<PAGE>
As filed with the Securities and Exchange Commission on July 26, 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. 30 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 31
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(Check appropriate box or boxes.)
TAX-FREE INVESTMENTS CO.
-----------------------------------
(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:
Ofelia M. Mayo, 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
X on July 28, 2000 pursuant to paragraph (b) of Rule 485
------
______ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
______ on (date) pursuant to paragraph (a)(1) of Rule 485
______ 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
JULY 28, 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
--Registered Trademark-- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
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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. The fund invests in compliance
with Rule 2a-7 under the Investment Company Act of 1940, as amended. 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>
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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
----------- --------
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 June 30, 2000 were 1.90% and 1.86%, 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
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- - - - - - - - - - - - - - - - - - - - - - -
<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
------------------------------------------------------------------
Cash Management Class -- -- -- -- 01/04/99
------------------------------------------------------------------
</TABLE>
Cash Management Class shares' seven-day yield on December 31, 1999 was 4.25%.
For the current seven-day yield, call (800) 877-7745.
2
<PAGE>
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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
------------------------------------------------------------
<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
------------------------------------------------------------
Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 0.10
Other Expenses 0.07
Total Annual Fund
Operating Expenses(1) 0.39
--------------------------------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.02% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Total Annual Fund Operating
Expenses, excluding the Rule 12b-1 distribution plan fee, interest, taxes,
director's fees, federal registration fees, extraordinary items and
increases in expenses due to expense offset arrangements (if any), to 0.20%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 0.28%.
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 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Cash Management Class $40 $125 $219 $493
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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, 2000, the advisor received compensation
of 0.13% of average daily net assets.
OTHER INFORMATION
--------------------------------------------------------------------------------
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 any
dividends 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>
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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).
This information 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
JANUARY 4, 1999
YEAR ENDED THROUGH
MARCH 31, 2000 MARCH 31, 1999
------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.03 0.01
Less distributions from net investment income (0.03) (0.01)
Net asset value, end of period $ 1.00 $ 1.00
Total return(a) 3.23% 0.64%
------------------------------------------------------------------------------
Ratios/supplemental data:
------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $6,178 $7,139
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.28%(b) 0.28%(c)
Without fee waivers and/or expense
reimbursements 0.39%(b) 0.38%(c)
Ratio of net investment income to average net
assets 3.17%(b) 3.08%(c)
------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are based on average net assets of $6,661,238.
(c) Annualized.
5
<PAGE>
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|CASH RESERVE PORTFOLIO|
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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 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)
--------------------------------------------------------------------------------
--------------------------------------
| 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
--------------------------------------------------------------------------------
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-- --Registered Trademark--
<PAGE>
CASH RESERVE PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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
JULY 28, 2000
This prospectus contains important
information about the Institutional
Class of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
There can be no assurance that the
fund will be able to maintain a
stable net asset value of $1.00 per
share.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE>
------------------------
|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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
------------------------
|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. The fund invests in compliance
with Rule 2a-7 under the Investment Company Act of 1940, as amended. 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 June 30, 2000
was 1.90%.
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 none
Other Expenses 0.07
Total Annual Fund
Operating Expenses(1) 0.29
--------------------------------------------------------------------------------
</TABLE>
(1) The investment advisor has agreed to limit Total Annual Fund Operating
Expenses, excluding interest, taxes, director's fees, federal registration
fees, extraordinary items and increases in expenses due to expense offset
arrangements (if any), to 0.20%. The expense limitation may be terminated at
any time.
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 $30 $93 $163 $368
----------------------------------------------------
</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, 2000, the advisor received compensation
of 0.13% 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 any
dividends 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).
This information 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
------------------------------------------------------------
YEAR ENDED MARCH 31,
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------
<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 0.04
Less distributions from
net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 3.32% 3.23% 3.55% 3.33% 3.67%
-------------------------------------------------------------------------------------
Ratios/supplemental data:
-------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $964,396 $1,072,597 $896,904 $966,567 $1,009,039
Ratio of expenses to
average net assets:
With fee waivers and/or
expense reimbursements 0.20%(a) 0.20% 0.20% 0.20% 0.20%
Without fee waivers
and/or expense
reimbursements 0.29%(a) 0.28% 0.27% 0.26% 0.26%
Ratio of net investment
income to average net
assets 3.25%(a) 3.16% 3.49% 3.27% 3.59%
-------------------------------------------------------------------------------------
</TABLE>
(a) Ratios are based on average net assets of $990,552,030.
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-- --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
JULY 28, 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
--Registered Trademark-- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
------------------------
| 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. The fund invests in compliance
with Rule 2a-7 under the Investment Company Act of 1940, as amended. 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 ENDED ANNUAL
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%
1990 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 had not commenced
operations.
The Institutional Class shares' year-to-date total return as of June 30, 2000
was 1.90%.
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>
Institutional Class shares' seven-day yield on December 31, 1999 was 4.33%. 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)(1) PERSONAL INVESTMENT CLASS
---------------------------------------------------------------------------
Management Fees 0.22%
Distribution and/or Service
(12b-1) Fees 0.75
Other Expenses 0.07
Total Annual Fund
Operating Expenses(2) 1.04
--------------------------------------------------------------------------------
</TABLE>
(1) The fees and expenses are based on estimated net assets for the current
fiscal period.
(2) The distributor has agreed to waive 0.25% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Total Annual Fund Operating
Expenses, excluding the Rule 12b-1 distribution plan fee, interest, taxes,
director's fees, federal registration fees, extraordinary items and
increases in expenses due to expense offset arrangements (if any), to
0.20%. The waivers and/or expense limitations may be terminated at any
time. Total Annual Fund Operating Expenses, net of these agreements, are
0.70%.
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 $106 $331
-----------------------------------------
</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, 2000, the advisor received compensation
of 0.13% 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 any
dividends 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|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered 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
JULY 28, 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
--Registered Trademark-- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
------------------------
|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. The fund invests in compliance
with Rule 2a-7 under the Investment Company Act of 1940, as amended. 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.
YEAR ENDED ANNUAL
DECEMBER 31 RETURNS
----------- -------
1993 2.07%
1994 2.48
1995 3.48
1996 3.08
1997 3.29
1998 3.08
1999 2.88
The Private Investment Class shares' year-to-date total return as of June 30,
2000 was 1.78%.
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 0.07
Total Annual Fund
Operating Expenses(1) 0.79
-----------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.25% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Total Annual Fund Operating
Expenses, excluding the Rule 12b-1 distribution plan fee, interest, taxes,
director's fees, federal registration fees, extraordinary items and
increases in expenses due to expense offset arrangements (if any), to 0.20%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 0.45%.
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 $81 $252 $439 $978
---------------------------------------------------------
</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, 2000, the advisor received compensation
of 0.13% 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 any
dividends 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).
This information 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
----------------------------------------------
YEAR ENDED MARCH 31,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<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 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 3.06% 2.98% 3.29% 3.07% 3.41%
------------------------------------------------------------------------------
Ratios/supplemental data:
------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $83,454 $90,606 $80,462 $37,544 $35,139
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 0.45%(a) 0.45% 0.45% 0.45% 0.45%
Without fee waivers and/or
expense reimbursements 0.79%(a) 0.78% 0.77% 0.83% 0.76%
Ratio of net investment
income to average net assets 3.00%(a) 2.91% 3.24% 3.02% 3.35%
------------------------------------------------------------------------------
</TABLE>
(a) Ratios are based on average net assets of $85,251,434.
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 |
-------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark-- --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
JULY 28, 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
--Registered Trademark-- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
------------------------
|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. The fund invests in compliance
with Rule 2a-7 under the Investment Company Act of 1940, as amended. 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 June 30, 2000 were 1.90% and 1.50%, 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% 04/18/93
----------------------------------------------------------------
Reserve Class -- -- -- -- 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 0.07
Total Annual Fund
Operating Expenses(1) 1.29
--------------------------------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.20% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Total Annual Fund Operating
Expenses, excluding the Rule 12b-1 distribution plan fee, interest, taxes,
director's fees, federal registration fees, extraordinary items and
increases in expenses due to expense offset arrangements (if any), to 0.20%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 1.00%.
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 5 YEARS 10 YEARS
------------------------------------------------
<S> <C> <C> <C> <C>
Reserve Class $131 $409 $708 $1,556
------------------------------------------------
</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, 2000, the advisor received compensation
of 0.13% 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 any
dividends 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).
This information 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>
RESERVE CLASS
--------------
FOR THE PERIOD
JUNE 1, 1999
THROUGH
MARCH 31, 2000
--------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.02
Less distributions from net investment income (0.02)
Net asset value, end of period $ 1.00
Total return(a) 2.10%
---------------------------------------------------------------------
Ratios/supplemental data:
---------------------------------------------------------------------
Net assets, end of period (000s omitted) $23,283
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(b)
Without fee waivers and/or expense reimbursements 1.29%(b)
Ratio of net investment income to average net assets 2.45%(b)
---------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $24,404,278.
