<PAGE>
As filed with the Securities and Exchange Commission on November 8, 1995
1933 Act Registration No. 33-66240
1940 Act Registration No. 811-7892
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---
Pre-Effective Amendment No. ---
--- X
Post-Effective Amendment No. 4 ---
---
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
---
Amendment No. 5 X
--- ---
(Check appropriate box or boxes.)
SHORT-TERM INVESTMENTS CO.
----------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 1919, Houston, TX 77046-1173
-----------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
Charles T. Bauer
11 Greenway Plaza, Suite 1919, Houston, TX 77046-1173
-----------------------------------------------------------
(Name and Address of Agent for Service)
Copy to:
P. Michelle Grace, Esquire Martha J. Hayes, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll
11 Greenway Plaza, Suite 1919 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public As soon as practicable after
Offering: the effective date of this Amendment
It is proposed that this filing will become effective (check the appropriate
box)
- --- immediately upon filing pursuant to paragraph (b)
- --- on (date) pursuant to paragraph (b)
- --- 60 days after filing pursuant to paragraph (a)(1)
x
- --- on December 12, 1995 pursuant to paragraph (a)(1)
- --- 75 days after filing pursuant to paragraph (a)(2)
- --- on (date) pursuant to paragraph (a)(2) of rule 485
(continued on next page)
<PAGE>
If appropriate, check the following box:
- --- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant continues its election to register an indefinite number of its shares
of Common Stock pursuant to Rule 24f-2 under the Investment Company Act of 1940
and accordingly, filed its Rule 24f-2 Notice for the fiscal year ended August
31, 1995, on October 26, 1995.
<PAGE>
SHORT-TERM INVESTMENTS CO.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
(as required by Rule 495)
Note: The Registrant currently offers two portfolios of investments: the
Prime Portfolio and the Liquid Assets Portfolio. The Prime Portfolio is composed
of five classes of shares, four of which are offered pursuant to separate
Prospectuses and Statements of Additional Information: the Personal Investment
Class, the Private Investment Class, the Cash Management Class and the Resource
Class; and one of which, the Institutional Class, is offered pursuant to a
combined Prospectus and Statement of Additional Information. The Liquid Assets
Portfolio consists of three classes of shares which are offered pursuant to
separate Prospectuses and Statements of Additional Information: the
Institutional Class, the Private Investment Class and the Cash Management Class.
1. PRIME PORTFOLIO - INSTITUTIONAL CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2. Synopsis.............................. Summary; Table of Fees and
Expenses
3. Condensed Financial Information....... Financial Highlights
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
5. Management of the Fund................ Management of the Fund; General
Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase.............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Statement of Additional
Item No. Information Location
- -------- --------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information About
the Fund
</TABLE>
<PAGE>
<TABLE>
<C> <S> <S>
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund - Directors and Officers
15. Control Persons and Principal Holders
of Securities......................... General Information About the
Fund - Principal Holders of
Securities
16. Investment Advisory and Other
Services.............................. General Information About the
Fund - Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters; See Part A - Taxes
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
</TABLE>
II. PRIME PORTFOLIO-PERSONAL INVESTMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2. Synopsis.............................. Summary; Table of Fees and
Expenses
3. Condensed Financial Information....... Financial Highlights
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
5. Management of the Fund................ Management of the Fund; General
Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase.............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
2
<PAGE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION> Statement of Additional
Item No. Information Location
- -------- -----------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information
About the Fund
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund - Directors and Officers
15. Control Persons and Principal Holders
of Securities......................... General Information About the
Fund - Principal Holders of
Securities
16. Investment Advisory and Other
Services.............................. General Information About the
Fund - Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters; See Part A - Taxes
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
</TABLE>
III. PRIME PORTFOLIO - PRIVATE INVESTMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2 Synopsis.............................. Summary; Table of Fees and
Expenses
3. Condensed Financial Information....... Financial Highlights
</TABLE>
3
<PAGE>
<TABLE>
<C> <S> <S>
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
5. Management of the Fund................ Management of the Fund; General
Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase ............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Statement of Additional
Item No. Information Location
- -------- --------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information
About the Fund
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund - Directors and Officers
15. Control Persons and Principal Holders
of Securities......................... General Information About the
Fund - Principal Holders of
Securities
16. Investment Advisory and Other
Services.............................. General Information About the
Fund - Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters; See Part A - Taxes
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
</TABLE>
4
<PAGE>
IV. PRIME PORTFOLIO - CASH MANAGEMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2. Synopsis.............................. Summary; Table of Fees and
Expenses
3. Condensed Financial Information....... Financial Highlights
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
5. Management of the Fund................ Management of the Fund; General
Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase ............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Statement of Additional
Item No. Information Location
- -------- --------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information
About the Fund
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund - Directors and Officers
15. Control Persons and Principal Holders
of Securities......................... General Information About the
Fund - Principal Holders of
Securities
16. Investment Advisory and Other
Services.............................. General Information About the
Fund - Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
</TABLE>
5
<PAGE>
<TABLE>
<C> <S> <S>
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters; See Part A - Taxes
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
</TABLE>
V. PRIME PORTFOLIO - RESOURCE CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2. Synopsis.............................. Summary; Table of Fees and
Expenses
3. Condensed Financial Information....... Financial Highlights
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
5. Management of the Fund................ Management of the Fund; General
Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase.............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information
About the Fund
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund - Directors and Officers
</TABLE>
6
<PAGE>
<TABLE>
<C> <S> <S>
15. Control Persons and Principal Holders
of Securities......................... General Information About the
Fund - Principal Holders of
Securities
16. Investment Advisory and Other
Services.............................. General Information About the
Fund - Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters; See Part A - Taxes
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Not Applicable
</TABLE>
VI. LIQUID ASSETS PORTFOLIO - INSTITUTIONAL CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2 Synopsis.............................. Summary; Table of Fees and
Expenses
3. Condensed Financial Information....... Financial Highlights
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
5. Management of the Fund................ Management of the Fund; General
Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase.............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
7
<PAGE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Statement of Additional
Item No. Information Location
- -------- -----------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information about the
Fund
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund -- Directors and Officers
15. Control Persons and Principal Holders
Securities............................ General Information About the
Fund -- Principal Holders of
Securities
16. Investment Advisory and
Other Services........................ General Information About the
Fund -- Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
</TABLE>
VII. LIQUID ASSETS PORTFOLIO - PRIVATE INVESTMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2. Synopsis.............................. Summary; Table of Fees
and Expenses
3. Condensed Financial Information....... Not Applicable
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <S>
5. Management of the Fund................ Management of the Fund;
General Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase.............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
Part B -- Statement of Additional Information
<TABLE>
<CAPTION>
Statement of Additional
Item No. Information Location
- -------- -----------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information About the
Fund
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund -- Directors and Officers
15. Control Persons and Principal Holders
of Securities......................... General Information About the
Fund -- Principal Holders of
Securities
16. Investment Advisory and
Other Services........................ General Information About the
Fund -- Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Not Applicable
</TABLE>
9
<PAGE>
VIII. LIQUID ASSETS PORTFOLIO -- CASH MANAGEMENT CLASS
Part A -- Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<C> <S> <S>
1. Cover Page............................ Cover Page
2. Synopsis.............................. Summary; Table of Fees
and Expenses
3. Condensed Financial Information....... Not Applicable
4. General Description of Registrant..... Cover Page; General Information;
Investment Program
5. Management of the Fund................ Management of the Fund; General
Information
6. Capital Stock and Other Securities.... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered.. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase.............. Redemption of Shares
9. Legal Proceedings..................... Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Statement of Additional
Item No. Information Location
- -------- -----------------------
<C> <S> <S>
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... General Information About the
Fund
13. Investment Objectives and Policies.... Investment Program and
Restrictions
14. Management of the Fund................ General Information About the
Fund -- Directors and Officers
15. Control Persons and Principal Holders
of Securities......................... General Information About the
Fund -- Principal Holders of
Securities
16. Investment Advisory and
Other Services........................ General Information About the
Fund -- Investment Advisor
17. Brokerage Allocation.................. Portfolio Transactions
18. Capital Stock and Other Securities.... General Information About the
Fund
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <S>
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchases and Redemptions
20. Tax Status............................ Tax Matters
21. Underwriters.......................... Purchases and Redemptions;
Distribution Agreement
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Not Applicable
</TABLE>
IX. All Classes of Registrant
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment objective is the
maximization of current income to the extent consistent with the preservation of capital and the
INSTITUTIONAL maintenance of liquidity. The Portfolio seeks to achieve its objective by investing in high grade money
CLASS market instruments, such as U.S. Government obligations, bank obligations, commercial instruments and
repurchase agreements. The instruments purchased by the Portfolio will have maturities of sixty days or
DECEMBER 12, 1995 less.
The Portfolio is a series portfolio of Short-Term Investments Co. (the "Fund"), an open-end diversified
series management investment company. This Prospectus relates solely to the Institutional Class of the
Portfolio, a class of shares designed to be a convenient vehicle in which institutions, particularly
banks, acting for themselves or in a fiduciary, advisory, agency, custodial or other similar capacity can
invest in a diversified money market fund.
The Fund also offers shares of other classes of the Portfolio pursuant to separate prospectuses: the
Cash Management Class, the Private Investment Class, the Personal Investment Class and the Resource
Class, as well as shares of classes of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING
IN SHARES OF THE INSTITUTIONAL CLASS OF THE PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION, DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY REFERENCE. A COPY OF THE
STATEMENT OF ADDITIONAL INFORMATION IS ATTACHED HERETO AS AN APPENDIX TO THIS PROSPECTUS.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND
THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE
THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE
[LOGO APPEARS HERE] PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 659-1005
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Institutional Class
(the "Class") of the Portfolio at net asset value. The Portfolio is a money
market fund which invests in money market instruments, such as U.S. Government
obligations, bank obligations, commercial instruments and repurchase
agreements. The instruments purchased by the Portfolio will have maturities of
sixty days or less. The investment objective of the Portfolio is the
maximization of current income to the extent consistent with the preservation
of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which institutions,
particularly banks, acting for themselves or in a fiduciary, advisory, agency,
custodial or other similar capacity can invest short-term cash reserves in a
diversified, open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value
without a sales charge. The minimum initial investment in the Class is
$1,000,000. There is no minimum amount for subsequent investments. Payment for
shares of the Class purchased must be in funds immediately available to the
Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Fund uses the amortized cost method of valuing the securities held by the
Portfolio and rounds the per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
2
<PAGE>
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund -- Investment
Advisor" and "-- Administrator."
DISTRIBUTOR
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. FMC does not receive any fee from the Fund with respect to
the shares of the Class. See "Management of the Fund--Distributor."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- INSTITUTIONAL CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES -- INSTITUTIONAL CLASS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees......................................................... .06%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... .03%
----
Total Portfolio Operating Expenses -- Institutional Class............... .09%
====
</TABLE>
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year........................................................... $1
3 years.......................................................... $3
5 years.......................................................... $5
10 years......................................................... $12
</TABLE>
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The fees and expense
figures are based upon actual costs and fees charged to the Class for the
fiscal year ended August 31, 1995. To the extent any service providers assume
expenses of the Class, such assumption will have the effect of lowering the
Class' overall expense ratio and increasing its yield to investors. Beneficial
owners of shares of the Class should also consider the effect of any charges
imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses -- Institutional Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for each of the years in the ten-year period ended
August 31, 1995. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income......... 0.06 0.04 0.03 0.04 0.07 0.08 0.09 0.07
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations..... 0.06 0.04 0.03 0.04 0.07 0.08 0.09 0.07
Less
distributions:
Dividends from
net investment
income.......... (0.06) (0.04) (0.03) (0.04) (0.07) (0.08) (0.09) (0.07)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ========== ==========
Total return..... 5.80% 3.64% 3.20% 4.44% 7.11% 8.72% 9.42% 7.34%
========== ========== ========== ========== ========== ========== ========== ==========
Ratios/supplemental
data
Net assets, end
of period (000s
omitted)........ $3,752,693 $4,080,753 $4,349,945 $3,993,340 $6,108,991 $6,475,123 $7,003,546 $5,841,901
========== ========== ========== ========== ========== ========== ========== ==========
Ratio of expenses
to average net
assets.......... 0.09%(a) 0.08% 0.07% 0.08% 0.07% 0.07% 0.08% 0.09%
========== ========== ========== ========== ========== ========== ========== ==========
Ratio of net
investment
income to
average net
assets.......... 5.64%(a) 3.58% 3.15% 4.43% 6.89% 8.39% 9.07% 7.11%
========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
1987 1986
----------- -----------
<S> <C> <C>
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income......... 0.06 0.07
---------- ----------
Total from
investment
operations..... 0.06 0.07
Less
distributions:
Dividends from
net investment
income.......... (0.06) (0.07)
---------- ----------
Net asset value,
end of period .. $ 1.00 $ 1.00
========== ==========
Total return..... 6.39% 7.62%
========== ==========
Ratios/supplemental
data
Net assets, end
of period (000s
omitted)........ $4,822,758 $4,237,113
========== ==========
Ratio of expenses
to average net
assets.......... 0.08% 0.08%
========== ==========
Ratio of net
investment
income to
average net
assets.......... 6.22% 7.36%
========== ==========
</TABLE>
- ------
(a) Ratios are based on average daily net assets of $4,072,096,206.
5
<PAGE>
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
as a convenient and economical vehicle in which to invest short-term cash
reserves in an open-end diversified money market fund. Shares of the Class may
not be purchased directly by individuals, although institutions may purchase
shares of the Class for accounts maintained by individuals. Prospective
investors should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day.
Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class. However, these expenses are expected to be
relatively small due primarily to the following factors: the Class will have a
small number of shareholders who do not need many of the services provided by
other money market investment companies, thereby resulting in lower transfer
agent fees and cost for printing reports and proxy statements; sales of the
shares of the Class to institutions acting for themselves or in a fiduciary
capacity are exempt from the registration requirements of most state securities
laws, thereby resulting in reduced state registration fees; and the relatively
low investment advisory fee paid to AIM.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations that may be available in the money markets. Such obligations
include U.S. Treasury obligations, which include Treasury bills, notes and
bonds, and repurchase agreements relating to such securities. These
instruments, which are collectively referred to as "Money Market Obligations,"
are briefly described below. The Portfolio may also engage in certain
investment practices described below. The market values of the money market
instruments held by the Portfolio will be affected by changes in the yields
available on similar securities. If yields have increased since a security was
purchased, the market value of such security will generally have decreased.
Conversely, if yields have decreased, the market value of such security will
generally have increased.
6
<PAGE>
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future, and it is not obligated to do so by law.
BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposit, over 5% of the Portfolio's total
assets would be invested in time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"), as such Rule may
be amended from time to time. Generally, "First Tier" securities are securities
that are rated in the highest rating category by two nationally recognized
statistical rating organizations ("NRSROs") or, if only rated by one NRSRO, are
rated in the highest rating category by that NRSRO or, if unrated, are
determined by AIM (under the supervision of and pursuant to guidelines
established by the Board of Directors) to be of comparable quality to a rated
security that meets the foregoing quality standards. Commercial paper consists
of short-term promissory notes issued by corporations. Commercial paper may be
traded in the secondary market after its issuance. Master notes are unsecured
demand notes that permit the investment of fluctuating amounts of money at
varying rates of interest pursuant to arrangements with issuers who meet the
quality criteria of the Portfolio. The interest rate on a master note may
fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master notes, if such notes have a demand
feature, the payee may demand payment of the principal amount of the note upon
relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. The
Portfolio may enter into repurchase agreements only with institutions believed
by the Fund's Board of Directors to present minimal credit risk. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the seller's failure to repurchase
the obligation in accordance with the terms of the agreement), the Portfolio
could experience both delays in liquidating the underlying securities and
losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities. For
additional information, see the Statement of Additional Information.
7
<PAGE>
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered 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 payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreement obligations or when-issued
commitments. If the market value of such securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the account will equal the amount of the Portfolio's delayed delivery agreement
obligations and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investment in securities on a when-issued basis and use of delayed
delivery agreements may increase the Portfolio's exposure to market
fluctuation, or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in
order to honor a when-issued commitment or accept delivery of a security under
a delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks. No additional delayed delivery agreements or when-issued
commitments will be made by the Portfolio if, as a result, more than 25% of the
Portfolio's net assets would become so committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
8
<PAGE>
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the credit
worthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty 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.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests),
the Portfolio may borrow money from banks or obtain funds by entering into
reverse repurchase agreements, and (b) to the extent that entering into
commitments to purchase securities in accordance with the Portfolio's
investment program may be considered the issuance of senior securities. The
Portfolio will not purchase portfolio securities while borrowings in excess
of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio. The investment policies described above
under the heading "Investment Policies" may be changed without the affirmative
vote of a majority of the outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The
United States Securities and Exchange Commission (the "SEC") has proposed
certain changes to Rule 2a-7. While such proposed changes may have a
prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
9
<PAGE>
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Banks will be required to certify to the Fund that they comply with
applicable state laws regarding registration as broker-dealers, or that they
are exempt from such registration.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Fund's custodian
bank, in the form described below and notice of such order is provided to the
Fund's transfer agent or (b) at the time the order is placed, if the Portfolio
is assured of payment.
Payment for shares of the Class purchased must be in federal funds or other
funds immediately available to the Portfolio. Federal Reserve wires should be
sent as early as possible in order to facilitate crediting to the shareholder's
account. Any funds received with respect to an order which is not accepted by
the Portfolio and any funds received for which an order has not been received
will be returned to the sending institution. An order must specify that it is
for the purchase of "Shares of the Institutional Class of the Prime Portfolio,"
otherwise any funds received will be returned to the sending institution.
The minimum initial investment in the Class is $1,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
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's master account(s) and sub-accounts with the Portfolio may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS"), 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
10
<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the net asset value per share of the Portfolio will remain constant
at $1.00. See "Net Asset Value." Redemption requests with respect to shares of
the Class for which certificates have not been issued are normally made by
calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will 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 Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class's pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, transfer
agent fees or registration fees that may be unique to the Class. Although
realized gains and losses on the assets of the Portfolio are reflected in its
net asset value, they are not expected to be of an amount which would affect
its $1.00 per-share net asset value for purposes of purchases and redemptions.
See "Net Asset Value." Distributions from net realized short-term gains may be
declared and paid yearly or more frequently. See "Taxes." The Portfolio does
not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the institution to AIFS at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
11
<PAGE>
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's 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 the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent, to the extent possible, the net asset value per share of
the Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income, so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on November 1, 1995 which are subject to change
by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods,
12
<PAGE>
the daily yield on shares of the Portfolio, computed as described in "Purchases
and Redemptions -- Performance Information" in the Statement of Additional
Information, may differ somewhat from an identical computation made by an
investment company with identical investments utilizing available indications
as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
659-1005. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
For the seven-day period ended August 31, 1995, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.76% and 5.93%, 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.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and A I M Management Group Inc. ("AIM Management"), a holding company engaged
in the financial services business. Information concerning the Board of
Directors may be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM
13
<PAGE>
was organized in 1976 and, together with its affiliates, manages or advises 37
investment company portfolios. As of October 31, 1995, the total assets of the
investment company portfolios managed, advised or administered by AIM and its
affiliates were approximately $39.3 billion. AIM is a wholly-owned subsidiary
of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1995, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.06% of the
Portfolio's average daily net assets. During such fiscal year, the expenses of
the Class, including AIM's fees, amounted to 0.09% of the Class's average daily
net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. As compensation to AIM for its services under the Administrative
Services Agreement, the Portfolio may reimburse AIM for expenses incurred by
AIM in connection with such services.
In addition, AIM and AIFS entered into an Administrative Services Agreement
pursuant to which AIFS was reimbursed by AIM for its costs in providing
shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $95,254 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995 AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $48,210.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC. The Distribution Agreement provides that FMC has the
exclusive right to distribute shares of the Fund either directly or through
other broker-dealers. FMC is the distributor of several of the mutual funds
managed or advised by AIM.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund which are not directly attributable to a
specific class of shares but are directly attributable to one or both of the
Portfolios are prorated among all classes of such Portfolios. Expenses of the
Fund which are directly attributable to a specific class of shares are charged
against the income available for distribution as dividends to the holders of
such shares.
14
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or a class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into eight classes. Five classes, including the Class,
represent interests in the Portfolio, and three classes represent interests in
the Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. The other classes of the Fund may have different sales charges and other
expenses which may affect performance. An investor may obtain information
concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 110 Washington Street, 8th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
15
<PAGE>
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 659-1005.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC and is attached as an Appendix to this
Prospectus. Additional copies of the Statement of Additional Information are
available upon request and without charge by writing or calling the Fund or
FMC. This Prospectus omits certain information contained in the registration
statement filed with the SEC. Copies of the registration statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations.
16
<PAGE>
APPENDIX
STATEMENT OF
ADDITIONAL INFORMATION
SHORT-TERM INVESTMENTS CO.
PRIME PORTFOLIO
(INSTITUTIONAL CLASS)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
THAT PRECEDES THIS APPENDIX, ADDITIONAL COPIES
OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 659-1005
------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 12, 1995
RELATING TO THE PROSPECTUS DATED DECEMBER 12, 1995
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.................................................... A-3
General Information about the Fund.............................. A-3
The Fund and Its Shares....................................... A-3
Directors and Officers........................................ A-4
Remuneration of Directors..................................... A-7
AIM Funds Retirement Plan for Eligible Directors/Trustees..... A-8
Deferred Compensation Agreements.............................. A-8
Investment Advisor............................................ A-8
Administrator................................................. A-10
Expenses...................................................... A-10
Transfer Agent and Custodian.................................. A-11
Reports....................................................... A-11
Principal Holders of Securities............................... A-12
Purchases and Redemptions....................................... A-14
Net Asset Value Determination................................. A-14
Distribution Agreement........................................ A-14
Performance Information....................................... A-15
Suspension of Redemption Rights............................... A-16
Investment Program and Restrictions............................. A-16
Investment Program............................................ A-16
Eligible Securities........................................... A-16
Commercial Paper Ratings...................................... A-17
Bond Ratings.................................................. A-18
Investment Restrictions....................................... A-19
Portfolio Transactions.......................................... A-20
Tax Matters..................................................... A-21
Qualification as a Regulated Investment Company............... A-21
Excise Tax On Regulated Investment Companies.................. A-22
Portfolio Distributions....................................... A-23
Effect of Future Legislation; Local Tax Considerations........ A-23
Financial Statements............................................ A-24
</TABLE>
A-2
<PAGE>
INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of Short-
Term Investments Co. (the "Fund"), a mutual fund. The rules and regulations of
the United States Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning
the activities of the fund being considered for investment. This information is
included in the Prospectus dated December 12, 1995 (the "Prospectus") that
precedes this Statement of Additional Information. Additional copies of the
Prospectus and Statement of Additional Information may be obtained without
charge by writing the distributor of the Portfolio's shares, Fund Management
Company ("FMC"), 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 or by
calling (800) 659-1005. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Institutional Class of the
Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end, diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993. On October 15, 1993, the Portfolio succeeded to the assets and
assumed the liabilities of the Prime Portfolio (the "Predecessor Portfolio") of
Short-Term Investments Co., a Massachusetts business trust ("STIC"), pursuant
to an Agreement and Plan of Reorganization between the Fund and STIC. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to October 15, 1993 relating to the
Portfolio (or a class thereof) is that of the Predecessor Portfolio (or the
corresponding class thereof). Shares of common stock of the Fund are redeemable
at their net asset value at the option of the shareholder or at the option of
the Fund in certain circumstances. For information concerning the methods of
redemption and the rights of share ownership, investors should consult the
Prospectus under the captions "General Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in one
of two portfolios: the Portfolio and the Liquid Assets Portfolio (together, the
"Portfolios"). The Portfolio consists of the following five classes of shares:
Resource Class, Cash Management Class, Private Investment Class, Personal
Investment Class and the Institutional Class. The Liquid Assets Portfolio
consists of three classes of shares. Each class of shares has different
shareholder qualifications and bears expenses differently. This Statement of
Additional Information and the associated Prospectus relate solely to the
Institutional Class (the "Class") of the Portfolio. Shares of the other classes
of the Portfolio and the classes of the Liquid Assets Portfolio are offered
pursuant to separate prospectuses and statements of additional information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders
of more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
Shareholders of the Fund do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of the Fund voting
together for election of directors can elect all of the members of the Board of
Directors of the Fund. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.
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 (the "1940 Act").
A-3
<PAGE>
The Charter of the Fund authorizes the issuance of 40 billion shares with a
par value of $.001 each, of which 16 billion shares represent an interest in
the Liquid Assets Portfolio (or class thereof) and 22 billion shares represent
an interest in the Portfolio (or class thereof). A share of a Portfolio (or
class) represents an equal proportionate interest in such Portfolio (or class)
with each other share of that Portfolio (or class) and is entitled to a
proportionate interest in the dividends and distributions from that Portfolio
(or class). Additional information concerning the rights of share ownership is
set forth in the Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated to that
Portfolio, and constitute the underlying assets of that Portfolio. The
underlying assets of each of the Portfolios are segregated and are charged with
the expenses with respect to that Portfolio and with a share of the general
expenses of the Fund. While the expenses of the Fund are allocated to the
separate books of account of each of the Portfolios, certain expenses may be
legally chargeable against the assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be liable
to the Fund or its shareholders for money damages, except (i) to the extent
that it is proved that such director or officer actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received, or (ii) to the
extent that a judgment or other final adjudication adverse to such director or
officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. The foregoing shall not be construed to protect
or purport to protect any director or officer of the Fund against any liability
to the Fund or its shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
office. The Fund shall indemnify and advance expenses to its currently acting
and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Fund shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents of the Fund to the
fullest extent permitted by the Maryland General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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 Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations during
the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services,
Inc., A I M Global Associates, Inc., A I M Global Holdings, Inc., A I M
Institutional Fund Services, Inc. and Fund Management Company; and Director,
AIM Global Advisors Limited, A I M Global Management Company Limited and AIM
Global Venture Co.
- ------
* A director who is an "interested person" of A I M Advisors, Inc. and the Fund
as defined in the 1940 Act.
A-4
<PAGE>
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division; COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director, CF
& I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
**CARL FRISCHLING, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
*ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Executive
Vice President, A I M Distributors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., AIM Global Ventures
Co., A I M Institutional Fund Services, Inc. and Fund Management Company;
and Senior Vice President, AIM Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road -- Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag
Investors Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors
Real Estate Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and
North American Government Bond Fund, Inc. (investment companies). Formerly,
Consultant, Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management
services to telephone companies); Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone companies); and Vice President and
Chief Financial Officer, Bell Telephone Company of Pennsylvania and Diamond
State Telephone Company.
- ------
* A director who is an "interested person" of A I M Advisors, Inc. and the Fund
as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the 1940
Act.
A-5
<PAGE>
LOUIS S. SKLAR, Director
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
***JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice President
and Treasurer, A I M Management Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Vice President, AIM
Global Advisors Limited, A I M Global Associates, Inc., A I M Global
Holdings, Inc. and AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc.,
A I M Global Associates, Inc., A I M Global Holdings, Inc. and AIM Global
Ventures Co.; Director, A I M Distributors, Inc.; and Senior Vice President,
AIM Global Advisors Limited.
***CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group
Inc., A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; Vice President and
Secretary, A I M Distributors, Inc., A I M Global Associates, Inc. and A I M
Global Holdings, Inc.; Vice President and Assistant Secretary, AIM Global
Advisors Limited and AIM Global Ventures Co.; and Secretary, A I M Capital
Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management
Company. Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant
Secretary, Charles Schwab Family of Funds and Schwab Investments; Chief
Compliance Officer, Charles Schwab Investment Management, Inc.; and Vice
President, Integrated Resources Life Insurance Co. and Capital Life
Insurance Co.
KAREN DUNN KELLY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice President,
A I M Capital Management, Inc. and AIM Global Advisors Limited; and Vice
President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and Fund
Management Company; Director and Senior Vice President, A I M Advisors,
Inc.; and Senior Vice President, A I M Management Group Inc.
