Exhibits
a(1) - (a) Articles of Incorporation of Registrant, as filed with the State
of Maryland on March 4, 1992, were filed as an Exhibit to Registrant's
Post-Effective Amendment No. 16 on March 23, 1992, and were filed
electronically as an Exhibit to Post-Effective Amendment No. 23 on
July 26, 1996, and are hereby incorporated by reference.
- (b) Articles Supplementary of Registrant, as filed with the State of
Maryland on June 22, 1994, were filed as an Exhibit to Registrant's
Post-Effective Amendment No. 21 on July 29, 1994, and were filed
electronically as an Exhibit to Post-Effective Amendment No. 23 on
July 26, 1996, and are hereby incorporated by reference.
- (c) Articles Supplementary of Registrant, as filed with the State of
Maryland November 9, 1998, were filed as an Exhibit to Post-Effective
Amendment No. 26 on November 25, 1998, and is hereby incorporated by
reference.
- (d) Articles of Amendment of Registrant, as filed with the State of
Maryland on December 16, 1998, are filed herewith electronically.
- (e) Certificate of Correction of Registrant, as filed with the State
of Maryland on December 16, 1998, is filed herewith electronically.
- (f) Articles Supplementary of Registrant, as filed with the State of
Maryland on December 9, 1999, are filed herewith electronically.
- (g) Articles Supplementary of Registrant, as filed with the State of
Maryland on December 29, 1999, are filed herewith electronically.
b(1) - (a) By-Laws of Registrant were initially filed as an Exhibit to
Registrant's Post-Effective Amendment No. 16 on March 23, 1992, and
were filed electronically as an Exhibit to Post-Effective Amendment
No. 22 on July 28, 1995.
- (b) First Amendment, dated May 10, 1994, to By-Laws of Registrant was
filed electronically as an Exhibit to Post-Effective Amendment No. 22
on July 28, 1995.
- (c) Second Amendment, dated March 14, 1995, to By-Laws of Registrant
was filed electronically as an Exhibit to Post-Effective Amendment
No. 22 on July 28, 1995.
(2) - (a) Amended and Restated Bylaws of Registrant, dated December 11,
1996 were filed electronically as an Exhibit to Post-Effective
Amendment No. 24 on July 29, 1997, and are hereby incorporated by
reference.
- (b) First Amendment to Amended and Restated Bylaws of Registrant,
adopted as of June 9, 1999, is filed herewith electronically.
c - Instruments Defining Rights of Security Holders - None.
d(1) - Investment Advisory Agreement, dated October 18, 1993, between A I M
Advisors, Inc. and Registrant, on behalf of the Cash Reserve
Portfolio, was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 21 on July 29, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 23 on July 26, 1996.
C-1
<PAGE>
(2) - Investment Advisory Agreement, dated February 28, 1997 between A I M
Advisors, Inc. and Registrant, on behalf of the Cash Reserve
Portfolio, was filed electronically as an Exhibit to Post-Effective
Amendment No. 24 on July 29, 1997, and is hereby incorporated by
reference.
(3) - Form of Master Investment Advisory Agreement between A I M Advisors,
Inc. and Registrant, on behalf of Cash Reserve Portfolio, is filed
herewith electronically.
e(1) - Master Distribution Agreement, dated October 18, 1993, between Fund
Management Company and Registrant was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 21 on July 29, 1994, and was
filed electronically as an Exhibit to Post-Effective Amendment No. 23
on July 26, 1996.
(2) - (a) Master Distribution Agreement dated February 28, 1997 between
Fund Management Company and Registrant was filed electronically as an
Exhibit to Post-Effective Amendment No. 24 on July 29, 1997, and is
hereby incorporated by reference.
- (b) Amendment No. 1 dated December 18, 1998, to Master Distribution
Agreement, dated February 28, 1997, between Fund Management Company
and Registrant was filed as an exhibit to Post-Effective Amendment
No. 27 on June 25, 1999, and is hereby incorporated by reference.
f(1) - AIM Funds Retirement Plan for Eligible Directors/Trustees was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 21 on July
29, 1994.
(2) - AIM Funds Retirement Plan for Eligible Directors/Trustees, effective
as of March 8, 1994, as restated September 18, 1995, was filed
electronically as an Exhibit to Post-Effective Amendment No. 23 on
July 26, 1996, and is hereby incorporated by reference.
(3) - Form of Deferred Compensation Agreement was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 21 on July 29, 1994.
(4) - Form of Deferred Compensation Plan for Eligible Directors/Trustees as
approved on December 5, 1995, was filed electronically as an Exhibit
to Post-Effective Amendment No. 23 on July 26, 1996, and is hereby
incorporated by reference.
(5) - Form of Deferred Compensation Agreement for Registrant's Non-
Affiliated Directors as approved March 12, 1997, was filed
electronically as an Exhibit to Post-Effective Amendment No. 25 on May
22, 1998, and is hereby incorporated by reference.
g(1) - (a) Custody Agreement, dated October 19, 1995, between The Bank of
New York and Registrant was filed electronically as an Exhibit to
Post-Effective Amendment No. 23 on July 26, 1996, and is hereby
incorporated by reference.
- (b) Amendment dated July 30, 1996, to Custody Agreement, dated
October 19, 1995, between Registrant and The Bank of New York was
filed as an exhibit to Post-Effective Amendment No. 27 on June 25,
1999, and is hereby incorporated by reference.
h(1) - (a) Transfer Agency and Service Agreement, dated September 16,
1994, between A I M Institutional Fund Services, Inc. and Registrant
was filed electronically as an Exhibit to Post-Effective Amendment
No. 22 on July 28, 1995.
- (b) Amendment No. 1, dated July 1, 1995, to Transfer Agency and
Service Agreement, dated September 16, 1994, between A I M
Institutional Fund Services, Inc. and Registrant was filed
electronically as an Exhibit to Post-Effective Amendment No. 22 on
July 28, 1995.
C-2
<PAGE>
(2) - (a) Transfer Agency and Service Agreement, dated December 29, 1997,
between A I M Fund Services, Inc. and Registrant, was filed
electronically as an Exhibit to Post-Effective Amendment No. 25 on May
22, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated January 1, 1999, to Transfer Agency and
Service Agreement, dated December 29, 1997, between Registrant and
A I M Fund Services, Inc. was filed as an exhibit to Post-Effective
Amendment No. 27 on June 25, 1999, and is hereby incorporated by
reference.
(c) Amendment No. 2, dated as of July 1, 1999, to Transfer Agency and
Service Agreement, dated December 29, 1997, between Registrant and
A I M Fund Services, Inc. was filed as an exhibit to Post-Effective
Amendment No. 27 on June 25, 1999, and is hereby incorporated by
reference.
(3) - Master Administrative Services Agreement, dated February 28, 1997,
between the Registrant and A I M Advisors, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 26 on November 25, 1998, and
is hereby incorporated by reference.
(4) - (a) Memorandum of Agreement entered into as of July 29, 1999, between
Registrant, on behalf of Cash Reserve Portfolio - Personal Class,
Private Investment Class, Cash Management Class, Resource Class,
Reserve Class and A I M Distributors, Inc. was filed as an exhibit to
Post-Effective Amendment No. 27 on June 25, 1999, and is hereby
incorporated by reference.
- (b) Memorandum of Agreement entered into as of July 29, 1999, between
Registrant, on behalf of Cash Reserve Portfolio - Institutional Class,
Private Investment Class, Cash Management Class, Resource Class,
Reserve Class and A I M Advisors, Inc. was filed as an exhibit to
Post-Effective Amendment No. 27 on June 25, 1999, and is hereby
incorporated by reference.
i(1) - Opinion and Consent of Messrs. Spangler, Carlson, Gubar & Frischling
was filed as an Exhibit to Registrant's Post-Effective Amendment No. 4
on August 27, 1985.
(2) - Opinion and Consent of Ballard Spahr Andrews & Ingersoll, LLP was
filed as an Exhibit to Post-Effective Amendment No. 26 on November 25,
1998, and is hereby incorporated by reference.
j(1) - Consent of Ballard Spahr Andrews & Ingersoll, LLP is filed herewith
electronically.