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-- --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
JULY 28, 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
--Registered Trademark-- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
------------------------
|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. The fund invests in compliance with
Rule 2a-7 under the Investment Company Act of 1940, as amended. 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 RETURN
----------- ------
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 June 30, 2000 were 1.90% and 1.82%, 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
-------------------------------------------------------------------
Resource Class -- -- -- -- 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 0.07
Total Annual Fund
Operating Expenses(1) 0.49
--------------------------------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.04% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Total Annual Fund Operating
Expenses, excluding the Rule 12b-1 distribution plan fee, interest, taxes,
director's fees, federal registration fees, extraordinary items and
increases in expenses due to expense offset arrangements (if any), to 0.20%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 0.36%.
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 5 YEARS 10 YEARS
-------------------------------------------------
<S> <C> <C>
Resource Class $50 $157 $274 $616
-------------------------------------------------
</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, 2000, the advisor received compensation
of 0.13% 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 any
dividends 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).
This information 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>
RESOURCE CLASS
--------------
FOR THE PERIOD
APRIL 6, 1999
THROUGH
MARCH 31, 2000
--------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.03
Less distributions from net investment income (0.03)
Net asset value, end of period $ 1.00
Total return(a) 3.15%
--------------------------------------------------------------------
Ratios/supplemental data:
--------------------------------------------------------------------
Net assets, end of period (000s omitted) $3,597
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.36%(b)
Without fee waivers and/or expense reimbursements 0.49%(b)
Ratio of net investment income to average net assets 3.09%(b)
--------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $1,061,128.
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|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark-- --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 JULY 28, 2000
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF CASH RESERVE
PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED JULY 28, 2000, INSTITUTIONAL
CLASS PROSPECTUS DATED JULY 28, 2000, PERSONAL INVESTMENT CLASS PROSPECTUS
DATED JULY 28, 2000, PRIVATE INVESTMENT CLASS PROSPECTUS DATED JULY 28, 2000,
RESERVE CLASS PROSPECTUS DATED JULY 28, 2000 AND RESOURCE CLASS PROSPECTUS
DATED JULY 28, 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 July 28, 2000, the Institutional Class Prospectus dated
July 28, 2000, the Personal Investment Class Prospectus dated July 28, 2000, the
Private Investment Class Prospectus dated July 28, 2000, the Reserve Class
Prospectus dated July 28, 2000 and the Resource Class Prospectus dated July 28,
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 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 June 30, 2000, the current and effective
yields for the Private Investment Class were 4.06% and 4.14%, respectively.
For the seven-day period ended June 30, 2000 the current and effective
yields for the Institutional Class were 4.31% and 4.40%, respectively. For the
seven-day period ended June 30, 2000, the current and effective yields
for the Cash Management Class were 4.23% and 4.32%, respectively. For the
seven-day period ended June 30, 2000, the current and effective yields
for the Reserve Class were 3.51% and 3.57%, respectively. For the seven-day
period ended June 30, 2000, the current and effective yields for the
Resource Class were 4.15% and 4.24%, 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.
5
<PAGE>
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, 2000,
1999 and 1998, 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. A later
change in percentage resulting from changes in asset values will not be
considered a violation of the percentage limitations. The percentage
limitations applicable to borrowings will be applied in accordance with
applicable provisions of the 1940 Act and the rules and regulations
promulgated thereunder which specifically limit the Portfolio's borrowing
abilities.
The Portfolio 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, letters of credit, or debt securities issued or guaranteed by the U.S.
Government or any of its agencies. The Portfolio would continue to receive the
income on loaned securities and would, at the same time, earn interest on
13
<PAGE>
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.
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.
(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 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.
15
<PAGE>
(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.
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) 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. (65) 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,
434 New Jersey Avenue, S.E. Inc. (foreign trading company) and
Washington, D.C. 20003 Twenty First Century Group, Inc. (a
governmental affairs company). 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 Formerly, Chief Executive Officer, YWCA
370 East 76th Street of the U.S.A.
New York, NY 10021
--------------------------------------------------------------------------------------------------------
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. Mr. Bauer has notified the Board that he intends to retire
from his positions as an officer and director of the Portfolio effective
September 30, 2000. The Board does not presently intend to fill the vacancy
that will result from Mr. Bauer's retirement. Effective September 30, 2000,
Mr. Graham will succeed Mr. Bauer as Chairman of the Board.
** 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,
and Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
----------------------------------------------------------------------------------------
STUART W. COCO (45) 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.................. $1,380 $ 37,485 $103,500
--------------------------------------------------------------------------------
Owen Daly II....................... $1,380 $122,898 $103,500
--------------------------------------------------------------------------------
Edward K. Dunn, Jr................. $1,380 $ 55,565 $103,500
--------------------------------------------------------------------------------
Jack M. Fields..................... $1,352 $ 15,826 $101,500
--------------------------------------------------------------------------------
Carl Frischling(4)................. $1,380 $ 97,791 $103,500
--------------------------------------------------------------------------------
Robert H. Graham................... -0- -0- -0-
--------------------------------------------------------------------------------
John F. Kroeger(5)................. $ -0- $ 40,461 -0-
--------------------------------------------------------------------------------
Prema Mathai-Davis................. $1,353 $ 11,870 $101,500
--------------------------------------------------------------------------------
Lewis F. Pennock................... $1,380 $ 45,766 $103,500
--------------------------------------------------------------------------------
Ian W. Robinson(6)................. $ -0- $ 94,442 $ 25,000
--------------------------------------------------------------------------------
Louis S. Sklar..................... $1,353 $ 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, 2000, including earnings thereon,
was $12,729.
(2) During the fiscal year ended March 31, 2000, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$6,107. Data reflects compensation for the calendar year ended December
31, 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, 2000, the Company paid $5,756 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. Of the amount listed
above, $0 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, 11
and 2 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, 2000, $12,545 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 who are registered with the NASD 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
June 1, 2000 (the "Advisory Agreement") with AIM. A prior investment advisory
agreement with similar terms to the Advisory Agreement was in effect prior to
June 1, 2000. The Advisory Agreement will remain in effect until June 30,
2001, and continue from year to year only if such continuance is specifically
approved at least annually by the 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 the
advisory agreement in effect prior to June 1, 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, 2000, 1999 and 1998, the fees paid by the
Company to AIM with respect to the Portfolio were $1,505,580, $1,646,048 and
$1,670,427, respectively (after giving effect to fee waivers for the fiscal
years ended March 31, 2000, 1999 and 1998 of $952,116, $809,773 and $683,910,
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 voluntarily undertaken to limit Institutional Class expenses,
excluding interest, taxes, director's fees, federal registration fees,
extraordinary items and indirect expenses resulting from expense offset
arrangements (if any), to 0.20% of the average daily net assets. AIM has
voluntarily undertaken to limit Cash Management Class, Personal Investment
Class, Private Investment Class, Reserve Class and Resource Class expenses,
excluding the Rule 12b-1 distribution plan fee, interest, taxes, director's
fees, federal registration fees, extraordinary items and indirect expenses
resulting from expense offset arrangements (if any), to 0.20% of the average
daily net assets.
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 agreement in effect prior to June 1,
2000, AIM received reimbursements for the fiscal years ended March 31, 2000,
1999 and 1998 in the amounts of $142,533, $86,020 and $66,515, 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 0.0125% 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--Registered Trademark--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 July 3, 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. ................ 58.79% -0-
P.O. Box 33022
St. Petersburg, FL 33733-8022
EVEREN CLEARING CORP. ......................... 25.41% -0-
111 East Kilbourn Ave.
Milwaukee, WI 53202
MCDONALD & COMPANY............................. 12.19% -0-
800 Superior Avenue, Suite 2100
Cleveland, OH 44114-2603
<CAPTION>
INSTITUTIONAL CLASS
-------------------
<S> <C> <C>
BANK OF AMERICA, N.A. ......................... 22.30% -0-
1401 Elm Street, 11th Floor
P.O. Box 831000
Dallas, TX 75202-2911
FROST NATIONAL BANK TX ........................ 13.52% -0-
Muir & Co.