- ------
*** Mr. Arthur and Ms. Relihan are married to each other.
A-6
<PAGE>
The Board of Directors has an Audit Committee, an Investments Committee, and
a Nomination Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the directors
as a whole with respect to the Portfolio's fund accounting or its internal
accounting controls, or for considering such matters as may from time to time
be set forth in a charter adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating
individuals to stand for election as directors who are not interested persons
as long as the Fund maintains a distribution plan pursuant to Rule 12b-1 under
the 1940 Act, reviewing from time to time the compensation payable to the
disinterested directors, or considering such matters as may from time to time
be set forth in a charter adopted by the Board of Directors and such Committee.
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors,
Inc. ("AIM") or distributed and administered by FMC. Most of the Fund'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 attended. The directors of
the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM
Funds"). Each such director receives a fee, allocated among the AIM Funds for
which he serves as a director or trustee, which consists of an annual retainer
component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued during
the fiscal year ended August 31, 1995 for each director of the Fund:
<TABLE>
<CAPTION>
RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED BY ALL FROM ALL
DIRECTOR FROM FUND(1) AIM FUNDS(2) AIM FUNDS(3)
-------- -------------- -------------- --------------
<S> <C> <C> <C>
Charles T. Bauer................... -0- -0- -0-
Bruce L. Crockett.................. $4,393 $ 2,814 $45,094
Owen Daly II....................... 4,423 14,375 45,844
Carl Frischling.................... 4,393 7,542 45,094
Robert H. Graham................... -0- -0- -0-
John F. Kroeger.................... 4,423 20,517 45,844
Lewis F. Pennock................... 4,423 5,093 45,844
Ian W. Robinson.................... 4,353 10,396 45,094
Louis S. Sklar..................... 4,353 4,682 45,094
</TABLE>
- ------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $18,174.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $11,985.
Data reflects compensation earned for the calendar year ended December 31,
1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
A-7
<PAGE>
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 an employee of any
of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may
be entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the
first day of the calendar quarter coincident with or following his date of
retirement equal to 5% of such Director's compensation paid by the AIM Funds
multiplied by the number of such Director's years of service (not in excess of
10 years of service) completed with respect to any of the AIM Funds. Such
benefit is payable to each eligible director in quarterly installments for a
period of no more than five years. If an eligible director dies after attaining
the normal retirement date but before receipt of any benefits under the Plan
commences, 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 five 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 AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17,13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
PAID BY ALL AIM FUNDS
NUMBER OF YEARS OF SERVICE WITH -----------------------
THE AIM FUNDS $60,000 $65,000
------------------------------- ------- -------
<S> <C> <C>
10............................... $30,000 $32,500
9............................... $27,000 $29,250
8............................... $24,000 $26,000
7............................... $21,000 $22,750
6............................... $18,000 $19,500
5............................... $15,000 $16,250
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable
after such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $42,334 in directors' fees and
expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees of
$3,247 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended
August 31, 1995, the Portfolio paid legal fees of $10,128 for services rendered
by that firm as counsel. A director of the Fund is a partner of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel and was a partner of the firm of Reid &
Priest prior to September 1994.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). A prior
A-8
<PAGE>
investment advisory agreement (the "Prior Advisory Agreement") with
substantially identical terms (including the fee schedules) to the Advisory
Agreement was previously in effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises or
manages 37 investment company portfolios. As of October 31, 1995, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $39.3 billion. AIM is a wholly-owned subsidiary
of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. Certain of the directors and officers of AIM
are also executive officers of the Fund and their affiliations are shown under
"Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and(iii) transactions involving securities being considered for
investment by an AIM Fund. The Code also prohibits investment personnel from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Directors reviews annually
such reports (including information on any substantial violations of the Code).
Violations of the Code may result in censure, monetary penalties, suspension or
termination of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be
subject to the policies and control of the Fund's Board of Directors. AIM shall
not be liable to the Fund or its shareholders for any act or omission by AIM or
for any loss sustained by the Fund or its shareholders except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services, AIM receives a monthly fee which is
calculated by applying the following annual rates to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
NET ASSETS RATE
---------- ----
<S> <C>
First $100 million.............................................. .20%
Over $100 million to $200 million............................... .15%
Over $200 million to $300 million............................... .10%
Over $300 million to $1.5 billion............................... .06%
Over $1.5 billion............................................... .05%
</TABLE>
The Advisory Agreement requires AIM to reduce its fee to the extent required
to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered into a master administrative services agreement under
which AIM will provide the additional services described below under the
caption "Administrator."
For the fiscal years ended August 31, 1995, 1994 and 1993, AIM received fees
pursuant to the Advisory Agreement with respect to the Portfolio (and the
Predecessor Portfolio) in the amounts of $2,567,762, $2,599,662 and $2,647,096,
respectively.
The Advisory Agreement will continue in effect until June 30, 1996, and from
year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a
majority of the directors who are not parties to the Advisory Agreement or
"interested persons" of any such party by votes cast in person at a meeting
called for such purpose. The Fund or AIM may terminate the Advisory Agreement
on 60 days' notice without penalty. The Advisory Agreement terminates
automatically in the event of its "assignment," as defined in the 1940 Act.
A-9
<PAGE>
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement, dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement, dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM performs accounting and
other administrative services for the Portfolio. As full compensation for the
performance of such services, AIM is reimbursed for any personnel and other
costs (including applicable office space, facilities and equipment) of
furnishing the services of a principal financial officer of the Fund and of
persons working under his supervision for maintaining the financial accounts
and books and records of the Fund, 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 Fund's
Board of Directors.
The AIFS Administrative Services Agreement between AIM and AIFS, a registered
transfer agent and wholly-owned subsidiary of AIM, provided that AIFS could
perform certain shareholder services for the Portfolio. For such services, AIFS
was entitled to receive from AIM reimbursement of its costs associated with the
Portfolio. The AIFS Administrative Services Agreement was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995 AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount $48,169.
Under the terms of the Prior Advisory Agreement, AIM was reimbursed for the
fiscal years ended August 31, 1993 in the amount of $94,922 for fund accounting
services for the Portfolio. Pursuant to the Administrative Services Agreement,
AIM was reimbursed for the fiscal years ended August 31, 1995 and 1994 in the
amounts of $154,963 and $106,109, respectively, for fund accounting services
for the Portfolio. For the period from August 31, 1994 through June 30, 1995
and for the period from June 1, 1994 through August 31, 1994, AIFS or its
affiliates received shareholder services fees from AIM with respect to the
Portfolio in the amounts of $95,254 and $14,651, respectively.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM under
the Advisory Agreement the charges and expenses of any registrar, any custodian
or depositary appointed by the Fund for the safekeeping of cash, portfolio
securities and other property, and any transfer, dividend or accounting agent
or agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable
by the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and shares with the SEC and various
states and other jurisdictions (including filing and legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting, and distributing prospectuses and statements of additional
information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing
and mailing of prospectuses, proxy statements and reports to shareholders; fees
and travel expenses of directors and director members of any advisory board or
committee; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's shares; charges and expenses
of legal counsel, including counsel to the directors of the Fund who are not
"interested persons" (as defined in the 1940 Act) of the Fund or AIM, and of
independent accountants in connection with any matter relating to the Fund,
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; and extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto). FMC bears the expenses of
printing and distributing prospectuses and statements of additional information
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund) 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 Fund's shares.
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund based upon
the relative net assets of each class. Expenses of the Fund which are not
directly attributable
A-10
<PAGE>
to a specific class of shares but are directly attributable to one or both of
the Portfolios are prorated among all classes of such Portfolios based upon the
relative net assets of each such class. The expenses of the Portfolio are
deducted from its total income before dividends are paid. Expenses of the Fund
which are directly attributable to a specific class of shares are charged
against the income available for distribution as dividends to the holders of
such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and cash
of the Portfolio. The Bank of New York receives such compensation from the Fund
for its services in such capacity as is agreed to from time to time by The Bank
of New York and the Fund. The address of The Bank of New York is 110 Washington
Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .007% of average daily net
assets of the Fund, payable monthly. Such compensation may be changed from time
to time as is agreed to by A I M Institutional Fund Services, Inc. and the
Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
A-11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of October 25, 1995, and the percentage of the Portfolio's outstanding
shares owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(1)
---------------- ----------------
INSTITUTIONAL CLASS
-------------------
<S> <C>
NATIONSBANK OF TEXAS....................................... 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. BANK OF OREGON........................................ 13.23%
321 Southwest 6th Street
Portland, OR 97208
TRUST COMPANY BANK......................................... 8.19%
P.O. Box 105504
Atlanta, GA 30348
TEXAS COMMERCE BANK........................................ 7.62%
P.O. Box 2558
Houston, TX 77252-8098
BOATMEN'S TRUST COMPANY.................................... 7.27%
100 North Broadway
St. Louis, MO 63101
FROST NATIONAL BANK........................................ 7.26%
P.O. Box 1600
San Antonio, TX 78296
<CAPTION>
PRIVATE INVESTMENT CLASS
------------------------
<S> <C>
HUNTINGTON CAPITAL CORPORATION............................. 71.90%(2)
41 South High Street
Columbus, OH 43287
VAR & CO................................................... 17.39%
180 East 5th Street
St. Paul, MN 55101
FROST NATIONAL BANK........................................ 6.94%
P.O. Box 1600
San Antonio, TX 78296
<CAPTION>
PERSONAL INVESTMENT CLASS
-------------------------
<S> <C>
BANK OF NEW YORK........................................... 67.37%(2)
440 Manaroneck Ave.
Harrison, NY 10528
CULLEN/FROST DISCOUNT BROKERS.............................. 30.94%(2)
P.O. Box 2358
San Antonio, TX 78299
</TABLE>
- ------
(1) The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
(2) A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
A-12
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(1)
---------------- ----------------
CASH MANAGEMENT CLASS
---------------------
<S> <C>
PIPER JAFFRAY AS AGENT FOR CUSTOMER....................... 35.24%(2)
101 California Street
Suite 1150
San Francisco, CA 94111
PIPER JAFFRAY AS AGENT FOR CUSTOMER....................... 29.49%(2)
P.O. Box 160727
Sacramento, CA 95816-0727
BANK OF NEW YORK.......................................... 10.75%
One Wall Street
New York, NY 10286
CITIBANK AS AGENT FOR CUSTOMER............................ 8.38%
120 Wall Street 13th Floor
New York, NY 10043
<CAPTION>
RESOURCE CLASS
--------------
</TABLE>
AIM provided the initial capitalization of the Resource Class of the Prime
Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, and the percentage of the Portfolio's
outstanding shares owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(1)
---------------- ----------------
INSTITUTIONAL CLASS
-------------------
<S> <C>
TRUST COMPANY BANK....................................... 20.96%
P.O. Box 105504
Atlanta, GA 30348
WACHOVIA BANK & TRUST.................................... 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
NATIONSBANK DALLAS....................................... 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
SOCIETY NATIONAL BANK.................................... 7.57%
127 Public Square
Cleveland, OH 44114-1306
BOATMEN'S TRUST COMPANY.................................. 6.56%
100 North Broadway
St. Louis, MO 63102
FIRSTAR BANK OF MADISON.................................. 5.41%
P.O. Box 7900
Madison, WI 53707
</TABLE>
- ------
(1) The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
(2) A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
A-13
<PAGE>
PRIVATE INVESTMENT CLASS
AIM provided the initial capitalization of the Private Investment Class of
the Liquid Assets Portfolio and, accordingly, as of the date of this Statement
of Additional Information, owned all the outstanding shares of common stock of
the Private Investment Class of the Liquid Assets Portfolio. Although the
Private Investment Class of the Liquid Assets Portfolio expects that the sale
of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid
Assets Portfolio, as defined in the 1940 Act.
CASH MANAGEMENT CLASS
AIM provided the initial capitalization of the Cash Management Class of the
Liquid Assets Portfolio and, accordingly, as of the date of this Statement of
Additional Information, owned all the outstanding shares of common stock of the
Cash Management Class of the Liquid Assets Portfolio. Although the Cash
Management Class of the Liquid Assets Portfolio expects that the sale of its
shares to the public pursuant to the Prospectus will reduce the percentage of
such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Portfolio are sold at net asset value. Shareholders may at any
time redeem all or a portion of their shares at net asset value. The investor's
price for purchases and redemptions will be the net asset value next determined
following the receipt of an order to purchase or a request to redeem shares.
The valuation of the portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Portfolio is permitted in accordance with applicable rules and regulations
of the SEC, including Rule 2a-7 under the 1940 Act, which require the Portfolio
to adhere to certain conditions. These rules require that the Portfolio
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 397 calendar days or
less and invest only in securities determined by the Board of Directors to be
"Eligible Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, 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's 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 existing holders of the Portfolio's shares. In the event the Board of
Directors determines that such a deviation exists, it will take such corrective
action as the Board of Directors deems necessary and appropriate, including the
sales of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity; the withholding of
dividends; redemption of shares in kind; or the establishment of a net asset
value per share by using available market quotations.
DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of
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the Class. The address of FMC is 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. See "General Information about the Fund--Directors and Officers"
and "General Information about the Fund -- Investment Advisor" for information
as to the affiliation of certain directors and officers of the Fund with FMC,
AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right to
distribute the shares of the Class either directly or through other broker-
dealers. The Distribution Agreement also provides that FMC will pay promotional
expenses, including the incremental costs of printing prospectuses and
statements of additional information, annual reports and other periodic reports
for distribution to persons who are not shareholders of the Portfolio 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 Class. FMC
does not receive any fees with respect to the shares of the Class pursuant to
the Distribution Agreement.
The Distribution Agreement will continue in effect until June 30, 1996, and
from year to year thereafter, provided that it is specifically approved at
least annually by the Fund'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 Fund 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.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus, yield
information for the shares of the Class may be obtained by calling the Fund at
(800) 659-1005. The current yield quoted will be the net average annualized
yield for an identified period. Current yield will be computed by assuming that
an account was established with a single share (the "Single Share Account") on
the first day of the period. To arrive at the quoted yield, the net change in
the value of that Single Share Account for the period (which would include
dividends accrued with respect to the share, and dividends declared on shares
purchased with dividends accrued and paid, if any, but would not include
realized gains and losses or unrealized appreciation or depreciation) will be
multiplied by 365 and then divided by the number of days in the period, with
the resulting figure carried to the nearest hundredth of one percent. The Fund
may also furnish a quotation of effective yield for the Class that assumes the
reinvestment of dividends for a 365-day year and a return for the entire year
equal to the average annualized yield for the period, which will be computed by
compounding the unannualized current yield for the period by adding 1 to the
unannualized current yield, raising the sum to a power equal to 365 divided by
the number of days in the period, and then subtracting 1 from the result.
For the seven-day period ended August 31, 1995, the current yield and the
effective yield (which assumes the reinvestment of dividends for a 365-day year
and a return for the entire year equal to the annualized current yield for the
period) for the Class were 5.76% and 5.93%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
The Fund may compare the performance of the Class or the performance of
securities in which the Portfolio may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of various
types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money
Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical Services,
Inc., a widely recognized independent service located in Summit, New Jersey,
which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate,
a financial information network, or by Bloomberg, a financial information
firm; and
. other fixed-income investments such as Certificates of Deposit ("CDs").
The principal value and interest rate of CDs and money market securities are
fixed at the time of purchase whereas the Class's yield will fluctuate. Unlike
some CDs and certain other money market securities, money market mutual funds
are not insured by the FDIC. Investors should give consideration to the quality
and maturity of the portfolio securities of the respective investment companies
when comparing investment alternatives.
The Fund may reference the growth and variety of money market mutual funds
and AIM's innovation and participation in the industry.
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<PAGE>
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of London branches of domestic banks
having total assets of $1.5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of United Kingdom withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than 5% of its total assets in securities issued by a single
issuer, provided that such a fund may invest more than 5% of its total assets
in the First Tier securities of a single issuer for a period of up to 3
business days after the purchase thereof if the money market fund is a
diversified investment company, provided further, that the fund may not make
more than one investment in accordance with the foregoing proviso at any time.
Under Rule 2a-7, for purposes of determining the percentage of a fund's total
assets that are invested in securities of an issuer, a repurchase agreement
shall be deemed to be an acquisition of the underlying securities, provided
that the obligation of the seller to repurchase the securities from the money
market fund is fully collateralized. To be fully collateralized, the collateral
must, among other things, consist entirely of U.S. Government securities or
securities that, at the time the repurchase agreement is entered into, are
rated in the highest rating category by Requisite NRSROs.(1)
The Portfolio may also lend its portfolio securities in amounts up to 33-1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money market
funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that is rated
(or that has been issued by an issuer that is rated with respect to a class
of short-term debt obligations, or any security within that class, that is
comparable in priority and security with the security) by the Requisite
NRSROs in one of the two highest rating categories for short-term debt
obligations (within which there may be subcategories or gradations
indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security but that has
a remaining maturity of 397 calendar days or less, and
(B) whose issuer has received from the Requisite NRSROs a rating, with
respect to a class of short-term debt obligations (or any security within
that class) that is now comparable in priority and security with the
security, in one of the two highest rating categories for short-term debt
obligations (within which there may be sub-categories or gradations
indicating relative standing); or
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(iii) an unrated security(2) that is of comparable quality to a security
meeting the requirements of paragraphs (a)(5)(i) or (ii) of this section, as
determined by the money market fund's board of directors; provided, however,
that:
(A) the board of directors may base its determination that a standby
commitment is an Eligible Security upon a finding that the issuer of the
commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-term security
but that has a remaining maturity of 397 calendar days or less and that
is an unrated security is not an Eligible Security if the security has a
long-term rating from any NRSRO that is not within the NRSRO's two
highest categories (within which there may be sub-categories or
gradations indicating relative standing).
- ------
(1) "Requisite NRSRO" 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 of such security, that NRSRO.
At present the NRSROs are: Standard & Poor's Corp., Moody's Investors
Service, Inc., Duff and Phelps, Inc., Fitch Investors Services, Inc. and,
with respect to certain types of securities, IBCA Limited and its affiliate,
IBCA Inc. Subcategories or gradations in ratings (such as a "+" or "-") do
not count as rating categories.
(2) An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the particular
security or as to any other short-term obligations of comparable priority
and security; (ii) that was a long-term security at the time of issuance and
whose issuer has not received from any NRSRO a rating with respect to a
class of short-term debt obligations now comparable in priority and
security; or (iii) a security that is rated but which is the subject of an
external credit support agreement not in effect when the security was
assigned its rating, provided that a security is not an unrated security if
any short-term debt obligation issued by the issuer and comparable in
priority and security is rated by any NRSRO.
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the commercial paper
ratings of Moody's, S&P and Fitch Investors Service, Inc. ("Fitch").
MOODY'S--The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is rated
P-1, P-2 or P-3.
S&P--Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality
of management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
FITCH--Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. The short-term rating places greater emphasis than a long-
term rating on the existence of liquidity necessary to meet the issuer's
obligations in a timely manner. Fitch short-term ratings are as follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are regarded
as having the strongest degree of assurance for timely payment.
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F-2
Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings of
Moody's, S&P and Fitch.
MOODY'S--The following are the two highest bond ratings of Moody's.
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
edge." Interest payments are protected by a large or 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 Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P--The following are the two highest bond ratings of S&P.
AAA
Bonds rated AAA are the highest grade obligations. They possess the ultimate
degree of protection as to principal and interest. Market values of bonds rated
AAA move with interest rates, and hence provide the maximum safety on all
counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
FITCH--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.
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<PAGE>
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 rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch 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.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of the holders of a majority of the outstanding shares of the
Portfolio (as that term is defined under "General Information about the Fund--
The Fund and its Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as amended from time to time;
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests),
the Portfolio may borrow money from banks or obtain funds by entering into
reverse repurchase agreements, and (b) to the extent that entering into
commitments to purchase securities in accordance with the Portfolio's
investment program may be considered the issuance of senior securities,
provided that the Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure permitted
borrowings and except for reverse repurchase agreements and then only in an
amount up to 33 1/3% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement;
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<PAGE>
(5) make loans of money or securities other than (a) through the purchase
of debt securities in accordance with the Portfolio's investment program,
(b) by entering into repurchase agreements and (c) by lending portfolio
securities to the extent permitted by law or regulation;
(6) underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities
in accordance with the Portfolio's investment program may be deemed an
underwriting;
(7) invest in real estate, except that the Portfolio may purchase and sell
securities secured by real estate or interests therein or issued by issuers
which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts, purchase
securities on margin, make short sales or invest in puts or calls;
(9) invest in any obligation not payable as to principal and interest in
United States currency; or
(10) acquire for value the securities of any other investment company,
except in connection with a merger, consolidation, reorganization or
acquisition of assets.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
State Law Restrictions. The Fund may, from time to time in order to qualify
shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
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 investment policy of the Portfolio requires that investments
mature within 60 days or less. Thus, there is likely to be relatively high
portfolio turnover, but since brokerage commissions are not normally paid on
money market instruments, the high rate of portfolio turnover is not expected
to have a material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the execution and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement
of portfolio transactions of other clients may be of value to AIM in fulfilling
its obligations to the Portfolio. AIM is of the opinion that the material
received is beneficial in supplementing AIM's research and analysis; and
therefore, it may benefit the Portfolio by improving the quality of AIM's
investment advice. The advisory fees paid by the Portfolio are not reduced
because AIM receives such services.
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<PAGE>
From time to time, the Fund may sell a security to, or purchase a security
from, an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital"), when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by AIM or AIM
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have
been adopted by the Board of Directors/Trustees of the various AIM Funds,
including the Fund. Although such transactions may result in custodian, tax or
other related expenses, no brokerage commissions or other direct transaction
costs are generated by transactions among the investment accounts advised by
AIM or AIM Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such
investment accounts. However, the position of each account in the securities of
the same issue may vary and the length of time that each account may choose to
hold its investment in the securities of the same issue may likewise vary. The
timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts and is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchases
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolios as a 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 Fund from purchasing a
security being publicly underwritten by a syndicate of which persons affiliated
with the Fund are members except in accordance with certain conditions. These
conditions may restrict the ability of the Portfolio to purchase money market
obligations being publicly underwritten by such a syndicate, and the Portfolio
may be required to wait until the syndicate has been terminated before buying
such securities. At such time, the market price of the securities may be higher
or lower than the original offering price. A person affiliated with the Fund
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligations and be paid a fee by such issuer. The
Portfolio may purchase such money market obligations directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and such purchase is reviewed at least quarterly by
the Fund's Board of Directors and a determination is made that all such
purchases were effected in compliance with such procedures, including a
determination that the placement fee or other remuneration paid by the issuer
to the person affiliated with the Fund was fair and reasonable in relation to
the fees charged by other persons, performing similar services. During the
fiscal year ended August 31, 1995, no securities or instruments were purchased
by the Portfolio from issuers who paid placement fees or other compensation to
a broker affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolio or its shareholders, and the discussion here and
in the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As
a regulated investment company, the Portfolio is not subject to federal income
tax
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on the portion of its net investment income (i.e., taxable interest, dividends
and other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Portfolio made during
the taxable year or, under specified circumstances, within twelve months after
the close of the taxable year, will be considered distributions of income and
gains for the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities)
and other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts,
will not be characterized as Short-Short Gains if they are directly related to
the regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition
of a loss before the expiration of the three-month holding period is
disregarded. Interest (including original issue discount) received by a fund at
maturity or upon the disposition of a security held for less than three months
will not be treated as gross income derived from the sale or other disposition
of a security within the meaning of the Short-Short Gain Test. However, income
that is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
In addition to satisfying the requirements described above, a regulated
investment company must satisfy an asset diversification test in order to
qualify for tax purposes as a regulated investment company. Under this test, at
the close of each quarter of a fund's taxable year, at least 50% of the value
of a fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a fund has not invested more than 5% of the value
of a fund's total assets in securities of such issuer and as to which a fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any other issuer (other than U.S. Government securities
and securities of other regulated investment companies), or in two or more
issuers which a fund controls and which are engaged in the same or similar
trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year). The balance of such income
must be distributed during the next calendar year. For the foregoing purposes,
a regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
A-22
<PAGE>
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the Portfolio
into account in the year in which the distributions are made. However,
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 the ordinary income dividends and capital gain dividends
and, in certain cases, 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 Fund that it is not
subject to backup withholding or that it is a corporation or other "exempt
recipient."
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
November 1, 1995. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting investment in the Fund.
A-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1995, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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
Prime Portfolio as of August 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the ten-year period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
October 6, 1995
A-24
<PAGE>
SCHEDULE OF INVESTMENTS
AUGUST 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 71.82%(a)
BASIC INDUSTRIES - 0.30%
MULTIPLE INDUSTRY - 0.30%
Philip Morris Companies, Inc.
5.75% 10/04/95 $ 12,500 $ 12,434,115
- ----------------------------------------------------------------------
Total Basic Industries 12,434,115
- ----------------------------------------------------------------------
BUSINESS SERVICES - 5.90%
POLLUTION CONTROL SERVICES - 2.15%
Browning-Ferris Industries, Inc.
5.69% 09/08/95 20,000 19,977,872
- ----------------------------------------------------------------------
5.75% 09/15/95 18,000 17,959,750
- ----------------------------------------------------------------------
5.73% 09/18/95 20,000 19,945,883
- ----------------------------------------------------------------------
5.75% 09/19/95 12,700 12,663,487
- ----------------------------------------------------------------------
5.73% 09/22/95 20,000 19,933,150
- ----------------------------------------------------------------------
90,480,142
- ----------------------------------------------------------------------
MISCELLANEOUS - 3.75%
Donnelley (R.R.) & Sons Co.
5.73% 09/22/95 53,000 52,822,848
- ----------------------------------------------------------------------
PHH Corp.
5.75% 09/13/95 47,100 47,009,725
- ----------------------------------------------------------------------
5.75% 10/11/95 58,000 57,629,445
- ----------------------------------------------------------------------
157,462,018
- ----------------------------------------------------------------------
Total Business Services 247,942,160
- ----------------------------------------------------------------------
CAPITAL GOODS - 2.35%
COMPUTERS & OFFICE EQUIPMENT - 1.40%
Xerox Corp.
5.75% 10/04/95 31,025 30,861,472
- ----------------------------------------------------------------------
Xerox Credit Corp.
5.73% 09/19/95 11,000 10,968,485
- ----------------------------------------------------------------------
5.74% 10/05/95 16,981 16,888,944
- ----------------------------------------------------------------------
58,718,901
- ----------------------------------------------------------------------
MACHINERY - 0.95%
Dover Corp.
5.75% 09/11/95 14,000 13,977,639
- ----------------------------------------------------------------------
5.75% 09/25/95 15,000 14,942,500
- ----------------------------------------------------------------------
5.77% 10/02/95 11,191 11,135,396
- ----------------------------------------------------------------------
40,055,535
- ----------------------------------------------------------------------
Total Capital Goods 98,774,436
- ----------------------------------------------------------------------
</TABLE>
A-25
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 2.52%
AUTOMOBILE - 2.52%
Daimler-Benz North America Corp.
5.68% 09/08/95 $ 66,000 $ 65,927,107
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.75% 10/06/95 40,000 39,776,389
- -------------------------------------------------------------------
Total Consumer Durables 105,703,496
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 3.32%
HOUSEHOLD PRODUCTS - 3.32%
Colgate-Palmolive Co.
5.70% 09/15/95 61,550 61,413,564
- -------------------------------------------------------------------
5.71% 09/18/95 20,000 19,946,072
- -------------------------------------------------------------------
5.72% 09/20/95 19,500 19,441,132
- -------------------------------------------------------------------
5.72% 09/21/95 38,800 38,676,702
- -------------------------------------------------------------------
Total Consumer Nondurables 139,477,470
- -------------------------------------------------------------------
CONSUMER SERVICES - 2.91%
MISCELLANEOUS - 2.91%
USL Capital Corp.
5.73% 09/07/95 21,000 20,979,945
- -------------------------------------------------------------------
5.74% 09/07/95 21,000 20,979,910
- -------------------------------------------------------------------
5.73% 09/19/95 9,000 8,974,215
- -------------------------------------------------------------------
5.77% 09/21/95 15,500 15,450,314
- -------------------------------------------------------------------
5.73% 10/05/95 31,016 30,848,152
- -------------------------------------------------------------------
5.74% 10/13/95 25,000 24,832,583
- -------------------------------------------------------------------
Total Consumer Services 122,065,119
- -------------------------------------------------------------------
ENERGY - 3.31%
NATURAL GAS - 1.45%
Colonial Pipeline Co.