(2) - Consent of KPMG LLP is filed herewith electronically.
k - Financial Statements - None.
l - Agreement Concerning Initial Capitalization - None.
m(1) - Rule 12b-1 Plan on behalf of the Private Investment Class of the Cash
Reserve Portfolio and related agreements were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 21 on July 29, 1994.
(2) - Distribution Plan for Registrant on behalf of the Private Investment
Class of the Cash Reserve Portfolio was filed electronically as an
Exhibit to Post-Effective Amendment No. 23 on July 26, 1996.
(3) - (a) Amended and Restated Master Distribution Plan on behalf of the
Private Investment Class of the Cash Reserve Portfolio was filed
electronically as an Exhibit to Post-Effective Amendment No. 24 on
July 29, 1997, and is hereby incorporated by reference.
C-3
<PAGE>
- (b) Amendment No. 1, dated December 18, 1998, to Amended and Restated
Master Distribution Plan on behalf of the Cash Management Class, the
Personal Investment Class, the Reserve Class and the Resource Class of
the Cash Reserve Portfolio was filed as an exhibit to Post-Effective
Amendment No. 27 on June 25, 1999, and is hereby incorporated by
reference.
(4) - Form of Shareholder Service Agreement to be used in connection with
Registrant's Amended and Restated Master Distribution Plan, as
amended, was filed as an Exhibit to Post-Effective Amendment No. 26 on
November 25, 1998, and is hereby incorporated by reference.
n(1) - Second Amended and Restated Rule 18f-3 Plan was filed electronically as
an Exhibit to Post-Effective Amendment No. 25 on May 22, 1998.
(2) - Third Amended and Restated Multiple Class Plan (Rule 18f-3) (effective
August 5, 1999) is filed herewith electronically.
o(1) - The AIM Management Group Code of Ethics, as amended February 24, 2000
relating to A I M Management Group Inc. and A I M Advisors, Inc. is
filed herewith electronically.
Item 24. Persons Controlled By or Under Common Control With Registrant
Provide a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant. For any person controlled by
another person, disclose the percentage of voting securities owned by the
immediately controlling person or other basis of that person's control. For
each company, also provide the state or other sovereign power under the laws of
which the company is organized.
None.
Item 25. Indemnification
State the general effect of any contract, arrangement or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified against any liability incurred in their official
capacity, other than insurance provided by any director, officer, affiliated
person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and the
Registrant's Charter and By-Laws, the Registrant may indemnify any person
who was or is a director, officer or employee of the Registrant to the
maximum extent permitted by the Maryland General Corporation Law. The
specific terms of such indemnification are reflected in the Registrant's
Charter and By-Laws, which are incorporated herein as part of this
Registration Statement. No indemnification will be provided by the
Registrant to any director or officer of the Registrant for any liability
to the Registrant or shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
C-4
<PAGE>
expressed in the Investment Company Act of 1940 and is, therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Investment Company Act of 1940 and will be governed by the final
adjudication of such issue. Insurance coverage is provided under a joint
Mutual Fund & Investment Advisory Professional and Directors & Officers
Liability Policy, issued by ICI Mutual Insurance Company, with a
$35,000,000 limit of liability.
Item 26. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature that each investment advisor and each director, officer or
partner of the advisor, is or has been, engaged within the past two fiscal
years, for his/her own account or in the capacity of director, officer,
employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's directors and
officers is with the Advisor and its affiliated companies. Reference is
also made to the caption "Fund Management--The Advisor" of the Prospectus
which comprises Part A of the Registration Statement, and to the caption
"Management" of the Statement of Additional Information which comprises
Part B of the Registration Statement, and to Item 27(b) of this Part C.
Item 27. Principal Underwriters
(a) State the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the Registrant's
securities also acts as a principal underwriter, depositor, or investment
advisor.
Fund Management Company, the registrant's principal underwriter, also acts
as principal underwriter to the following investment companies:
AIM Equity Funds (Institutional Classes)
AIM Investment Securities Funds (AIM Limited Maturity Treasury Fund -
Institutional Class)
Short-Term Investments Trust
Short-Term Investments Co.
(b) Provide the information required by the following tables for each director,
officer or partner of each principal underwriter named in response to Item 20:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------------- ----------------------------------------- --------------------------------
<S> <C> <C>
Charles T. Bauer Director & Chairman Chairman & Director
</TABLE>
- -------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------------- ----------------------------------------- --------------------------------
<S> <C> <C>
J. Abbott Sprague President & Director Vice President
Robert H. Graham Senior Vice President & Director President & Director
Mark D. Santero Senior Vice President None
William J. Wendel Senior Vice President None
Carol F. Relihan Vice President, General Counsel & Secretary & Senior Vice President
Director
James R. Anderson Vice President None
Melville B. Cox Vice President & Chief Compliance Officer Vice President
Dawn M. Hawley Vice President & Treasurer None
Lisa A. Moss Vice President, Assistant Assistant Secretary
General Counsel & Assistant Secretary
Stephen I. Winer Vice President, Assistant Assistant Secretary
General Counsel & Assistant Secretary
Kathleen J. Pflueger Secretary Assistant Secretary
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
Jeffrey L. Horne Assistant Vice President None
Robert W. Morris, Jr. Assistant Vice President None
Ann M. Srubar Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Dana R. Sutton Assistant Vice President & Vice President &
Assistant Treasurer Treasurer
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Ofelia M. Mayo Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
</TABLE>
- ---------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
C-6
<PAGE>
(c) Provide the information required by the following table for all
commissions and other compensation received, directly or indirectly, from the
Registrant during the last fiscal year by each principal underwriter who is not
an affiliated person of the Registrant or any affiliated person of an affiliated
person.
None.
Item 28. Location of Accounts and Records
State the name and address of each person maintaining physical possession
of each account, book, or other document required to be maintained by section
31(a) [15 U.S.C 80a-30(a)] and the rules under that section.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, will maintain physical possession of each such account, book or other
document of the Registrant at its principal executive offices, except for
those maintained by the Registrant's Custodian, The Bank of New York, 90
Washington Street, 11th Floor, New York, New York 10286, and the
Registrant's Transfer Agent and Dividend Paying Agent, A I M Fund Services,
Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
Item 29. Management Services
Provide a summary of the substantive provisions of any management related
service contract not discussed in Part A or B, disclosing the parties to the
contract and the total amount paid and by whom for the Registrant's last three
fiscal years.
None.
Item 30. Undertakings
In initial registration statements filed under the Securities Act, provide
an undertaking to file an amendment to the registration statement with certified
financial statements showing the initial capital received before accepting
subscriptions from more than 25 persons if the Registrant intends to raise its
initial capital under section 14(a)(3) [15 U.S.C. 80a-14(a)(3)].
Not Applicable.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 24th day
of March, 2000.
REGISTRANT: TAX-FREE INVESTMENTS CO.
By: /s/ Robert H. Graham
_______________________________
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Charles T. Bauer
____________________________ Chairman & Director March 24, 2000
(Charles T. Bauer)
/s/ Robert H. Graham
____________________________ Director & President March 24, 2000
(Robert H. Graham) (Principal Executive Officer)
/s/ Bruce L. Crockett
____________________________ Director March 24, 2000
(Bruce L. Crockett)
/s/ Owen Daly II
____________________________ Director March 24, 2000
(Owen Daly II)
/s/ Edward K. Dunn, Jr.
____________________________ Director March 24, 2000
(Edward K. Dunn, Jr.)
/s/ Jack Fields
____________________________ Director March 24, 2000
(Jack Fields)
/s/ Carl Frischling
- ---------------------------- Director March 24, 2000
(Carl Frischling)
/s/ Prema Mathai-Davis
- ---------------------------- Director March 24, 2000
(Prema Mathai-Davis)
/s/ Lewis F. Pennock
- ---------------------------- Director March 24, 2000
(Lewis F. Pennock)
/s/ Louis S. Sklar
- ---------------------------- Director March 24, 2000
(Louis S. Sklar)
/s/ Dana R. Sutton
- ---------------------------- Vice President & March 24, 2000
(Dana R. Sutton) Treasurer (Principal Financial
and Accounting Officer)
8
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
a(1)(d) Articles of Amendment of Registrant, as filed with the State of
Maryland on December 16, 1998
a(1)(e) Certificate of Correction of Registrant, as filed with the State of
Maryland on December 16, 1998
a(1)(f) Articles Supplementary of Registrant, as filed with the State of
Maryland on December 9, 1999
a(1)(g) Articles Supplementary of Registrant, as filed with the State of
Maryland on December 29, 1999
b(2)(b) First Amendment to Amended and Restated Bylaws of Registrant,
adopted as of June 9, 1999
d(3) Form of Master Investment Advisory Agreement between A I M Advisors,
Inc. and Registrant
j(1) Consent of Ballard Spahr Andrews & Ingersoll, LLP
j(2) Consent of KPMG LLP
n(2) Third Amended and Restated Multiple Class Plan (Rule 18f-3) (effective
August 5, 1999)
o(1) The AIM Management Group Code of Ethics, as amended February 24, 2000,
relating to AIM Management Group Inc. and A I M Advisors, Inc.