c/o Frost
P.O. Box 2479
San Antonio, TX 78298-2479
CHASE BANK OF TEXAS FBO OBIE & CO. ............ 11.23% -0-
18 HCB 340
P.O. Box 2558
Houston, TX 77252-2558
TRUST COMPANY BANK ............................ 8.07% -0-
Center 3139
P.O. Box 105504
Atlanta, GA 30348
MID ATLANTIC INSTITUTIONAL SHARES, INC. ....... 6.25% -0-
336 Fourth Ave.
Pittsburgh, PA 15222
FIRST TRUST/VAR & CO. ......................... 5.82% -0-
180 East Fifth Street
St. Paul, MN 55101
</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................... 38.36% -0-
P.O. Box 2358
San Antonio, TX 78299
THE BANK OF NEW YORK............................ 15.38% -0-
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
ANDERSON TAX FREE ACCOUNTS...................... 12.42% -0-
330 Spring Creek Road
Rockford, IL 61107-1035
NEW HAVEN SAVINGS BANK TRUST DEPARTMENT......... 8.35% -0-
Trust Department
P.O. Box 302
New Haven, CT 06502
BANK ONE TRUST COMPANY.......................... 7.06% -0-
1111 Polaris Parkway
Columbus, OH 43240
HAMBRECHT & QUIST LLC........................... 5.72% -0-
1100 Newport Center Drive, Second Floor
Newport Beach, CA 92660
<CAPTION>
RESERVE CLASS
-------------
<S> <C> <C>
THE BANK OF NEW YORK............................ 100% -0-
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
<CAPTION>
RESOURCE CLASS
--------------
<S> <C> <C>
HAMBRECHT & QUIST LLC........................... 52.80% -0-
1100 Newport Center Drive, Second Floor
Newport Beach, CA 92660
MCDONALD & COMPANY.............................. 33.00% -0-
800 Superior Avenue, Suite 2100
Cleveland, OH 44114-2603
EVEREN CLEARING CORP. .......................... 13.29% -0-
111 East Kilbourn Ave.
Milwaukee, WI 53202
</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 July 3, 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, Private Investment Class,
Reserve Class and Resource Class the amount paid to dealers and financial
institutions pursuant to the Plan for the fiscal year ended March 31, 2000 was
$5,329, $213,129, $162,695 and $1,674, respectively, (or an amount equal to
0.25%, 0.08%, 0.80% and 0.16% of the average daily net assets of Cash
Management Class and Private Investment Class, respectively). With respect to
the Cash Management Class and Private Investment Class, FMC received $127,273 as
compensation pursuant to the Plan for the fiscal year ended March 31, 2000.
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 July
28, 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>
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, 2000, 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 or periods in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of March 31, 2000, 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, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
or periods in the five-year period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
May 1, 2000
Houston, Texas
FS-1
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS -
100.98%
ALABAMA - 1.49%
Alabama (State of) Water Pollution
Control Authority;
Refunding Series 1997 RB
4.50%, 08/15/00(b) AAA Aaa $ 2,340 $ 2,343,962
-----------------------------------------------------------------------------
Birmingham (City of) (YMCA-Birmingham);
Public Park and Recreation Board VRD
Series 1996 RB (LOC-Amsouth Bank of
Alabama)
4.00%, 06/01/16(c) -- VMIG-1 2,945 2,945,000
-----------------------------------------------------------------------------
Mobile (County of) Alabama Board School
of Commissioners; Capital Outlay Series
1996 Wts.
4.75%, 03/01/01(b) AAA Aaa 3,000 3,013,280
-----------------------------------------------------------------------------
Morgan Stanley Float Program, Jefferson
(County of) Sewer Improvement; Floating
Rate Trust Certificates VRD
Series 124 1999 Wts. RB
3.98%, 07/01/08(b)(c)(d) A-1c -- 1,400 1,400,000
-----------------------------------------------------------------------------
Northern Alabama Environmental
Improvement Authority (Reynolds Metals
Co.); VRD Series 1985 PCR (LOC-Bank of
Nova Scotia)
4.10%, 12/01/00(c) -- P-1 6,400 6,400,000
-----------------------------------------------------------------------------
16,102,242
-----------------------------------------------------------------------------
ALASKA - 0.46%
Valdez Marine (BP Pipelines Inc.
Project); Floating Rate Treasury VRD
Series 1999 A28 Reg D Term RB
4.05%, 12/01/25(c)(d) -- VMIG-1 5,000 5,000,000
-----------------------------------------------------------------------------
ARIZONA - 1.17%
Mesa Industrial Development Authority
(Discovery Health Systems); VRD Series
1999 B RB
3.85%, 01/01/29(b)(c) A-1+ VMIG-1 2,700 2,700,000
-----------------------------------------------------------------------------
Pima (County of) Arizona Industrial
Authority (Tuscon Electric Power Co.);
Floating Monthly VRD Series 1982 RB
3.90%, 12/01/22(c) A-1+ VMIG-1 10,000 10,000,000
-----------------------------------------------------------------------------
12,700,000
-----------------------------------------------------------------------------
CALIFORNIA - 0.28%
Huntington Beach (City of) (Seabridge
Villas Project); Floating Rate
Multifamily Housing VRD Series 1985 A
RB (LOC-Bank of America)
4.00%, 02/01/10(c) -- VMIG-1 3,000 3,000,000
-----------------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
COLORADO - 3.19%
Colorado (State of) Health Facilities
Authority (Catholic Health
Initiatives); VRD Series 2000 B RB
4.05%, 12/01/20(c) A-1 VMIG-1 $10,000 $ 10,000,000
-----------------------------------------------------------------------------
Eagle Ranch Metro District Golf Course;
VRD Series 1999 B RB
(LOC-Societe Generale)
3.95%, 10/15/18(c) A-1+ -- 3,900 3,900,000
-----------------------------------------------------------------------------
Moffat (County of) (National Rural
Utility Cooperative); VRD
Series 1984 PCR
3.95%, 07/01/10(c) A-1+ VMIG-1 14,700 14,700,000
-----------------------------------------------------------------------------
Pitkin (County of) Industrial
Development (Aspen Skiing Co. Project);
Refunding VRD Series 1994 A IDR (LOC-
First National Bank)
4.00%, 04/01/16(c) A-1+ -- 5,890 5,890,000
-----------------------------------------------------------------------------
34,490,000
-----------------------------------------------------------------------------
CONNECTICUT - 0.78%
Connecticut (State of) Development
Authority (Corporation for Independent
Living Project); Health Care VRD Series
1990 RB (LOC-Chase Manhattan Bank)
3.75%, 07/01/15(c) -- VMIG-1 3,334 3,334,000
-----------------------------------------------------------------------------
Connecticut (State of) (Transportation
Infrastructure Purpose S-1); Special
Tax Obligation VRD Series RB
3.85%, 12/01/10(c) A-1+ VMIG-1 2,595 2,595,000
-----------------------------------------------------------------------------
Connecticut (State of) Special Tax
Obligation (JP Morgan PUTTERS ); VRD
Series 114 1999 A RB
3.81%, 10/01/09(b)(c)(d) -- VMIG-1 2,464 2,464,000
-----------------------------------------------------------------------------
8,393,000
-----------------------------------------------------------------------------
DELAWARE - 1.05%
University of Delaware; VRD Series 1998
RB
3.90%, 11/01/23(c) A-1+ -- 9,500 9,500,000
-----------------------------------------------------------------------------
Wilmington (City of); Unlimited Tax
Series 1990 GO
6.75%, 05/15/00(b)(f) AAA Aaa 1,815 1,858,680
-----------------------------------------------------------------------------
11,358,680
-----------------------------------------------------------------------------
FLORIDA - 7.18%
Capital Trust Agency (Reliance Community
Revitalization Project); Multifamily
Housing VRD Series RB
4.00%, 12/01/32(b)(c) A-1+ -- 51,631 51,631,000
-----------------------------------------------------------------------------
Gulf Breeze (City of) Healthcare
Facilities (Heritage Health Care
Project); VRD Series 1999 RB
4.00%, 01/01/24(b)(c) -- VMIG-1 7,000 7,000,000
-----------------------------------------------------------------------------
Jacksonville (City of) Capital Project;
VRD Series 1999 2 RB
3.95%, 10/01/22(b)(c) A-1 -- 10,950 10,950,000
-----------------------------------------------------------------------------
Palm Beach (County of) (Jewish Community
Campus Project); VRD Series 2000 RB
(LOC-Northern Trust Co.)
3.90%, 03/01/30(c) A-1+ -- 4,000 4,000,000
-----------------------------------------------------------------------------
Seminole (County of) Florida School
District; Series 1999 TAN
4.00%, 07/28/00 -- MIG-1 4,000 4,001,054
-----------------------------------------------------------------------------
77,582,054
-----------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA - 3.79%
Cobb (County of) Development Authority
(Institute of Nuclear Power Operations);
VRD Series 1998 IDR (LOC-Suntrust Bank)
3.95%, 02/01/13(c) -- Aa3 $ 4,970 $ 4,970,000
-------------------------------------------------------------------------------
Cobb (County of) Georgia School District;
Ltd. Tax Series 2000 GO
4.38%, 12/29/00 -- MIG-1 5,000 5,014,606
-------------------------------------------------------------------------------
Cobb (County of) Kennestone Hospital
Authority (Equipment Pool Project);
Anticipation Certificates
VRD Series 1999 RB
4.00%, 04/01/26(b)(c) A-1+ VMIG-1 15,000 15,000,000
-------------------------------------------------------------------------------
Decatur County Bainbridge Industrial
Development Authority
(Kaiser Agriculture Chemical Inc.