5.72% 09/12/95 15,000 14,973,783
- -------------------------------------------------------------------
5.72% 09/19/95 13,800 13,760,532
- -------------------------------------------------------------------
5.76% 09/28/95 12,000 11,948,160
- -------------------------------------------------------------------
5.78% 09/29/95 20,100 20,009,639
- -------------------------------------------------------------------
60,692,114
- -------------------------------------------------------------------
OIL & GAS - 1.86%
ARCO Coal Australia Inc.
5.69% 09/12/95 9,501 9,484,482
- -------------------------------------------------------------------
5.70% 09/14/95 12,489 12,463,293
- -------------------------------------------------------------------
5.75% 09/15/95 14,788 14,754,932
- -------------------------------------------------------------------
5.72% 10/10/95 12,507 12,429,498
- -------------------------------------------------------------------
</TABLE>
A-26
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
ENERGY--(continued)
OIL & GAS - (CONTINUED)
Mobil Australia Finance Company, Inc.
5.68% 09/01/95 $ 29,088 $ 29,088,000
- -------------------------------------------------------------------------
78,220,205
- -------------------------------------------------------------------------
Total Energy 138,912,319
- -------------------------------------------------------------------------
FINANCIAL - 47.89%
ASSET-BACKED SECURITIES - 22.81%
Asset Securitization Cooperative Corp.
5.70% 09/08/95 55,000 54,939,041
- -------------------------------------------------------------------------
5.72% 09/22/95 10,000 9,966,633
- -------------------------------------------------------------------------
5.72% 10/26/95 55,000 54,519,361
- -------------------------------------------------------------------------
5.71% 10/27/95 30,000 29,733,533
- -------------------------------------------------------------------------
Ciesco, L.P.
5.73% 09/06/95 15,000 14,988,063
- -------------------------------------------------------------------------
5.72% 10/18/95 40,000 39,701,289
- -------------------------------------------------------------------------
Clipper Receivables Corp.
5.77% 09/12/95 50,000 49,911,848
- -------------------------------------------------------------------------
5.77% 09/13/95 28,911 28,855,394
- -------------------------------------------------------------------------
5.77% 09/14/95 17,227 17,191,106
- -------------------------------------------------------------------------
5.77% 09/19/95 57,000 56,835,555
- -------------------------------------------------------------------------
5.77% 09/25/95 19,000 18,926,913
- -------------------------------------------------------------------------
Corporate Asset Funding Co. Inc.
5.73% 09/06/95 32,900 32,873,817
- -------------------------------------------------------------------------
5.74% 09/07/95 25,000 24,976,083
- -------------------------------------------------------------------------
Delaware Funding Corp.
5.72% 09/18/95 16,228 16,184,166
- -------------------------------------------------------------------------
5.76% 09/25/95 12,134 12,087,405
- -------------------------------------------------------------------------
Eiger Capital Corp.
5.75% 09/14/95 27,540 27,482,816
- -------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.76% 09/11/95 15,325 15,300,480
- -------------------------------------------------------------------------
5.77% 09/20/95 25,000 24,923,868
- -------------------------------------------------------------------------
5.74% 10/04/95 31,425 31,259,653
- -------------------------------------------------------------------------
5.75% 10/04/95 15,050 14,970,674
- -------------------------------------------------------------------------
5.74% 10/12/95 15,825 15,721,548
- -------------------------------------------------------------------------
Matterhorn Capital Corp.
5.75% 09/27/95 31,016 30,887,197
- -------------------------------------------------------------------------
</TABLE>
A-27
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Preferred Receivables Funding Corp.
5.70% 09/08/95 $ 11,375 $ 11,362,393
- ------------------------------------------------------------------------
5.73% 09/14/95 20,875 20,831,806
- ------------------------------------------------------------------------
5.73% 09/18/95 30,125 30,043,487
- ------------------------------------------------------------------------
5.75% 10/05/95 81,275 80,833,633
- ------------------------------------------------------------------------
5.73% 10/20/95 30,125 29,890,050
- ------------------------------------------------------------------------
Sheffield Receivables Corp.
5.72% 09/06/95 25,800 25,779,503
- ------------------------------------------------------------------------
5.71% 09/12/95 24,700 24,656,905
- ------------------------------------------------------------------------
5.77% 09/13/95 46,000 45,911,528
- ------------------------------------------------------------------------
5.77% 09/14/95 40,000 39,916,656
- ------------------------------------------------------------------------
5.73% 09/19/95 26,900 26,822,931
- ------------------------------------------------------------------------
958,285,335
- ------------------------------------------------------------------------
BUSINESS CREDIT - 4.08%
CIT Group Holdings, Inc.
5.68% 09/06/95 30,000 29,976,333
- ------------------------------------------------------------------------
5.68% 09/07/95 30,000 29,971,600
- ------------------------------------------------------------------------
5.72% 09/21/95 75,000 74,761,667
- ------------------------------------------------------------------------
5.72% 10/20/95 37,000 36,711,934
- ------------------------------------------------------------------------
171,421,534
- ------------------------------------------------------------------------
INSURANCE - 2.33%
MetLife Funding, Inc.
5.72% 09/22/95 50,000 49,833,166
- ------------------------------------------------------------------------
5.74% 10/12/95 48,211 47,895,834
- ------------------------------------------------------------------------
97,729,000
- ------------------------------------------------------------------------
PERSONAL CREDIT - 7.68%
Associates Corp. of North America
5.73% 10/18/95 50,000 49,625,958
- ------------------------------------------------------------------------
5.73% 10/19/95 100,000 99,236,000
- ------------------------------------------------------------------------
AVCO Financial Services, Inc.
5.70% 09/15/95 50,000 49,889,167
- ------------------------------------------------------------------------
</TABLE>
A-28
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Household Finance Corp.
5.75% 10/12/95 $ 50,000 $ 49,672,569
- --------------------------------------------------------------------
5.73% 10/20/95 50,000 49,610,042
- --------------------------------------------------------------------
Student Loan Corp.
5.73% 10/20/95 25,000 24,805,021
- --------------------------------------------------------------------
322,838,757
- --------------------------------------------------------------------
MISCELLANEOUS - 7.10%
Hertz Corp. (The)
5.69% 09/07/95 25,000 24,976,292
- --------------------------------------------------------------------
5.68% 09/08/95 20,000 19,977,911
- --------------------------------------------------------------------
5.70% 09/18/95 81,000 80,781,975
- --------------------------------------------------------------------
5.72% 10/06/95 35,000 34,805,361
- --------------------------------------------------------------------
5.75% 10/13/95 11,500 11,422,854
- --------------------------------------------------------------------
International Lease Finance Corp.
5.70% 09/15/95 19,000 18,957,883
- --------------------------------------------------------------------
5.71% 09/25/95 18,500 18,429,577
- --------------------------------------------------------------------
5.72% 10/05/95 6,570 6,534,507
- --------------------------------------------------------------------
5.72% 10/06/95 38,900 38,683,673
- --------------------------------------------------------------------
5.73% 10/13/95 44,000 43,705,860
- --------------------------------------------------------------------
298,275,893
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 3.89%
General Electric Capital Corp.
5.74% 09/07/95 23,500 23,477,518
- --------------------------------------------------------------------
5.72% 09/20/95 100,000 99,698,110
- --------------------------------------------------------------------
5.71% 10/06/95 40,500 40,275,169
- --------------------------------------------------------------------
163,450,797
- --------------------------------------------------------------------
Total Financial 2,012,001,316
- --------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.69% 09/12/95 20,424 20,388,491
- --------------------------------------------------------------------
5.73% 09/22/95 23,224 23,146,374
- --------------------------------------------------------------------
5.72% 10/10/95 26,556 26,391,441
- --------------------------------------------------------------------
5.74% 10/13/95 26,759 26,579,804
- --------------------------------------------------------------------
</TABLE>
A-29
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
OTHER--(continued)
DIVERSIFIED - (CONTINUED)
Cargill Inc.
5.69% 09/08/95 $ 12,000 $ 11,986,724
- -----------------------------------------------------------------------------
5.70% 09/11/95 16,300 16,274,192
- -----------------------------------------------------------------------------
5.73% 09/22/95 15,000 14,949,863
- -----------------------------------------------------------------------------
Total Other 139,716,889
- -----------------------------------------------------------------------------
Total Commercial Paper 3,017,027,320
- -----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 4.06%
Citicorp Securities, Inc.(b)
6.063% 09/13/95 6,000 6,000,000
- -----------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.(c)
5.988% 10/16/95 87,500 87,500,000
- -----------------------------------------------------------------------------
Morgan Stanley Group, Inc.(d)
5.893% 01/29/96 77,000 77,000,000
- -----------------------------------------------------------------------------
Total Master Note Agreements 170,500,000
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENTS - 1.78%
Goldman, Sachs & Co.(e)
5.913% 01/29/96 75,000 75,000,000
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 3,262,527,320
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 22.77%(f)
BT Securities Corp.(g)
5.83% -- 50,000 50,000,000
- -----------------------------------------------------------------------------
Daiwa Securities America, Inc.(h)
5.84% 09/01/95 91,528 91,528,472
- -----------------------------------------------------------------------------
Fuji Securities Inc.(i)
5.87% -- 115,000 115,000,000
- -----------------------------------------------------------------------------
Nesbitt Burns Securities, Inc.(j)
5.86% -- 100,000 100,000,000
- -----------------------------------------------------------------------------
Nikko Securities Co., Ltd.(k)
5.87% 09/01/95 200,000 200,000,000
- -----------------------------------------------------------------------------
Nomura Securities Co., Ltd.(l)
5.85% 09/01/95 100,000 100,000,000
- -----------------------------------------------------------------------------
SBC Government Securities, Inc.(m)
5.87% -- 200,000 200,000,000
- -----------------------------------------------------------------------------
UBS Securities Inc.(n)
5.85% -- 100,000 100,000,000
- -----------------------------------------------------------------------------
</TABLE>
A-30
<PAGE>
<TABLE>
<CAPTION>
VALUE
<S> <C> <C> <C>
Total Repurchase Agreements $ 956,528,472
- ---------------------------------------------------------------------
TOTAL INVESTMENTS - 100.43% 4,219,055,792(o)
- ---------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.43)% (17,975,680)
- ---------------------------------------------------------------------
NET ASSETS - 100% $4,201,080,112
=====================================================================
</TABLE>
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon notice to the issuer. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
August 31, 1995.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven calendar days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on August 31, 1995.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Purchase Agreement will become
payable. Interest rates on master notes are redetermined periodically. Rate
shown is the rate in effect on August 31, 1995.
(e) The Portfolio may demand prepayment of Note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1995.
(f) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds managed
by the investment advisor.
(g) Open repurchase agreement entered into 02/27/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $95,150,000 U.S. Treasury STRIPS, due 08/15/04 to
08/15/05.
(h) Joint repurchase agreement entered into 08/31/95 with a maturing value of
$209,464,857. Collateralized by $204,224,000 U.S. Treasury obligations, 0%
to 10.75% due 11/30/95 to 05/15/16.
(i) Open joint repurchase agreement entered into 12/12/94; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $332,491,000 U.S. Treasury
obligations, 0% to 9.25% due 05/15/97 to 02/15/16.
(j) Open joint repurchase agreement entered into 08/16/95; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $270,681,000 U.S. Treasury STRIPS,
due 11/15/95 to 11/15/21.
(k) Entered into 08/31/95 with a maturing value of $200,032,611. Collateralized
by $271,592,502 U.S. Government agency obligations, 6.583% to 9.50% due
09/01/98 to 08/01/25.
(l) Entered into 08/31/95 with a maturing value of $100,016,250. Collateralized
by $102,805,000 U.S. Government agency obligations, 0% to 8.25% due
10/02/95 to 05/12/05.
(m) Open repurchase agreement entered into 08/16/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $232,765,728 U.S. Government agency obligations, 5.997%
to 9.00% due 11/01/21 to 02/01/31 and $8,000,000 U.S. Treasury Bills due
03/07/96.
(n) Open joint repurchase agreement entered into 08/18/95; however, either
party may terminate the agreement upon demand. Collateralized by
$249,645,000 U.S. Treasury Bills, due 12/14/95 to 01/18/96.
(o) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
A-31
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $3,262,527,320
- ------------------------------------------------------------------------
Repurchase agreements 956,528,472
- ------------------------------------------------------------------------
Interest receivable 1,395,798
- ------------------------------------------------------------------------
Investment for deferred compensation plan 31,965
- ------------------------------------------------------------------------
Other assets 1,351,229
- ------------------------------------------------------------------------
Total assets 4,221,834,784
- ------------------------------------------------------------------------
LIABILITIES:
Dividends payable 20,375,980
- ------------------------------------------------------------------------
Deferred compensation payable 31,965
- ------------------------------------------------------------------------
Accrued advisory fees 213,136
- ------------------------------------------------------------------------
Accrued distribution fees 88,951
- ------------------------------------------------------------------------
Accrued transfer agent fees 5,493
- ------------------------------------------------------------------------
Accrued operating expenses 39,147
- ------------------------------------------------------------------------
Total liabilities 20,754,672
- ------------------------------------------------------------------------
NET ASSETS $4,201,080,112
========================================================================
NET ASSETS:
Institutional Class $3,752,693,248
========================================================================
Private Investment Class $ 154,277,704
========================================================================
Personal Investment Class $ 99,630,235
========================================================================
Cash Management Class $ 194,478,925
========================================================================
NET ASSET VALUE PER SHARE:
Shares outstanding, $0.001 par value per share:
Institutional Class 3,752,704,848
========================================================================
Private Investment Class 154,278,185
========================================================================
Personal Investment Class 99,629,606
========================================================================
Cash Management Class 194,479,527
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
A-32
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $246,526,258
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,567,762
- ----------------------------------------------------------------------------
Custodian fees 329,212
- ----------------------------------------------------------------------------
Administrative services fees 250,216
- ----------------------------------------------------------------------------
Directors' fees and expenses 42,334
- ----------------------------------------------------------------------------
Registration fees 262,523
- ----------------------------------------------------------------------------
Transfer agent fees 89,684
- ----------------------------------------------------------------------------
Distribution fees (Note 2) 795,232
- ----------------------------------------------------------------------------
Other 348,810
- ----------------------------------------------------------------------------
Total expenses 4,685,773
- ----------------------------------------------------------------------------
Less expenses assumed by advisor (50,900)
============================================================================
Net expenses 4,634,873
============================================================================
Net investment income 241,891,385
============================================================================
Net increase in net assets resulting from operations $241,891,385
============================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 241,891,385 $ 155,832,059
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 241,891,385 155,832,059
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (241,891,385) (155,832,059)
- ----------------------------------------------------------------------------
Share transactions-net 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,115,013,351 4,368,706,238
- ----------------------------------------------------------------------------
End of period $4,201,080,112 $4,115,013,351
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,201,092,165 $4,115,025,404
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (12,053) (12,053)
- ----------------------------------------------------------------------------
$4,201,080,112 $4,115,013,351
============================================================================
</TABLE>
See Notes to Financial Statements.
A-33
<PAGE>
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, the Prime Portfolio, which offers separate classes
of shares, and the Liquid Assets Portfolio. Information presented in these
financial statements pertains only to the Prime Portfolio (the "Portfolio").
The assets, liabilities and operations of each portfolio are accounted for
separately. The Portfolio consists of four different classes of shares: the
Institutional Class, the Private Investment Class, the Personal Investment
Class, and the Cash Management Class.
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
--------------------------------------------------------
<S> <C>
First $100 million 0.20%
--------------------------------------------------------
Over $100 million to $200 million 0.15%
--------------------------------------------------------
Over $200 million to $300 million 0.10%
--------------------------------------------------------
Over $300 million to $1.5 billion 0.06%
--------------------------------------------------------
Over $1.5 billion 0.05%
--------------------------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $14,000 on the Prime Portfolio-Private Investment Class, $13,300 on
the Prime Portfolio-Personal Investment Class and $23,600 on the Prime
Portfolio-Cash Management Class during the year ended August 31, 1995.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1995,
the Portfolio reimbursed AIM $154,963 for such services. During the year ended
August 31, 1995, the Fund paid A I M Institutional Fund Services, Inc. ("AIFS")
$143,464 for shareholder and transfer agency services. Effective July 1, 1995,
AIFS became the exclusive transfer agent of the Portfolio.
A-34
<PAGE>
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class and the Cash Management Class
of the Portfolio. The Plan provides that the Portfolio's Private Investment
Class, the Personal Investment Class and the Cash Management Class may pay up
to a 0.50%, 0.75% and 0.10%, respectively, maximum annual rate of the average
daily net assets attributable to such class. Of this amount, the Fund may pay
an asset-based sales charge to FMC and the Fund may pay a service fee of (a)
0.25% of the average daily net assets of each of the Private Investment Class
and the Personal Investment Class and (b) 0.10% of the average daily net assets
of the Cash Management 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 or the Cash Management Class. Any amounts not
paid as a service fee under such Plan would constitute an asset-based sales
charge. During the year ended August 31, 1995, the Prime Portfolio-Private
Investment Class, the Prime Portfolio-Personal Investment Class and Prime
Portfolio-Cash Management Class accrued $367,522, $413,064 and $14,646,
respectively, for compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1995, the Portfolio paid legal fees of $3,247
for services rendered by Reid & Priest as counsel to the Board of Directors. In
September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was appointed
as counsel to the Board of Directors. During the year ended August 31, 1995,
the Portfolio paid legal fees of $10,128 for services rendered by that firm as
counsel. A director of the Fund is a member of Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel and was a member of the firm of Reid & Priest prior to
September 1994.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-SHARE INFORMATION
Changes in shares outstanding during the years ended August 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 30,516,627,315 $30,516,627,315 33,826,759,958 $33,826,759,958
- --------------------------------------------------------------------------------------------
Private Investment
Class 1,403,913,359 1,403,913,359 120,927,192 120,927,192
- --------------------------------------------------------------------------------------------
Personal Investment
Class 881,857,651 881,857,651 15,823,134 15,823,134
- --------------------------------------------------------------------------------------------
Cash Management Class* 307,521,987 307,521,987 25,113,434 25,113,434
- --------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 3,106,371 3,106,371 527,557 527,557
- --------------------------------------------------------------------------------------------
Private Investment
Class 4,691,704 4,691,704 3,982 3,982
- --------------------------------------------------------------------------------------------
Personal Investment
Class 4,299,720 4,299,720 39,701 39,701
- --------------------------------------------------------------------------------------------
Cash Management Class* 896,094 896,094 5,586 5,586
- --------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (30,847,783,300) (30,847,783,300) (34,096,489,905) (34,096,489,905)
- --------------------------------------------------------------------------------------------
Private Investment
Class (1,285,160,664) (1,285,160,664) (107,954,443) (107,954,443)
- --------------------------------------------------------------------------------------------
Personal Investment
Class (789,592,898) (789,592,898) (13,702,087) (13,702,087)
- --------------------------------------------------------------------------------------------
Cash Management Class* (114,310,578) (114,310,578) (24,746,996) (24,746,996)
- --------------------------------------------------------------------------------------------
Net increase (decrease) 86,066,761 $ 86,066,761 (253,692,887) $ (253,692,887)
============================================================================================
</TABLE>
* The Prime Portfolio-Cash Management Class commenced operations on June 30,
1994.
A-35
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Prime Portfolio-Institutional Class during each of the years in the ten-
year period ended August 31, 1995.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
investment
operations:
Net investment
income 0.06 0.04 0.03 0.04 0.07 0.08 0.09 0.07
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less
distributions:
Dividends from
net
investment
income (0.06) (0.04) (0.03) (0.04) (0.07) (0.08) (0.09) (0.07)
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================ ========== ========== ========== ========== ========== ========== ========== ==========
Total return 5.80% 3.64% 3.20% 4.44% 7.11% 8.72% 9.42% 7.34%
================ ========== ========== ========== ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end
of period (000s
omitted) $3,752,693 $4,080,753 $4,349,945 $3,993,340 $6,108,991 $6,475,123 $7,003,546 $5,841,901
================ ========== ========== ========== ========== ========== ========== ========== ==========
Ratio of
expenses to
average net
assets 0.09%(a) 0.08% 0.07% 0.08% 0.07% 0.07% 0.08% 0.09%
================ ========== ========== ========== ========== ========== ========== ========== ==========
Ratio of net
investment
income to
average net
assets 5.64%(a) 3.58% 3.15% 4.43% 6.89% 8.39% 9.07% 7.11%
================ ========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
1987 1986
---------- ----------
<S> <C> <C>
Net asset value,
beginning of
period $ 1.00 $ 1.00
- -------------------- ---------- ----------
Income from
investment
operations:
Net investment
income 0.06 0.07
- -------------------- ---------- ----------
Less
distributions:
Dividends from
net
investment
income (0.06) (0.07)
- -------------------- ---------- ----------
Net asset value,
end of period $ 1.00 $ 1.00
==================== ========== ==========
Total return 6.39% 7.62%
==================== ========== ==========
Ratios/supplemental
data:
Net assets, end
of period (000s
omitted) $4,822,758 $4,237,113
==================== ========== ==========
Ratio of
expenses to
average net
assets 0.08% 0.08%
==================== ========== ==========
Ratio of net
investment
income to
average net
assets 6.22% 7.36%
==================== ========== ==========
</TABLE>
(a) Ratios are based on average net assets of $4,072,096,206.
A-36
<PAGE>
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 12, 1995
(800) 659-1005
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 INSTITUTIONAL CLASS
Houston, Texas 77046-1173
(800) 659-1005 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
Summary......................... 2
CUSTODIAN
THE BANK OF NEW YORK Table of Fees and Expenses...... 4
110 Washington Street
8th Floor Financial Highlights............ 5
New York, New York 10286
Suitability For Investors....... 6
TRANSFER AGENT
Investment Program.............. 6
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 Purchase of Shares.............. 10
Houston, Texas 77046-1173
Redemption of Shares............ 11
Dividends....................... 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE Taxes........................... 12
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS Net Asset Value................. 12
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND Yield Information............... 13
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED Reports to Shareholders......... 13
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THIS Management of the Fund.......... 13
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY General Information............. 15
PERSON TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE. Appendix........................ A-1
</TABLE>
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment objective is the
maximization of current income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by investing in high grade money
PERSONAL market instruments such as U.S. Government obligations, bank obligations, commercial instruments and
INVESTMENT repurchase agreements. The instruments purchased by the Portfolio will have maturities of sixty days or
CLASS less.
DECEMBER 12, 1995 The Portfolio is a series portfolio of Short-Term Investments Co. (the "Fund"), an open-end,
diversified, series, management investment company. This Prospectus relates solely to the Personal
Investment Class of the Portfolio, a class of shares designed to be a convenient vehicle in which
customers of banks, certain broker-dealers and other financial institutions can invest in a diversified
money market fund.
The Fund also offers shares of the following classes of the Portfolio pursuant to separate
prospectuses: the Institutional Class, the Private Investment Class, the Cash Management Class and the
Resource Class, as well as shares of classes of another portfolio of the Fund, the Liquid Assets
Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING
IN SHARES OF THE PERSONAL INVESTMENT CLASS OF THE PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION, DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED
[LOGO APPEARS STATES SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY REFERENCE. FOR A COPY OF THE
HERE] STATEMENT OF ADDITIONAL INFORMATION, WRITE TO THE ADDRESS ABOVE OR CALL (800) 877-4744.
Fund Management Company
11 Greenway Plaza THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND
Suite 1919 THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
Houston, TX 77046-1173 DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE
(800) 877-4744 THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE
PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Personal Investment Class (the "Class") of the
Portfolio. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less. The investment objective
of the Portfolio is the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which customers of banks,
certain broker-dealers and other financial institutions can invest in a
diversified open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $1,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in funds immediately available to the Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
2
<PAGE>
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "Administrator."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay to FMC
as well as certain broker-dealers or other financial institutions up to 0.75%
of the average daily net assets of the Portfolio attributable to the shares of
the Class. Of this amount, up to 0.25% may be for continuing personal services
to shareholders provided by broker-dealers, banks or other financial
institutions and the balance would be deemed an asset-based sales charge. See
"Purchase of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- PERSONAL INVESTMENT CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)............................................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)...................................................... None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)... None
Exchange Fee.......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- PERSONAL INVESTMENT CLASS (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees....................................................... .06%
12b-1 Fees (after fee waivers)*....................................... .50%**
Other Expenses (after expense reimbursements)*........................ .03%
----
Total Portfolio Operating Expenses -- Personal Investment Class....... .59%
====
</TABLE>
- -------
* Had there been no fee waivers and no expense reimbursements, 12b-1 Fees and
Other Expenses would have been 0.75% and 0.05%, respectively.
** It is possible that as a result of Rule 12b-1 fees, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted under rules of the National Association of Securities
Dealers, Inc. Given the Rule 12b-1 fee of the Class, however, it is
estimated that it would take a substantial number of years for a shareholder
to exceed such maximum front-end sales charges.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period.
<TABLE>
<S> <C>
1 year............................................................. $ 6
3 years............................................................ $19
5 years............................................................ $33
10 years........................................................... $74
</TABLE>
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The expense figures
are based upon actual costs and fees charged to the Class for the fiscal year
ended August 31, 1994. There can be no assurance that future waivers of fees
(if any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume additional expenses of the
Class, such assumption of additional expenses will have the effect of lowering
the Class' overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Class should also consider the effect of any
charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses -- Personal Investment Class" remain the same in
the years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively "data") for each of the years in the four year period ended
August 31, 1995 and the period August 8, 1991 (date operations commenced)
through August 31, 1991. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------ ----- ----- -------
<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........... 0.05 0.03 0.03 0.04 0.002
------- ------ ----- ----- -------
Total from investment
operations..................... 0.05 0.03 0.03 0.04 0.002
Less distributions:
Dividends from net investment
income......................... (0.05) (0.03) (0.03) (0.04) (0.002)
------- ------ ----- ----- -------
Net asset value, end of period... $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
======= ====== ===== ===== =======
Total return..................... 5.27% 3.12% 2.74% 3.94% 5.02%(a)
======= ====== ===== ===== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)....................... $99,630 $3,065 $ 904 $ 727 $ 270
======= ====== ===== ===== =======
Ratio of expenses to average net
assets(b)...................... 0.59%(c) 0.58% 0.52% 0.54% 0.80%(a)
======= ====== ===== ===== =======
Ratio of net investment income
to average net assets(b)....... 5.23%(c) 3.34% 2.71% 3.75% 5.03%(a)
======= ====== ===== ===== =======
</TABLE>
- -------
(a) Annualized.
(b) After expense reimbursements. The ratios of expenses and net investment
income prior to expense reimbursement are 0.61% and 5.21%, respectively,
for the year ended August 31, 1995, 2.14% and 1.78%, respectively, for the
year ended August 31, 1994 and 2.03% and 1.20%, respectively, for the year
ended August 31, 1993.
(c) Ratios are based on average net assets of $82,612,764.
5
<PAGE>
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by customers of banks, certain
broker-dealers and other financial institutions who seek a convenient vehicle
in which to invest in an open-end diversified money market fund. The minimum
initial investment is $1,000.
Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments, and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations that may be available in the money markets. Such obligations
include U.S. Treasury obligations, which include Treasury bills, notes and
bonds, and repurchase agreements relating to such securities. These
instruments, which are collectively referred to as "Money Market Obligations,"
are briefly described below. The Portfolio may also engage in the investment
practices described below. The market values of the money market instruments
held by the Portfolio will be affected by changes in the yields available on
similar securities. If yields have increased since a security was purchased,
the market value of such security will generally have decreased. Conversely, if
yields have decreased, the market value of such security will generally have
increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
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BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposits, over 5% of the Portfolio's total
assets would be invested in the time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"), as such Rule may
be amended from time to time. Generally, "First Tier" securities are securities
that are rated in the highest rating category by two nationally recognized
statistical rating organizations ("NRSROs") or, if only rated by one NRSRO, are
rated in the highest rating category by that NRSRO or, if unrated, are
determined by A I M Advisors, Inc. ("AIM") (under the supervision of and
pursuant to guidelines established by the Board of Directors) to be of
comparable quality to a rated security that meets the foregoing quality
standards. Commercial paper consists of short-term promissory notes issued by
corporations. Commercial paper may be traded in the secondary market after its
issuance. Master notes are unsecured demand notes that permit the investment of
fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may fluctuate based upon changes in specified
interest rates or be reset periodically according to a prescribed formula or
may be a set rate. Although there is no secondary market in master notes, if
such notes have a demand feature, the payee may demand payment of the principal
amount of the note upon relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. The
Portfolio may enter into repurchase agreements only with institutions believed
by the Fund's Board of Directors to present minimal credit risk. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the seller's failure to repurchase
the obligation in accordance with the terms of the agreement), the Portfolio
could experience both delays in liquidating the underlying securities and
losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period and (c) the expense of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities. For
additional information, see the Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the
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repurchase price of the securities sold by the Portfolio which it is obligated
to repurchase. The risk, if encountered, could cause a reduction in the net
asset value of the Portfolio's shares. Reverse repurchase agreements are
considered to be borrowings under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered 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 payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreement obligations or when-issued
commitments. If the market value of such securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the account will equal the amount of the Portfolio's delayed delivery agreement
obligations and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investments in securities on a when-issued basis and use of
delayed delivery agreements may increase the Portfolio's exposure to market
fluctuation, or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in
order to honor a when-issued commitment or accept delivery of a security under
a delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks. No additional delayed delivery agreements or when-issued
commitments will be made by the Portfolio if, as a result, more than 25% of the
Portfolio's net assets would become so committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.
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INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investors in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase securities while borrowings in
excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The
United States Securities and Exchange Commission (the "SEC") has proposed
certain changes to Rule 2a-7. While such proposed changes may have a
prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
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A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, President's Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Shares of the Class are sold to customers of banks, certain broker-dealers
and other financial institutions (each, an "Institution" and, collectively,
"Institutions"). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an Institution may invest in the shares of
the Class. Each Institution will render administrative support services to its
customers who are the beneficial owners of the shares of the Class. Such
services may include, among other things, establishment and maintenance of
shareholder accounts and records; assistance in processing purchase and
redemption transactions in shares of the Class; providing periodic statements
to customers showing a client's account balance in shares of the 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.
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
Class through an Institution in accordance with the procedures established by
such Institution. Each Institution separately determines the rules applicable
to accounts in the Class opened with it, including minimum initial and
subsequent investment requirements and the procedures to be followed by
investors to effect purchases of shares of the Class. The minimum initial
investment is $1,000, and there is no minimum amount for subsequent purchases
of shares of the Class by an Institution on behalf of its customers. An
investor who proposes to open a Portfolio account with an Institution should
consult with a representative of such Institution to obtain a description of
the rules governing such an account. The Institution holds shares of the Class
registered in its name, as agent for the customer, on the books of the
Institution. A statement with regard to the customer's shares of the Class is
supplied to the customer periodically, and confirmations of all transactions
for the account of the customer are provided by the Institution to the customer
promptly upon request. In addition, the Institution sends each customer
proxies, periodic reports and other information with regard to the customer's
shares of the Class. The customer's shares of the Class are fully assignable
and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his 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 Class directly, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be 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 Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
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Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Personal Investment Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the net asset value per share of the Portfolio will remain constant
at $1.00. See "Net Asset Value." Redemption requests with respect to shares of
the Class for which certificates have not been issued are normally made through
a customer's Institution.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will 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 Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
such Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses,
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such as custodian fees, directors' fees, accounting and legal expenses, based
upon the Class' pro rata share of the net assets of the Portfolio, less (c)
expenses directly attributable to the Class, such as distribution expenses, if
any, transfer agent fees or registration fees that may be unique to the Class.
Although realized gains and losses on the assets of the Portfolio are reflected
in its net asset value, they are not expected to be of an amount which would
affect its $1.00 per share net asset value for purposes of purchases and
redemptions. See "Net Asset Value." Distributions from net realized short-term
gains may be declared and paid yearly or more frequently. See "Taxes." The
Portfolio does not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the Institution to AIFS at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
The dividend accrued and paid for each class will consist of (a) income of
the Portfolio, the allocation of which is based upon such class' pro rata share
of the total outstanding shares representing an interest in the Portfolio, less
(b) Fund expenses accrued for the applicable dividend period attributable to
the Portfolio, such as custodian fees, trustees' fees, accounting and legal
expenses, based upon such class' pro rata share of the net assets of the
Portfolio, less (c) expenses directly attributable to such class that are
accrued for the applicable dividend period, such as distribution expenses, if
any, transfer agent fees or registration fees that may be unique to such class.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's 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 the then prevailing circumstances. For example, under such unusual
circumstances, the Board of Directors might reduce or suspend the daily
dividend in order to prevent, to the extent possible, the net asset value per
share of the Portfolio from being reduced below $1.00. Thus, such expenses,
losses or depreciation may result in a shareholder receiving no dividends for
the period during which it held its shares of the Class and cause such a
shareholder to receive upon redemption a price per share lower than the
shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31 and intends
to meet the other requirements of Subchapter M, including the requirements with
respect to diversification of assets and sources of income, so that the
Portfolio will pay no taxes on net investment income and net realized capital
gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
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The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each Portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on November 1, 1995 which are subject to change
by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all its
liabilities (including accrued expenses and dividends payable) by the number of
shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods, the daily yield on shares of the Portfolio, computed as
described in "Purchases and Redemptions--Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
877-4744. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY OTHER
INSTITUTION. These factors should be carefully considered by the investor
before investing in the Portfolio.
For the seven-day period ended August 31, 1995, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.26% and 5.40%, 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.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
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Each shareholder will be provided a written confirmation by its Institution
for each transaction unless otherwise specified by the shareholder.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and A I M Management Group Inc. ("AIM Management"), a holding company engaged
in the financial services business. Information concerning the Board of
Directors may be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 37 investment company portfolios. As of October 31, 1995,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $39.3 billion. AIM is a wholly-owned
subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1995, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.06% of the
Portfolio's average daily net assets. During such fiscal year, the expenses of
the Class, including AIM's fees, amounted to 0.59% of the Class' average daily
net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. Under the Administrative Services Agreement, the Portfolio reimburses
AIM for expenses incurred by AIM in connection with such services.
In addition, AIM and AIFS entered into an Administrative Services Agreement
pursuant to which AIFS was reimbursed by AIM for its costs in providing
shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $95,254 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995 AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $48,210.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year.
14
<PAGE>
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Class either directly or
through other broker-dealers. FMC is the distributor of several of the mutual
funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the 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 payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.75% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund 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.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments retained by FMC would be characterized as an asset-
based sales charge pursuant to the 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 the Class. The Plan does not obligate the
Fund to reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund 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.
As required by Rule 12b-1 under the 1940 Act, the Plan was 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 Fund 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") on May 9, 1995. In
approving the continuance of the Plan, the directors considered various factors
and determined that there is a reasonable likelihood that the Plan will benefit
the Fund and the shareholders of the Class.
The Plan requires the officers of the Fund 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.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes 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.
15
<PAGE>
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund which are not directly attributable to a specific class of shares
but are directly attributable to one or both of the Portfolios are prorated
among all classes of such Portfolios. Expenses of the Fund which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment programs. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into eight classes. Five classes, including the Class,
represent interests in the Portfolio and three classes represent interests in
the Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. The other classes of the Fund may have different sales charges and other
expenses which may affect performance. An investor may obtain information
concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemptions which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
16
<PAGE>
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 110 Washington Street, 8th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919 Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-4744.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
<PAGE>
======================================= =======================================
PROSPECTUS
SHORT-TERM INVESTMENTS CO.
11 Greenway Plaza, Suite 1919 December 12, 1995
Houston, Texas 77046-1173
(800) 877-4744 SHORT-TERM
INVESTMENTS CO.
INVESTMENT ADVISOR
A I M ADVISORS, INC. ------------
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 PRIME PORTFOLIO
(713) 626-1919
------------
DISTRIBUTOR
FUND MANAGEMENT COMPANY PERSONAL INVESTMENT CLASS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 TABLE OF CONTENTS
(800) 877-4744
<TABLE>
AUDITORS <CAPTION>
KPMG PEAT MARWICK LLP PAGE
NationsBank Building ----
700 Louisiana <S> <C>
Houston, Texas 77002 SUMMARY.......................... 2
CUSTODIAN TABLE OF FEES AND EXPENSES....... 4
THE BANK OF NEW YORK
110 Washington Street, 8th Floor FINANCIAL HIGHLIGHTS............. 5
New York, New York 10286
SUITABILITY FOR INVESTORS........ 6
TRANSFER AGENT
INVESTMENT PROGRAM............... 6
PURCHASE OF SHARES............... 9
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 REDEMPTION OF SHARES............. 11
Houston, Texas 77046-1173
DIVIDENDS........................ 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY TAXES............................ 12
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE NET ASSET VALUE.................. 13
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR YIELD INFORMATION................ 13
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE REPORTS TO SHAREHOLDERS.......... 13
FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN MANAGEMENT OF THE FUND........... 14
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY GENERAL INFORMATION.............. 16
NOT LAWFULLY BE MADE. </TABLE>
======================================= =======================================
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
PERSONAL INVESTMENT CLASS
OF THE
PRIME PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
(800) 877-4744
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 877-4744
--------------------
Statement of Additional Information Dated: December 12, 1995
Relating to the Prospectus Dated: December 12, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION.................................................... 1
GENERAL INFORMATION ABOUT THE FUND.............................. 1
The Fund and Its Shares.................................... 1
Directors and Officers..................................... 3
Remuneration of Directors.................................. 6
AIM Funds Retirement Plan for Eligible Directors/Trustees.. 7
Deferred Compensation Agreements........................... 8
Investment Advisor......................................... 9
Administrator.............................................. 10
Expenses................................................... 10
Transfer Agent and Custodian............................... 11
Reports.................................................... 11
Principal Holders of Securities............................ 12
PURCHASES AND REDEMPTIONS....................................... 16
Net Asset Value Determination.............................. 16
Distribution Agreement..................................... 16
Distribution Plan.......................................... 17
Banking Regulations........................................ 17
Performance Information.................................... 18
Suspension of Redemption Rights............................ 19
INVESTMENT PROGRAM AND RESTRICTIONS............................. 19
Investment Program......................................... 19
Eligible Securities........................................ 20
Commercial Paper Ratings................................... 21
Bond Ratings............................................... 22
Investment Restrictions.................................... 23
PORTFOLIO TRANSACTIONS.......................................... 25
TAX MATTERS..................................................... 26
Qualification as a Regulated Investment Company............ 26
Excise Tax on Regulated Investment Companies............... 27
Portfolio Distributions.................................... 28
Effect of Future Legislation; Local Tax Considerations..... 28
FINANCIAL STATEMENTS............................................ FS
</TABLE>
i
<PAGE>
INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of Short-
Term Investments Co. (the "Fund"), a mutual fund. The rules and regulations of
the United States Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning the
activities of the fund being considered for investment. This information is
included in a Prospectus dated December 12, 1995 (the "Prospectus"). Copies of
the Prospectus and additional copies of this Statement of Additional Information
may be obtained without charge by writing the distributor of the Portfolio's
shares, Fund Management Company ("FMC"), 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173, or by calling (800) 877-4744. Investors must receive a
Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Personal Investment Class
of the Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus; thus in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993. On October 15, 1993, the Portfolio succeeded to the assets and
assumed the liabilities of the Prime Portfolio (the "Predecessor Portfolio") of
Short-Term Investments Co., a Massachusetts business trust ("STIC"), pursuant to
an Agreement and Plan of Reorganization between the Fund and STIC. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to October 15, 1993 relating to the
Portfolio (or a class thereof) is that of the Predecessor Portfolio (or the
corresponding class thereof). Shares of common stock of the Fund are redeemable
at their net asset value at the option of the shareholder or at the option of
the Fund in certain circumstances. For information concerning the methods of
redemption and the rights of share ownership, investors should consult the
Prospectus under the captions "General Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Liquid Assets Portfolio (together,
the "Portfolios"). The Portfolio consists of the following five classes of
shares: Resource Class, Cash Management Class, Private Investment Class,
Personal Investment Class and the Institutional Class. The Liquid Assets
Portfolio consists of three classes of shares. Each class of shares has
different shareholder qualifications and bears expenses differently. This
Statement of Additional Information and the Prospectus relate solely to shares
of the Personal Investment Class (the "Class") of the Portfolio. Shares of the
other classes of the Portfolio and the classes of the Liquid Assets Portfolio
are offered pursuant to separate prospectuses and statements of additional
information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
1
<PAGE>
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
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 Charter of the Fund authorizes the issuance of 40 billion shares with a
par value of $.001 each, of which 16 billion shares, represent an interest in
the Liquid Assets Portfolio (or class thereof) and 22 billion shares represent
an interest in the Portfolio (or class thereof). A share of a Portfolio (or
class) represents an equal proportionate interest in such Portfolio (or class)
with each other share of that Portfolio (or class) and is entitled to a
proportionate interest in the dividends and distributions from that Portfolio
(or class). Additional information concerning the rights of share ownership is
set forth in the Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Portfolio, and
constitute the underlying assets of that Portfolio. The underlying assets of
each of the Portfolios are segregated and are charged with the expenses with
respect to that Portfolio and with a share of the general expenses of the Fund.
While the expenses of the Fund are allocated to the separate books of account of
each of the Portfolios, certain expenses may be legally chargeable against the
assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its current and former directors to the fullest extent
that indemnification of directors is permitted by the Maryland General
Corporation Law. The Fund shall indemnify and advance expenses to its officers
to the same extent as its directors and to such further extent as is consistent
with law. The Board of Directors may by By-Law, resolution or agreement make
further provision for indemnification of directors, officers, employees and
agents of the Fund to the fullest extent permitted by the Maryland General
Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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 of the Fund, 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 Fund has undertaken to provide a list of shareholders
or to disseminate appropriate materials (at the expense of the requesting
shareholders).
2
<PAGE>
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, A I M Global Management Company Limited and AIM Global Venture Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director, CF
& I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
**CARL FRISCHLlNG, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
- ---------------------
* A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
3
<PAGE>
***ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Executive Vice
President, A I M Distributors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Fund Services, Inc., A I M Global Associates,
Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Senior Vice President, AIM
Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road - Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment companies). Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
- -----------------------
*** A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
4
<PAGE>
****JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice President
and Treasurer, A I M Management Group Inc., A I M Capital Management, Inc., A
I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc. and
AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and Senior
Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M Global
Associates, Inc., A I M Global Holdings, Inc. and AIM Global Ventures Co.;
Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
****CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group Inc.,
A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc. and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and Assistant
Vice President, A I M Distributors, Inc. and Fund Management Company. Formerly,
Vice President, Charles Schwab & Co., Inc.; Assistant Secretary, Charles Schwab
Family of Funds and Schwab Investments; Chief Compliance Officer, Charles Schwab
Investment Management, Inc.; and Vice President, Integrated Resources Life
Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice President, A
I M Capital Management, Inc. and AIM Global Advisors Limited; and Vice
President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and Fund
Management Company; Director and Senior Vice President, A I M Advisors, Inc.;
and Senior Vice President, A I M Management Group Inc.
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit
- ----------------------
**** Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
procedures and results and to consider any matters arising from an audit to be
brought to the attention of the directors as a whole with respect to the
Portfolio's fund accounting or its internal accounting controls, or for
considering such matters as may from time to time be set forth in a charter
adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Fund maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the Board of Directors and such Committee.
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. Most of the Fund'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 attended. The directors of
the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Fund").
Each such director receives a fee, allocated among the AIM Funds for which he
serves as a director or trustee, which consists of an annual retainer component
and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each director of the Fund:
6
<PAGE>
<TABLE>
<CAPTION>
Retirement
Benefits Total
Aggregate Accrued Compensation
Director Compensation by all AIM from all AIM
from Fund(1) Funds(2) Funds(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- --------------------------------------------------------------------------------
Bruce L. Crockett 4,393 2,814 45,094
- --------------------------------------------------------------------------------
Owen Daly II 4,423 14,375 45,844
- --------------------------------------------------------------------------------
Carl Frischling 4,393 7,542 45,094
- --------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- --------------------------------------------------------------------------------
John F. Kroeger 4,423 20,517 45,844
- --------------------------------------------------------------------------------
Lewis F. Pennock 4,423 5,093 45,844
- --------------------------------------------------------------------------------
Ian W. Robinson 4,353 10,396 45,094
- --------------------------------------------------------------------------------
Louis S. Sklar 4,353 4,682 45,094
================================================================================
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $18,174.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$11,985. Data as compensation earned for the calendar year ended
December 31, 1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
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, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 5% of such Director's compensation paid by the AIM Funds multiplied by
the number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is
payable to each eligible director in quarterly installments for a period of no
more than five years. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences, 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 five 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 AIM Fund.
7
<PAGE>
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
Annual Compensation Paid By
All AIM Funds
Number of Years of Service with <S> <C> <C>
the AIM Funds $60,000 $65,000
=====================================
10 $30,000 $32,500
-------------------------------------
9 $27,000 $29,250
-------------------------------------
8 $24,000 $26,000
-------------------------------------
7 $21,000 $22,750
-------------------------------------
6 $18,000 $19,500
-------------------------------------
5 $15,000 $16,250
=====================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $42,334 in directors' fees
and expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees of
$3,247 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended
August 31, 1995, the Portfolio paid legal fees of $10,128 for services rendered
by that firm as counsel. A director of the Fund is a partner of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel and was a partner of the firm of Reid & Priest
prior to September 1994.
8
<PAGE>
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated as of October 18, 1993 (the "Advisory Agreement"). A prior
investment advisory agreement (the "Prior Advisory Agreement") with
substantially identical terms (including the fee schedules) to the Advisory
Agreement was previously in effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises or
manages 37 investment company portfolios. As of October 31, 1995, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $39.3 billion. AIM is a wholly-owned subsidiary
of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. Certain of the directors and officers of AIM
are also executive officers of the Fund and their affiliations are shown under
"Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews annually such reports
(including information on any substantial violations of the Code). Violations
of the Code may result in censure, monetary penalties, suspension or termination
of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services, AIM receives a monthly fee which is
calculated by applying the following annual rates to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets Rate
---------- ----
<S> <C>
First $100 million 0.20%
Over $100 million to $200 million 0.15%
Over $200 million to $300 million 0.10%
Over $300 million to $1.5 billion 0.06%
Over $1.5 billion 0.05%
</TABLE>
The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
The Advisory Agreement provides that, upon the request of the Fund's
Board of Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered
9
<PAGE>
into the Master Administrative Services Agreement under which AIM will provide
the additional services described below under the caption "Administrator".
For the fiscal years ended August 31, 1995, 1994 and 1993, AIM
received fees pursuant to the Advisory Agreement with respect to the Portfolio
(and the Predecessor Portfolio) in the amounts of $2,567,762, $2,599,662 and
$2,647,096, respectively.
The Advisory Agreement will continue in effect until June 30, 1996,
and from year to year thereafter, provided that it is specifically approved at
least annually by the Fund's Board of Directors and the affirmative vote of a
majority of the directors who are not parties to the Advisory Agreement or
"interested persons" of any such party by votes cast in person at a meeting
called for such purpose. The Fund or AIM may terminate the Advisory Agreement
on 60 days' notice without penalty. The Advisory Agreement terminates
automatically in the event of its "assignment," as defined in the 1940 Act.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement, dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM has agreed to perform
or arrange for the performance of certain accounting and other administrative
services for the Portfolio which are not required to be performed by AIM under
the Advisory Agreement. As full compensation for the performance of such
services, AIM is reimbursed for any personnel and other costs (including the
cost of applicable office space, facilities and equipment) of furnishing the
services of a principal financial officer of the Fund and of persons working
under his supervision for maintaining the financial accounts and books and
records of the Fund, 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 Fund's Board of Directors.
The AIFS Administrative Services Agreement between AIM and AIFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provided that AIFS
could perform certain shareholder services for the Portfolio. For such
services, AIFS was entitled to receive from AIM reimbursement of its costs
associated with the Class. The AIFS Administrative Services Agreement was
terminated July 1, 1995. Beginning July 1, 1995, AIFS received fees with
respect to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the period July 1,
1995 through August 31, 1995 AIFS received transfer agency fees from AIM with
respect to the Portfolio in the amount of $48,210.
Under the terms of the Prior Advisory Agreement, AIM was reimbursed
for the fiscal year ended August 31, 1993 in the amount of $94,922 for fund
accounting services for the Portfolio. Pursuant to the Administrative Services
Agreement, A I M was reimbursed for the fiscal years ended August 31, 1995 and
1994 in the amounts of $154,963 and $106,109, respectively, for fund accounting
services for the Portfolio. For the period from August 31, 1994 through June
30, 1995 and for the period from June 1, 1994 through August 31, 1994, AIFS or
its affiliates received shareholder services fees from AIM with respect to the
Portfolio in the amounts of $95,254 and $14,651, respectively.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM
under the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent
10
<PAGE>
or agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and maintenance
of registration of the Fund and shares with the SEC and various states and other
jurisdictions (including filing and legal fees and disbursements of counsel);
the costs and expenses of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and directors' meetings and of preparing, printing and mailing of prospectuses,
proxy statements and reports to shareholders; fees and travel expenses of
directors and director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not "interested persons"
(as defined in the 1940 Act) of the Fund or AIM, and of independent accountants
in connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto). Except as disclosed under the caption "Distribution Plan," FMC
bears the expenses of printing and distributing prospectuses and statements of
additional information (other than those prospectuses and statements of
additional information distributed to existing shareholders of the Fund) 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 Fund's
shares.
Expenses of the Fund which are not directly attributable to the
operations of either of the Portfolios are prorated among all classes of the
Fund based upon the relative net assets of each class. Expenses of the Fund
which are not directly attributable to a specific class of shares but are
directly attributable to one or both of the Portfolios are prorated among all
classes of such Portfolios based upon the relative net assets of each such
class. The expenses of the Portfolio are deducted from its total income before
dividends are paid. Expenses of the Fund which are directly attributable to a
specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities
and cash of the Portfolio. The Bank of New York receives such compensation from
the Fund for its services in such capacity as is agreed to from time to time by
The Bank of New York and the Fund. The address of The Bank of New York is 110
Washington Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173 serves as a transfer agent and dividend
disbursing agent for the Class and receives an annual fee from the Fund for its
services in such capacity in the amount of .007% of average daily net assets of
the Fund, payable monthly. Such compensation may be changed from time to time as
is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held by the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the
Portfolio as of October 25, 1995, and the percentage of the Portfolio's
outstanding shares owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
INSTITUTIONAL CLASS
- -------------------
NationsBank of Texas 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. Bank of Oregon 13.23%
321 Southwest 6th Street
Portland, OR 97208
Trust Company Bank 8.19%
P.O. Box 105504
Atlanta, GA 30348
Texas Commerce Bank 7.62%
P.O. Box 2558
Houston, TX 77252-8098
Boatmen's Trust Company 7.27%
100 North Broadway
St. Louis, MO 63101
Frost National Bank 7.26%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
- -------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corporation 71.90%**
41 South High Street
Columbus, OH 43287
Var & Co. 17.39%
180 East 5th Street
St. Paul, MN 55101
Frost National Bank 6.94%
P.O. Box 1600
San Antonio, TX 78296
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 67.37%**
440 Manaroneck Ave.
Harrison, NY 10528
Cullen/Frost Discount Brokers 30.94%**
P.O. Box 2358
San Antonio, TX 78299
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
CASH MANAGEMENT CLASS
- ---------------------
Piper Jaffray As Agent For Customer 35.24%**
101 California Street
Suite 1150
San Francisco, CA 94111
</TABLE>
- -------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
13
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
Piper Jaffray As Agent For Customer 29.49%**
P.O. Box 160727
Sacramento, CA 95816-0727
Bank Of New York 10.75%
One Wall Street
New York, NY 10286
Citibank As Agent For Customer 8.38%
120 Wall Street 13th Floor
New York, NY 10043
</TABLE>
RESOURCE CLASS
- --------------
AIM provided the initial capitalization of the Resource Class of the
Prime Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
- -------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
14
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
INSTITUTIONAL CLASS
- -------------------
Trust Company Bank 20.96%
P.O. Box 105504
Atlanta, GA 30348
Wachovia Bank & Trust 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
NationsBank Dallas 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
Society National Bank 7.57%
127 Public Square
Cleveland, OH 44114-1306
Boatmen's Trust Company 6.56%
100 North Broadway
St. Louis, MO 63102
Firstar Bank of Madison 5.41%
P.O. Box 7900
Madison, WI 53707
</TABLE>
PRIVATE INVESTMENT CLASS
- ------------------------
AIM provided the initial capitalization of the Private Investment
Class of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Private Investment Class of the Liquid Assets Portfolio. Although
the Private Investment Class of the Liquid Assets Portfolio expects that the
sale of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid Assets
Portfolio, as defined in the 1940 Act.
- -------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
15
<PAGE>
CASH MANAGEMENT CLASS
- ---------------------
AIM provided the initial capitalization of the Cash Management Class
of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Cash Management Class of the Liquid Assets Portfolio. Although the
Cash Management Class of the Liquid Assets Portfolio expects that the sale of
its shares to the public pursuant to the Prospectus will reduce the percentage
of such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Portfolio is permitted in accordance with applicable rules and
regulations of the SEC, including Rule 2a-7 under the 1940 Act. These rules
require that the Portfolio maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase only instruments having remaining maturities of 397
calendar days or less and invest only in securities determined by the Fund's
Board of Directors to be "Eligible Securities" and to present minimal credit
risk to the Portfolio.
The Fund's Board of Directors is required to establish procedures
designed to stabilize, to the extent reasonably practicable, 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's 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
existing holders of the Portfolio's shares. In the event the Board of Directors
determines that such a deviation exists, it will take such corrective action as
the Board of Directors deems necessary and appropriate, including the sales of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten the average portfolio maturity; the withholding of dividends; redemption
of shares in kind; or the establishment of a net asset value per share by using
available market quotations.
DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. See "General Information about the Fund --
Directors and Officers" and "General Information about the Fund -- Investment
Advisor" for information as to the affiliation of certain directors and officers
of the Fund with FMC, AIM and AIM Management.
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<PAGE>
The Distribution Agreement provides that FMC has the exclusive right
to distribute the shares of the Class either directly or through other broker-
dealers. The Distribution Agreement also provides that FMC will pay promotional
expenses, including the incremental costs of printing prospectuses and
statements of additional information, annual reports and other periodic reports
for distribution to persons who are not shareholders of the Portfolio 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 Class.
The Distribution Agreement will continue in effect until June 30,
1996, and from year to year thereafter, provided that it is specifically
approved at least annually by the Fund'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 Fund 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.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund 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 the shares of the Class. These services may include among
other things: (i) answering customer inquiries regarding the Class and the
Portfolio; (ii) assisting customers in changing dividend options, account
designations and addresses; (iii) performing sub-accounting; (iv) establishing
and maintaining shareholder accounts and records; (v) processing purchase and
redemption transactions; (vi) automatic investment of customer cash accounting
balances in shares of the Class; (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 Fund
may request on behalf of the Class, to the extent such firms are permitted to
engage in such services by applicable statute, rule or regulation. The Plan may
only be used for the purposes specified above and as stated in the Plan.
Expenses may not be carried over from year to year.
For the fiscal year ended August 31, 1995, FMC received compensation
pursuant to the Plan in the amount of $413,064, or an amount equal to 0.50% of
the average daily net assets of the Class. Of such amount, $319,720 (or an
amount equal to 0.39% the average daily net assets of the Class) was paid to
dealers and financial institutions and $93,344 (or an amount equal to 0.11% of
the average daily net assets of the Class) was retained by FMC.
FMC is a wholly-owned subsidiary of AIM, which is a wholly-owned
subsidiary of AIM Management. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund, own shares of
AIM Management.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations among
other things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers and
to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, shareholder clients of
such bank would be permitted to remain shareholders of the Fund and alternate
means for continuing the servicing of such shareholders would be sought. In
such event, changes in the operation of the Fund might occur and shareholders
serviced by such bank might no longer be able to avail themselves of any
automatic
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investment or other services then being provided by such bank. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.
In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments more restrictive than the
restrictions described herein. These restrictions are not matters of fundamental
policy, and should the Fund determine that any such commitment is no longer in
the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the states involved.