<PAGE>
EXHIBIT a(1)(d)
TAX-FREE INVESTMENTS CO.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The charter of Tax-Free Investments Co., a Maryland corporation
(the "Corporation"), is hereby amended by changing the designation of the "Cash
Reserve Portfolio - Institutional Cash Reserve Shares" to the "Cash Reserve
Portfolio - Institutional Class".
SECOND: Immediately prior to the filing of these Articles of Amendment,
the total number of shares of stock of all classes that the Corporation had
authority to issue was Ten Billion (10,000,000,000) shares, $.001 par value per
share, having an aggregate par value of $10,000,000. The number of shares of
stock of each class and the designation of each such class were as follows:
Designation Number of Shares
Cash Reserve Portfolio - Cash Management Class 1,000,000,000
Cash Reserve Portfolio - Institutional Cash Reserve Shares 3,000,000,000
Cash Reserve Portfolio - Personal Investment Class 1,000,000,000
Cash Reserve Portfolio - Private Investment Class 1,000,000,000
Cash Reserve Portfolio - Reserve Class 1,000,000,000
Cash Reserve Portfolio - Resource Class 1,000,000,000
THIRD: As of the filing of these Articles of Amendment, the total number of
shares of stock of all classes that the Corporation has authority to issue is
Ten Billion (10,000,000,000) shares, $.001 par value per share, having an
aggregate par value of $10,000,000. The number of shares of stock of each class
and the designation of each such class are as follows:
Designation Number of Shares
Cash Reserve Portfolio - Cash Management Class 1,000,000,000
Cash Reserve Portfolio - Institutional Class 3,000,000,000
Cash Reserve Portfolio - Personal Investment Class 1,000,000,000
Cash Reserve Portfolio - Private Investment Class 1,000,000,000
Cash Reserve Portfolio - Reserve Class 1,000,000,000
Cash Reserve Portfolio - Resource Class 1,000,000,000
FOURTH: The foregoing amendment was approved by a majority of the entire
Board of Directors of the Corporation and is limited to a change expressly
permitted by Section 2-605(a)(4) of the Maryland General Corporation Law to be
made without action by the stockholders.
FIFTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SIXTH: The undersigned President acknowledges these Articles of
Amendment to be the corporate act of the Corporation and, as to all matters or
facts required to be verified under oath, the undersigned President acknowledges
that to the best of his knowledge, information and
1
<PAGE>
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be signed
in its name and on its behalf by its President and attested to by its Assistant
Secretary on this 15 day of December, 1998.
ATTEST: TAX-FREE INVESTMENTS CO.
/s/ Nancy L. Martin By: /s/ Robert H. Graham
- --------------------------- --------------------------(SEAL)
Assistant Secretary Robert H. Graham
President
2
<PAGE>
EXHIBIT a(1)(e)
TAX-FREE INVESTMENTS CO.
CERTIFICATE OF CORRECTION
THIS IS TO CERTIFY THAT:
FIRST: The title of the document being corrected hereby is Articles
Supplementary of Tax-Free Investments Co.
SECOND: The name of each party to the Articles Supplementary being
corrected hereby is Tax-Free Investments Co.
THIRD: The date that the Articles Supplementary being corrected hereby
were filed with the State Department of Assessments and Taxation of Maryland was
November 9, 1998.
FOURTH: The third clause of Article SECOND as previously filed was:
". . . , of which Three Billion (3,000,000,000) shares have been classified as
Cash Reserve Portfolio - Institutional Class, . . . "; and as hereby corrected
is as follows: ". . . , of which Three Billion (3,000,000,000) shares have been
classified as Cash Reserve Portfolio - Institutional Cash Reserve Shares, . . ."
FIFTH: The undersigned President of the Corporation acknowledges this
Certificate of Correction to be the corporate act of the Corporation and, as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Correction to be executed under seal in its name and on its behalf by its
President and attested to by its Secretary on December 15, 1998.
ATTEST: TAX-FREE INVESTMENTS CO.
/s/ Nancy L. Martin By: /s/ Robert H. Graham
- -------------------------- ------------------------------(SEAL)
Assistant Secretary Robert H. Graham
President
<PAGE>
EXHIBIT a(1)(f)
TAX-FREE INVESTMENTS CO.
ARTICLES SUPPLEMENTARY
TAX-FREE INVESTMENTS CO., a Maryland corporation (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, by resolutions duly
adopted at a meeting duly called and held on December 8, 1999, has (a) increased
the aggregate number of shares of stock that the Corporation has authority to
issue from Ten Billion (10,000,000,000) to Twenty-Five Billion One Hundred
Million (25,100,000,000) shares, (b) classified and designated such newly
authorized shares (collectively, the "Shares") as follows: One Hundred Million
(100,000,000) shares as shares of the Cash Reserve Portfolio - Cash Management
Class, Eight Billion Six Hundred Million (8,600,000,000) shares as shares of the
Cash Reserve Portfolio - Institutional Class, One Hundred Million (100,000,000)
shares as shares of the Cash Reserve Portfolio - Personal Investment Class, One
Hundred Million (100,000,000) shares as shares of the Cash Reserve Portfolio -
Private Investment Class, One Hundred Million (100,000,000) shares as shares of
the Cash Reserve Portfolio - Reserve Class, One Hundred Million (100,000,000)
shares as shares of the Cash Reserve Portfolio - Resource Class and Six Billion
(6,000,000,000) shares as unclassified, with the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of shares of stock as set
forth in ARTICLE FIFTH, paragraph (b) of the Charter of the Corporation (the
"Charter") and in any other provisions of the Charter relating to the stock of
the Corporation generally, and (c) ratified and confirmed the issuance of shares
of Common Stock of the Corporation, of each class of whatever portfolio, as
reflected in the records of the Corporation, and further declared and confirmed
that each such share, of whatever class of whatever portfolio, is duly
authorized, validly issued, fully paid and nonassessable.
SECOND: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue Ten Billion (10,000,000,000) shares,
$.001 par value per share, having an aggregate par value of $10,000,000, of
which:
(a) One Billion (1,000,000,000) shares are classified as Cash Reserve
Portfolio - Cash Management Class,
Three Billion (3,000,000,000) shares are classified as Cash Reserve
Portfolio - Institutional Class,
One Billion (1,000,000,000) shares are classified as Cash Reserve
Portfolio - Personal Investment Class,
One Billion (1,000,000,000) shares are classified as Cash Reserve
Portfolio - Private Investment Class,
One Billion (1,000,000,000) shares are classified as Cash Reserve
Portfolio - Reserve Class, and
<PAGE>
One Billion (1,000,000,000) shares are classified as Cash Reserve
Portfolio - Resource Class; and
(b) Two Billion (2,000,000,000) shares are unclassified.
THIRD: As of the filing of these Articles Supplementary, the Corporation
shall have authority to issue Twenty-Five Billion One Hundred Million
(25,100,000,000) shares, $.001 par value per share, having an aggregate par
value of $25,100,000, of which:
(a) One Billion One Hundred Million (1,100,000,000) shares are classified
as Cash Reserve Portfolio - Cash Management Class,
Eleven Billion Six Hundred Million (11,600,000,000) shares are
classified as Cash Reserve Portfolio - Institutional Class,
One Billion One Hundred Million (1,100,000,000) shares are classified
as Cash Reserve Portfolio - Personal Investment Class,
One Billion One Hundred Million (1,100,000,000) shares are classified
as Cash Reserve Portfolio - Private Investment Class,
One Billion One Hundred Million (1,100,000,000) shares are classified
as Cash Reserve Portfolio - Reserve Class, and
One Billion One Hundred Million (1,100,000,000) shares are classified
as Cash Reserve Portfolio - Resource Class; and
(b) Eight Billion (8,000,000,000) shares are unclassified.
FOURTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FIFTH: The total number of shares of capital stock that the Corporation
had authority to issue immediately prior to the filing of these Articles
Supplementary was increased and such additional shares were classified by the
Board of Directors of the Corporation in accordance with section 2-105(c) of the
Maryland General Corporation Law.
SIXTH: The Shares were classified by the Board of Directors of the
Corporation under authority granted to it in ARTICLE FIFTH, paragraph (a) of the
Charter.
The undersigned Vice President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his or
her knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
2
<PAGE>
IN WITNESS WHEREOF, TAX-FREE INVESTMENTS CO. has caused these Articles
Supplementary to be executed in its name and on its behalf by its Vice President
and witnessed by its Assistant Secretary on December 8, 1999.
TAX-FREE INVESTMENTS CO.
Witness:
/s/ KATHLEEN J. PFLUEGER /s/ MELVILLE B. COX
_____________________________ By:____________________________
Assistant Secretary Vice President
3
<PAGE>
EXHIBIT a(1)(g)
TAX-FREE INVESTMENTS CO.
ARTICLES SUPPLEMENTARY
TAX-FREE INVESTMENTS CO., a Maryland corporation (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, by resolutions duly
adopted at a meeting duly called and held on December 8, 1999, has (a) increased
the aggregate number of shares of stock that the Corporation has authority to
issue from Twenty-Five Billion One Hundred Million (25,100,000,000) to Thirty
Billion One Hundred Million (30,100,000,000) shares, (b) classified and
designated such newly authorized shares as follows: Five Billion (5,000,000,000)
shares as shares of the Cash Reserve Portfolio - Institutional Class, with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of shares of stock as set forth in ARTICLE FIFTH, paragraph (b) of
the Charter of the Corporation (the "Charter") and in any other provisions of
the Charter relating to the stock of the Corporation generally, and (c) ratified
and confirmed the issuance of shares of Common Stock of the Corporation, of each
class of whatever portfolio, as reflected in the records of the Corporation, and
further declared and confirmed that each such share, of whatever class of
whatever portfolio, is duly authorized, validly issued, fully paid and
nonassessable.
SECOND: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue Twenty-Five Billion One Hundred Million
(25,100,000,000) shares, $.001 par value per share, having an aggregate par
value of $25,100,000, of which:
(a) One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Cash Management Class,
Eleven Billion Six Hundred Million (11,600,000,000) shares are classified
as Cash Reserve Portfolio - Institutional Class,
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Personal Investment Class,
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Private Investment Class,
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Reserve Class, and
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Resource Class; and
(b) Eight Billion (8,000,000,000) shares are unclassified.
THIRD: As of the filing of these Articles Supplementary, the Corporation
shall have authority to issue Thirty Billion One Hundred Million
(30,100,000,000) shares, $.001 par value per share, having an aggregate par
value of $30,100,000, of which:
(a) One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Cash Management Class,
Sixteen Billion Six Hundred Million (16,600,000,000) shares are classified
as Cash Reserve Portfolio - Institutional Class,
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Personal Investment Class,
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Private Investment Class,
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Reserve Class, and
One Billion One Hundred Million (1,100,000,000) shares are classified as
Cash Reserve Portfolio - Resource Class; and
<PAGE>
(b) Eight Billion (8,000,000,000) shares are unclassified.
FOURTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FIFTH: The total number of shares of capital stock that the Corporation
had authority to issue immediately prior to the filing of these Articles
Supplementary was increased and such additional shares were classified by the
Board of Directors of the Corporation in accordance with section 2-105(c) of the
Maryland General Corporation Law.
SIXTH: The Shares were classified by the Board of Directors of the
Corporation under authority granted to it in ARTICLE FIFTH, paragraph (a) of the
Charter.
The undersigned Vice President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his or
her knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, TAX-FREE INVESTMENTS CO. has caused these Articles
Supplementary to be executed in its name and on its behalf by its Vice President
and witnessed by its Assistant Secretary on December 29, 1999.
TAX-FREE INVESTMENTS CO.
Witness:
/s/ Kathleen J. Pflueger By: /s/ Melville B. Cox
- ----------------------------- -------------------------------
Assistant Secretary Vice President
2
<PAGE>
EXHIBIT b(2)(b)
FIRST AMENDMENT TO AMENDED AND RESTATED
BYLAWS OF TAX-FREE INVESTMENTS CO.
(A MARYLAND CORPORATION)
ADOPTED JUNE 9, 1999
The Bylaws of Tax-Free Investments Co. are hereby amended as follows:
WHEREAS, the Board of Directors of the Fund desires to modify the manner in
which a chairman is appointed to preside at each shareholder meeting;
NOW THEREFORE BE IT RESOLVED, that paragraph (a) of Article I, Section 8 of
each Funds Bylaws be, and it hereby is, amended by deleting paragraph (a)
of Article I, Section 8 in its entirety and replacing it with the
following:
Section 8. Conduct of Stockholders Meetings.
(a) The meetings of the stockholders shall be presided over
by the Chairman of the Board, or if the Chairman shall not be present
or if there is no Chairman, by the President, or if the President
shall not be present, by a Vice President, or if no Vice President is
present, by a chairman appointed for such purpose by the Board of
Directors or, if not so appointed, by a chairman appointed for such
purpose by the officers and Directors present at the meeting. The
Secretary of the Corporation, if present, shall act as Secretary of
such meetings, or if the Secretary is not present, an Assistant
Secretary of the Corporation shall so act, and if no Assistant
Secretary is present, then a person designated by the Secretary of the
Corporation shall so act, and if the Secretary has not designated a
person, then the meeting shall elect a secretary for the meeting.
<PAGE>
EXHIBIT d(3)
TAX-FREE INVESTMENTS CO.
FORM OF MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this day of , , by and
between Tax-Free Investments Co., a Maryland corporation (the "Company") with
respect to its series of shares shown on the Schedule A attached hereto, as the
same may be amended from time to time, and A I M Advisors, Inc., a Delaware
corporation (the "Advisor").
RECITALS
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "l940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Company's charter authorizes the Board of Directors of the
Company (the "Board of Directors") to classify or reclassify authorized but
unissued shares of the Company, and as of the date of this Agreement, the Board
of Directors has created one separate series portfolio (such portfolio and any
other portfolios hereafter added to the Company being referred to collectively
herein as the "Funds"); and
WHEREAS, the Company and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Board of Directors. The Advisor shall give the
Company and the Funds the benefit of its best judgment, efforts and facilities
in rendering its services as investment advisor.
1
<PAGE>
2. Investment Analysis and Implementation. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in the
Funds' investment portfolios and regularly report thereon to the Board of
Directors;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Board of Directors; and
(e) take, on behalf of the Company and the Funds, all actions which
appear to the Company and the Funds necessary to carry into effect such
purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and
sale of securities for the Funds.
3. Securities Lending Duties and Fees. The Advisor agrees to provide the
following services in connection with the securities lending activities of each
Fund: (a) oversee participation in the securities lending program to ensure
compliance with all applicable regulatory and investment guidelines; (b) assist
the securities lending agent or principal (the "Agent") in determining which
specific securities are available for loan; (c) monitor the Agent to ensure that
securities loans are effected in accordance with the Advisor's instructions and
with procedures adopted by the Board of Directors; (d) prepare appropriate
periodic reports for, and seek appropriate approvals from, the Board of
Directors with respect to securities lending activities; (e) respond to Agent
inquiries; and (f) perform such other duties as necessary.
As compensation for such services provided by the Advisor in connection
with securities lending activities of each Fund, a lending Fund shall pay the
Advisor a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities.
4. Delegation of Responsibilities. The Advisor is authorized to delegate
any or all of its rights, duties and obligations under this Agreement to one or
more sub-advisors, and may enter into agreements with sub-advisors, and may
replace any such sub-advisors from time to time in its discretion, in accordance
2
<PAGE>
with the 1940 Act, the Advisers Act, and rules and regulations thereunder, as
such statutes, rules and regulations are amended from time to time or are
interpreted from time to time by the staff of the Securities and Exchange
Commission ("SEC"), and if applicable, exemptive orders or similar relief
granted by the SEC and upon receipt of approval of such sub-advisors by the
Board of Directors and by shareholders (unless any such approval is not required
by such statutes, rules, regulations, interpretations, orders or similar
relief).