Project); VRD Series 1985 IDR (LOC-
Harris Trust & Savings Bank)
3.90%, 12/01/02(c)(e) -- -- 2,100 2,100,000
-------------------------------------------------------------------------------
Dekalb (County of) Private Hospital
Authority (Egleston Childrens Hospital
at Emory University); VRD Series 1994 A
RAN (LOC-Suntrust Bank)
3.85%, 03/01/24(c) A-1+ VMIG-1 2,371 2,371,000
-------------------------------------------------------------------------------
Floyd (County of) Development Authority
(Shorter College Project); VRD Series
1998 RB (LOC-Suntrust Bank)
4.00%, 06/01/17(c) A-1+ -- 4,000 4,000,000
-------------------------------------------------------------------------------
Fulton (County of) Georgia Development
Authority Educational Facilities
(Friends of High Meadows Project); VRD
Series 2000 RB
3.95%, 01/01/20(c) A-1+ -- 4,000 4,000,000
-------------------------------------------------------------------------------
Gwinnett (County of) Housing Authority
(Post Chase Project); Multifamily
Housing VRD Series 1997 RB
3.90%, 06/01/25(c) A-1+ -- 3,500 3,500,000
-------------------------------------------------------------------------------
40,955,606
-------------------------------------------------------------------------------
IDAHO - 0.28%
Idaho (State of); Unlimited Tax Series
1999 TAN
4.25%, 06/30/00 SP-1+ MIG-1 3,000 3,006,058
-------------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS - 13.64%
Bear Stearns Municipal Securities Trust
Certificates (Illinois Sales Tax); Class
A VRD Series 1998-25 RB
3.98%, 03/15/07(c)(d) A-1 -- $10,000 $ 10,000,000
-------------------------------------------------------------------------------
Bear Stearns Municipal Securities Trust
Certificates (Illinois State Toll Highway
Authority); Class A VRD Series 1998-67 RB
3.98%, 02/15/12(b)(c)(d) A-1 -- 11,700 11,700,000
-------------------------------------------------------------------------------
Chicago (City of), Ltd. Tax Notes Series
1999 GO (LOC-Westdeutsche Landesbank
Girozentrale)
4.00%, 01/26/01 A-1+ VMIG-1 10,000 10,000,000
-------------------------------------------------------------------------------
East Peoria (City of) (Radnor/East Peoria
Partnership Project); Multifamily Housing
VRD Series 1983 RB
(LOC-Bank of Nova Scotia)
4.15%, 06/01/08(c) -- Aa3 5,085 5,085,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(American College of Surgeons Project);
Tax Exempt VRD Series 1996 RB
(LOC-Northern Trust Co.)
3.95%, 08/01/26(c) A-1+ -- 7,917 7,917,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Chicago Commons Association Project);
VRD Series 1999 RB (LOC-Bank of America)
4.00%, 01/01/29(c) A-1+ -- 5,500 5,500,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Jewish Charities Program); VRD Series
2000 B (LOC-Harris Trust & Savings Bank)
4.00%, 06/30/00(c) A-1+ -- 6,990 6,990,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Local Government Financing Program); VRD
Series 1999 A RB
4.00%, 09/01/29(b)(c) -- VMIG-1 10,000 10,000,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Metropolitan Family Services); VRD
Series 1999 RB (LOC-Bank of America)
4.00%, 01/01/29(c) A-1+ -- 9,700 9,700,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(The Uno-Ven Co. Project); Refunding VRD
Series 1994 PCR
3.95%, 09/01/08(c) A-1 P-1 6,900 6,900,000
-------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(The Adler Planetarium);
VRD Series 1997 RB (LOC-Bank of America)
3.90%, 04/01/31(c) A-1+ -- 4,400 4,400,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Blessing Hospital); VRD Series 1999 B RB
4.00%, 11/15/29(b)(c) A-1 VMIG-1 17,000 17,000,000
-------------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Illinois - (continued)
Illinois Health Facilities Authority
(Northwestern Memorial Hospital); VRD
Series 1995 RB
4.00%, 08/15/25(c) A-1+ VMIG-1 $ 2,400 $ 2,400,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Proctor Hospital Project); VRD Series
1996 RB
3.95%, 01/01/12(c) A-1 -- 3,200 3,200,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Resurrection Health Care);
VRD Series 1999 B RB
3.95%, 05/15/29(c) A-1+ VMIG-1 13,615 13,615,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority;
Revolving Fund Pooled VRD Series 1985 D
RB (LOC-Bank One Illinois N.A.)
3.90%, 08/01/15(c) A-1 VMIG-1 4,200 4,200,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Swedish Covenant Hospital); Refunding
VRD Series 1998 A RB
3.85%, 08/15/27(c) A-1 VMIG-1 2,100 2,100,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority (The
University of Chicago Hospitals); VRD
Series 1998 RB
4.00%, 08/01/26(c) A-1 VMIG-1 7,795 7,795,000
-------------------------------------------------------------------------------
Illinois (State of) Regional
Transportation Authority (Cook Dupage
Lake Co.); Refunding Unlimited Tax
Series 1999 GO
5.00%, 06/01/00(b) AAA Aaa 4,990 5,000,891
-------------------------------------------------------------------------------
University of Illinois; MERLOTS VRD
Series 2000 S RB
4.05%, 04/01/30(b)(c)(d) -- VMIG-1 3,900 3,900,000
-------------------------------------------------------------------------------
147,402,891
-------------------------------------------------------------------------------
INDIANA - 3.60%
Auburn (City of) (Sealed Power Corp.
Project); Economic Development VRD
Series 1985 RB (LOC-NBD Bank)
3.90%, 07/01/10(c) -- VMIG-1 1,200 1,200,000
-------------------------------------------------------------------------------
Indiana Health Facility Financing
Authority (Ascension Health Credit); VRD
Series 1999 B RB
3.90%, 11/15/39(c) A-1+ VMIG-1 13,200 13,200,000
-------------------------------------------------------------------------------
Indiana State Development Finance
Authority (USX Corp. Project); Refunding
Environmental Improvement Series 1998 RB
(LOC-Scotia Bank)
4.05%, 10/05/00(f) A-1 VMIG-1 5,000 5,000,000
-------------------------------------------------------------------------------
Indiana (State of); Bond Bank Notes
4.75%, Series 2000 A-1 07/26/00 SP-1+ MIG-1 6,000 6,016,016
-------------------------------------------------------------------------------
4.75%, Series 2000 A-2 01/18/01 SP-1+ MIG-1 10,000 10,046,123
-------------------------------------------------------------------------------
Indianapolis (City of); Local Public
Improvement Bond Bank Notes Series 1999
G
4.50%, 07/10/00 SP-1+ -- 3,450 3,455,533
-------------------------------------------------------------------------------
38,917,672
-------------------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
IOWA - 0.65%
Iowa School Corporation (Iowa School Cash
Anticipation Program);
Warrant Certificates
4.00%, Series 1999 A 06/23/00(b) SP-1+ MIG-1 $ 2,000 $ 2,003,379
-------------------------------------------------------------------------------
4.75%, Series 2000 02/01/01(b) SP-1+ MIG-1 5,000 5,028,092
-------------------------------------------------------------------------------
7,031,471
-------------------------------------------------------------------------------
KANSAS - 0.15%
Olathe (City of); Unlimited Tax Series
194 1999 GO
3.75%, 04/01/00(b) AAA Aaa 1,660 1,660,048
-------------------------------------------------------------------------------
KENTUCKY - 1.30%
Kentucky Interlocal School Transportation
Association; Series 1999 TRAN
4.00%, 06/30/00 SP-1+ MIG-1 14,000 14,015,482
-------------------------------------------------------------------------------
LOUISIANA - 0.65%
Louisiana Public Facilities Authority
(Christus Health); Series 1999 B
Commercial Paper Notes
3.65%, 04/06/00(b) A-1 VMIG-1 7,000 7,000,000
-------------------------------------------------------------------------------
MARYLAND - 2.36%
Anne Arundel (County of) Maryland; GO
Commercial Paper Notes
4.05%, 07/07/00 A-1+ P-1 8,000 8,000,000
-------------------------------------------------------------------------------
Maryland Health & Higher Educational
Facilities Authority Pooled Loan
Program; VRD Series 1994 D
(LOC-Bank of America NA)
3.95%, 01/01/29(c) A-1+ -- 9,255 9,255,000
-------------------------------------------------------------------------------
Morgan Stanley Float Program, Washington
Suburban Sanitary District; Floating
Rate Trust Certificates Unlimited Tax
VRD Series 246 GO
4.01%, 06/01/09(c)(d) -- VMIG-1 8,305 8,305,000
-------------------------------------------------------------------------------
25,560,000
-------------------------------------------------------------------------------
MASSACHUSETTS - 0.23%
Worcester Massachusetts Municipal Purpose
Loan; Ltd. Tax Series 1998 B GO
4.50%, 11/01/00(b) AAA Aaa 2,510 2,517,043
-------------------------------------------------------------------------------
MICHIGAN - 5.22%
Bear Stearns Municipal Securities Trust
Certificates, Detroit (City of) Sewage
Disposal Systems; VRD Series 1999-81
Class A RB
3.98%, 10/01/02(b)(c)(d)(f) A-1 -- 15,000 15,000,000
-------------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Michigan - (continued)
Dearborn Michigan Economic Development
(Henry Ford Village Inc.); Ltd. Tax
Obligation VRD Series 1998 RB
(LOC-Comerica Bank)
3.95%, 10/01/23(c)(e) -- -- $10,000 $ 10,000,000
-----------------------------------------------------------------------------
Detroit (City of) Water Supply System;
Sr. Lien MERLOTS VRD Series 2000 D
4.05%, 07/01/29(b)(c)(d) -- VMIG-1 10,000 10,000,000
-----------------------------------------------------------------------------
Jackson County Economic Development
Corp. (Sealed Power Corp.); Economic
Development Refunding VRD
Series 1984 RB (LOC-NBD Bank)
3.90%, 10/01/19(c) -- VMIG-1 1,000 1,000,000
-----------------------------------------------------------------------------
Michigan (State of); Municipal Bond
Authority Series 1999 B-1 RB
4.25%, 08/25/00 SP-1+ -- 2,000 2,005,000
-----------------------------------------------------------------------------
Michigan Strategic Fund (260 Brown St.