To permit the sale of shares of the Fund in Texas, the Fund will limit
its investment in securities which are not readily marketable to 15% of its net
assets.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus,
yield information for the Class may be obtained by calling the Fund at (800)
877-4744. The current yield quoted will be the net average annualized yield for
an identified period. Current yield will be computed by assuming that an
account was established with a single share (the "Single Share Account") on the
first day of the period. To arrive at the quoted yield, the net change in the
value of that Single Share Account for the period (which would include dividends
accrued with respect to the share, and dividends declared on shares purchased
with dividends accrued and paid, if any, but would not include realized gains
and losses or unrealized appreciation or depreciation) will be multiplied by 365
and then divided by the number of days in the period, with the resulting figure
carried to the nearest hundredth of one percent. The Fund may also furnish a
quotation of effective yield for the Class that assumes the reinvestment of
dividends for a 365-day year and a return for the entire year equal to the
average annualized yield for the period, which will be computed by compounding
the unannualized current yield for the period by adding 1 to the unannualized
current yield, raising the sum to a power equal to 365 divided by the number of
days in the period, and then subtracting 1 from the result.
For the seven-day period ended August 31, 1995, the current yield and
the effective yield (which assumes the reinvestment of dividends for a 365-day
year and a return for the entire year equal to the annualized current yield for
the period) for the Class were 5.26% and 5.40%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
The Fund may compare the performance of the Class or the performance
of securities in which the Portfolio may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by IBC/Donoghue's
Money Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical
Services, Inc., a widely recognized independent service located in Summit, New
Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
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. other fixed-income investments such as Certificates of Deposit
("CDs").
The principal value and interest rate of CDs and money market
securities are fixed at the time of purchase, whereas the Class's yield will
fluctuate. Unlike some CDs and certain other money market securities, money
market mutual funds are not insured by the FDIC. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
The Fund may reference the growth and variety of money market mutual
funds and AIM's innovation and participation in the industry.
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Portfolio may invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets of $1.5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible imposition
of United Kingdom withholding taxes on interest income payable on Eurodollar CDs
or Eurodollar time deposits, and the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on Eurodollar CDs and Eurodollar
time deposits.
Rule 2a-7 under the 1940 Act provides that a money market fund shall
not invest more than 5% of its total assets in securities issued by the issuer
of the security, provided that such a fund may invest more than 5% of its total
assets in the First Tier securities of a single issuer for a period of up to
three business days after the purchase thereof if the money market fund is a
diversified investment company, provided further, that the fund may not make
more than one investment in accordance with the foregoing proviso at any time.
Under Rule 2a-7, for purposes of determining the percentage of a fund's total
assets that are invested in securities of an issuer, a repurchase agreement
shall be deemed to be an acquisition of the underlying securities, provided that
the obligation of the seller to repurchase the securities from the money market
fund is fully collateralized. To be fully collateralized, the collateral must,
among other things, consist
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<PAGE>
entirely of U.S. Government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the highest rating category
by Requisite NRSROs(1).
The Portfolio may also lend its portfolio securities in amounts up to
33-1/3% of its total assets to financial institutions in accordance with the
investment restrictions of the Portfolio. Such loans would involve risks of
delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be made
only to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money
market funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that
is rated (or that has been issued by an issuer that is rated with respect
to a class of short-term debt obligations, or any security within that
class, that is comparable in priority and security with the security) by
the Requisite NRSROs in one of the two highest rating categories for short-
term debt obligations (within which there may be sub-categories or
gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security
but that has a remaining maturity of 397 calendar days or less, and
(B) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of short-term debt obligations (or any
security within that class) that is now comparable in priority and
security with the security, in one of the two highest rating
categories for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
- --------------------------
(1) "Requisite NRSO" 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 of such security, that
NRSRO. At present the NRSROs are: Standard & Poor's Corp. ("S&P"), Moody's
Investors Service, Inc. ("Moody's), Duff and Phelps, Inc., Fitch Investors
Services, Inc. ("Fitch") and, with respect to certain types of securities,
IBCA Limited and its affiliate, IBCA Inc. Subcategories or gradations in
ratings (such as a "+" or "-") do not count as rating categories.
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(iii) an unrated security(2) that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of this
section, as determined by the money market fund's board of directors;
provided, however, that:
(A) the Board of Directors may base its determination that a
standby commitment is an Eligible Security upon a finding that the
issuer of the commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-term
security but that has a remaining maturity of 397 calendar days or
less and that is an unrated security is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be sub-
categories or gradations indicating relative standing).
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the
commercial paper ratings of Moody's, S&P and Fitch.
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following
characteristics. Liquidity ratios are adequate to meet cash requirements. Long-
term senior debt is rated "A" or better, although in some cases "BBB" credits
may be allowed. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management is unquestioned. The relative strength or weakness of the
above factors determine whether the issuer's commercial paper is rated A-1, A-2
or A-3.
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch's short-term ratings are as
follows:
- -------------------------------
(2) An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of comparable
priority and security; (ii) that was a long-term security at the time of
issuance and whose issuer has not received from any NRSRO a rating with
respect to a class of short-term debt obligations now comparable in
priority and security; or (iii) a security that is rated but which is the
subject of an external credit support agreement not in effect when the
security was assigned its rating, provided that a security is not an
unrated security if any short-term debt obligation issued by the issuer and
comparable in priority and security is rated by any NRSRO.
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<PAGE>
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated "F-
1."
Plus(+) and Minus (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond
ratings of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of Moody's.
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 edge." Interest payments are protected by a large or 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 Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the two highest bond ratings of S&P.
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
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<PAGE>
AA
Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
FITCH -- 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 guaranties unless otherwise
indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch 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.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in
the securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to investments in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
and bank instruments, such as CDs, bankers' acceptances, time deposits
and bank repurchase agreements;
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<PAGE>
(2) purchase securities of any one issuer (other than
obligations of the U.S. Government, its agencies or instrumentalities)
if, immediately after such purchase, more than 5% of the value of the
Portfolio's total assets would be invested in such issuer, except as
permitted by Rule 2a-7 under the 1940 Act, as such Rule may be amended
from time to time;
(3) borrow money or issue senior securities except (a) for
temporary or emergency purposes (e.g., in order to facilitate the
orderly sale of portfolio securities to accommodate abnormally heavy
redemption requests), the Portfolio may borrow money from banks or
obtain funds by entering into reverse repurchase agreements, and (b)
to the extent that entering into commitments to purchase securities in
accordance with the Portfolio's investment program may be considered
the issuance of senior securities, provided that the Portfolio will
not purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and
then only in an amount up to 33 1/3% of the value of its total assets
at the time of borrowing or entering into a reverse repurchase
agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's
investment program, (b) by entering into repurchase agreements and (c)
by lending portfolio securities to the extent permitted by law or
regulation;
(6) underwrite securities issued by any other person, except to
the extent that the purchase of securities and the later disposition
of such securities in accordance with the Portfolio's investment
program may be deemed an underwriting;
(7) invest in real estate, except that the Portfolio may
purchase and sell securities secured by real estate or interests
therein or issued by issuers which invest in real estate or interests
therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or
calls;
(9) invest in any obligation not payable as to principal and
interest in United States currency; or
(10) acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
State Law Restrictions The Fund may, from time to time in order to
qualify shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the Ohio Division
of Securities, the Portfolio will not purchase the securities of an issuer if
the officers or directors of the Fund who own more than 0.5% of the securities
of the issuer together own beneficially more than 5% of the securities of such
issuer.
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<PAGE>
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
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 market. For example, market
conditions frequently result in similar securities trading at different prices.
AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The investment policy of the Portfolio requires that investments
mature within 60 days or less. Thus, there is likely to be relatively high
portfolio turnover, but since brokerage commissions are not normally paid on
money market instruments, the high rate of portfolio turnover is not expected to
have a material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by AIM to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement of
portfolio transactions of other clients may be of value to AIM in fulfilling its
obligations to the Portfolio. AIM is of the opinion that the material received
is beneficial in supplementing AIM's research and analysis; and therefore, it
may benefit the Portfolio by improving the quality of AIM's investment advice.
The advisory fees paid by the Portfolio are not reduced because AIM receives
such services.
From time to time, the Fund may sell a security to, or purchase a
security from, an AIM Fund or another investment account advised by AIM or A I M
Capital Management, Inc. ("AIM Capital"), when such transactions comply with
applicable rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by AIM or AIM
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have been
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Fund. Although such transactions may result in custodian, tax or other
related expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Fund from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The Fund
has obtained an order of exemption from the SEC which permits the Portfolio to
engage in certain transactions with such 5% holder, if the Portfolio complies
with conditions and procedures designed to ensure that such transactions are
executed at fair market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some
of which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same
25
<PAGE>
issue may likewise vary. The timing and amount of purchase by each account will
also be determined by its cash position. If the purchase or sale of securities
is consistent with the investment policies of the Portfolio and one or more of
these accounts and is considered at or about the same time, transactions in such
securities will be allocated in good faith among such accounts, in accordance
with applicable laws and regulations, in order to obtain the best net price and
most favorable execution. The allocation and combination of simultaneous
securities purchased on behalf of the Portfolio will be made in the same way
that such purchases are allocated among or combined with those of other AIM
accounts. Simultaneous transactions could adversely affect the ability of the
Portfolio to obtain or dispose of the full amount of a security which it seeks
to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited
from dealing with the Portfolio as a 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 Fund from purchasing a
security being publicly underwritten by a syndicate of which persons affiliated
with the Fund are members except in accordance with certain conditions. These
conditions may restrict the ability of the Portfolio to purchase money market
obligations being publicly underwritten by such a syndicate, and the Portfolio
may be required to wait until the syndicate has been terminated before buying
such securities. At such time, the market price of the securities may be higher
or lower than the original offering price. A person affiliated with the Fund
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligations and be paid a fee by such issuer. The
Portfolio may purchase such money market obligations directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and such purchase is reviewed at least quarterly by
the Fund's Board of Directors and a determination is made that all such
purchases were effected in compliance with such procedures, including a
determination that the placement fee or other remuneration paid by the issuer
to the person affiliated with the Fund was fair and reasonable in relation to
the fees charged by other performing similar services. During the fiscal year
ended August 31, 1995, no securities or instruments were purchased by the
Portfolio from issuers who paid placement fees or other compensation to a broker
affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Portfolio and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Portfolio or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities
26
<PAGE>
loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to
the regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies (the "Income Requirement"); and (2)
derive less than 30% of its gross income (exclusive of certain gains on
designated hedging transactions that are offset by realized or unrealized losses
on offsetting positions) from the sale or other disposition of stock, securities
or foreign currencies (or of options, futures or forward contracts thereon) held
for less than three months (the "Short-Short Gain Test"). However, foreign
currency gains, including those derived from options, futures and forward
contracts, will not be characterized as Short-Short Gains if they are directly
related to the regulated investment company's principal business of investing in
stock or securities (or in options or futures thereon). Because of the Short-
Short Gain Test, a fund may have to limit the sale of appreciated securities
that it has held for less than three months. However, the Short-Short Gain Test
will not prevent a fund from disposing of investments at a loss, since the
recognition of a loss before the expiration of the three-month holding period is
disregarded. Interest (including original issue discount) received by a fund at
maturity or upon the disposition of a security held for less than three months
will not be treated as gross income derived from the sale or other disposition
of a security within the meaning of the Short-Short Gain Test. However, income
that is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
In addition to satisfying the requirements described above, a
regulated investment company must satisfy an asset diversification test in order
to qualify for tax purposes as a regulated investment company. Under this test,
at the close of each quarter of a fund's taxable year, at least 50% of the value
of a fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a fund has not invested more than 5% of the value
of a fund's total assets in securities of such issuer and as to which a fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any other issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which a fund controls and which are engaged in the same or similar trades or
businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Portfolio may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
27
<PAGE>
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions
will be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will not qualify for the 70% dividends
received deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, 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 the ordinary income dividends and capital gain
dividends and, in certain cases, 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 Fund that it
is not subject to backup withholding or that it is a corporation or other
"exempt recipient."
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 November 1, 1995. Future legislative or administrative changes or
court decisions may significantly change the conclusions expressed herein, and
any such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisors as to the consequences of these and other state
and local tax rules affecting investment in the Portfolio.
28
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1995, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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
Prime Portfolio as of August 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the ten-year period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
October 6, 1995
FS-1
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 71.82%(a)
BASIC INDUSTRIES - 0.30%
MULTIPLE INDUSTRY - 0.30%
Philip Morris Companies, Inc.
5.75% 10/04/95 $ 12,500 $ 12,434,115
- ----------------------------------------------------------------------
Total Basic Industries 12,434,115
- ----------------------------------------------------------------------
BUSINESS SERVICES - 5.90%
POLLUTION CONTROL SERVICES - 2.15%
Browning-Ferris Industries, Inc.
5.69% 09/08/95 20,000 19,977,872
- ----------------------------------------------------------------------
5.75% 09/15/95 18,000 17,959,750
- ----------------------------------------------------------------------
5.73% 09/18/95 20,000 19,945,883
- ----------------------------------------------------------------------
5.75% 09/19/95 12,700 12,663,487
- ----------------------------------------------------------------------
5.73% 09/22/95 20,000 19,933,150
- ----------------------------------------------------------------------
90,480,142
- ----------------------------------------------------------------------
MISCELLANEOUS - 3.75%
Donnelley (R.R.) & Sons Co.
5.73% 09/22/95 53,000 52,822,848
- ----------------------------------------------------------------------
PHH Corp.
5.75% 09/13/95 47,100 47,009,725
- ----------------------------------------------------------------------
5.75% 10/11/95 58,000 57,629,445
- ----------------------------------------------------------------------
157,462,018
- ----------------------------------------------------------------------
Total Business Services 247,942,160
- ----------------------------------------------------------------------
CAPITAL GOODS - 2.35%
COMPUTERS & OFFICE EQUIPMENT - 1.40%
Xerox Corp.
5.75% 10/04/95 31,025 30,861,472
- ----------------------------------------------------------------------
Xerox Credit Corp.
5.73% 09/19/95 11,000 10,968,485
- ----------------------------------------------------------------------
5.74% 10/05/95 16,981 16,888,944
- ----------------------------------------------------------------------
58,718,901
- ----------------------------------------------------------------------
MACHINERY - 0.95%
Dover Corp.
5.75% 09/11/95 14,000 13,977,639
- ----------------------------------------------------------------------
5.75% 09/25/95 15,000 14,942,500
- ----------------------------------------------------------------------
5.77% 10/02/95 11,191 11,135,396
- ----------------------------------------------------------------------
40,055,535
- ----------------------------------------------------------------------
Total Capital Goods 98,774,436
- ----------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 2.52%
AUTOMOBILE - 2.52%
Daimler-Benz North America Corp.
5.68% 09/08/95 $ 66,000 $ 65,927,107
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.75% 10/06/95 40,000 39,776,389
- -------------------------------------------------------------------
Total Consumer Durables 105,703,496
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 3.32%
HOUSEHOLD PRODUCTS - 3.32%
Colgate-Palmolive Co.
5.70% 09/15/95 61,550 61,413,564
- -------------------------------------------------------------------
5.71% 09/18/95 20,000 19,946,072
- -------------------------------------------------------------------
5.72% 09/20/95 19,500 19,441,132
- -------------------------------------------------------------------
5.72% 09/21/95 38,800 38,676,702
- -------------------------------------------------------------------
Total Consumer Nondurables 139,477,470
- -------------------------------------------------------------------
CONSUMER SERVICES - 2.91%
MISCELLANEOUS - 2.91%
USL Capital Corp.
5.73% 09/07/95 21,000 20,979,945
- -------------------------------------------------------------------
5.74% 09/07/95 21,000 20,979,910
- -------------------------------------------------------------------
5.73% 09/19/95 9,000 8,974,215
- -------------------------------------------------------------------
5.77% 09/21/95 15,500 15,450,314
- -------------------------------------------------------------------
5.73% 10/05/95 31,016 30,848,152
- -------------------------------------------------------------------
5.74% 10/13/95 25,000 24,832,583
- -------------------------------------------------------------------
Total Consumer Services 122,065,119
- -------------------------------------------------------------------
ENERGY - 3.31%
NATURAL GAS - 1.45%
Colonial Pipeline Co.
5.72% 09/12/95 15,000 14,973,783
- -------------------------------------------------------------------
5.72% 09/19/95 13,800 13,760,532
- -------------------------------------------------------------------
5.76% 09/28/95 12,000 11,948,160
- -------------------------------------------------------------------
5.78% 09/29/95 20,100 20,009,639
- -------------------------------------------------------------------
60,692,114
- -------------------------------------------------------------------
OIL & GAS - 1.86%
ARCO Coal Australia Inc.
5.69% 09/12/95 9,501 9,484,482
- -------------------------------------------------------------------
5.70% 09/14/95 12,489 12,463,293
- -------------------------------------------------------------------
5.75% 09/15/95 14,788 14,754,932
- -------------------------------------------------------------------
5.72% 10/10/95 12,507 12,429,498
- -------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ENERGY--(continued)
OIL & GAS - (CONTINUED)
Mobil Australia Finance Company, Inc.
5.68% 09/01/95 $ 29,088 $ 29,088,000
- ------------------------------------------------------------------------
78,220,205
- ------------------------------------------------------------------------
Total Energy 138,912,319
- ------------------------------------------------------------------------
FINANCIAL - 47.89%
ASSET-BACKED SECURITIES - 22.81%
Asset Securitization Cooperative Corp.
5.70% 09/08/95 55,000 54,939,041
- ------------------------------------------------------------------------
5.72% 09/22/95 10,000 9,966,633
- ------------------------------------------------------------------------
5.72% 10/26/95 55,000 54,519,361
- ------------------------------------------------------------------------
5.71% 10/27/95 30,000 29,733,533
- ------------------------------------------------------------------------
Ciesco, L.P.
5.73% 09/06/95 15,000 14,988,063
- ------------------------------------------------------------------------
5.72% 10/18/95 40,000 39,701,289
- ------------------------------------------------------------------------
Clipper Receivables Corp.
5.77% 09/12/95 50,000 49,911,848
- ------------------------------------------------------------------------
5.77% 09/13/95 28,911 28,855,394
- ------------------------------------------------------------------------
5.77% 09/14/95 17,227 17,191,106
- ------------------------------------------------------------------------
5.77% 09/19/95 57,000 56,835,555
- ------------------------------------------------------------------------
5.77% 09/25/95 19,000 18,926,913
- ------------------------------------------------------------------------
Corporate Asset Funding Co. Inc.
5.73% 09/06/95 32,900 32,873,817
- ------------------------------------------------------------------------
5.74% 09/07/95 25,000 24,976,083
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.72% 09/18/95 16,228 16,184,166
- ------------------------------------------------------------------------
5.76% 09/25/95 12,134 12,087,405
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.75% 09/14/95 27,540 27,482,816
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.76% 09/11/95 15,325 15,300,480
- ------------------------------------------------------------------------
5.77% 09/20/95 25,000 24,923,868
- ------------------------------------------------------------------------
5.74% 10/04/95 31,425 31,259,653
- ------------------------------------------------------------------------
5.75% 10/04/95 15,050 14,970,674
- ------------------------------------------------------------------------
5.74% 10/12/95 15,825 15,721,548
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.75% 09/27/95 31,016 30,887,197
- ------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Preferred Receivables Funding Corp.
5.70% 09/08/95 $ 11,375 $ 11,362,393
- ------------------------------------------------------------------------
5.73% 09/14/95 20,875 20,831,806
- ------------------------------------------------------------------------
5.73% 09/18/95 30,125 30,043,487
- ------------------------------------------------------------------------
5.75% 10/05/95 81,275 80,833,633
- ------------------------------------------------------------------------
5.73% 10/20/95 30,125 29,890,050
- ------------------------------------------------------------------------
Sheffield Receivables Corp.
5.72% 09/06/95 25,800 25,779,503
- ------------------------------------------------------------------------
5.71% 09/12/95 24,700 24,656,905
- ------------------------------------------------------------------------
5.77% 09/13/95 46,000 45,911,528
- ------------------------------------------------------------------------
5.77% 09/14/95 40,000 39,916,656
- ------------------------------------------------------------------------
5.73% 09/19/95 26,900 26,822,931
- ------------------------------------------------------------------------
958,285,335
- ------------------------------------------------------------------------
BUSINESS CREDIT - 4.08%
CIT Group Holdings, Inc.
5.68% 09/06/95 30,000 29,976,333
- ------------------------------------------------------------------------
5.68% 09/07/95 30,000 29,971,600
- ------------------------------------------------------------------------
5.72% 09/21/95 75,000 74,761,667
- ------------------------------------------------------------------------
5.72% 10/20/95 37,000 36,711,934
- ------------------------------------------------------------------------
171,421,534
- ------------------------------------------------------------------------
INSURANCE - 2.33%
MetLife Funding, Inc.
5.72% 09/22/95 50,000 49,833,166
- ------------------------------------------------------------------------
5.74% 10/12/95 48,211 47,895,834
- ------------------------------------------------------------------------
97,729,000
- ------------------------------------------------------------------------
PERSONAL CREDIT - 7.68%
Associates Corp. of North America
5.73% 10/18/95 50,000 49,625,958
- ------------------------------------------------------------------------
5.73% 10/19/95 100,000 99,236,000
- ------------------------------------------------------------------------
AVCO Financial Services, Inc.
5.70% 09/15/95 50,000 49,889,167
- ------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Household Finance Corp.
5.75% 10/12/95 $ 50,000 $ 49,672,569
- --------------------------------------------------------------------
5.73% 10/20/95 50,000 49,610,042
- --------------------------------------------------------------------
Student Loan Corp.
5.73% 10/20/95 25,000 24,805,021
- --------------------------------------------------------------------
322,838,757
- --------------------------------------------------------------------
MISCELLANEOUS - 7.10%
Hertz Corp. (The)
5.69% 09/07/95 25,000 24,976,292
- --------------------------------------------------------------------
5.68% 09/08/95 20,000 19,977,911
- --------------------------------------------------------------------
5.70% 09/18/95 81,000 80,781,975
- --------------------------------------------------------------------
5.72% 10/06/95 35,000 34,805,361
- --------------------------------------------------------------------
5.75% 10/13/95 11,500 11,422,854
- --------------------------------------------------------------------
International Lease Finance Corp.
5.70% 09/15/95 19,000 18,957,883
- --------------------------------------------------------------------
5.71% 09/25/95 18,500 18,429,577
- --------------------------------------------------------------------
5.72% 10/05/95 6,570 6,534,507
- --------------------------------------------------------------------
5.72% 10/06/95 38,900 38,683,673
- --------------------------------------------------------------------
5.73% 10/13/95 44,000 43,705,860
- --------------------------------------------------------------------
298,275,893
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 3.89%
General Electric Capital Corp.
5.74% 09/07/95 23,500 23,477,518
- --------------------------------------------------------------------
5.72% 09/20/95 100,000 99,698,110
- --------------------------------------------------------------------
5.71% 10/06/95 40,500 40,275,169
- --------------------------------------------------------------------
163,450,797
- --------------------------------------------------------------------
Total Financial 2,012,001,316
- --------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.69% 09/12/95 20,424 20,388,491
- --------------------------------------------------------------------
5.73% 09/22/95 23,224 23,146,374
- --------------------------------------------------------------------
5.72% 10/10/95 26,556 26,391,441
- --------------------------------------------------------------------
5.74% 10/13/95 26,759 26,579,804
- --------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
OTHER--(continued)
DIVERSIFIED - (CONTINUED)
Cargill Inc.
5.69% 09/08/95 $ 12,000 $ 11,986,724
- ----------------------------------------------------------------------------
5.70% 09/11/95 16,300 16,274,192
- ----------------------------------------------------------------------------
5.73% 09/22/95 15,000 14,949,863
- ----------------------------------------------------------------------------
Total Other 139,716,889
- ----------------------------------------------------------------------------
Total Commercial Paper 3,017,027,320
- ----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 4.06%
Citicorp Securities, Inc.(b)
6.063% 09/13/95 6,000 6,000,000
- ----------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.(c)
5.988% 10/16/95 87,500 87,500,000
- ----------------------------------------------------------------------------
Morgan Stanley Group, Inc.(d)
5.893% 01/29/96 77,000 77,000,000
- ----------------------------------------------------------------------------
Total Master Note Agreements 170,500,000
- ----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENTS - 1.78%
Goldman, Sachs & Co.(e)
5.913% 01/29/96 75,000 75,000,000
- ----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 3,262,527,320
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 22.77%(f)
BT Securities Corp.(g)
5.83% -- 50,000 50,000,000
- ----------------------------------------------------------------------------
Daiwa Securities America, Inc.(h)
5.84% 09/01/95 91,528 91,528,472
- ----------------------------------------------------------------------------
Fuji Securities Inc.(i)
5.87% -- 115,000 115,000,000
- ----------------------------------------------------------------------------
Nesbitt Burns Securities, Inc.(j)
5.86% -- 100,000 100,000,000
- ----------------------------------------------------------------------------
Nikko Securities Co., Ltd.(k)
5.87% 09/01/95 200,000 200,000,000
- ----------------------------------------------------------------------------
Nomura Securities Co., Ltd.(l)
5.85% 09/01/95 100,000 100,000,000
- ----------------------------------------------------------------------------
SBC Government Securities, Inc.(m)
5.87% -- 200,000 200,000,000
- ----------------------------------------------------------------------------
UBS Securities Inc.(n)
5.85% -- 100,000 100,000,000
- ----------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
VALUE
<S> <C>
Total Repurchase Agreements $ 956,528,472
- ---------------------------------------------------------------------
TOTAL INVESTMENTS - 100.43% 4,219,055,792(o)
- ---------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.43)% (17,975,680)
- ---------------------------------------------------------------------
NET ASSETS - 100% $4,201,080,112
=====================================================================
</TABLE>
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon notice to the issuer. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
August 31, 1995.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven calendar days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on August 31, 1995.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Purchase Agreement will become
payable. Interest rates on master notes are redetermined periodically. Rate
shown is the rate in effect on August 31, 1995.
(e) The Portfolio may demand prepayment of Note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1995.
(f) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds managed
by the investment advisor.
(g) Open repurchase agreement entered into 02/27/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $95,150,000 U.S. Treasury STRIPS, due 08/15/04 to
08/15/05.
(h) Joint repurchase agreement entered into 08/31/95 with a maturing value of
$209,464,857. Collateralized by $204,224,000 U.S. Treasury obligations, 0%
to 10.75% due 11/30/95 to 05/15/16.
(i) Open joint repurchase agreement entered into 12/12/94; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $332,491,000 U.S. Treasury
obligations, 0% to 9.25% due 05/15/97 to 02/15/16.
(j) Open joint repurchase agreement entered into 08/16/95; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $270,681,000 U.S. Treasury STRIPS,
due 11/15/95 to 11/15/21.
(k) Entered into 08/31/95 with a maturing value of $200,032,611. Collateralized
by $271,592,502 U.S. Government agency obligations, 6.583% to 9.50% due
09/01/98 to 08/01/25.
(l) Entered into 08/31/95 with a maturing value of $100,016,250. Collateralized
by $102,805,000 U.S. Government agency obligations, 0% to 8.25% due
10/02/95 to 05/12/05.
(m) Open repurchase agreement entered into 08/16/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $232,765,728 U.S. Government agency obligations, 5.997%
to 9.00% due 11/01/21 to 02/01/31 and $8,000,000 U.S. Treasury Bills due
03/07/96.
(n) Open joint repurchase agreement entered into 08/18/95; however, either
party may terminate the agreement upon demand. Collateralized by
$249,645,000 U.S. Treasury Bills, due 12/14/95 to 01/18/96.