5. Independent Contractors. The Advisor and any sub-advisors shall for all
purposes herein be deemed to be independent contractors and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Company in any way or otherwise be deemed to be an agent of the
Company.
6. Control by Board of Directors. Any investment program undertaken by the
Advisor pursuant to this Agreement, as well as any other activities undertaken
by the Advisor on behalf of the Funds, shall at all times be subject to any
directives of the Board of Directors.
7. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act and
any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Company, as
the same may be amended from time to time under the Securities Act of 1933
and the 1940 Act;
(c) the provisions of the corporate charter of the Company, as the
same may be amended from time to time;
(d) the provisions of the by-laws of the Company, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
8. Broker-Dealer Relationships. The Advisor is responsible for decisions to
buy and sell securities for the Funds, broker-dealer selection, and negotiation
of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a security
transaction will be to obtain the best execution.
(b) In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial
condition of the broker-dealer; the size of and the difficulty in executing
the order; and the value of the expected contribution of the broker-dealer
to the investment performance of the Funds on a continuing basis.
Accordingly, the price to the Funds
3
<PAGE>
in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of
the fund execution services offered.
(c) Subject to such policies as the Board of Directors may from time
to time determine, the Advisor shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely
by reason of its having caused the Funds to pay a broker or dealer that
provides brokerage and research services to the Advisor an amount of
commission for effecting a fund investment transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Advisor's overall
responsibilities with respect to a particular Fund, other Funds of the
Company, and to other clients of the Advisor as to which the Advisor
exercises investment discretion. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Funds to such brokers and
dealers who also provide research or statistical material, or other
services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocations regularly to the
Board of Directors indicating the brokers to whom such allocations have
been made and the basis therefor.
(d) With respect to one or more Funds, to the extent the Advisor does
not delegate trading responsibility to one or more sub-advisors, in making
decisions regarding broker-dealer relationships, the Advisor may take into
consideration the recommendations of any sub-advisor appointed to provide
investment research or advisory services in connection with the Funds, and
may take into consideration any research services provided to such sub-
advisor by broker-dealers.
(e) Subject to the other provisions of this Section 8, the 1940 Act,
the Securities Exchange Act of 1934, and rules and regulations thereunder,
as such statutes, rules and regulations are amended from time to time or
are interpreted from time to time by the staff of the SEC, any exemptive
orders issued by the SEC, and any other applicable provisions of law, the
Advisor may select brokers or dealers with which it or the Funds are
affiliated.
9. Compensation. The compensation that each Fund shall pay the Advisor is
set forth in Schedule B attached hereto.
10. Expenses of the Funds. All of the ordinary business expenses incurred
in the operations of the Funds and the offering of their shares shall be borne
by the Funds unless specifically provided otherwise in this Agreement. These
expenses borne by the Funds include but are not limited to brokerage commis-
4
<PAGE>
sions, taxes, legal, accounting, auditing, or governmental fees, the cost of
preparing share certificates, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to directors and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Company on behalf
of the Funds in connection with membership in investment company organizations
and the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
11. Services to Other Companies or Accounts. The Company understands that
the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and as
investment manager or advisor to other investment companies, including any
offshore entities, or accounts, and the Company has no objection to the Advisor
so acting, provided that whenever the Company and one or more other investment
companies or accounts managed or advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each company and account.
The Company recognizes that in some cases this procedure may adversely affect
the size of the positions obtainable and the prices realized for the Funds.
12. Non-Exclusivity. The Company understands that the persons employed by
the Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the Advisor
or any affiliate of the Advisor to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature. The Company
further understands and agrees that officers or directors of the Advisor may
serve as officers or directors of the Company, and that officers or directors of
the Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
13. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such Fund,
on the Effective Date for such Fund, as set forth in Schedule A attached hereto.
If so approved, this Agreement shall thereafter continue in force and effect
until June 30, 2001, and may be continued from year to year thereafter, provided
that the continuation of the Agreement is specifically approved at least
annually:
(a) (i) by the Board of Directors or (ii) by the vote of "a majority
of the outstanding voting securities" of such Fund (as defined in Section
2(a)(42) of the 1940 Act); and
5
<PAGE>
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as Company directors), by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated as to the Company or as
to any one or more of the Funds at any time, without the payment of any penalty,
by vote of the Board of Directors or by vote of a majority of the outstanding
voting securities of the applicable Fund, or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by the party entitled to receipt thereof. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
15. Amendment. No amendment of this Agreement shall be effective unless it
is in writing and signed by the party against which enforcement of the amendment
is sought.
16. Liability of Advisor and Fund. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Company or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security. Any
liability of the Advisor to one Fund shall not automatically impart liability on
the part of the Advisor to any other Fund. No Fund shall be liable for the
obligations of any other Fund.
17. Liability of Shareholders. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any of the shareholders of the Company individually but are binding
only upon the assets and property of the Company and that the shareholders shall
be entitled, to the fullest extent permitted by applicable law, to the same
limitation on personal liability as shareholders of private corporations for
profit.
18. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company and that of the Advisor shall be 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
19. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act or the Advisers Act shall be resolved by
reference to such term or provision of the 1940 Act or the Advisers Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of
6
<PAGE>
any controlling decision of any such court, by rules, regulations or orders of
the SEC issued pursuant to said Acts. In addition, where the effect of a
requirement of the 1940 Act or the Advisers Act reflected in any provision of
the Agreement is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
Subject to the foregoing, this Agreement shall be governed by and construed in
accordance with the laws (without reference to conflicts of law provisions) of
the State of Texas.
20. License Agreement. The Company shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only so
long as A I M Advisors, Inc. serves as investment manager or advisor to the
Company with respect to such series of shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
<TABLE>
<S> <C>
TAX-FREE INVESTMENTS CO.
(a Maryland corporation)
Attest:
By:
- ---------------------------------------
Assistant Secretary --------------------------------------
President
(SEAL)
Attest: A I M ADVISORS, INC.
- --------------------------------------- By:
Assistant Secretary
--------------------------------------
(SEAL) President
</TABLE>
7
<PAGE>
SCHEDULE A
FUNDS AND EFFECTIVE DATES
<TABLE>
<CAPTION>
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
- ------------ ------------------
<S> <C>
Cash Reserve Portfolio May 24, 2000
</TABLE>
8
<PAGE>
SCHEDULE B
COMPENSATION TO THE ADVISOR
The Company shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered, an advisory fee for such Fund set forth
below. Such fee shall be calculated by applying the following annual rates to
the average daily net assets of such Fund for the calendar year computed in the
manner used for the determination of the net asset value of shares of such Fund.
CASH RESERVE PORTFOLIO
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $500 million............. 0.25 %
Over $500 million.............. 0.20 %
</TABLE>
9
<PAGE>
EXHIBIT j(1)
CONSENT OF COUNSEL
TAX-FREE INVESTMENTS CO.
------------------------
We hereby consent to the use of our name and to the reference to our
firm under the caption "General Information About the Company - Legal Matters"
in the Statement of Additional Information for the Cash Reserve Portfolio, which
is included in Post-Effective Amendment No. 28 to the Registration Statement
under the Securities Act of 1933, as amended (No. 2-58286), and Amendment No. 29
to the Registration Statement under the Investment Company Act of 1940, as
amended (No. 811-2731), on Form N-1A of Tax-Free Investments Co.
/s/ Ballard Spahr Andrews & Ingersoll, LLP
-----------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
March 16, 2000
<PAGE>
EXHIBIT j(2)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
Tax-Free Investments Co.:
We consent to the use of our report on the Cash Reserve Portfolio (a Portfolio
of Tax-Free Investments Co.) dated May 7, 1999 included herein and the
references to our firm under the headings "Financial Highlights in the
Prospectuses" and "Reports" in the Statement of Additional Information.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
March 21, 2000
<PAGE>
EXHIBIT n(2)
THIRD AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS--Registered Trademark--
1. This Third Amended and Restated Multiple Class Plan (the "Plan") adopted in
accordance with Rule 18f-3 under the Act shall govern the terms and
conditions under which the Funds may issue separate Classes of Shares
representing interests in one or more Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
(a) Act - Investment Company Act of 1940, as amended.