Associates Project); Convertible VRD
Ltd. Obligation Series 1985 RB
(LOC-Comerica Bank)
3.80%, 10/01/15(c) -- VMIG-1 3,400 3,400,000
-----------------------------------------------------------------------------
Morgan Stanley Float Program, Michigan
State Hospital Finance Authority
(Ascension Health); Floating Rate
Trust Certificates VRD Series 98-180
4.01%, 11/15/06(c)(d) A-1+c -- 15,000 15,000,000
-----------------------------------------------------------------------------
56,405,000
-----------------------------------------------------------------------------
MINNESOTA - 2.02%
Metropolitan Council (Minneapolis-St.
Paul Metro Area Transit); Unlimited
Tax Series 2000 A GO
5.00%, 02/01/01 AAA Aaa 2,250 2,263,879
-----------------------------------------------------------------------------
Rochester Health Care Facility;
Commercial Paper Notes
3.90%, 05/04/00 A-1+ -- 9,600 9,600,000
-----------------------------------------------------------------------------
Rochester Health Care Facility (Mayo
Foundation); Series 2000 C Commercial
Paper Notes
3.70%, 05/25/00 A-1+ -- 10,000 10,000,000
-----------------------------------------------------------------------------
21,863,879
-----------------------------------------------------------------------------
MISSISSIPPI - 1.11%
Mississippi (State of) Hospital
Equipment & Facility Authority;
Commercial Paper Notes (North
Mississippi Health Services Series);
3.90%, 05/16/00 A-1+ VMIG-1 12,000 12,000,000
-----------------------------------------------------------------------------
MISSOURI - 1.74%
Bear Stearns Municipal Securities Trust
Certificates, Health & Educational
Facilities of Missouri; 1998-41 Class
A VRDN Series (SSM Healthcare)
3.98%, 08/01/05(b)(c)(d) A-1+c -- 13,835 13,835,000
-----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (Washington
University); VRD Series 2000 C RB
4.00%, 03/01/40(c) A-1+ VMIG-1 5,000 5,000,000
-----------------------------------------------------------------------------
18,835,000
-----------------------------------------------------------------------------
</TABLE>
FS-8
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW MEXICO - 0.93%
New Mexico (State of); Series 1999 TRAN
4.00%, 06/30/00 SP-1+ MIG-1 $10,000 $ 10,018,321
--------------------------------------------------------------------------------
NEW YORK - 9.85%
Eagle Tax Exempt Trust; Class A COP(d)
3.96%, VRD Series 1993 E 08/01/06(c) A-1+c -- 15,000 15,000,000
--------------------------------------------------------------------------------
3.96%, VRD Series 1993 F 08/01/06(c) A-1+c -- 20,850 20,850,000
--------------------------------------------------------------------------------
3.96%, VRD Series 943901 06/15/07(b)(c) A-1+c -- 15,175 15,175,000
--------------------------------------------------------------------------------
3.96%, VRD Series 97C4702 01/01/20(c) A-1+c -- 9,900 9,900,000
--------------------------------------------------------------------------------
3.96%, VRD Series 964703
07/01/11(b)(c)(g) A-1+c -- 5,870 5,870,000
--------------------------------------------------------------------------------
3.96%, VRD Series 97C4703 01/01/01(c)(g) A-1+c -- 11,295 11,295,000
--------------------------------------------------------------------------------
Eagle Tax Exempt Trust (Houston Water and
Sewer);
VRD Series 974305 Class A
3.96%, 12/01/27(b)(c)(d) A-1+c AAA 14,005 14,005,000
--------------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington State);
VRD Series 984701
Class A
3.96%, 05/01/18(c)(d) A-1+c -- 14,400 14,400,000
--------------------------------------------------------------------------------
106,495,000
--------------------------------------------------------------------------------
NORTH CAROLINA - 2.32%
Beaufort (County of) Industrial Facilities
& Pollution Control Financing Authority
(Texas Gulf Inc.); Series 1982 PCR
(LOC-UBS AG)
4.30%, 09/01/00(f) AA+ Aa1 5,000 5,000,000
--------------------------------------------------------------------------------
Mecklenburg (County of) (The YMCA); Lease
VRD Series 1996 RB (LOC-Wachovia Bank of
North Carolina)
4.00%, 02/01/16(c) A-1+ -- 4,900 4,900,000
--------------------------------------------------------------------------------
North Carolina Medical Care Community
Hospital (ACES Pooled Financing Project);
VRD Series 1985 RB
3.85%, 12/01/25 (b)(c) A-1 VMIG-1 15,150 15,150,000
--------------------------------------------------------------------------------
25,050,000
--------------------------------------------------------------------------------
OHIO - 0.19%
Marion (County of) (Pooled Lease Program);
Hospital Improvement VRD Series 1992 RB
(LOC-Bank One Akron NA)
3.97%, 10/01/22(c) A-1 -- 1,165 1,165,000
--------------------------------------------------------------------------------
Ohio Housing Financing Agency (Kenwood
Congregate Retirement Community Project);
Multifamily Housing VRD Series 1985 RB
(LOC-Morgan Guaranty Trust)
3.95%, 12/01/15(c) -- VMIG-1 856 856,000
--------------------------------------------------------------------------------
2,021,000
--------------------------------------------------------------------------------
OKLAHOMA - 2.90%
Oklahoma Development Financing Authority
(Oklahoma Hospital Association); VRD
Series 1999 A RB
4.00%, 06/01/29(b)(c) A-1+ -- 20,000 20,000,000
--------------------------------------------------------------------------------
</TABLE>
FS-9
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Oklahoma - (continued)
Oklahoma (State of) Water Reserve Board
(State Loan Program);
4.10%, VRD Series 1999 RB
09/01/00(b)(c)(f) A-1+c -- $ 4,000 $ 4,000,000
-------------------------------------------------------------------------------
4.05%, VRD Series 1995 RB
09/01/24(b)(c)(f) A-1+ -- 7,370 7,370,000
-------------------------------------------------------------------------------
31,370,000
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
PENNSYLVANIA - 6.09%
Allegheny (County of); Refunding
Unlimited Tax VRD Series 2000
C-50 GO
3.65%, 05/01/27(b)(c) A-1+c VMIG-1 35,045 35,045,000
-------------------------------------------------------------------------------
Bucks (County of) Industrial Development
Authority (Christian Life Center
Project); VRD Series 1999 RB
(LOC-First Union National Bank)
3.95%, 09/01/19(c)(e) -- -- 3,535 3,535,000
-------------------------------------------------------------------------------
Delaware County Industrial Development
Authority (Henderson-Radnor Joint
Venture Project); Ltd. Obligation VRD
Series 1985 IDR
(LOC-First Union National Bank)
4.15%, 04/01/15(c) -- Aa3 720 720,000
-------------------------------------------------------------------------------
Emmaus General Authority (State Loan
Program); VRD Series 2000 A RB
4.00%, 03/01/30(b)(c) A-1 -- 5,000 5,000,000
-------------------------------------------------------------------------------
Franklin (County of) Industrial
Development Authority (Chambersburg
Hospital); Health Care VRD
Series 2000 RB
3.96%, 12/01/24(b)(c) A-1 Aaa 5,500 5,500,000
-------------------------------------------------------------------------------
Lancaster (County of) Hospital Authority
(Bretheren Village Health Center); VRD
Series 2000 RB (LOC-Suntrust Bank)
3.94%, 06/15/20(c) A-1+ -- 7,825 7,825,000
-------------------------------------------------------------------------------
Lancaster (County of); Unlimited Tax VRD
Series 2000 GO
3.94%, 05/01/30(b)(c) A-1+ Aaa 3,700 3,700,000
-------------------------------------------------------------------------------
York (City of) General Authority; Pooled
Financing VRD Series 1996 RB
(LOC-First Union National Bank)
3.95%, 09/01/26(c) A-1 -- 4,481 4,481,000
-------------------------------------------------------------------------------
65,806,000
-------------------------------------------------------------------------------
SOUTH CAROLINA - 2.47%
South Carolina (State of) Jobs Economic
Development Authority (The Methodist
Home Project); Health Facilities VRD
Series 1994 RB (LOC-Bank of America NA)
4.05%, 12/01/14(c) A-1+ -- 5,200 5,200,000
-------------------------------------------------------------------------------
</TABLE>
FS-10
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
South Carolina - (continued)
South Carolina (State of) Public Service
Authority (Santee Cooper); Commercial
Paper Notes
3.55%, 04/10/00 A-1+ P-1 $15,000 $ 15,000,000
-------------------------------------------------------------------------------
South Carolina (State of) Public Service
Authority; MERLOTS VRD Series 2000 L RB
4.05%, 01/01/22(b)(c)(d) -- VMIG-1 6,500 6,500,000
-------------------------------------------------------------------------------
26,700,000
-------------------------------------------------------------------------------
TENNESSEE - 4.07%
Clarksville Public Building Authority
(Pooled Financing Municipal Building
Funding); VRD Series 1999 RB
(LOC-Bank of America NA)
4.00%, 06/01/29(c) -- VMIG-1 20,450 20,450,000
-------------------------------------------------------------------------------
Hamilton (County of) (Tennessee Aquarium);
VRD Series 1999 RB
4.00%, 07/01/21(c) A-1+ -- 5,500 5,500,000
-------------------------------------------------------------------------------
Industrial Development Board of the
Metropolitan Government of Nashville and
Davidson Counties (Amberwood, Ltd.