(o) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $3,262,527,320
- ------------------------------------------------------------------------
Repurchase agreements 956,528,472
- ------------------------------------------------------------------------
Interest receivable 1,395,798
- ------------------------------------------------------------------------
Investment for deferred compensation plan 31,965
- ------------------------------------------------------------------------
Other assets 1,351,229
- ------------------------------------------------------------------------
Total assets 4,221,834,784
- ------------------------------------------------------------------------
LIABILITIES:
Dividends payable 20,375,980
- ------------------------------------------------------------------------
Deferred compensation payable 31,965
- ------------------------------------------------------------------------
Accrued advisory fees 213,136
- ------------------------------------------------------------------------
Accrued distribution fees 88,951
- ------------------------------------------------------------------------
Accrued transfer agent fees 5,493
- ------------------------------------------------------------------------
Accrued operating expenses 39,147
- ------------------------------------------------------------------------
Total liabilities 20,754,672
- ------------------------------------------------------------------------
NET ASSETS $4,201,080,112
========================================================================
NET ASSETS:
Institutional Class $3,752,693,248
========================================================================
Private Investment Class $ 154,277,704
========================================================================
Personal Investment Class $ 99,630,235
========================================================================
Cash Management Class $ 194,478,925
========================================================================
NET ASSET VALUE PER SHARE:
Shares outstanding, $0.001 par value per share:
Institutional Class 3,752,704,848
========================================================================
Private Investment Class 154,278,185
========================================================================
Personal Investment Class 99,629,606
========================================================================
Cash Management Class 194,479,527
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-9
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $246,526,258
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 2,567,762
- -------------------------------------------------------------------
Custodian fees 329,212
- -------------------------------------------------------------------
Administrative services fees 250,216
- -------------------------------------------------------------------
Directors' fees and expenses 42,334
- -------------------------------------------------------------------
Transfer agent fees 89,684
- -------------------------------------------------------------------
Registration fees 262,523
- -------------------------------------------------------------------
Distribution fees (Note 2) 795,232
- -------------------------------------------------------------------
Other 348,810
- -------------------------------------------------------------------
Total expenses 4,685,773
- -------------------------------------------------------------------
Less expenses assumed by advisor (50,900)
===================================================================
Net expenses 4,634,873
===================================================================
Net investment income 241,891,385
===================================================================
Net increase in net assets resulting from operations $241,891,385
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 241,891,385 $ 155,832,059
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 241,891,385 155,832,059
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (241,891,385) (155,832,059)
- ----------------------------------------------------------------------------
Share transactions-net 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,115,013,351 4,368,706,238
- ----------------------------------------------------------------------------
End of period $4,201,080,112 $4,115,013,351
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,201,092,165 $4,115,025,404
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (12,053) (12,053)
- ----------------------------------------------------------------------------
$4,201,080,112 $4,115,013,351
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, the Prime Portfolio, which offers separate classes
of shares, and the Liquid Assets Portfolio. Information presented in these
financial statements pertains only to the Prime Portfolio (the "Portfolio").
The assets, liabilities and operations of each portfolio are accounted for
separately. The Portfolio consists of four different classes of shares: the
Institutional Class, the Private Investment Class, the Personal Investment
Class, and the Cash Management Class.
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
- -----------------------------------------------------------------------
<S> <C>
First $100 million 0.20%
- -----------------------------------------------------------------------
Over $100 million to $200 million 0.15%
- -----------------------------------------------------------------------
Over $200 million to $300 million 0.10%
- -----------------------------------------------------------------------
Over $300 million to $1.5 billion 0.06%
- -----------------------------------------------------------------------
Over $1.5 billion 0.05%
- -----------------------------------------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $14,000 on the Prime Portfolio-Private Investment Class, $13,300 on
the Prime Portfolio-Personal Investment Class and $23,600 on the Prime
Portfolio-Cash Management Class during the year ended August 31, 1995.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1995,
the Portfolio reimbursed AIM $154,963 for such services. During the year ended
August 31, 1995, the Fund paid A I M Institutional Fund
FS-12
<PAGE>
Services, Inc. ("AIFS") $143,464 for shareholder and transfer agency services.
Effective July 1, 1995, AIFS became the exclusive transfer agent of the
Portfolio.
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 and the Cash Management Class
of the Portfolio. The Plan provides that the Portfolio's Private Investment
Class, the Personal Investment Class and the Cash Management Class may pay up
to a 0.50%, 0.75% and 0.10%, respectively, maximum annual rate of the average
daily net assets attributable to such class. Of this amount, the Fund may pay
an asset-based sales charge to FMC and the Fund may pay a service fee of (a)
0.25% of the average daily net assets of each of the Private Investment Class
and the Personal Investment Class and (b) 0.10% of the average daily net assets
of the Cash Management 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 or the Cash Management Class. Any amounts not
paid as a service fee under such Plan would constitute an asset-based sales
charge. During the year ended August 31, 1995, the Prime Portfolio-Private
Investment Class, the Prime Portfolio-Personal Investment Class and Prime
Portfolio-Cash Management Class accrued $367,522, $413,064 and $14,646,
respectively, for compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1995, the Portfolio paid legal fees of $3,247
for services rendered by Reid & Priest as counsel to the Board of Directors. In
September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was appointed
as counsel to the Board of Directors. During the year ended August 31, 1995,
the Portfolio paid legal fees of $10,128 for services rendered by that firm as
counsel. A director of the Fund is a member of Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel and was a member of the firm of Reid & Priest prior to
September 1994.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-SHARE INFORMATION
Changes in shares outstanding during the years ended August 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 30,516,627,315 $30,516,627,315 33,826,759,958 $33,826,759,958
- -------------------------------------------------------------------------------------------
Private Investment
Class 1,403,913,359 1,403,913,359 120,927,192 120,927,192
- -------------------------------------------------------------------------------------------
Personal Investment
Class 881,857,651 881,857,651 15,823,134 15,823,134
- -------------------------------------------------------------------------------------------
Cash Management Class* 307,521,987 307,521,987 25,113,434 25,113,434
- -------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 3,106,371 3,106,371 527,557 527,557
- -------------------------------------------------------------------------------------------
Private Investment
Class 4,691,704 4,691,704 3,982 3,982
- -------------------------------------------------------------------------------------------
Personal Investment
Class 4,299,720 4,299,720 39,701 39,701
- -------------------------------------------------------------------------------------------
Cash Management Class* 896,094 896,094 5,586 5,586
- -------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (30,847,783,300) (30,847,783,300) (34,096,489,905) (34,096,489,905)
- -------------------------------------------------------------------------------------------
Private Investment
Class (1,285,160,664) (1,285,160,664) (107,954,443) (107,954,443)
- -------------------------------------------------------------------------------------------
Personal Investment
Class (789,592,898) (789,592,898) (13,702,087) (13,702,087)
- -------------------------------------------------------------------------------------------
Cash Management Class* (114,310,578) (114,310,578) (24,746,996) (24,746,996)
- -------------------------------------------------------------------------------------------
Net increase (decrease) 86,066,761 $ 86,066,761 (253,692,887) $ (253,692,887)
===========================================================================================
</TABLE>
* The Prime Portfolio-Cash Management Class commenced operations on June 30,
1994.
FS-13
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Prime
Portfolio-Personal Investment Class outstanding during each of the years in the
four-year period ended August 31, 1995 and the period August 8, 1991 (date
operations commenced) through August 31, 1991.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------ ----- ----- ------
<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 0.05 0.03 0.03 0.04 0.002
================================== ======= ====== ===== ===== ======
Total from investment operations 0.05 0.03 0.03 0.04 0.002
================================== ======= ====== ===== ===== ======
Less distributions:
Dividends from net investment
income (0.05) (0.03) (0.03) (0.04) (0.002)
- ---------------------------------- ------- ------ ----- ----- ------
Net asset value, end of period $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
================================== ======= ====== ===== ===== ======
Total return 5.27% 3.12% 2.74% 3.94% 5.02%(a)
================================== ======= ====== ===== ===== ======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $99,630 $3,065 $904 $727 $270
================================== ======= ====== ===== ===== ======
Ratio of expenses to average net
assets(b) 0.59%(c) 0.58% 0.52% 0.54% 0.80%(a)
================================== ======= ====== ===== ===== ======
Ratio of net investment income to
average net assets(b) 5.23%(c) 3.34% 2.71% 3.75% 5.03%(a)
================================== ======= ====== ===== ===== ======
</TABLE>
(a) Annualized.
(b) After expense reimbursements. The ratios of expenses and net investment
income prior to expense reimbursement are 0.61% and 5.21%, respectively,
for the year ended August 31, 1995, 2.14% and 1.78%, respectively, for the
year ended August 31, 1994 and 2.03% and 1.20%, respectively, for the year
ended August 31, 1993.
(c) Ratios are based on average net assets of $82,612,764.
FS-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment objective is the
maximization of current income to the extent consistent with the preservation of capital and the
PRIVATE maintenance of liquidity. The Portfolio seeks to achieve its objective by investing in high grade money
INVESTMENT market instruments, such as U.S. Government obligations, bank obligations, commercial instruments and
CLASS repurchase agreements. The instruments purchased by the Portfolio will have maturities of sixty days or
less.
DECEMBER 12, 1995
The Portfolio is a series portfolio of Short-Term Investments Co. (the "Fund"), an open-end,
diversified, series, management investment company. This Prospectus relates solely to the Private
Investment Class of the Portfolio, a class of shares designed to be a convenient vehicle in which
customers of banks, certain broker-dealers and other financial institutions can invest in a diversified,
money market fund.
The Fund also offers shares of other classes of the Portfolio pursuant to separate prospectuses: the
Institutional Class, the Cash Management Class, the Personal Investment Class and the Resource Class, as
well as shares of classes of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING
IN SHARES OF THE PRIVATE INVESTMENT CLASS OF THE PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION, DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY REFERENCE. FOR A COPY OF THE
STATEMENT OF ADDITIONAL INFORMATION, WRITE TO THE ADDRESS ABOVE OR CALL (800) 877-7748.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND
THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE
THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE
[LOGO APPEARS HERE] PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7748
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Private Investment Class (the "Class") of the
Portfolio. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less. The investment objective
of the Portfolio is the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of the Fund representing interests in the Portfolio. Such classes have
different distribution arrangements and are designed for institutional and
other categories of investors. The Fund also offers shares of classes of
another portfolio, the Liquid Assets Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which customers of banks,
certain broker-dealers and other financial institutions can invest in a
diversified, open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $10,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in funds immediately available to the Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing the securities held
by the Portfolio and rounds the per share net asset value to the nearest whole
cent. Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "Administrator."
2
<PAGE>
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
0.50% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions. Of this amount, up to 0.25% may be for continuing personal
services to shareholders provided by broker-dealers or institutions and the
balance would be deemed an asset-based sales charge. See "Purchase of Shares"
and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- PRIVATE INVESTMENT CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)............................................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)...................................................... None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)... None
Exchange Fee.......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- PRIVATE INVESTMENT CLASS (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees....................................................... 0.06%
12b-1 Fees (after fee waivers)*....................................... 0.30%**
Other Expenses (after expense reimbursements)*........................ 0.03%
----
Total Portfolio Operating Expenses --Private Investment Class......... 0.39%
====
</TABLE>
- -------
* Had there been no fee waivers and no expense reimbursement, 12b-1 Fees and
Other Expenses would have been 0.50% and 0.04%, respectively.
** It is possible that as a result of Rule 12b-1 fees, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted under rules of the National Association of Securities
Dealers, Inc. Given the Rule 12b-1 fee of the Class, however, it is
estimated that it would take a substantial number of years for a shareholder
to exceed such maximum front-end sales charges.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period.
<TABLE>
<S> <C>
1 year............................................................ $ 4
3 years........................................................... $13
5 years........................................................... $22
10 years.......................................................... $49
</TABLE>
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The expense figures
are based upon actual costs and fees charged to the Class for the fiscal year
ended August 31, 1995. There can be no assurance that future waivers of fees
(if any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume additional expenses of the
Class, such assumption of additional expenses will have the effect of lowering
the Class' overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Class should also consider the effect of any
charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses -- Private Investment Class" remain the same in
the years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively "data") for each of the years in the two year period ended August
31, 1995 and the period July 8, 1993 (date operations commenced) through August
31, 1993. The data has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report on the financial statements and the related notes
appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
JULY 8, 1993
(COMMENCEMENT
OF OPERATIONS)
TO AUGUST 31,
1995 1994 1993
-------- ------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period... $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.05 0.03 0.03
-------- ------- -------
Total from investment operations...... 0.05 0.03 0.03
Less distributions:
Dividends from net investment income.. (0.05) (0.03) (0.03)
-------- ------- -------
Net asset value, end of period......... $ 1.00 $ 1.00 $ 1.00
======== ======= =======
Total return........................... 5.48% 3.33% 3.24%(a)
======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $154,278 $30,834 $17,857
======== ======= =======
Ratio of expenses to average net
assets............................... 0.39%(b) 0.38%(c) 0.37%(a)
======== ======= =======
Ratio of net investment income to
average net assets................... 5.50%(b) 3.32%(c) 2.85%(a)
======== ======= =======
</TABLE>
- -------
(a) Annualized.
(b) After expense reimbursements. The ratios of expenses and net investment
income prior to expense reimbursements are 0.40% and 5.49%, respectively.
Ratios are based on average net assets of $122,507,351.
(c) After expense reimbursements. The ratios of expenses and net investment
income to average net assets prior to expense reimbursements would have
been 1.18% and 2.52%, respectively.
5
<PAGE>
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by customers of banks, certain
broker-dealers and other financial institutions who seek a convenient vehicle
in which to invest in an open-end diversified money market fund. The minimum
initial investment is $10,000.
Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments, and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations that may be available in the money markets. Such obligations
include U.S. Treasury obligations, which include Treasury bills, notes and
bonds, and repurchase agreements relating to such securities. These
instruments, which are collectively referred to as "Money Market Obligations,"
are briefly described below. The Portfolio may also engage in certain
investment practices described below. The market values of the money market
instruments held by the Portfolio will be affected by changes in the yields
available on similar securities. If yields have increased since a security was
purchased, the market value of such security will generally have decreased.
Conversely, if yields have decreased, the market value of such security will
generally have increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
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BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposits, over 5% of the Portfolio's total
assets would be invested in illiquid time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"), as such Rule may
be amended from time to time. Generally, "First Tier" securities are securities
that are rated in the highest rating category by two nationally recognized
statistical rating organizations ("NRSROs") or, if only rated by one NRSRO, are
rated in the highest rating category by that NRSRO or, if unrated, are
determined by A I M Advisors, Inc. ("AIM") (under the supervision of and
pursuant to guidelines established by the Board of Directors) to be of
comparable quality to a rated security that meets the foregoing quality
standards. Commercial paper consists of short-term promissory notes issued by
corporations. Commercial paper may be traded in the secondary market after its
issuance. Master notes are unsecured demand notes that permit the investment of
fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may fluctuate based upon changes in specified
interest rates or be reset periodically according to a prescribed formula or
may be a set rate. Although there is no secondary market in master notes, if
such notes have a demand feature, the payee may demand payment of the principal
amount of the note upon relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. The
Portfolio may enter into repurchase agreements only with institutions believed
by the Fund's Board of Directors to present minimal credit risk. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the seller's failure to repurchase
the obligation in accordance with the terms of the agreement), the Portfolio
could experience both delays in liquidating the underlying securities and
losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period and (c) the expense of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities. For
additional information, see the Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the
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repurchase price of the securities sold by the Portfolio which it is obligated
to repurchase. The risk, if encountered, could cause a reduction in the net
asset value of the Portfolio's shares. Reverse repurchase agreements are
considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered 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 payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Fund will direct its custodian bank to segregate cash
or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreement obligations or when-issued
commitments. If the market value of such securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the account will equal the amount of the Portfolio's delayed delivery agreement
obligations and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investment in securities on a when-issued basis and use of delayed
delivery agreements may increase the Portfolio's exposure to market
fluctuation, or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in
order to honor a when-issued commitment or accept delivery of a security under
a delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks. No additional delayed delivery agreements or when-issued
commitments will be made by the Portfolio if, as a result, more than 25% of the
Portfolio's net assets would become so committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.
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INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The
United States Securities and Exchange Commission (the "SEC") has proposed
certain changes to Rule 2a-7. While such proposed changes may have a
prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and
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The Bank of New York will be closed during the next twelve months on Saturdays
and Sundays and on observed holidays of New Year's Day, Martin Luther King,
Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Shares of the Class are sold to customers of banks, certain broker-dealers
and other financial institutions (each, an "Institution" and, collectively,
"Institutions"). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an Institution may invest in the shares of
the Class. Each Institution will render administrative support services to its
customers who are the beneficial owners of the shares of the Class. Such
services may include, among other things, establishment and maintenance of
shareholder accounts and records; assistance in processing purchase and
redemption transactions in shares of the Class; providing periodic statements
showing a customer's account balance in shares of the 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.
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
shares of the Class through an Institution in accordance with the procedures
established by such Institution. Each Institution separately determines the
rules applicable to accounts in the shares of the Class opened with it,
including minimum initial and subsequent investment requirements and the
procedures to be followed by investors to effect purchases of shares of the
Class. The minimum initial investment is $10,000, and there is no minimum
amount for subsequent purchases of shares of the Class by an Institution on
behalf of its customers. An investor who proposes to open a Portfolio account
with an Institution should consult with a representative of such Institution to
obtain a description of the rules governing such an account. The Institution
holds shares of the Class registered in its name, as agent for the customer, on
the books of the Institution. A statement with regard to the customer's shares
of the Class is supplied to the customer periodically, and confirmations of all
transactions for the account of the customer are provided by the Institution to
the customer promptly upon request. In addition, each Institution sends its
customers proxies, periodic reports and other information from the Institution
with regard to the customer's shares of the Class. The customer's shares of the
Class are fully assignable and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his 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
directly purchase additional shares of the Class, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be 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 Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
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Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Private Investment Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the net asset value per share of the Portfolio will remain constant
at $1.00. See "Net Asset Value." Redemption requests with respect to shares of
the Class for which certificates have not been issued are normally made through
a customer's Institution.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will 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 Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, transfer
agent fees or registration fees that may be unique to the Class. Although
realized gains and losses on the assets of the Portfolio are
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reflected in its net asset value, they are not expected to be of an amount
which would affect its $1.00 per share net asset value for purposes of
purchases and redemptions. See "Net Asset Value." Distributions from net
realized short-term gains may be declared and paid yearly or more frequently.
See "Taxes." The Portfolio does not expect to realize any long-term capital
gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the Institution to AIFS at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's 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 the then prevailing circumstances. For example, under such unusual
circumstances, the Board of Directors might reduce or suspend the daily
dividend in order to prevent, to the extent possible, the net asset value per
share of the Portfolio from being reduced below $1.00. Thus, such expenses,
losses or depreciation may result in a shareholder receiving no dividends for
the period during which it held its shares of the Class and cause such a
shareholder to receive upon redemption a price per share lower than the
shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income, so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each Portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
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The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on November 1, 1995 which are subject to change
by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods, the daily yield on shares of the Portfolio, computed as
described in "Purchases and Redemptions -- Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
877-7748. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
For the seven-day period ended August 31, 1995, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.46% and 5.61%, 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.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation by its
Institution for each transaction unless otherwise specified by the shareholder.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and A I M Management Group Inc. ("AIM Management"), a holding company engaged
in the financial services business. Information concerning the Board of
Directors may be found in the Statement of Additional Information.
13
<PAGE>
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 37 investment company portfolios. As of October 31, 1995,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $39.3 billion. AIM is a wholly-owned
subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1995, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.06% of the
Portfolio's average daily net assets. During such fiscal year, the expenses of
the Class, including AIM's fees, amounted to 0.39% of the Class' average daily
net assets.
ADMINISTRATOR
The Fund has also entered into a Master Administrative Services Agreement
dated as of October 18, 1993 with AIM (the "Administrative Services
Agreement"), as permitted by the Advisory Agreement pursuant to which AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Portfolio, including the services of a principal
financial officer of the Fund and related staff. Under the Administrative
Services Agreement, the Portfolio reimburses AIM for expenses incurred by AIM
in connection with such services.
In addition, AIM and AIFS entered into an Administrative Services Agreement
pursuant to which AIFS was reimbursed by AIM for its costs in providing
shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $95,254 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995 AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $48,210.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year. FMC may in its discretion from time to time voluntarily agree to waive
its 12b-1 fee, but will retain its ability to be reimbursed prior to the end of
the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Class either directly or
through other broker-dealers. FMC is the distributor of several of the mutual
funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of the shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or institutions who
have sold or may sell significant amounts of shares. The total amount of such
14
<PAGE>
additional bonus 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
of the Class or the amount received as proceeds from such sales. Sales of the
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.50% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts 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.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments to FMC would be characterized as an asset-based sales
charge pursuant to the 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 the Class. The Plan does not obligate the Fund to
reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund 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.
As required by Rule 12b-1 under the 1940 Act, the Plan was 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 Fund 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") on May 9, 1995. In
approving the continuance of the Plan, the directors considered various factors
and determined that there is a reasonable likelihood that the Plan will benefit
the Fund and the shareholders of the Class.
The Plan requires the officers of the Fund 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.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes 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.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund which are not directly attributable to a specific class of shares
but are directly attributable to one or both of the Portfolios are prorated
among all classes of such Portfolios. Expenses of the Fund which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
15
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or a class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into eight classes. Five classes, including the Class,
represent interests in the Portfolio, and three classes represent interests in
the Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. The other classes of the Fund may have different sales charges and other
expenses which may affect performance. An investor may obtain information
concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 110 Washington Street, 8th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
16
<PAGE>
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7748.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
<PAGE>
===================================== ========================================
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 12, 1995
(800) 877-7748
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ----------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ----------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 PRIVATE INVESTMENT CLASS
Houston, Texas 77046-1173
(800) 877-7748 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
SUMMARY......................... 2
CUSTODIAN
THE BANK OF NEW YORK TABLE OF FEES AND EXPENSES...... 4
110 Washington Street, 8th Floor
New York, New York 10286 FINANCIAL HIGHLIGHTS............ 5
TRANSFER AGENT SUITABILITY FOR INVESTORS....... 6
INVESTMENT PROGRAM.............. 6
A I M INSTITUTIONAL FUND SERVICES, INC. PURCHASE OF SHARES.............. 9
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 REDEMPTION OF SHARES............ 11
DIVIDENDS....................... 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY TAXES........................... 12
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE NET ASSET VALUE................. 13
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR YIELD INFORMATION............... 13
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE REPORTS TO SHAREHOLDERS......... 13
FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN MANAGEMENT OF THE FUND.......... 13
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY NOT GENERAL INFORMATION............. 16
LAWFULLY BE MADE. </TABLE>
===================================== ========================================
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
PRIVATE INVESTMENT CLASS
OF THE
PRIME PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 877-7748
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS, COPIES OF WHICH MAY BE
OBTAINED BY WRITING FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA, SUITE
1919, HOUSTON, TEXAS 77046-1173 OR CALLING (800) 877-7748
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED: DECEMBER 12, 1995
RELATING TO THE PROSPECTUS DATED: DECEMBER 12, 1995
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION............................................................ 1
GENERAL INFORMATION ABOUT THE FUND...................................... 1
The Fund and Its Shares............................................ 1
Directors and Officers............................................. 3
Remuneration of Directors.......................................... 6
AIM Funds Retirement Plan for Eligible Directors/Trustees.......... 7
Deferred Compensation Agreements................................... 8
Investment Advisor................................................. 9
Administrator...................................................... 10
Expenses........................................................... 10
Transfer Agent and Custodian....................................... 11
Reports............................................................ 11
Principal Holders of Securities.................................... 12
PURCHASES AND REDEMPTIONS............................................... 16
Net Asset Value Determination...................................... 16
Distribution Agreement............................................. 16
Distribution Plan.................................................. 17
Banking Regulations................................................ 17
Performance Information............................................ 18
Suspension of Redemption Rights.................................... 19
INVESTMENT PROGRAM AND RESTRICTIONS..................................... 19
Investment Program................................................. 19
Eligible Securities................................................ 20
Commercial Paper Ratings........................................... 21
Bond Ratings....................................................... 21
Investment Restrictions............................................ 23
PORTFOLIO TRANSACTIONS.................................................. 24
TAX MATTERS............................................................. 26
Qualification as a Regulated Investment Company.................... 26
Excise Tax On Regulated Investment Companies....................... 27
Portfolio Distributions............................................ 27
Effect of Future Legislation; Local Tax Considerations............. 28
FINANCIAL STATEMENTS.................................................... FS
i
<PAGE>
INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of Short-
Term Investments Co. (the "Fund"), a mutual fund. The rules and regulations of
the United States Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning the
activities of the fund being considered for investment. This information is
included in a Prospectus dated December 12, 1995 (the "Prospectus"). Copies of
the Prospectus and additional copies of this Statement of Additional Information
may be obtained without charge by writing the distributor of the Portfolio's
shares, Fund Management Company ("FMC"), 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173 or by calling (800) 877-7748. Investors must receive a
Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Private Investment Class of
the Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end, diversified, series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993. On October 15, 1993, the Portfolio succeeded to the assets and
assumed the liabilities of the Prime Portfolio (the "Predecessor Portfolio") of
Short-Term Investments Co., a Massachusetts business trust ("STIC"), pursuant to
an Agreement and Plan of Reorganization between the Fund and STIC. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to October 15, 1993 relating to the
Portfolio (or a class thereof) is that of the Predecessor Portfolio (or the
corresponding class thereof). Shares of common stock of the Fund are redeemable
at their net asset value at the option of the shareholder or at the option of
the Fund in certain circumstances. For information concerning the methods of
redemption and the rights of share ownership, investors should consult the
Prospectus under the captions "General Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Liquid Assets Portfolio (together,
the "Portfolios"). The Portfolio consists of the following five classes of
shares: Resource Class, Cash Management Class, Private Investment Class,
Personal Investment Class and the Institutional Class. The Liquid Assets
Portfolio consists of three classes of shares. Each class of shares has
different shareholder qualifications and bears expenses differently. This
Statement of Additional Information and the associated Prospectus relate solely
to shares of the Private Investment Class (the "Class") of the Portfolio.
Shares of the other classes of the Portfolio and the classes of the Liquid
Assets Portfolio are offered pursuant to separate prospectuses and statements of
additional information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
1
<PAGE>
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
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 Charter of the Fund authorizes the issuance of 40 billion shares
with a par value of $.001 each, of which 16 billion shares represent an interest
in the Liquid Assets Portfolio and 22 billion shares represent an interest in
the Portfolio (or class thereof). A share of a Portfolio (or class) represents
an equal proportionate interest in such Portfolio (or class) with each other
share of that Portfolio (or class) and is entitled to a proportionate interest
in the dividends and distributions from that Portfolio (or class). Additional
information concerning the rights of share ownership is set forth in the
Prospectus.
The assets received by the Fund for the issue or sale of shares of
each of the Portfolios and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated to that
Portfolio, and constitute the underlying assets of that Portfolio. The
underlying assets of each of the Portfolios are segregated and are charged with
the expenses with respect to that Portfolio and with a share of the general
expenses of the Fund. While the expenses of the Fund are allocated to the
separate books of account of each of the Portfolios, certain expenses may be
legally chargeable against the assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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 Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
2
<PAGE>
Except as otherwise disclosed in the Prospectus and in this Statement
of Additional Information, the directors shall continue to hold office and may
appoint their successors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, AIM Management Group
Inc.; Chairman of the Board of Directors, AIM Advisors, Inc., AIM Capital
Management, Inc., AIM Distributors, Inc., AIM Fund Services, Inc., AIM
Global Associates, Inc., AIM Global Holdings, Inc., AIM Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, AIM Global Management Company Limited and AIM Global Venture Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF & I Steel Corp., Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the Board of Equitable
Bancorporation.
**CARL FRISCHLlNG, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
- -----------------------
* A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined
in the 1940 Act.
3
<PAGE>
***ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, AIM Management
Group Inc.; Director and President, AIM Advisors, Inc.; Director and Executive
Vice President, AIM Distributors, Inc.; Director and Senior Vice President,
AIM Capital Management, Inc., AIM Fund Services, Inc., AIM Global
Associates, Inc., AIM Global Holdings, Inc., AIM Global Ventures Co., AIM
Institutional Fund Services, Inc. and Fund Management Company; and Senior Vice
President, AIM Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road - Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment companies). Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
- -----------------------
*** A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
4
<PAGE>
****JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Management Group Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Institutional Fund Services, Inc. and Fund Management Company; and Vice
President, AIM Global Advisors Limited, A I M Global Associates, Inc., A I M
Global Holdings, Inc. and AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc. and AIM Global Ventures
Co.; Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
****CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group
Inc., A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc. and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance Officer,
Charles Schwab Investment Management, Inc.; and Vice President, Integrated
Resources Life Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice
President, A I M Capital Management, Inc. and AIM Global Advisors Limited; and
Vice President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and
Fund Management Company; Director and Senior Vice President, A I M Advisors,
Inc.; and Senior Vice President, A I M Management Group Inc.