(b) AIM Cash Reserve Shares - shall mean the AIM Cash Reserve Shares Class
of AIM Money Market Fund, a Portfolio of AIM Funds Group.
(c) CDSC - contingent deferred sales charge.
(d) CDSC Period - the period of years following acquisition of Shares
during which such Shares may be assessed a CDSC upon redemption.
(e) Class - a class of Shares of a Fund representing an interest in a
Portfolio.
(f) Class A Shares - shall mean those Shares designated as Class A Shares
in the Fund's organizing documents.
(g) Class B Shares - shall mean those Shares designated as Class B Shares
in the Fund's organizing documents.
(h) Class C Shares - shall mean those Shares designated as Class C Shares
in the Fund's organizing documents.
(i) Directors - the directors or trustees of a Fund.
(j) Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of Shares as
defined in a Plan of Distribution and/or agreements relating thereto.
(k) Distribution Fee - a fee paid by a Fund to the Distributor to
compensate the Distributor for Distribution Expenses.
(l) Distributor - A I M Distributors, Inc. or Fund Management Company, as
applicable.
(m) Fund - those investment companies advised by A I M Advisors, Inc.
which have adopted this Plan.
1
<PAGE>
(n) Institutional Shares - shall mean Shares of a Fund representing an
interest in a Portfolio offered for sale to institutional customers as
may be approved by the Directors from time to time and as set forth in
the Fund's prospectus.
(o) Plan of Distribution - Any plan adopted under Rule 12b-1 under the Act
with respect to payment of a Distribution Fee and/or Service Fee.
(p) Portfolio - a series of the Shares of a Fund constituting a separate
investment portfolio of the Fund.
(q) Service Fee - a fee paid to financial intermediaries for the ongoing
provision of personal services to Fund shareholders and/or the
maintenance of shareholder accounts.
(r) Share - a share of common stock of or beneficial interest in a Fund,
as applicable.
3. Allocation of Income and Expenses.
(a) Distribution Fees and Service Fees - Each Class shall bear directly
any and all Distribution Fees and/or Service Fees payable by such
Class pursuant to a Plan of Distribution adopted by the Fund with
respect to such Class.
(b) Transfer Agency and Shareholder Recordkeeping Fees - Each Class shall
bear directly the transfer agency fees and expenses and other
shareholder recordkeeping fees and expenses specifically attributable
to that Class; provided, however, that where two or more Classes of a
Portfolio pay such fees and/or expenses at the same rate or in the
same amount, those Classes shall bear proportionately such fees and
expenses based on the relative net assets attributable to each such
Class.
(c) Allocation of Other Expenses - Each Class shall bear proportionately
all other expenses incurred by a Fund based on the relative net assets
attributable to each such Class.
(d) Allocation of Income, Gains and Losses - Except to the extent provided
in the following sentence, each Portfolio will allocate income and
realized and unrealized capital gains and losses to a Class based on
the relative net assets of each Class. Notwithstanding the foregoing,
each Portfolio that declares dividends on a daily basis will allocate
income on the basis of settled shares.
(e) Waiver and Reimbursement of Expenses - A Portfolio's adviser,
underwriter or any other provider of services to the Portfolio may
waive or reimburse the expenses of a particular Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and servicing
arrangements identified below will apply for the following Classes offered
by a Fund with respect to a Portfolio. The provisions of the Fund's
prospectus describing the distribution and servicing arrangements in detail
are incorporated herein by this reference.
2
<PAGE>
(a) Class A Shares. Class A Shares shall be offered at net asset value
plus a front-end sales charge as approved from time to time by the
Directors and set forth in the Fund's prospectus, which sales charge
may be reduced or eliminated for certain money market fund shares, for
larger purchases, under a combined purchase privilege, under a right
of accumulation, under a letter of intent or for certain categories of
purchasers as permitted by Section 22(d) of the Act and as set forth
in the Fund's prospectus. Class A Shares that are not subject to a
front-end sales charge as a result of the foregoing shall be subject
to a CDSC for the CDSC Period set forth in Section 5(a) of this Plan
if so provided in the Fund's prospectus. The offering price of Shares
subject to a front-end sales charge shall be computed in accordance
with Rule 22c-1 and Section 22(d) of the Act and the rules and
regulations thereunder. Class A Shares shall be subject to ongoing
Service Fees and/or Distribution Fees approved from time to time by
the Directors and set forth in the Fund's prospectus.
(b) Class B Shares. Class B Shares shall be (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in Section
5(b), (iii) subject to ongoing Service Fees and Distribution Fees
approved from time to time by the Directors and set forth in the
Fund's prospectus, and (iv) converted to Class A Shares eight years
from the end of the calendar month in which the shareholder's order to
purchase was accepted, as set forth in the Fund's prospectus.
(c) Class C Shares. Class C Shares shall be (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in Section
5(c), and (iii) subject to ongoing Service Fees and Distribution Fees
approved from time to time by the Directors and set forth in the
Fund's prospectus.
(d) Institutional Shares. Institutional Shares shall be (i) offered at
net asset value, (ii) offered only to certain categories of
institutional customers as approved from time to time by the Directors
and as set forth in the Fund's prospectus and (iii) may be subject to
ongoing Service Fees and/or Distribution Fees as approved from time to
time by the Directors and set forth in the Fund's prospectus.
(e) AIM Cash Reserve Shares. AIM Cash Reserve Shares shall be (i) offered
at net asset value and (ii) subject to ongoing Service Fees and/or
Distribution Fees approved from time to time by the Directors and set
forth in the Fund's prospectus. AIM Cash Reserve Shares acquired
through exchange of Class A Shares of another Portfolio may be subject
to a CDSC for the CDSC Period set forth in Section 5(a) of this Plan
if so provided in the Fund's prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that do
not incur a front-end sales charge and of Class B Shares and Class C Shares
as follows:
(a) Class A Shares. The CDSC Period for Class A Shares shall be 18
months. The CDSC Rate shall be as set forth in the Fund's prospectus,
the relevant portions of which are incorporated herein by this
reference. No CDSC shall be imposed on Class A Shares unless so
provided in a Fund's prospectus.
3
<PAGE>
(b) Class B Shares. The CDSC Period for the Class B Shares shall be six
years. The CDSC Rate for the Class B Shares shall be as set forth in
the Fund's prospectus, the relevant portions of which are incorporated
herein by this reference.
(c) Class C Shares. The CDSC Period for the Class C Shares shall be one
year. The CDSC Rate for the Class C Shares shall be as set forth in
the Fund's prospectus, the relevant portions of which are incorporated
herein by reference.
(d) Method of Calculation. The CDSC shall be assessed on an amount equal
to the lesser of the then current market value or the cost of the
Shares being redeemed. No sales charge shall be imposed on increases
in the net asset value of the Shares being redeemed above the initial
purchase price. No CDSC shall be assessed on Shares derived from
reinvestment of dividends or capital gains distributions. The order
in which Shares are to be redeemed when not all of such Shares would
be subject to a CDSC shall be determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.
(e) Waiver. The Distributor may in its discretion waive a CDSC otherwise
due upon the redemption of Shares on terms disclosed in the Fund's
prospectus or statement of additional information and, for the Class A
Shares and AIM Cash Reserve Shares, as allowed under Rule 6c-10 under
the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between Funds
as follows:
(a) Class A Shares may be exchanged for Class A Shares of another
Portfolio or AIM Cash Reserve Shares, subject to certain limitations
set forth in the Fund's prospectus as it may be amended from time to
time, relevant portions of which are incorporated herein by this
reference.
(b) Class B Shares may be exchanged for Class B Shares of another
Portfolio at their relative net asset value.
(c) Class C Shares may be exchanged for Class C Shares of any other
Portfolio at their relative net asset value.
(d) AIM Cash Reserve Shares may be exchanged for Class A Shares, Class B
Shares or Class C Shares of another Portfolio, subject to certain
limitations set forth in the Fund's prospectus as it may be amended
from time to time, relevant portions of which are incorporated herein
by this reference.