Project); Multifamily Housing Refunding
IDR (LOC-Commerzbank AG)
4.16%, VRD Series 1993 A 07/01/13(c) A-1+ VMIG-1 2,095 2,095,000
-------------------------------------------------------------------------------
4.16%, VRD Series 1993 B 07/01/13(c) A-1+ VMIG-1 1,790 1,790,000
-------------------------------------------------------------------------------
Sevier (County of) Public Building
Authority (Local Government Public
Improvement);
4.00%, VRD Series 2000 IV B-6 RB
06/01/20(b)(c) -- VMIG-1 7,700 7,700,000
-------------------------------------------------------------------------------
4.00%, VRD Series 1999 IV A-2 RB
06/01/25(b)(c) -- VMIG-1 6,500 6,500,000
-------------------------------------------------------------------------------
44,035,000
-------------------------------------------------------------------------------
TEXAS - 15.98%
Austin (City of) (Travis & Williamson
Counties); Combined Utility Systems
Series 1998 A Commercial Paper Notes
3.85%, 04/17/00 A-1+ P-1 22,344 22,344,000
-------------------------------------------------------------------------------
Bexar (County of) Texas Housing Finance
Authority (Fountainhead Apartments);
Refunding Multifamily Housing VRD
Series 1996 RB
3.90%, 09/15/26(c) A-1+ -- 11,621 11,621,000
-------------------------------------------------------------------------------
Bowie (County of) Texas Industrial
Development Corp. (Wehco Media Inc.); VRD
Series 1985 IDR (LOC-Bank of New York)
4.05%, 11/01/25(c) A-1+ -- 3,500 3,500,000
-------------------------------------------------------------------------------
Dallas Area Rapid Transit (DART); Sales
Tax Revenue Commercial Paper Notes Series
1998 B
(LOC-Westdeutsche Landesbank Girozentrale)
3.90%, 05/08/00 A-1+ P-1 5,513 5,513,000
-------------------------------------------------------------------------------
Dallas (City of) Water & Sewer; Commercial
Paper Notes
3.85%, 04/04/00 A-1+ P-1 18,482 18,482,000
-------------------------------------------------------------------------------
</TABLE>
FS-11
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Texas - (continued)
Harris County Health Facilities
Development Corp. (Gulf Coast Regional
Blood Center Project); Blood Center
VRD Series 1992 RB
(LOC-Texas Commerce Bank NA)
3.90%, 04/01/17(c) A-1+ -- $ 3,050 $ 3,050,000
-----------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Methodist Hospital
Project); Hospital VRD Series 1994 RB
3.95%, 12/01/25(b)(c) A-1+ -- 4,700 4,700,000
-----------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (The YMCA-Houston);
VRD Series 1999 RB
(LOC-Bank One Texas NA)
4.00%, 07/01/34(c) -- VMIG-1 5,600 5,600,000
-----------------------------------------------------------------------------
Harris (County of) Toll Road; Refunding
Sub Lien Unlimited Tax
Series 1995 A GO
6.00%, 08/15/00 AA VMIG-1 2,470 2,490,800
-----------------------------------------------------------------------------
Houston (City of) Water and Sewer
Systems; Floating Rate Treasury VRD
Series A29 1999 Reg D RB
4.00%, 12/01/15(b)(c)(d) -- VMIG-1 4,300 4,300,000
-----------------------------------------------------------------------------
Houston (City of) Water and Sewer
Systems; Series A Commercial Paper
Notes
3.90%, 05/22/00 A-1 P-1 20,000 20,000,000
-----------------------------------------------------------------------------
Plano Texas; Refunding & Improvement
Ltd. Tax Series 1992 GO
5.20%, 09/01/00(b) AAA Aaa 5,000 5,026,998
-----------------------------------------------------------------------------
San Antonio (City of) Texas Water;
Refunding Series 1992 RB
5.90%, 05/15/00(b) AAA Aaa 2,050 2,055,652
-----------------------------------------------------------------------------
San Antonio (City of) Texas Electric &
Gas System; Refunding Series 1991 B RB
5.00%, 02/01/01(g) AA Aa1 2,250 2,263,540
-----------------------------------------------------------------------------
San Antonio (City of) Texas Electric &
Gas System; Series A Commercial Paper
Notes
3.95%, 05/11/00 A-1+ P-1 12,500 12,500,000
-----------------------------------------------------------------------------
Texas (State of) Public Finance
Authority; Series 1993 A GO
Commercial Paper Notes
3.60%, 04/10/00 A-1+ P-1 13,800 13,800,000
-----------------------------------------------------------------------------
3.80%, 06/12/00 A-1+ P-1 9,195 9,195,000
-----------------------------------------------------------------------------
Texas (State of); Series 1999 A TRAN
4.50%, 08/31/00 SP-1+ MIG-1 24,000 24,076,891
-----------------------------------------------------------------------------
Trinity River Industrial Development
Authority (Radiation Sterilizers, Inc.
Project); (LOC-Comerica Bank)
3.95%, VRD
Series 1985 A IDR 11/01/05(c) A-1 -- 500 500,000
-----------------------------------------------------------------------------
3.95%, VRD
Series 1985 B IDR 11/01/05(c) A-1 -- 1,650 1,650,000
-----------------------------------------------------------------------------
172,668,881
-----------------------------------------------------------------------------
</TABLE>
FS-12
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
UTAH - 0.32%
Intermountain Power Agency, Utah Power
Supply; VRD Series 1985 E RB
4.08%, 09/15/00(b)(c)(f) A-1+ VMIG-1 $ 2,500 $ 2,500,000
-----------------------------------------------------------------------------
Utah Associated Municipal Power System
(The Hunter Project);
Refunding Series 1994 RB
4.35%, 07/01/00(b) AAA Aaa 1,000 1,001,835
-----------------------------------------------------------------------------
3,501,835
-----------------------------------------------------------------------------
VIRGINIA - 1.18%
Alexandria Industrial Development
Authority (Pooled Loan Program); VRD
Series 1996 A RB
(LOC-Bank of America NA)
4.00%, 07/01/26(c) A-1+ -- 12,710 12,710,000
-----------------------------------------------------------------------------
WISCONSIN - 0.49%
Wausau (City of) School District;
Series 1999 BAN
3.45%, 06/01/00 -- MIG-1 4 395
-----------------------------------------------------------------------------
Wisconsin Health & Educational
Facilities Authority (Ascension
Health); Credit Series 1999 A RB
4.50%, 11/15/00 AA Aa2 2,285 2,290,447
-----------------------------------------------------------------------------
Wisconsin (State of); Unlimited Tax
Series 1996 A GO
5.00%, 05/01/00 AA Aa2 3,000 3,002,359
-----------------------------------------------------------------------------
5,293,201
-----------------------------------------------------------------------------
WYOMING - 1.39%
Uinta (County of) (Chevron USA Inc.