- -----------------------
**** Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
The Board of Directors has an Audit Committee, an Investment
Committee and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for meeting
with the Portfolio's auditors to review audit procedures and results and to
consider any matters arising from an audit to be brought to the attention of the
directors as a whole with respect to the Portfolio's fund accounting or its
internal accounting controls, or for considering such matters as may from time
to time be set forth in a charter adopted by the Board of Directors and such
Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investments Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Fund maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the Board of Directors and such Committee.
All of the Fund's directors also serve as directors or trustees of
some or all of the other investment companies managed or advised by A I M
Advisors, Inc. ("AIM") or distributed and administered by FMC. Most of the
Fund'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 attended. The directors
of the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each such director receives a fee, allocated among the AIM Funds for which he
serves as a director or trustee, which consists of an annual retainer component
and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each director of the Fund:
6
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
Director Aggregate Retirement Total
Compensation Benefits Compensation
from Fund(1) Accrued from all AIM
by all AIM Funds(3)
Funds(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- --------------------------------------------------------------------------------
Bruce L. Crockett 4,393 2,814 45,094
- --------------------------------------------------------------------------------
Owen Daly II 4,423 14,375 45,844
- --------------------------------------------------------------------------------
Carl Frischling 4,393 7,542 45,094
- --------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- --------------------------------------------------------------------------------
John F. Kroeger 4,423 20,517 45,844
- --------------------------------------------------------------------------------
Lewis F. Pennock 4,423 5,093 45,844
- --------------------------------------------------------------------------------
Ian W. Robinson 4,353 10,396 45,094
- --------------------------------------------------------------------------------
Louis S. Sklar 4,353 4,682 45,094
================================================================================
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $18,174.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$11,985. Data reflects compensation earned for the calendar year ended
December 31, 1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
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, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 5% of such Director's compensation paid by the AIM Funds multiplied by
the number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is
payable to each eligible director in quarterly installments for a period of no
more than five years. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences, 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 five 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 AIM Fund.
7
<PAGE>
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
Annual Compensation Paid
By All AIM Funds
<S> <C> <C> <C>
$60,000 $65,000
=================================
Number of Years of 10 $30,000 $32,500
Service with the ---------------------------------
AIM Funds 9 $27,000 $29,250
---------------------------------
8 $24,000 $26,000
---------------------------------
7 $21,000 $22,750
---------------------------------
6 $18,000 $19,500
---------------------------------
5 $15,000 $16,250
=================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $42,334 in directors' fees
and expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees of
$3,247 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended
August 31, 1995, the Portfolio paid legal fees of $10,128 for services rendered
by that firm as counsel. A director of the Fund is a partner of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel and was a partner of the firm of Reid &
Priest prior to September 1994.
8
<PAGE>
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated as of October 18, 1993 (the "Advisory Agreement"). A prior
investment advisory agreement (the "Prior Advisory Agreement") with
substantially identical terms (including the fee schedules) to the Advisory
Agreement was previously in effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates advises or
manages 37 investment company portfolios. As of October 31, 1995, the total
assets of investment company portfolios managed or advised by AIM and its
affiliates were approximately $39.3 billion. AIM is a wholly-owned subsidiary
of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. Certain of the directors and officers of AIM
are also executive officers of the Fund and their affiliations are shown under
"Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews annually such reports
(including information on any substantial violations of the Code). Violations
of the Code may result in censure, monetary penalties, suspension or termination
of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services, AIM receives a monthly fee which is
calculated by applying the following annual rates to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets Rate
---------- ----
<S> <C>
First $100 million .20%
Over $100 million to $200 million .15%
Over $200 million to $300 million .10%
Over $300 million to $1.5 billion .06%
Over $1.5 billion .05%
</TABLE>
The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered into
9
<PAGE>
the Master Administrative Services Agreement under which AIM will provide the
additional services described below under the caption "Administrator."
For the fiscal years ended August 31, 1995, 1994 and 1993, AIM received
fees pursuant to the Advisory Agreement with respect to the Portfolio (and the
Predecessor Portfolio) in the amounts of $2,567,762, $2,599,662 and $2,647,096,
respectively.
The Advisory Agreement will continue in effect until June 30, 1996, and
from year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a majority
of the directors who are not parties to the Advisory Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or AIM may terminate the Advisory Agreement on 60 days'
notice without penalty. The Advisory Agreement terminates automatically in the
event of its "assignment," as defined in the 1940 Act.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement, dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM has agreed to perform or
arrange for the performance of certain accounting and other administrative
services for the Portfolio which are not required to be performed by A I M under
the Advisory Agreement. 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 Fund and of persons working under his
supervision for maintaining the financial accounts and books and records of the
Fund, 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 Fund's Board of Directors.
The AIFS Administrative Services Agreement between AIM and AIFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provided that AIFS
could perform certain shareholder services for the Portfolio. For such
services, AIFS was entitled to receive from AIM reimbursement of its costs
associated with the Class. The AIFS Administrative Services Agreement was
terminated July 1, 1995. Beginning July 1, 1995, AIFS received fees with
respect to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the period July 1,1995
through August 31, 1995 AIFS received transfer agency fees from AIM with respect
to the Portfolio in the amount of $48,210.
Under the terms of the Prior Advisory Agreement, AIM was reimbursed for the
fiscal year ended August 31, 1993 in the amount of $94,922 for fund accounting
services for the Portfolio. Pursuant to the Administrative Services Agreement,
AIM was reimbursed for the fiscal years ended August 31, 1995 and 1994 in the
amounts of $154,963 and $106,109, respectively, for fund accounting services for
the Portfolio. For the period from August 31, 1994 through June 30, 1995 and for
the period from June 1, 1994 through August 31, 1994, AIFS or its affiliates
received shareholder services fees from AIM with respect to the Portfolio in the
amounts of $95,254 and $14,651, respectively.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM
under the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the
10
<PAGE>
safekeeping of cash, portfolio securities and other property, and any transfer,
dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
shares with the SEC and various states and other jurisdictions (including filing
and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of prospectuses, proxy statements and reports to
shareholders; fees and travel expenses of directors and director members of any
advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not "interested persons" (as defined in the 1940
Act) of the Fund or AIM, and of independent accountants in connection with any
matter relating to the Fund, membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and directors) of the Fund which inure to its benefit; and
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto).
Except as disclosed under the caption "Distribution Plan," FMC bears the
expenses of printing and distributing prospectuses and statements of additional
information (other than those prospectuses and statements of additional
information distributed to existing shareholders of the Fund) 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 Fund's shares.
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of the Fund based
upon the relative net assets of each class. Expenses of the Fund which are not
directly attributable to a specific class of shares but are directly
attributable to one or both of the Portfolios are prorated among all classes of
such Portfolios based upon the relative net assets of each such class. The
expenses of the Portfolio are deducted from its total income before dividends
are paid. Expenses of the Fund which are directly attributable to a specific
class of shares are charged against the income available for distribution as
dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and
cash of the Portfolio. The Bank of New York receives such compensation from the
Fund for its services in such capacity as is agreed to from time to time by The
Bank of New York and the Fund. The address of The Bank of New York is 110
Washington Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .007% of average daily net assets
of the Fund, payable montly. Such compensation may be changed from time to time
as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of October 25, 1995, and the percentage of the Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
INSTITUTIONAL CLASS
- -------------------
<S> <C>
NationsBank of Texas 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. Bank of Oregon 13.23%
321 Southwest 6th Street
Portland, OR 97208
Trust Company Bank 8.19%
P.O. Box 105504
Atlanta, GA 30348
Texas Commerce Bank 7.62%
P.O. Box 2558
Houston, TX 77252-8098
Boatmen's Trust Company 7.27%
100 North Broadway
St. Louis, MO 63101
Frost National Bank 7.26%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
- -----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
PRIVATE INVESTMENT CLASS
- ------------------------
<S> <C>
Huntington Capital Corporation 71.90%**
41 South High Street
Columbus, OH 43287
Var & Co. 17.39%
180 East 5th Street
St. Paul, MN 55101
Frost National Bank 6.94%
P.O. Box 1600
San Antonio, TX 78296
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
PERSONAL INVESTMENT CLASS
- -------------------------
<S> <C>
Bank of New York 67.37%**
440 Manaroneck Ave.
Harrison, NY 10528
Cullen/Frost Discount Brokers 30.94%**
P.O. Box 2358
San Antonio, TX 78299
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
CASH MANAGEMENT CLASS
- ---------------------
<S> <C>
Piper Jaffray As Agent For Customer 35.24%**
101 California Street
Suite 1150
San Francisco, CA 94111
</TABLE>
- -----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
13
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
Piper Jaffray As Agent For Customer 29.49%**
P.O. Box 160727
Sacramento, CA 95816-0727
Bank Of New York 10.75%
One Wall Street
New York, NY 10286
Citibank As Agent For Customer 8.38%
120 Wall Street 13th Floor
New York, NY 10043
</TABLE>
RESOURCE CLASS
- --------------
AIM provided the initial capitalization of the Resource Class of the
Prime Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
INSTITUTIONAL CLASS
- -------------------
<S> <C>
Trust Company Bank 20.96%
P.O. Box 105504
Atlanta, GA 30348
</TABLE>
- -----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
14
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
Wachovia Bank & Trust 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
NationsBank Dallas 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
Society National Bank 7.57%
127 Public Square
Cleveland, OH 44114-1306
Boatmen's Trust Company 6.56%
100 North Broadway
St. Louis, MO 63102
Firstar Bank of Madison 5.41%
P.O. Box 7900
Madison, WI 53707
</TABLE>
PRIVATE INVESTMENT CLASS
- ------------------------
AIM provided the initial capitalization of the Private Investment
Class of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Private Investment Class of the Liquid Assets Portfolio. Although
the Private Investment Class of the Liquid Assets Portfolio expects that the
sale of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid Assets
Portfolio, as defined in the 1940 Act.
CASH MANAGEMENT CLASS
- ---------------------
AIM provided the initial capitalization of the Cash Management Class
of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Cash Management Class of the Liquid Assets Portfolio. Although the
Cash Management Class of the Liquid Assets Portfolio expects that the sale of
its shares to the public pursuant to the Prospectus will reduce the percentage
of such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
- -----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
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Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Portfolio are sold at the net asset value of such
shares. Shareholders may at any time redeem all or a portion of their shares at
net asset value. The investor's price for purchases and redemptions will be the
net asset value next determined following the receipt of an order to purchase or
a request to redeem shares.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Portfolio is permitted in accordance with applicable rules and
regulations of the SEC, including Rule 2a-7 under the 1940 Act, which require
the Portfolio to adhere to certain conditions. These rules require that the
Portfolio maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 calendar days
or less and invest only in securities determined by the Board of Directors to be
"Eligible Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, 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's 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 existing holders of
the Portfolio's shares. In the event the Board of Directors determines that such
a deviation exists, it will take such corrective action as the Board of
Directors deems necessary and appropriate, including the sales of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
the average portfolio maturity; the withholding of dividends; redemption of
shares in kind; or the establishment of a net asset value per share by using
available market quotations.
DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. See "General Information about the Fund -- Directors
and Officers" and "General Information about the Fund -- Investment Advisor" for
information as to the affiliation of certain directors and officers of the Fund
with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right
to distribute the shares of the Class either directly or through other broker-
dealers. The Distribution Agreement also provides that FMC will pay promotional
expenses, including the incremental costs of printing prospectuses and
statements of additional information, annual reports and other periodic reports
for distribution to persons who are not
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shareholders of the Portfolio 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 Class.
The Distribution Agreement will continue in effect until June 30, 1996
and from year to year thereafter, provided that it is specifically approved at
least annually by the Fund'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 Fund 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.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund 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 the shares of the Class. These services may include among
other things: (i) answering customer inquiries regarding the shares of the Class
and the Portfolio; (ii) assisting customers in changing dividend options,
account designations and addresses; (iii) performing sub-accounting; (iv)
establishing and maintaining shareholder accounts and records; (v) processing
purchase and redemption transactions; (vi) automatic investment in shares of the
Class of customer cash accounting balances; (vii) providing periodic statements
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
such firm; (viii) arranging for bank wires; and (ix) such other services as the
Fund may request on behalf of the shares of the Class, to the extent such firms
are permitted to engage in such services by applicable statute, rule or
regulation. The Plan may only be used for the purposes specified above and as
stated in the Plan. Expenses may not be carried over from year to year.
For the fiscal year ended August 31, 1995, FMC received compensation
pursuant to the Plan in the amount of $367,522 or an amount equal to 0.30%, of
the average daily net assets of the Class. Of such amount $305,799 (or an
amount equal to 0.25% of the average daily net assets of the Class) was paid to
dealers and financial institutions and $61,723 (or an amount equal to 0.05% of
the average daily net assets of the Class) was retained by FMC.
FMC is a wholly-owned subsidiary of AIM, which is a wholly-owned
subsidiary of AIM Management. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund own shares of
AIM Management.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised banks from engaging in the
business of underwriting, selling or distributing securities, but permit banks
to make shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a bank
were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the Fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the Fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or other
services then being provided by such bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of these
occurrences.
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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.
In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments more restrictive than the
restrictions described herein.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus,
yield information for the shares of the Class may be obtained by calling the
Fund at (800) 877-7748. The current yield quoted will be the net average
annualized yield for an identified period. Current yield will be computed by
assuming that an account was established with a single share (the "Single Share
Account") on the first day of the period. To arrive at the quoted yield, the net
change in the value of that Single Share Account for the period (which would
include dividends accrued with respect to the share, and dividends declared on
shares purchased with dividends accrued and paid, if any, but would not include
realized gains and losses or unrealized appreciation or depreciation) will be
multiplied by 365 and then divided by the number of days in the period, with the
resulting figure carried to the nearest hundredth of one percent. The Fund may
also furnish a quotation of effective yield for the Class that assumes the
reinvestment of dividends for a 365-day year and a return for the entire year
equal to the average annualized yield for the period, which will be computed by
compounding the unannualized current yield for the period by adding 1 to the
unannualized current yield, raising the sum to a power equal to 365 divided by
the number of days in the period, and then subtracting 1 from the result.
For the seven-day period ended August 31, 1995, the current yield and
the effective yield (which assumes the reinvestment of dividends for a 365-day
year and a return for the entire year equal to the annualized current yield for
the period) for the Class were 5.46% and 5.61%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
The Fund may compare the performance of the Class or the
performance of securities in which the Portfolio may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by IBC/Donoghue's
Money Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical
Services, Inc., a widely recognized independent service located in Summit, New
Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
. other fixed-income investments such as Certificates of Deposit
("CDs").
The principal value and interest rate of CDs and money market
securities are fixed at the time of purchase whereas the Class's yield will
fluctuate. Unlike some CDs and certain other money market securities, money
market mutual funds are not insured by the FDIC. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
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The Fund may reference the growth and variety of money market mutual
funds and AIM's innovation and participation in the industry.
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Portfolio may invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets of $1.5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible imposition
of United Kingdom withholding taxes on interest income payable on Eurodollar CDs
or Eurodollar time deposits, and the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on Eurodollar CDs and Eurodollar
time deposits.
Rule 2a-7 under the 1940 Act provides that a money market fund shall
not invest more than 5% of its total assets in securities issued by the issuer
of the security, provided that such a fund may invest more than 5% of its total
assets in the First Tier securities of a single issuer for a period of up to
three business days after the purchase thereof if the money market fund is a
diversified investment company, provided further, that the fund may not make
more than one investment in accordance with the foregoing proviso at any time.
Under Rule 2a-7, for purposes of determining the percentage of a fund's total
assets that are invested in securities of an issuer, a repurchase agreement
shall be deemed to be an acquisition of the underlying securities, provided that
the obligation of the seller to repurchase the securities from the money market
fund is fully collateralized. To be fully collateralized, the collateral must,
among other things, consist entirely of U.S. Government securities or securities
that, at the time the repurchase agreement is entered into, are rated in the
highest rating category by Requisite NRSROs.(1)
The Portfolio may also lend its portfolio securities in amounts up to
33-1/3% of its total assets to financial institutions in accordance with the
investment restrictions of the Portfolio. Such loans would involve risks of
delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be made
only to borrowers
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(1) "Requisite NRSRO" 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 of
such security, that NRSRO. At present the NRSROs are: Standard &
Poor's Corp. ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Duff and Phelps, Inc., Fitch Investors Services, Inc. ("Fitch") and,
with respect to certain types of securities, IBCA Limited and its
affiliate, IBCA Inc. Subcategories or gradations in ratings (such as a
"+" or "-") do not count as rating categories.
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deemed by AIM to be of good standing and only when, in AIM's judgment, the
income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money
market funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that is
rated (or that has been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
that is comparable in priority and security with the security) by the
Requisite NRSROs in one of the two highest rating categories for short-term
debt obligations (within which there may be sub-categories or gradations
indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security but
that has a remaining maturity of 397 calendar days or less, and
(B) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of short-term debt obligations (or any
security within that class) that is now comparable in priority and
security with the security, in one of the two highest rating
categories for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
(iii) an unrated security(2) that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of this
section, as determined by the money market fund's board of directors;
provided, however, that:
(A) the board of directors may base its determination that a
standby commitment is an Eligible Security upon a finding that the
issuer of the commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-term
security but that has a remaining maturity of 397 calendar days or
less and that is an unrated security is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be sub-
categories or gradations indicating relative standing).
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(2) An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of comparable
priority and security; (ii) that was a long-term security at the time of
issuance and whose issuer has not received from any NRSRO a rating with
respect to a class of short-term debt obligations now comparable in
priority and security; or (iii) a security that is rated but which is the
subject of an external credit support agreement not in effect when the
security was assigned its rating, provided that a security is not an
unrated security if any short-term debt obligation issued by the issuer and
comparable in priority and security is rated by any NRSRO.
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COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the commercial
paper ratings of Moody's, S&P and Fitch.
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch short-term ratings are as
follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings
of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of Moody's.
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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
edge." Interest payments are protected by a large or by 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 Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the two highest bond ratings of S&P.
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
FITCH - 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 guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch 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
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<PAGE>
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.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of
the U.S. Government, its agencies or instrumentalities) if, immediately
after such purchase, more than 5% of the value of the Portfolio's total
assets would be invested in such issuer, except as permitted by Rule 2a-7
under the 1940 Act, as amended from time to time;
(3) borrow money or issue senior securities except (a) for
temporary or emergency purposes (e.g., in order to facilitate the orderly
sale of portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities, provided that the Portfolio will not purchase portfolio
securities while borrowings in excess of 5% of its total assets are
outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and then
only in an amount up to 33-1/3% of the value of its total assets at the
time of borrowing or entering into a reverse repurchase agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements and (c) by lending
portfolio securities to the extent permitted by law or regulation;
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<PAGE>
(6) underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Portfolio's investment program may be
deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase
and sell securities secured by real estate or interests therein or issued
by issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or calls;
(9) invest in any obligation not payable as to principal and
interest in United States currency; or
(10) acquire for value the securities of any other investment
company, except in connection with a merger, consolidation, reorganization
or acquisition of assets.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
Shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
State Law Restrictions The Fund may, from time to time in order to qualify
shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the Ohio Division
of Securities, the Portfolio will not purchase the securities of an issuer if
the officers or directors of the Fund who own more than 0.5% of the securities
of the issuer together own beneficially more than 5% of the securities of such
issuer.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
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 market. For example, market
conditions frequently result in similar securities trading at different prices.
AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one
24
<PAGE>
dealer are comparable, AIM may, in its discretion, effect transactions with
dealers that furnish statistical, research or other information or services
which are deemed by AIM to be beneficial to the Portfolio's investment program.
Certain research services furnished by dealers may be useful to AIM with clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio. AIM is of the opinion that
the material received is beneficial in supplementing AIM's research and
analysis; and therefore, it may benefit the Portfolio by improving the quality
of AIM's investment advice. The advisory fees paid by the Portfolio are not
reduced because AIM receives such services.
From time to time, the Fund may sell a security to, or purchase a security
from, an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital"), when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Fund.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing
and amount of purchase by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts and is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchases
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolio as a 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 Fund from purchasing a security being
publicly underwritten by a syndicate of which persons affiliated with the Fund
are members except in accordance with certain conditions. These conditions may
restrict the ability of the Portfolio to purchase money market obligations being
publicly underwritten by such a syndicate, and the Portfolio may be required to
wait until the syndicate has been terminated before buying such securities. At
such time, the market price of the securities may be higher or lower than the
original offering price. A person affiliated with the Fund may, from time to
time, serve as placement agent or financial advisor to an issuer of money market
obligations and be paid a fee by such issuer. The Portfolio may purchase such
money market obligations directly from the issuer, provided that the purchase is
made in accordance with procedures adopted by the Fund's Board of Directors and
such purchase is reviewed at least quarterly by the Fund's Board of Directors
and a determination is made that all such purchases were effected in compliance
with such procedures,
25
<PAGE>
including a determination that the placement fee or other remuneration paid by
the issuer to the person affiliated with the Fund was fair and reasonable in
relation to the fees charged by other performing similar services. During the
fiscal year ended August 31, 1995, no securities or instruments were purchased
by the Portfolio from issuers who paid placement fees or other compensation to a
broker affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts, will
not be characterized as Short-Short Gains if they are directly related to the
regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is disregarded.
Interest (including original issue discount) received by a fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of a security
within the meaning of the Short-Short Gain Test. However, income that is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In addition to satisfying the requirements described above, a regulated
investment company must satisfy an asset diversification test in order to
qualify for tax purposes as a regulated investment company. Under this test, at
the close of each quarter of a fund's taxable year, at least 50% of the value of
a fund's assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated
26
<PAGE>
investment companies, and securities of other issuers (as to which a fund has
not invested more than 5% of the value of a fund's total assets in securities of
such issuer and as to which a fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any other issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which a fund controls and which are
engaged in the same or similar trades or businesses.
If, for any taxable year, the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Portfolio may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, 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 the ordinary income dividends and capital gain
dividends and, in certain cases, 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 Fund that it
is not subject to backup withholding or that it is a corporation or other
"exempt recipient."
27
<PAGE>
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 November
1, 1995. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting investment in the Portfolio.
28
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1995, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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
Prime Portfolio as of August 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the ten-year period then ended, in conformity with generally accepted
accounting principles.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
October 6, 1995
FS-1
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 71.82%(a)
BASIC INDUSTRIES - 0.30%
MULTIPLE INDUSTRY - 0.30%
Philip Morris Companies, Inc.
5.75% 10/04/95 $ 12,500 $ 12,434,115
- ----------------------------------------------------------------------
Total Basic Industries 12,434,115
- ----------------------------------------------------------------------
BUSINESS SERVICES - 5.90%
POLLUTION CONTROL SERVICES - 2.15%
Browning-Ferris Industries, Inc.
5.69% 09/08/95 20,000 19,977,872
- ----------------------------------------------------------------------
5.75% 09/15/95 18,000 17,959,750
- ----------------------------------------------------------------------
5.73% 09/18/95 20,000 19,945,883
- ----------------------------------------------------------------------
5.75% 09/19/95 12,700 12,663,487
- ----------------------------------------------------------------------
5.73% 09/22/95 20,000 19,933,150
- ----------------------------------------------------------------------
90,480,142
- ----------------------------------------------------------------------
MISCELLANEOUS - 3.75%
Donnelley (R.R.) & Sons Co.
5.73% 09/22/95 53,000 52,822,848
- ----------------------------------------------------------------------
PHH Corp.
5.75% 09/13/95 47,100 47,009,725
- ----------------------------------------------------------------------
5.75% 10/11/95 58,000 57,629,445
- ----------------------------------------------------------------------
157,462,018
- ----------------------------------------------------------------------
Total Business Services 247,942,160
- ----------------------------------------------------------------------
CAPITAL GOODS - 2.35%
COMPUTERS & OFFICE EQUIPMENT - 1.40%
Xerox Corp.
5.75% 10/04/95 31,025 30,861,472
- ----------------------------------------------------------------------
Xerox Credit Corp.
5.73% 09/19/95 11,000 10,968,485
- ----------------------------------------------------------------------
5.74% 10/05/95 16,981 16,888,944
- ----------------------------------------------------------------------
58,718,901
- ----------------------------------------------------------------------
MACHINERY - 0.95%
Dover Corp.
5.75% 09/11/95 14,000 13,977,639
- ----------------------------------------------------------------------
5.75% 09/25/95 15,000 14,942,500
- ----------------------------------------------------------------------
5.77% 10/02/95 11,191 11,135,396
- ----------------------------------------------------------------------
40,055,535
- ----------------------------------------------------------------------
Total Capital Goods 98,774,436
- ----------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 2.52%
AUTOMOBILE - 2.52%
Daimler-Benz North America Corp.
5.68% 09/08/95 $ 66,000 $ 65,927,107
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.75% 10/06/95 40,000 39,776,389
- -------------------------------------------------------------------
Total Consumer Durables 105,703,496
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 3.32%
HOUSEHOLD PRODUCTS - 3.32%
Colgate-Palmolive Co.
5.70% 09/15/95 61,550 61,413,564
- -------------------------------------------------------------------
5.71% 09/18/95 20,000 19,946,072
- -------------------------------------------------------------------
5.72% 09/20/95 19,500 19,441,132
- -------------------------------------------------------------------
5.72% 09/21/95 38,800 38,676,702
- -------------------------------------------------------------------
Total Consumer Nondurables 139,477,470
- -------------------------------------------------------------------
CONSUMER SERVICES - 2.91%
MISCELLANEOUS - 2.91%
USL Capital Corp.
5.73% 09/07/95 21,000 20,979,945
- -------------------------------------------------------------------
5.74% 09/07/95 21,000 20,979,910
- -------------------------------------------------------------------
5.73% 09/19/95 9,000 8,974,215
- -------------------------------------------------------------------
5.77% 09/21/95 15,500 15,450,314
- -------------------------------------------------------------------
5.73% 10/05/95 31,016 30,848,152
- -------------------------------------------------------------------
5.74% 10/13/95 25,000 24,832,583
- -------------------------------------------------------------------
Total Consumer Services 122,065,119
- -------------------------------------------------------------------
ENERGY - 3.31%
NATURAL GAS - 1.45%
Colonial Pipeline Co.
5.72% 09/12/95 15,000 14,973,783
- -------------------------------------------------------------------
5.72% 09/19/95 13,800 13,760,532
- -------------------------------------------------------------------
5.76% 09/28/95 12,000 11,948,160
- -------------------------------------------------------------------
5.78% 09/29/95 20,100 20,009,639
- -------------------------------------------------------------------
60,692,114
- -------------------------------------------------------------------
OIL & GAS - 1.86%
ARCO Coal Australia Inc.
5.69% 09/12/95 9,501 9,484,482
- -------------------------------------------------------------------
5.70% 09/14/95 12,489 12,463,293
- -------------------------------------------------------------------
5.75% 09/15/95 14,788 14,754,932
- -------------------------------------------------------------------
5.72% 10/10/95 12,507 12,429,498
- -------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ENERGY--(continued)
OIL & GAS - (CONTINUED)
Mobil Australia Finance Company, Inc.
5.68% 09/01/95 $ 29,088 $ 29,088,000
- ------------------------------------------------------------------------
78,220,205
- ------------------------------------------------------------------------
Total Energy 138,912,319
- ------------------------------------------------------------------------
FINANCIAL - 47.89%
ASSET-BACKED SECURITIES - 22.81%
Asset Securitization Cooperative Corp.
5.70% 09/08/95 55,000 54,939,041
- ------------------------------------------------------------------------
5.72% 09/22/95 10,000 9,966,633
- ------------------------------------------------------------------------
5.72% 10/26/95 55,000 54,519,361
- ------------------------------------------------------------------------
5.71% 10/27/95 30,000 29,733,533
- ------------------------------------------------------------------------
Ciesco, L.P.
5.73% 09/06/95 15,000 14,988,063
- ------------------------------------------------------------------------
5.72% 10/18/95 40,000 39,701,289
- ------------------------------------------------------------------------
Clipper Receivables Corp.