(e) Depending upon the Portfolio from which and into which an exchange is
being made and when the shares were purchased, shares being acquired
in an exchange may be acquired at their offering price, at their net
asset value or by paying the difference in sales charges, as disclosed
in the Fund's prospectus and statement of additional information.
4
<PAGE>
(f) CDSC Computation. The CDSC payable upon redemption of Class A
Shares, Class B Shares, Class C Shares and AIM Cash Reserve Shares
subject to a CDSC shall be computed in the manner described in the
Fund's prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's prospectus,
relevant portions of which are incorporated herein by this reference. All
other terms and conditions with respect to Service Fees and Distribution
Fees shall be governed by the Plan of Distribution adopted by the Fund with
respect to such fees and Rule 12b-1 of the Act.
8. Conversion of Class B Shares.
(a) Shares Received upon Reinvestment of Dividends and Distributions -
Shares purchased through the reinvestment of dividends and
distributions paid on Shares subject to conversion shall be treated as
if held in a separate sub-account. Each time any Shares in a
Shareholder's account (other than Shares held in the sub-account)
convert to Class A Shares, a proportionate number of Shares held in
the sub-account shall also convert to Class A Shares.
(b) Conversions on Basis of Relative Net Asset Value - All conversions
shall be effected on the basis of the relative net asset values of the
two Classes without the imposition of any sales load or other charge.
(c) Amendments to Plan of Distribution for Class A Shares - If any
amendment is proposed to the Plan of Distribution under which Service
Fees and Distribution Fees are paid with respect to Class A Shares of
a Fund that would increase materially the amount to be borne by those
Class A Shares, then no Class B Shares shall convert into Class A
Shares of that Fund until the holders of Class B Shares of that Fund
have also approved the proposed amendment. If the holders of such
Class B Shares do not approve the proposed amendment, the Directors of
the Fund and the Distributor shall take such action as is necessary to
ensure that the Class voting against the amendment shall convert into
another Class identical in all material respects to Class A Shares of
the Fund as constituted prior to the amendment.
9. Effective Date. This Plan shall not take effect until a majority of the
Directors of a Fund, including a majority of the Directors who are not
interested persons of the Fund, shall find that the Plan, as proposed and
including the expense allocations, is in the best interests of each Class
individually and the Fund as a whole.
10. Amendments. This Plan may not be amended to materially change the
provisions of this Plan unless such amendment is approved in the manner
specified in Section 9 above.
5
<PAGE>
EXHIBIT o(1)
A I M MANAGEMENT GROUP INC.
CODE OF ETHICS
(ADOPTED MAY 1, 1981)
(As Last Amended February 24, 2000)
WHEREAS, the members of the AIM Management Group are A I M Management Group
Inc. ("AIM Management") and A I M Advisors, Inc. ("AIM Advisors") and its wholly
owned and indirect subsidiaries (individually and collectively referred to as
"AIM"); and
WHEREAS, certain members of AIM provide investment advisory services to AIM's
investment companies and other clients; and
WHEREAS, certain members of AIM provide distribution services as principal
underwriters for AIM's investment company clients; and
WHEREAS, certain members of AIM provide shareholder services as the transfer
agent, dividend disbursing agent and shareholder processing agent for AIM's
investment company clients; and
WHEREAS, the investment advisory business involves decisions and information
which may have at least a temporary impact on the market price of securities,
thus creating a potential for conflicts of interest between the persons engaged
in such business and their clients; and
WHEREAS, the members of AIM have a fiduciary relationship with respect to
each portfolio under management and the interests of the client accounts and of
the shareholders of AIM's investment company clients must take precedence over
the personal interests of the employees of AIM, thus requiring a rigid adherence
to the highest standards of conduct by such employees; and
WHEREAS, every practical step must be taken to ensure that no intentional or
inadvertent action is taken by an employee of AIM which is, or appears to be,
adverse to the interests of AIM or any of its client accounts, including the
defining of standards of behavior for such employees, while at the same time
avoiding unnecessary interference with the privacy or personal freedom of such
employees; and
WHEREAS, the members of AIM originally adopted a Code of Ethics ("the Code")
on May 1, 1981, and adopted amendments thereto in January 1989, October 1989,
April 1991, December 6, 1994 and December 5, 1995, December 10, 1996, and now
deem it advisable to update and revise said Code in light of new investment
company products developed by AIM and changing circumstances in the securities
markets in which AIM conducts business; and
NOW, THEREFORE, the Boards of Directors of AIM Management and AIM Advisors
hereby adopt the following revised Code pursuant to the provisions of Rule 17j-1
under the Investment Company Act of 1940 ("1940 Act"), with the intention that
certain provisions of the Code shall become applicable to the officers,
directors and employees of AIM.
I. APPLICABILITY
A. The provisions of AIM's Code shall apply to certain officers, directors
and employees (as hereinafter designated) of AIM. Unless otherwise
indicated, the term "employee" as used herein means: (i) all officers,
directors and employees of AIM Advisors and its wholly owned and indirect
subsidiaries and (ii) officers, directors and employees of AIM Management
who have an active part in the management, portfolio selection,
underwriting or shareholder
-1-
<PAGE>
functions with respect to AIM's investment company clients or provide one
or more similar services for AIM's non-investment company clients. The
term "employee" does not include directors of AIM Management who do not
maintain an office at the home office of AIM Management and who do not
regularly obtain information concerning the investment recommendations or
decisions made by AIM on behalf of client accounts ("independent
directors").
B. The Code shall also apply to any person or entity appointed as a sub-
advisor for an AIM investment company client account unless such person or
entity has adopted a code of ethics in compliance with Section 17(j) of
the 1940 Act; or, in the event that such person or entity is domiciled
outside of the United States, has adopted employee standards of conduct
that provide equivalent protections to AIM's client accounts. In
performing sub-advisory services, such person or entity will be subject to
the direction and supervision of AIM, and subject to the policies and
control of the Boards of Directors/Trustees of the respective AIM
investment company client(s).
II. INTERPRETATION AND ENFORCEMENT
A. The Chief Executive Officer of AIM Management shall appoint a Code of
Ethics Committee ("Committee"). The Committee shall have the
responsibility for interpreting the provisions of the Code, for adopting
and implementing Procedures for the enforcement of the provisions of the
Code, and for determining whether a violation of the provisions of the
Code, or of any such related Procedures has occurred. The Committee will
appoint an officer to monitor personal investment activity by "Covered
Persons" (as defined in the Procedures adopted hereunder), both before and
after any trade occurs and to prepare periodic and annual reports, conduct
education seminars and obtain employee certifications as deemed
appropriate. In the event of a finding that a violation has occurred
requiring significant remedial action, the Committee shall take such
action as it deems appropriate on the imposition of sanctions or
initiation of disgorgement proceedings. The Committee shall also make
recommendations and submit reports to the Boards of Directors/Trustees of
AIM's investment company clients.
B. If a sub-advisor has adopted a code of ethics in accordance with Section
17(j) of the 1940 Act, then pursuant to a sub-advisory agreement with AIM,
it shall be the duty of such sub-advisor to furnish AIM with a copy of the
following:
. code of ethics and related procedures of the sub-advisor, and a
statement as to its employees' compliance therewith;
. any statement or policy on insider trading adopted pursuant to Section
204A under the 1940 Act; and the procedures designed to prevent the
misuse of material non-public information by any person associated with
such sub-advisor; and
. such other information as may reasonably be necessary for AIM to report
to the Boards of Directors/Trustees of its investment company client
account(s) as to such sub-advisor's adherence to the Boards' policies
and controls referenced in Section I.B. above.
III. PROCEDURES ADOPTED UNDER THE CODE
From time to time, AIM's Committee shall adopt Procedures to carry out the
intent of the Code. Among other things, the Procedures require certain new
employees to complete an Asset Disclosure Form, a Brokerage Accounts Listing
Form and such other forms as deemed appropriate by the Committee. Such
Procedures are hereby incorporated into the Code and are made a part of the
Code. Therefore, a violation of the Procedures shall be deemed a violation
of the Code itself.
IV. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
-2-
<PAGE>
A. Each employee shall have and maintain knowledge of and shall comply
strictly with all applicable federal and state laws and all rules and
regulations of any governmental agency or self-regulatory organization
governing his/her actions as an employee.