Project); Refunding VRD
Series 1993 PCR
3.85%, 08/15/20(c) -- P-1 15,000 15,000,000
-----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.98% (Cost
$1,091,465,364)(h) 1,091,465,364
-----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.98%) (10,557,921)
=============================================================================
NET ASSETS - 100.00% $1,080,907,443
=============================================================================
</TABLE>
FS-13
<PAGE>
INVESTMENT ABBREVIATIONS:
BAN Bond Anticipation Notes
COP Certificates of Participation
GO General Obligation Bonds
Gtd. Guaranteed
IDR Industrial Development Revenue Bonds
LOC Letter of Credit
Ltd. Limited
MERLOTS Municipal Exempt Receipts Liquidity Optional Tender
PCR Pollution Control Revenue Bonds
PUTTERS Putable Tax Exempt Receipts
RAN Revenue Anticipation Notes
RB Revenue Bonds
Sr. Senior
Sub. Subordinate
TAN Tax Anticipation Notes
TRAN Tax and Revenue Anticipation Notes
VRD Variable Rate Demand
Wts. Warrants
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 Auditor's Report.
(b) Secured by bond insurance provided by one of the following companies:
AMBAC, FGIC, FSA or MBIA.
(c) Demand security, payable upon demand by the Fund at specified time
intervals no greater than thirteen months. Interest rate is redetermined
periodically. Rate shown is the rate in effect on 03/31/00.
(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) Unrated; determined by the investment advisor to be of comparable quality
to the rated securities in which the Fund may invest, pursuant to
guidelines for the determination of quality adopted by the Board of
Directors and followed by the investment advisor.
(f) Subject to an irrevocable call or mandatory put by the issuer. Value and
maturity date reflect such call or put.
(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-14
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $1,091,465,364
----------------------------------------------------------------------------
Cash 19,324,736
----------------------------------------------------------------------------
Receivables for:
Investments sold 5,386,833
----------------------------------------------------------------------------
Interest 7,468,060
----------------------------------------------------------------------------
Investment for deferred compensation plan 52,247
----------------------------------------------------------------------------
Other assets 85,930
----------------------------------------------------------------------------
Total assets 1,123,783,170
----------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 39,303,187
----------------------------------------------------------------------------
Dividends 3,214,030
----------------------------------------------------------------------------
Deferred compensation 52,247
----------------------------------------------------------------------------
Accrued administrative services fees 13,422
----------------------------------------------------------------------------
Accrued advisory fees 109,738
----------------------------------------------------------------------------
Accrued transfer agent fees 28,476
----------------------------------------------------------------------------
Accrued distribution fees 33,399
----------------------------------------------------------------------------
Accrued operating expenses 121,228
----------------------------------------------------------------------------
Total liabilities 42,875,727
----------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,080,907,443
============================================================================
NET ASSETS:
Institutional Class $ 964,396,339
============================================================================
Private Investment Class $ 83,453,671
============================================================================
Cash Management Class $ 6,177,627
============================================================================
Reserve Class $ 23,283,221
============================================================================
Resource Class $ 3,596,585
============================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class:
Authorized 3,000,000,000
----------------------------------------------------------------------------
Outstanding 964,394,960
============================================================================
Private Investment Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 83,450,956
============================================================================
Cash Management Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 6,177,545
============================================================================
Reserve Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 23,281,300
============================================================================
Resource Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 3,596,950
============================================================================
Net asset value, offering and redemption price per share for
all classes $1.00
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-15
<PAGE>
STATEMENT OF OPERATIONS
For the year ended March 31, 2000
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest income $38,158,829
------------------------------------------------------------------
EXPENSES:
Advisory fees 2,457,696
------------------------------------------------------------------
Administrative services fees 142,533
------------------------------------------------------------------
Transfer agent fees 182,602
------------------------------------------------------------------
Custodian fees 55,569
------------------------------------------------------------------
Directors' fees 12,545
------------------------------------------------------------------
Distribution Fees:
Private Investment Class 426,258
------------------------------------------------------------------
Cash Management Class 6,661
------------------------------------------------------------------
Reserve Class 203,369
------------------------------------------------------------------
Resource Class 2,093
------------------------------------------------------------------
Registration and filing fees 217,249
------------------------------------------------------------------
Other expenses 151,148
------------------------------------------------------------------
Total expenses 3,857,723
------------------------------------------------------------------
Less: Fees waived and expenses assumed (1,207,670)
------------------------------------------------------------------
Net expenses 2,650,053
------------------------------------------------------------------
Net investment income 35,508,776
------------------------------------------------------------------
Net realized gain (loss) on sales of investments (532)
------------------------------------------------------------------
Net increase in net assets resulting from operations $35,508,244
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 35,508,776 $ 34,628,129
-----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments (532) 8,745
-----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 35,508,244 34,636,874
-----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (32,180,120) (32,079,516)
-----------------------------------------------------------------------------
Private Investment Class (2,570,746) (2,486,438)
-----------------------------------------------------------------------------
Cash Management Class (218,513) (62,175)
-----------------------------------------------------------------------------
Reserve Class (505,734) --
-----------------------------------------------------------------------------
Resource Class (33,663) --
-----------------------------------------------------------------------------
Capital stock transactions - net:
Institutional Class (108,197,093) 175,685,921
-----------------------------------------------------------------------------
Private Investment Class (7,153,879) 10,142,224
-----------------------------------------------------------------------------
Cash Management Class (961,187) 7,138,732
-----------------------------------------------------------------------------
Reserve Class 23,281,300 --
-----------------------------------------------------------------------------
Resource Class 3,596,950 --
-----------------------------------------------------------------------------
Net increase (decrease) in net assets (89,434,441) 192,975,622
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,170,341,884 977,366,262
-----------------------------------------------------------------------------
End of period $1,080,907,443 $1,170,341,884
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in):
Institutional Class $ 964,471,249 $1,072,668,342
-----------------------------------------------------------------------------
Private Investment Class 83,457,398 90,611,277
-----------------------------------------------------------------------------
Cash Management Class 6,178,307 7,139,494
-----------------------------------------------------------------------------
Reserve Class 23,281,300 --
-----------------------------------------------------------------------------
Resource Class 3,596,950 --
-----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (77,761) (77,229)
-----------------------------------------------------------------------------
$1,080,907,443 $1,170,341,884
=============================================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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, 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. Distributions - It is the policy of the Fund to declare daily dividends from
net investment income. Such distributions 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.
During the year ended March 31, 2000, AIM waived advisory fees of $952,116.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended March 31, 2000, AIM was
paid $142,533 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-18
<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, 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. Currently, FMC has elected to waive a portion of its
compensation payable by the Fund such that the compensation paid pursuant to
the Plan with respect to the Private Investment Class, the Personal Investment
Class, the Cash Management Class, the Reserve Class, and the Resource Class
equals 0.25%, 0.50%, 0.08%, 0.80% and 0.16%, respectively, of the average daily
net assets attributable to such class. For the year ended March 31, 2000, the
Private Investment Class, the Cash Management Class, the Reserve Class and the
Resource Class paid $213,129, $5,329, $162,695 and $1,674, respectively, as
compensation to FMC under the Plan. FMC waived fees of $255,554 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. For the year ended March 31, 2000, the Fund
paid AFS $143,898 for such services.
During the year ended March 31, 2000, the Fund paid legal fees of $5,756 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 years ended March 31, 2000 and
1999 were as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 6,322,728,466 $ 6,322,728,466 7,257,933,597 $ 7,257,933,597
--------------------------------------------------------------------------------------------
Private Investment
Class 370,686,399 370,686,399 580,913,749 580,913,749
--------------------------------------------------------------------------------------------
Cash Management Class* 103,822,089 103,822,089 13,152,591 13,152,591
--------------------------------------------------------------------------------------------
Reserve Class** 195,924,640 195,924,640 -- --
--------------------------------------------------------------------------------------------
Resource Class*** 18,257,101 18,257,101 -- --
--------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 2,285,592 2,285,592 1,929,870 1,929,870
--------------------------------------------------------------------------------------------
Private Investment
Class 2,041,123 2,041,123 2,254,362 2,254,362
--------------------------------------------------------------------------------------------
Cash Management Class* 175,159 175,159 41,812 41,812
--------------------------------------------------------------------------------------------
Reserve Class** 456,780 456,780 -- --
--------------------------------------------------------------------------------------------
Resource Class*** 22,084 22,084 -- --
--------------------------------------------------------------------------------------------
Redeemed:
Institutional Class (6,433,211,151) (6,433,211,151) (7,084,177,546) (7,084,177,546)
--------------------------------------------------------------------------------------------
Private Investment
Class (379,881,401) (379,881,401) (573,025,887) (573,025,887)
--------------------------------------------------------------------------------------------
Cash Management Class* (104,958,435) (104,958,435) (6,055,671) (6,055,671)
--------------------------------------------------------------------------------------------
Reserve Class** (173,100,120) (173,100,120) -- --
--------------------------------------------------------------------------------------------
Resource Class*** (14,682,235) (14,682,235) -- --
--------------------------------------------------------------------------------------------
Net increase (decrease) (89,433,909) $ (89,433,909) 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-19
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Cash Management
Class capital stock outstanding during the year ended March 31, 2000 and the
period January 4, 1999 (date sales commenced) through March 31, 1999.
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
---------------------------------------------------- ------ ------
Income from investment operations:
Net investment income 0.03 0.01
---------------------------------------------------- ------ ------
Less distributions from net investment income (0.03) (0.01)
---------------------------------------------------- ------ ------
Net asset value, end of period $ 1.00 $ 1.00
---------------------------------------------------- ------ ------
Total return(a) 3.23% 0.64%
---------------------------------------------------- ------ ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,178 $7,139
---------------------------------------------------- ------ ------
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.28%(b) 0.28%(c)
---------------------------------------------------- ------ ------
Without fee waivers and/or expense reimbursements 0.39%(b) 0.38%(c)
---------------------------------------------------- ------ ------
Ratio of net investment income to average net assets 3.17%(b) 3.08%(c)
---------------------------------------------------- ------ ------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are based on average net assets of $6,661,238.
(c) Annualized.
FS-20
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period
ended March 31, 2000.
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
-------- ---------- -------- -------- ----------
<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 0.04
------------------------ -------- ---------- -------- -------- ----------
Less distributions from
net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
------------------------ -------- ---------- -------- -------- ----------
Net asset value, end of
period $ 1.00 $1.00 $1.00 $1.00 $1.00
------------------------ -------- ---------- -------- -------- ----------
Total return 3.32% 3.23% 3.55% 3.33% 3.67%
------------------------ -------- ---------- -------- -------- ----------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $964,396 $1,072,597 $896,904 $966,567 $1,009,039
------------------------ -------- ---------- -------- -------- ----------
Ratio of expenses to
average net assets:
With fee waivers and/or
expense reimbursements 0.20%(a) 0.20% 0.20% 0.20% 0.20%
------------------------ -------- ---------- -------- -------- ----------
Without fee waivers
and/or expense
reimbursements 0.29%(a) 0.28% 0.27% 0.26% 0.26%
------------------------ -------- ---------- -------- -------- ----------
Ratio of net investment
income to average net
assets 3.25%(a) 3.16% 3.49% 3.27% 3.59%
------------------------ -------- ---------- -------- -------- ----------
</TABLE>
(a) Ratios are based on average net assets of $990,552,030.
FS-21
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Private Investment
Class capital stock outstanding during each of the years in the five-year
period ended March 31, 2000.
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<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 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 3.06% 2.98% 3.29% 3.07% 3.41%
------------------------------ ------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $83,454 $90,606 $80,462 $37,544 $35,139
------------------------------ ------- ------- ------- ------- -------
Ratio of expenses to average
net assets:
With fee waivers and/or
expense reimbursements 0.45%(a) 0.45% 0.45% 0.45% 0.45%
------------------------------ ------- ------- ------- ------- -------
Without fee waivers and/or
expense reimbursements 0.79%(a) 0.78% 0.77% 0.83% 0.76%
------------------------------ ------- ------- ------- ------- -------
Ratio of net investment income
to average net assets 3.00%(a) 2.91% 3.24% 3.02% 3.35%
------------------------------ ------- ------- ------- ------- -------
</TABLE>
(a) Ratios are based on average net assets of $85,251,434.
FS-22
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Reserve Class
capital stock outstanding during the period June 1, 1999 (date sales commenced)
through March 31, 2000.
<TABLE>
<CAPTION>
2000
-------
<S> <C>
Net asset value, beginning of period $ 1.00
---------------------------------------------------- -------
Income from investment operations:
Net investment income 0.02
---------------------------------------------------- -------
Less distributions from net investment income (0.02)
---------------------------------------------------- -------
Net asset value, end of period $ 1.00
---------------------------------------------------- -------
Total return(a) 2.10%
---------------------------------------------------- -------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $23,283
---------------------------------------------------- -------
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(b)
---------------------------------------------------- -------
Without fee waivers and/or expense reimbursements 1.29%(b)
---------------------------------------------------- -------
Ratio of net investment income to average net assets 2.45%(b)
---------------------------------------------------- -------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $24,404,278.
FS-23
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Resource Class
capital stock outstanding during the period April 6, 1999 (date sales
commenced) through March 31, 2000.
<TABLE>
<CAPTION>
2000
------
<S> <C>
Net asset value, beginning of period $ 1.00
---------------------------------------------------- ------
Income from investment operations:
Net investment income 0.03
---------------------------------------------------- ------
Less distributions from net investment income (0.03)
---------------------------------------------------- ------
Net asset value, end of period $ 1.00
---------------------------------------------------- ------
Total return(a) 3.15%
---------------------------------------------------- ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,597
---------------------------------------------------- ------
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.36%(b)
---------------------------------------------------- ------
Without fee waivers and/or expense reimbursements 0.49%(b)
---------------------------------------------------- ------
Ratio of net investment income to average net assets 3.09%(b)
---------------------------------------------------- ------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $1,061,128.
FS-24
<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 are hereby incorporated by
reference.
- (d) Articles of Amendment of Registrant, as filed with the State of
Maryland on December 16, 1998, were filed as an Exhibit to Post-
Effective Amendment No. 28 on March 24, 2000, and are hereby
incorporated by reference.
- (e) Certificate of Correction of Registrant, as filed with the State
of Maryland on December 16, 1998, was filed as an Exhibit to Post-
Effective Amendment No. 28 on March 24, 2000, and is hereby
incorporated by reference.
- (f) Articles Supplementary of Registrant, as filed with the State of
Maryland on December 9, 1999, were filed as an Exhibit to Post-
Effective Amendment No. 28 on March 24, 2000, and are hereby
incorporated by reference.
- (g) Articles Supplementary of Registrant, as filed with the State of
Maryland on December 29, 1999, were filed as an Exhibit to Post-
Effective Amendment No. 28 on March 24, 2000, and are hereby
incorporated by reference.
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.
C-1
<PAGE>
- (b) First Amendment to Amended and Restated Bylaws of Registrant,
adopted as of June 9, 1999, was filed as an Exhibit to Post-
Effective Amendment No. 28 on March 24, 2000, and is hereby
incorporated by reference.
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.
(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.
(3) - Master Investment Advisory Agreement, dated June 1, 2000, 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.
- (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.
(3) - First Amended and Restated Master Distribution Agreement, dated
July 1, 2000, between Fund Management Company and Registrant is filed
herewith electronically.
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.
(3) - AIM Funds Retirement Plan for Eligible Directors/Trustees, as restated
March 7, 2000, was filed as an Exhibit to Post-Effective Amendment
No. 29 on May 22, 2000, and is hereby incorporated by reference.
(4) - Form of Deferred Compensation Agreement was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 21 on July 29, 1994.
(5) - Form of Deferred Compensation Agreement 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.
(6) - 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.
(7) - Form of Director Deferred Compensation Agreement for Registrant's Non-
Affiliated Directors, as amended March 7, 2000, was filed as an
Exhibit to Post-Effective Amendment No. 29 on May 22, 2000, 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.
C-2
<PAGE>
- (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.
(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.
(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.
(4) - Master Administrative Services Agreement, dated June 1, 2000,
between Registrant and A I M Advisors, Inc. is filed herewith
electronically.
(5) - (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.
- (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.
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.
C-3
<PAGE>
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.
- (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) was filed as an Exhibit to Post-Effective Amendment
No. 28 on March 24, 2000, and is hereby incorporated by reference.
o - Reserved
p(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. was
filed as an Exhibit to Post-Effective Amendment No. 28 on March 24,
2000, and is hereby incorporated by reference.
(2) - Code of Ethics of Tax-Free Investments Co., effective as of May 1, 1992
was filed as an Exhibit to Post-Effective Amendment No. 29 on May 22,
2000.
(3) - Code of Ethics of Tax-Free Investments Co., effective as of June 14,
2000, 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.
C-4
<PAGE>
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
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 coverage.
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.
C-5
<PAGE>
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
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
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
</TABLE>
---------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
C-6
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
------------------------- ----------------------------------------- --------------------------------
<S> <C> <C>
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) 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.
C-7
<PAGE>
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-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 26th day of
July, 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 July 26, 2000
----------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Director & President July 26, 2000
---------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Director July 26, 2000
----------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Director July 26, 2000
----------------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Director July 26, 2000
----------------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Director July 26, 2000
----------------------------
(Jack Fields)
/s/ CARL FRISCHLING Director July 26, 2000
----------------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Director July 26, 2000
----------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Director July 26, 2000
----------------------------
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR Director July 26, 2000
----------------------------
(Louis S. Sklar)
/s/ DANA R. SUTTON Vice President & July 26, 2000
---------------------------- Treasurer (Principal Financial
(Dana R. Sutton) and Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
d(3) Master Investment Advisory Agreement, dated June 1, 2000, between
A I M Advisors, Inc. and Registrant, on behalf of Cash Reserve
Portfolio
e(3) First Amended and Restated Master Distribution Agreement, dated
July 1, 2000, between Fund Management Company and Registrant
h(4) Master Administrative Services Agreement, dated June 1, 2000, between
Registrant and A I M Advisors, Inc.
j(1) Consent of Ballard Spahr Andrews & Ingersoll, LLP
j(2) Consent of KPMG LLP
p(3) Code of Ethics of Tax-Free Investments Co., effective as of June 14,
2000