B. Each employee shall comply with all laws and regulations, and AIM's
prohibition against insider trading. Trading on or communicating material
non-public information, or "inside information", of any sort, whether
obtained in the course of research activities, through a client
relationship or otherwise, is strictly prohibited.
C. Each employee shall comply with the procedures and guidelines established
by AIM to ensure compliance with applicable federal and state laws and
regulations of governmental agencies and self-regulatory organizations.
No employee shall knowingly participate in, assist, or condone any act in
violation of any statute or regulation governing AIM or any act that would
violate any provision of this Code, or of the Procedures adopted
hereunder.
D. Each employee shall have and maintain knowledge of and shall comply with
the provisions of this Code and any Procedures adopted hereunder.
E. Each employee having supervisory responsibility shall exercise reasonable
supervision over employees subject to his/her control, with a view to
preventing any violation by such persons of applicable statutes or
regulations, AIM's corporate procedures, or the provisions of the Code, or
the Procedures adopted hereunder.
F. Any employee obtaining evidence that an act in violation of applicable
statutes, regulations or provisions of the Code or of any Procedures
adopted hereunder has occurred shall immediately report such evidence to
the Chief Compliance Officer of AIM. Such action by the employee will
remain confidential, unless the employee waives confidentiality or federal
or state authorities compel disclosure. Failure to report such evidence
may result in disciplinary proceedings and may include sanctions as set
forth in Section VI hereof.
V. ETHICAL STANDARDS
A. Employees shall conduct themselves in a manner consistent with the highest
ethical and fiduciary standards. They shall avoid any action, whether for
personal profit or otherwise, that results in an actual or potential
conflict of interest with AIM or its client accounts, or which may be
otherwise detrimental to the interests of the members of AIM or its client
accounts.(1)
B. Employees shall act in a manner consistent with their fiduciary obligation
to clients of AIM, and shall not deprive any client account of an
investment opportunity in order to personally benefit from that
opportunity.
C. Without the knowledge and approval of the Chief Executive Officer of AIM
Management, employees shall not engage in a business activity or practice
for compensation in competition with the members of AIM. Each employee,
who is deemed to be a "Covered Person" as defined in the Procedures
adopted hereunder, shall obtain the written approval of AIM
______________________
(1) Conflicts of interest generally result from a situation in which an
individual has a personal interest in a matter that is or may be competitive
with his or her responsibilities to other persons or entities (such as AIM or
its client accounts) or where an individual has or may have competing
obligations or responsibilities to two or more persons or entities. In the case
of the relationship between a client account on the one hand, and AIM, its
officers, directors and employees, on the other hand, such conflict may result
from the purchase or sale of securities for a client account and for the
personal account of the individual involved or the account of any "affiliate" of
such individual, as such term is defined in the 1940 Act. Such conflict may also
arise from the purchase or sale for a client account of securities in which an
officer, director or employee of AIM has an economic interest. Moreover, such
conflict may arise in connection with vendor relationships in which such
employee has any direct or indirect financial interest, family interests or
other personal interest. To the extent of conflicts of interest between AIM and
a vendor, such conflicts must be resolved in a manner that is not
disadvantageous to AIM. In any such case, potential or actual conflicts must be
disclosed to AIM and the first preference and priority must be to avoid such
conflicts of interest wherever possible and, where they unavoidably occur, to
resolve them in a manner that is not disadvantageous to a client.
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Management's Chief Executive Officer to participate on a board of
directors/trustees of any of the following organizations:
. publicly traded company, partnership or trust;
. hospital or philanthropic institution;*
. local or state municipal authority;* and/or
. charitable organization.*
* These restrictions relate to organizations that have or intend to raise
proceeds in a public securities offering.
In the relatively small number of instances in which board approval is
authorized, investment personnel serving as directors shall be isolated
from those making investment decisions through AIM's "Chinese Wall"
Procedures.
D. Each employee, in making an investment recommendation or taking any
investment action, shall exercise diligence and thoroughness, and shall
have a reasonable and adequate basis for any such recommendation or
action.
E. Each employee shall not attempt to improperly influence for such person's
personal benefit any investment strategy to be followed or investment
action to be taken by the members of AIM for its client accounts.
F. Each employee shall not improperly use for such person's personal benefit
any knowledge, whether obtained through such person's relationship with
AIM or otherwise, of any investment recommendation made or to be made, or
of any investment action taken or to be taken by AIM for its client
accounts.
G. Employees shall not disclose any non-public information relating to a
client account's portfolio or transactions or to the investment
recommendations of AIM, nor shall any employee disclose any non-public
information relating to the business or operations of the members of AIM,
unless properly authorized to do so.
H. Employees shall not accept, directly or indirectly, from a broker/dealer
or other vendor who transacts business with AIM or its client accounts,
any gifts, gratuities or other things of more than de minimis value or
significance that their acceptance might reasonably be expected to
interfere with or influence the exercise of independent and objective
judgment in carrying out such person's duties or otherwise gives the
appearance of a possible impropriety. For this purpose, gifts, gratuities
and other things of value shall not include unsolicited entertainment so
long as such unsolicited entertainment is not so frequent or extensive as
to raise any question of impropriety.
I. Employees who are registered representatives and/or principals of AIM
shall not acquire securities for an account for which he/she has a direct
or indirect beneficial interest in an initial public offering ("IPO") or
on behalf of any person, entity or organization that is not an AIM client.
All other employees shall not acquire securities for an account for which
he/she has a direct or indirect beneficial interest offered in an IPO or
on behalf of any person, entity or organization that is not an AIM client
account except in those circumstances where different amounts of such
offerings are specified for different investor types (e.g., private
investors and institutional investors) and such transaction has been pre-
cleared by the Compliance Office.
J. All personal securities transactions by employees must be conducted
consistent with this Code and the Procedures adopted hereunder, and in
such a manner as to avoid any actual or potential conflicts of interest or
any abuse of such employee's position of trust and responsibility. Unless
an exemption is available, employees who are deemed to be "Covered
Persons" as defined in
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the Procedures adopted hereunder, shall pre-clear all personal securities
transactions in securities in accordance with the Procedures adopted
hereunder.
K. Each employee, who is deemed to be a "Covered Person" as defined in the
Procedures adopted hereunder, (or registered representative and/or
principal of AIM), shall refrain from engaging in personal securities
transactions in connection with a security that is not registered under
Section 12 of the Securities Act of 1933 (i.e., a private placement
security) unless such transaction has been pre-approved by the Chief
Compliance Officer or the Director of Investments (or their designees).
L. Employees, who are deemed to be "Covered Persons" as defined in the
Procedures adopted hereunder, may not engage in a transaction in
connection with the purchase or sale of a security within seven calendar
days before and after an AIM investment company client trades in that same
(or equivalent) security unless the de minimis exemption is available.
M. Each employee, who is deemed to be a "Covered Person" as defined in the
Procedures adopted hereunder, may not purchase and voluntarily sell, or
sell and voluntarily purchase the same (or equivalent) securities of the
same issuer within 60 calendar days unless such employee complies with the
disgorgement procedures adopted by the Code of Ethics Committee. Subject
to certain limited exceptions set forth in the related Procedures, any
transaction under this provision may result in disgorgement proceedings
for any profits received in connection with such transaction by such
employee.
VI. SANCTIONS
Employees violating the provisions of AIM's Code or any Procedures adopted
hereunder may be subject to sanctions, which may include, among other things,
restrictions on such person's personal securities transactions; a letter of
admonition, education or formal censure; fines, suspension, re-assignment,
demotion or termination of employment; or other significant remedial action.
Employees may also be subject to disgorgement proceedings for transactions in
securities that are inconsistent with Sections V.L. and V.M. above.
VII. ADDITIONAL DISCLOSURE
This Code and the related Procedures cannot, and do not, cover every
situation in which choices and decisions must be made, because other company
policies, practices and procedures (as well as good common sense) and good
business judgment also apply. Every person subject to this Code should read
and understand these documents thoroughly. They present important rules of
conduct and operating controls for all employees. Employees are also expected
to present questions to the attention of their supervisors and to the Chief
Compliance Officer (or designee) and to report suspected violations as
specified in these documents.
For the Boards of Directors:
The AIM Management Group
by: /s/ CHARLES T. BAUER
--------------------------------
Charles T. Bauer
February 24, 2000
--------------------------------
Date
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