5.77% 09/12/95 50,000 49,911,848
- ------------------------------------------------------------------------
5.77% 09/13/95 28,911 28,855,394
- ------------------------------------------------------------------------
5.77% 09/14/95 17,227 17,191,106
- ------------------------------------------------------------------------
5.77% 09/19/95 57,000 56,835,555
- ------------------------------------------------------------------------
5.77% 09/25/95 19,000 18,926,913
- ------------------------------------------------------------------------
Corporate Asset Funding Co. Inc.
5.73% 09/06/95 32,900 32,873,817
- ------------------------------------------------------------------------
5.74% 09/07/95 25,000 24,976,083
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.72% 09/18/95 16,228 16,184,166
- ------------------------------------------------------------------------
5.76% 09/25/95 12,134 12,087,405
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.75% 09/14/95 27,540 27,482,816
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.76% 09/11/95 15,325 15,300,480
- ------------------------------------------------------------------------
5.77% 09/20/95 25,000 24,923,868
- ------------------------------------------------------------------------
5.74% 10/04/95 31,425 31,259,653
- ------------------------------------------------------------------------
5.75% 10/04/95 15,050 14,970,674
- ------------------------------------------------------------------------
5.74% 10/12/95 15,825 15,721,548
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.75% 09/27/95 31,016 30,887,197
- ------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Preferred Receivables Funding Corp.
5.70% 09/08/95 $ 11,375 $ 11,362,393
- ------------------------------------------------------------------------
5.73% 09/14/95 20,875 20,831,806
- ------------------------------------------------------------------------
5.73% 09/18/95 30,125 30,043,487
- ------------------------------------------------------------------------
5.75% 10/05/95 81,275 80,833,633
- ------------------------------------------------------------------------
5.73% 10/20/95 30,125 29,890,050
- ------------------------------------------------------------------------
Sheffield Receivables Corp.
5.72% 09/06/95 25,800 25,779,503
- ------------------------------------------------------------------------
5.71% 09/12/95 24,700 24,656,905
- ------------------------------------------------------------------------
5.77% 09/13/95 46,000 45,911,528
- ------------------------------------------------------------------------
5.77% 09/14/95 40,000 39,916,656
- ------------------------------------------------------------------------
5.73% 09/19/95 26,900 26,822,931
- ------------------------------------------------------------------------
958,285,335
- ------------------------------------------------------------------------
BUSINESS CREDIT - 4.08%
CIT Group Holdings, Inc.
5.68% 09/06/95 30,000 29,976,333
- ------------------------------------------------------------------------
5.68% 09/07/95 30,000 29,971,600
- ------------------------------------------------------------------------
5.72% 09/21/95 75,000 74,761,667
- ------------------------------------------------------------------------
5.72% 10/20/95 37,000 36,711,934
- ------------------------------------------------------------------------
171,421,534
- ------------------------------------------------------------------------
INSURANCE - 2.33%
MetLife Funding, Inc.
5.72% 09/22/95 50,000 49,833,166
- ------------------------------------------------------------------------
5.74% 10/12/95 48,211 47,895,834
- ------------------------------------------------------------------------
97,729,000
- ------------------------------------------------------------------------
PERSONAL CREDIT - 7.68%
Associates Corp. of North America
5.73% 10/18/95 50,000 49,625,958
- ------------------------------------------------------------------------
5.73% 10/19/95 100,000 99,236,000
- ------------------------------------------------------------------------
AVCO Financial Services, Inc.
5.70% 09/15/95 50,000 49,889,167
- ------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Household Finance Corp.
5.75% 10/12/95 $ 50,000 $ 49,672,569
- --------------------------------------------------------------------
5.73% 10/20/95 50,000 49,610,042
- --------------------------------------------------------------------
Student Loan Corp.
5.73% 10/20/95 25,000 24,805,021
- --------------------------------------------------------------------
322,838,757
- --------------------------------------------------------------------
MISCELLANEOUS - 7.10%
Hertz Corp. (The)
5.69% 09/07/95 25,000 24,976,292
- --------------------------------------------------------------------
5.68% 09/08/95 20,000 19,977,911
- --------------------------------------------------------------------
5.70% 09/18/95 81,000 80,781,975
- --------------------------------------------------------------------
5.72% 10/06/95 35,000 34,805,361
- --------------------------------------------------------------------
5.75% 10/13/95 11,500 11,422,854
- --------------------------------------------------------------------
International Lease Finance Corp.
5.70% 09/15/95 19,000 18,957,883
- --------------------------------------------------------------------
5.71% 09/25/95 18,500 18,429,577
- --------------------------------------------------------------------
5.72% 10/05/95 6,570 6,534,507
- --------------------------------------------------------------------
5.72% 10/06/95 38,900 38,683,673
- --------------------------------------------------------------------
5.73% 10/13/95 44,000 43,705,860
- --------------------------------------------------------------------
298,275,893
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 3.89%
General Electric Capital Corp.
5.74% 09/07/95 23,500 23,477,518
- --------------------------------------------------------------------
5.72% 09/20/95 100,000 99,698,110
- --------------------------------------------------------------------
5.71% 10/06/95 40,500 40,275,169
- --------------------------------------------------------------------
163,450,797
- --------------------------------------------------------------------
Total Financial 2,012,001,316
- --------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.69% 09/12/95 20,424 20,388,491
- --------------------------------------------------------------------
5.73% 09/22/95 23,224 23,146,374
- --------------------------------------------------------------------
5.72% 10/10/95 26,556 26,391,441
- --------------------------------------------------------------------
5.74% 10/13/95 26,759 26,579,804
- --------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
OTHER--(continued)
DIVERSIFIED - (CONTINUED)
Cargill Inc.
5.69% 09/08/95 $ 12,000 $ 11,986,724
- ----------------------------------------------------------------------------
5.70% 09/11/95 16,300 16,274,192
- ----------------------------------------------------------------------------
5.73% 09/22/95 15,000 14,949,863
- ----------------------------------------------------------------------------
Total Other 139,716,889
- ----------------------------------------------------------------------------
Total Commercial Paper 3,017,027,320
- ----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 4.06%
Citicorp Securities, Inc.(b)
6.063% 09/13/95 6,000 6,000,000
- ----------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.(c)
5.988% 10/16/95 87,500 87,500,000
- ----------------------------------------------------------------------------
Morgan Stanley Group, Inc.(d)
5.893% 01/29/96 77,000 77,000,000
- ----------------------------------------------------------------------------
Total Master Note Agreements 170,500,000
- ----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENTS - 1.78%
Goldman, Sachs & Co.(e)
5.913% 01/29/96 75,000 75,000,000
- ----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 3,262,527,320
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 22.77%(f)
BT Securities Corp.(g)
5.83% -- 50,000 50,000,000
- ----------------------------------------------------------------------------
Daiwa Securities America, Inc.(h)
5.84% 09/01/95 91,528 91,528,472
- ----------------------------------------------------------------------------
Fuji Securities Inc.(i)
5.87% -- 115,000 115,000,000
- ----------------------------------------------------------------------------
Nesbitt Burns Securities, Inc.(j)
5.86% -- 100,000 100,000,000
- ----------------------------------------------------------------------------
Nikko Securities Co., Ltd.(k)
5.87% 09/01/95 200,000 200,000,000
- ----------------------------------------------------------------------------
Nomura Securities Co., Ltd.(l)
5.85% 09/01/95 100,000 100,000,000
- ----------------------------------------------------------------------------
SBC Government Securities, Inc.(m)
5.87% -- 200,000 200,000,000
- ----------------------------------------------------------------------------
UBS Securities Inc.(n)
5.85% -- 100,000 100,000,000
- ----------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
VALUE
<S> <C>
Total Repurchase Agreements $ 956,528,472
- ---------------------------------------------------------------------
TOTAL INVESTMENTS - 100.43% 4,219,055,792(o)
- ---------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.43)% (17,975,680)
- ---------------------------------------------------------------------
NET ASSETS - 100% $4,201,080,112
=====================================================================
</TABLE>
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon notice to the issuer. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
August 31, 1995.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven calendar days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on August 31, 1995.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Purchase Agreement will become
payable. Interest rates on master notes are redetermined periodically. Rate
shown is the rate in effect on August 31, 1995.
(e) The Portfolio may demand prepayment of Note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1995.
(f) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds managed
by the investment advisor.
(g) Open repurchase agreement entered into 02/27/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $95,150,000 U.S. Treasury STRIPS, due 08/15/04 to
08/15/05.
(h) Joint repurchase agreement entered into 08/31/95 with a maturing value of
$209,464,857. Collateralized by $204,224,000 U.S. Treasury obligations, 0%
to 10.75% due 11/30/95 to 05/15/16.
(i) Open joint repurchase agreement entered into 12/12/94; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $332,491,000 U.S. Treasury
obligations, 0% to 9.25% due 05/15/97 to 02/15/16.
(j) Open joint repurchase agreement entered into 08/16/95; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $270,681,000 U.S. Treasury STRIPS,
due 11/15/95 to 11/15/21.
(k) Entered into 08/31/95 with a maturing value of $200,032,611. Collateralized
by $271,592,502 U.S. Government agency obligations, 6.583% to 9.50% due
09/01/98 to 08/01/25.
(l) Entered into 08/31/95 with a maturing value of $100,016,250. Collateralized
by $102,805,000 U.S. Government agency obligations, 0% to 8.25% due
10/02/95 to 05/12/05.
(m) Open repurchase agreement entered into 08/16/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $232,765,728 U.S. Government agency obligations, 5.997%
to 9.00% due 11/01/21 to 02/01/31 and $8,000,000 U.S. Treasury Bills due
03/07/96.
(n) Open joint repurchase agreement entered into 08/18/95; however, either
party may terminate the agreement upon demand. Collateralized by
$249,645,000 U.S. Treasury Bills, due 12/14/95 to 01/18/96.
(o) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $3,262,527,320
- ------------------------------------------------------------------------
Repurchase agreements 956,528,472
- ------------------------------------------------------------------------
Interest receivable 1,395,798
- ------------------------------------------------------------------------
Investment for deferred compensation plan 31,965
- ------------------------------------------------------------------------
Other assets 1,351,229
- ------------------------------------------------------------------------
Total assets 4,221,834,784
- ------------------------------------------------------------------------
LIABILITIES:
Dividends payable 20,375,980
- ------------------------------------------------------------------------
Deferred compensation payable 31,965
- ------------------------------------------------------------------------
Accrued advisory fees 213,136
- ------------------------------------------------------------------------
Accrued distribution fees 88,951
- ------------------------------------------------------------------------
Accrued transfer agent fees 5,493
- ------------------------------------------------------------------------
Accrued operating expenses 39,147
- ------------------------------------------------------------------------
Total liabilities 20,754,672
- ------------------------------------------------------------------------
NET ASSETS $4,201,080,112
========================================================================
NET ASSETS:
Institutional Class $3,752,693,248
========================================================================
Private Investment Class $ 154,277,704
========================================================================
Personal Investment Class $ 99,630,235
========================================================================
Cash Management Class $ 194,478,925
========================================================================
NET ASSET VALUE PER SHARE:
Shares outstanding, $0.001 par value per share:
Institutional Class 3,752,704,848
========================================================================
Private Investment Class 154,278,185
========================================================================
Personal Investment Class 99,629,606
========================================================================
Cash Management Class 194,479,527
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-9
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $246,526,258
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 2,567,762
- -------------------------------------------------------------------
Custodian fees 329,212
- -------------------------------------------------------------------
Administrative services fees 250,216
- -------------------------------------------------------------------
Directors' fees and expenses 42,334
- -------------------------------------------------------------------
Registration fees 262,523
- -------------------------------------------------------------------
Transfer agent fees 89,684
- -------------------------------------------------------------------
Distribution fees (Note 2) 795,232
- -------------------------------------------------------------------
Other 348,810
- -------------------------------------------------------------------
Total expenses 4,685,773
- -------------------------------------------------------------------
Less expenses assumed by advisor (50,900)
- -------------------------------------------------------------------
Net expenses 4,634,873
- -------------------------------------------------------------------
Net investment income 241,891,385
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $241,891,385
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 241,891,385 $ 155,832,059
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 241,891,385 155,832,059
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (241,891,385) (155,832,059)
- ----------------------------------------------------------------------------
Share transactions-net 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,115,013,351 4,368,706,238
- ----------------------------------------------------------------------------
End of period $4,201,080,112 $4,115,013,351
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,201,092,165 $4,115,025,404
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (12,053) (12,053)
- ----------------------------------------------------------------------------
$4,201,080,112 $4,115,013,351
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, the Prime Portfolio, which offers separate classes
of shares, and the Liquid Assets Portfolio. Information presented in these
financial statements pertains only to the Prime Portfolio (the "Portfolio").
The assets, liabilities and operations of each portfolio are accounted for
separately. The Portfolio consists of four different classes of shares: the
Institutional Class, the Private Investment Class, the Personal Investment
Class, and the Cash Management Class.
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
- -----------------------------------------------------------------------
<S> <C>
First $100 million 0.20%
- -----------------------------------------------------------------------
Over $100 million to $200 million 0.15%
- -----------------------------------------------------------------------
Over $200 million to $300 million 0.10%
- -----------------------------------------------------------------------
Over $300 million to $1.5 billion 0.06%
- -----------------------------------------------------------------------
Over $1.5 billion 0.05%
- -----------------------------------------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $14,000 on the Prime Portfolio-Private Investment Class, $13,300 on
the Prime Portfolio-Personal Investment Class and $23,600 on the Prime
Portfolio-Cash Management Class during the year ended August 31, 1995.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1995,
the Portfolio reimbursed AIM $154,963 for such services. During the year ended
August 31, 1995, the Fund paid A I M Institutional Fund
FS-12
<PAGE>
Services, Inc. ("AIFS") $143,464 for shareholder and transfer agency services.
Effective July 1, 1995, AIFS became the exclusive transfer agent of the
Portfolio.
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 and the Cash Management Class
of the Portfolio. The Plan provides that the Portfolio's Private Investment
Class, the Personal Investment Class and the Cash Management Class may pay up
to a 0.50%, 0.75% and 0.10%, respectively, maximum annual rate of the average
daily net assets attributable to such class. Of this amount, the Fund may pay
an asset-based sales charge to FMC and the Fund may pay a service fee of (a)
0.25% of the average daily net assets of each of the Private Investment Class
and the Personal Investment Class and (b) 0.10% of the average daily net assets
of the Cash Management 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 or the Cash Management Class. Any amounts not
paid as a service fee under such Plan would constitute an asset-based sales
charge. During the year ended August 31, 1995, the Prime Portfolio-Private
Investment Class, the Prime Portfolio-Personal Investment Class and Prime
Portfolio-Cash Management Class accrued $367,522, $413,064 and $14,646,
respectively, for compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1995, the Portfolio paid legal fees of $3,247
for services rendered by Reid & Priest as counsel to the Board of Directors. In
September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was appointed
as counsel to the Board of Directors. During the year ended August 31, 1995,
the Portfolio paid legal fees of $10,128 for services rendered by that firm as
counsel. A director of the Fund is a member of Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel and was a member of the firm of Reid & Priest prior to
September 1994.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-SHARE INFORMATION
Changes in shares outstanding during the years ended August 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 30,516,627,315 $30,516,627,315 33,826,759,958 $33,826,759,958
- -------------------------------------------------------------------------------------------
Private Investment
Class 1,403,913,359 1,403,913,359 120,927,192 120,927,192
- -------------------------------------------------------------------------------------------
Personal Investment
Class 881,857,651 881,857,651 15,823,134 15,823,134
- -------------------------------------------------------------------------------------------
Cash Management Class* 307,521,987 307,521,987 25,113,434 25,113,434
- -------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 3,106,371 3,106,371 527,557 527,557
- -------------------------------------------------------------------------------------------
Private Investment
Class 4,691,704 4,691,704 3,982 3,982
- -------------------------------------------------------------------------------------------
Personal Investment
Class 4,299,720 4,299,720 39,701 39,701
- -------------------------------------------------------------------------------------------
Cash Management Class* 896,094 896,094 5,586 5,586
- -------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (30,847,783,300) (30,847,783,300) (34,096,489,905) (34,096,489,905)
- -------------------------------------------------------------------------------------------
Private Investment
Class (1,285,160,664) (1,285,160,664) (107,954,443) (107,954,443)
- -------------------------------------------------------------------------------------------
Personal Investment
Class (789,592,898) (789,592,898) (13,702,087) (13,702,087)
- -------------------------------------------------------------------------------------------
Cash Management Class* (114,310,578) (114,310,578) (24,746,996) (24,746,996)
- -------------------------------------------------------------------------------------------
Net increase (decrease) 86,066,761 $ 86,066,761 (253,692,887) $ (253,692,887)
===========================================================================================
</TABLE>
* The Prime Portfolio-Cash Management Class commenced operations on June 30,
1994.
FS-13
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Prime
Portfolio-Private Investment Class outstanding during each of the years in the
two-year period ended August 31, 1995 and the period July 8, 1993 (date
operations commenced) through August 31, 1993.
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- -------- ------- -------
Income from investment operations:
Net investment income 0.05 0.03 0.03
- ----------------------------------------- -------- ------- -------
Total from investment operations 0.05 0.03 0.03
- ----------------------------------------- -------- ------- -------
Less distributions:
Dividends from net investment income (0.05) (0.03) (0.03)
- ----------------------------------------- -------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
========================================= ======== ======= =======
Total return 5.48% 3.33% 3.24%(a)
========================================= ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $154,278 $30,834 $17,857
========================================= ======== ======= =======
Ratio of expenses to average net assets 0.39%(b) 0.38%(c) 0.37%(a)
========================================= ======== ======= =======
Ratio of net investment income to average
net assets 5.50%(b) 3.32%(c) 2.85%(a)
========================================= ======== ======= =======
</TABLE>
(a) Annualized.
(b) After expense reimbursements. The ratios of expenses and net investment
income prior to expense reimbursements are 0.40% and 5.49%, respectively.
Ratios are based on average net assets of $122,507,351.
(c) After expense reimbursements. The ratios of expenses and net investment
income prior to expense reimbursements are 1.18% and 2.52%, respectively.
FS-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment objective is the
maximization of current income to the extent consistent with the preservation of capital and the
CASH maintenance of liquidity. The Portfolio seeks to achieve its objective by investing in high grade money
MANAGEMENT market instruments, such as U.S. Government obligations, bank obligations, commercial instruments and
CLASS repurchase agreements. The instruments purchased by the Portfolio will have maturities of sixty days or
less.
DECEMBER 12, 1995
The Portfolio is a series portfolio of Short-Term Investments Co. (the "Fund"), an open-end,
diversified, series management investment company. This Prospectus relates solely to the Cash Management
Class of the Portfolio, a class of shares designed to be a convenient vehicle in which institutional
customers of banks, certain broker-dealers and other financial institutions can invest in a diversified,
money market fund.
The Fund also offers shares of other classes of the Portfolio pursuant to separate prospectuses: the
Institutional Class, the Private Investment Class, the Personal Investment Class and the Resource Class,
as well as shares of classes of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING
IN SHARES OF THE CASH MANAGEMENT CLASS OF THE PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION, DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY REFERENCE. FOR A COPY OF THE
STATEMENT OF ADDITIONAL INFORMATION, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-7745.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND
THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE
THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE
PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
[LOGO APPEARS
HERE]
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7745
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Cash Management Class (the "Class") of the
Portfolio. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less. The investment objective
of the Portfolio is the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which institutional
customers of banks, certain broker-dealers and other financial institutions can
invest in a diversified open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $1,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in funds immediately available to the Portfolio. See "Purchase of
Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing the securities of the
Portfolio and rounds the per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
2
<PAGE>
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
0.10% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions as compensation for distribution-related services. See "Purchase
of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- CASH MANAGEMENT CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................ None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)....................................................... None
Deferred Sales Load (as a percentage of original purchase price or re-
demption proceeds, as applicable)..................................... None
Redemption Fees (as a percentage of amount redeemed,if applicable)..... None
Exchange Fee........................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- CASH MANAGEMENT CLASS (AS A PER-
CENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................................ .06%
12b-1 Fees (after fee waivers)*........................................ .08%
Other Expenses (after expense reimbursement)*.......................... .03%
----
Total Portfolio Operating Expenses --Cash Management Class............. .17%
====
</TABLE>
- ------
* Had there been no fee waivers and no expense reimbursements, 12b-1 Fees and
Other Expenses would have been 0.10% and 0.16%, respectively.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.
1 year............................. $ 2
3 years............................ $ 5
5 years............................ $10
10 years............................ $22
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The Other Expenses
figure is based upon actual costs and fees charged to the Class for the fiscal
year ended August 31, 1995. There can be no assurance that future waivers of
fees (if any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume expenses of the Class,
such assumption will have the effect of lowering the Class' overall expense
ratio and increasing its yield to investors. Beneficial owners of shares of the
Class should also consider the effect of any charges imposed by the institution
maintaining their accounts. As a result of 12b-1 fees, a long-term shareholder
of the Class may pay more than the economic equivalent of the maximum front-end
sales charges permitted by the Rules of the National Association of Securities
Dealers, Inc.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Cash Management Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively "data") for the fiscal year ended August 31, 1995 and for the
period June 30, 1994 (date operations commenced) through August 31, 1994. The
data has been audited by KPMG Peat Marwick LLP, independent auditors, whose
report on the financial statements and the related notes appears in the
Statement of Additional Information.
<TABLE>
<CAPTION>
JUNE 30, 1994
(COMMENCEMENT
OF
OPERATIONS)
TO AUGUST 31,
1995 1994
-------- -------------
<S> <C> <C>
Net asset value, beginning of period................ $1.00 $1.00
Income from investment operations:
Net investment income............................. 0.06 0.01
-------- -----
Total from investment operations................ 0.06 0.01
-------- -----
Less distributions:
Dividends from net investment income.............. (0.06) (0.01)
-------- -----
Net asset value, end of period...................... $1.00 $1.00
======== =====
Total return........................................ 5.71% 4.34%(a)
======== =====
Ratios/Supplemental Data:
Net assets, end of period (000s omitted)............ $194,479 $372
======== =====
Ratio of expenses to average net assets............. 0.17%(b) 0.14%(c)
======== =====
Ratio of net investment income to average net
assets............................................. 5.69%(b) 4.26%(c)
======== =====
</TABLE>
- ------
(a) Annualized
(b) After expense reimbursements. Ratios are based on average net assets of
$18,307,649. The ratios of expenses and net investment income prior to
expense reimbursements are 0.30% and 5.56%, respectively.
(c) Ratios are annualized. After expense reimbursements. The ratios of expenses
and net investment income prior to expense reimbursements are 0.65% and
3.75%, respectively.
5
<PAGE>
SUITABILITY FOR INVESTORS
The shares of the Class are intended for use primarily by institutional
customers of banks, certain broker-dealers and other financial institutions who
seek a convenient vehicle in which to invest in an open-end diversified money
market fund. It is expected that the shares of the Class may be particularly
suitable investments for corporate cash managers, municipalities or other
public entities. The minimum initial investment is $1,000,000.
Investors in the shares of the Class have the opportunity to receive a
somewhat higher yield than might be obtainable through direct investment in
money market instruments, and enjoy the benefits of diversification, economies
of scale and same-day liquidity. Generally, higher interest rates can be
obtained on the purchase of very large blocks of money market instruments. Of
course, any such relative increase in interest rates may be offset to some
extent by the operating expenses of the shares of the Class.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations that may be available in the money markets. Such obligations
include U.S. Treasury obligations, which include Treasury bills, notes and
bonds, and repurchase agreements relating to such securities. These
instruments, which are collectively referred to as "Money Market Obligations,"
are briefly described below. The Portfolio may also engage in the investment
practices described below. The market values of the money market instruments
held by the Portfolio will be affected by changes in the yields available on
similar securities. If yields have increased since a security was purchased,
the market value of such security will generally have decreased. Conversely, if
yields have decreased, the market value of such security will generally have
increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
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BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposit, over 5% of the Portfolio's total
assets would be invested in time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"), as such Rule may
be amended from time to time. Generally, "First Tier" securities are securities
that are rated in the highest rating category by two nationally recognized
statistical rating organizations ("NRSROs") or, if only rated by one NRSRO, are
rated in the highest rating category by that NRSRO or, if unrated, are
determined by AIM (under the supervision of and pursuant to guidelines
established by the Board of Directors) to be of comparable quality to a rated
security that meets the foregoing quality standards. Commercial paper consists
of short-term promissory notes issued by corporations. Commercial paper may be
traded in the secondary market after its issuance. Master notes are unsecured
demand notes that permit the investment of fluctuating amounts of money at
varying rates of interest pursuant to arrangements with issuers who meet the
quality criteria of the Portfolio. The interest rate on a master note may
fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master demand notes, if such notes have a
demand feature, the payee may demand payment of the principal amount of the
note upon relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. The
Portfolio may enter into repurchase agreements only with institutions believed
by the Fund's Board of Directors to present minimal credit risk. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the seller's failure to repurchase
the obligation in accordance with the terms of the agreement), the Portfolio
could experience both delays in liquidating the underlying securities and
losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities. For
additional information, see the Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the
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repurchase price of the securities sold by the Portfolio which it is obligated
to repurchase. The risk, if encountered, could cause a reduction in the net
asset value of the Portfolio's shares. Reverse repurchase agreements are
considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES.The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered 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 payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreements or when-issued commitments. If
the market value of such securities declines, additional cash or securities
will be segregated on a daily basis so that the market value of the account
will equal the amount of the Portfolio's delayed delivery agreements and when-
issued commitments. To the extent that funds are segregated, they will not be
available for new investment or to meet redemptions. Investment in securities
on a when-issued basis and use of delayed delivery agreements may increase the
Portfolio's exposure to market fluctuation, or may increase the possibility
that the Portfolio will incur a short-term loss, if the Portfolio must engage
in portfolio transactions in order to honor a when-issued commitment or accept
delivery of a security under a delayed delivery agreement. The Portfolio will
employ techniques designed to minimize these risks. No additional delayed
delivery agreements or when-issued commitments will be made by the Portfolio
if, as a result, more than 25% of the Portfolio's net assets would become so
committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations.
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INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The
United States Securities and Exchange Commission (the "SEC") has proposed
certain changes to Rule 2a-7. While such proposed changes may have a
prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
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Shares of the Class are sold to institutional customers of banks, certain
broker-dealers and other financial institutions (individually an "Institution"
and collectively, "Institutions"). Individuals, corporations, partnerships and
other businesses that maintain qualified accounts at an Institution may invest
in the shares of the Class. Each Institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Class. Such services may include, among other things, establishment and
maintenance of shareholder accounts and records; assistance in processing
purchase and redemption transactions in shares of the Class; providing periodic
statements showing a customer's account balance in shares of the 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.
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS, at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
shares of the Class through an Institution in accordance with the procedures
established by such Institution. Each Institution separately determines the
rules applicable to accounts in the shares of the Class opened with it,
including minimum initial and subsequent investment requirements and the
procedures to be followed by investors to effect purchases of shares of the
Class. The minimum initial investment is $1,000,000, and there is no minimum
amount for subsequent purchases of shares of the Class by an Institution on
behalf of its customers. An investor who proposes to open a Portfolio account
with an Institution should consult with a representative of such Institution to
obtain a description of the rules governing such an account. The Institution
holds shares of the Class registered in its name, as agent for the customer, on
the books of the Institution. A statement with regard to the customer's shares
of the Class is supplied to the customer periodically, and confirmations of all
transactions for the account of the customer are provided by the Institution to
the customer promptly upon request. In addition, the Institution sends to each
customer proxies, periodic reports and other information with regard to the
customer's shares of the Class. The customer's shares of the Class are fully
assignable and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his 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 Class directly, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be 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 Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Cash Management Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request. Certificates (in
full shares only) will be issued without charge and may be redeposited at any
time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
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REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the net asset value per share of the Portfolio will remain constant
at $1.00. See "Net Asset Value." Redemption requests with respect to shares of
the Class for which certificates have not been issued are normally made through
a customer's Institution.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will 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 Portfolio's best interest to do so.
Shares of the Class are not redeemable at the option of the Fund unless the
Board of Directors of the Fund determines in its sole discretion that failure
to so redeem may have materially adverse consequences to the shareholders of
the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, transfer
agent fees or registration fees that may be unique to the Class. Although
realized gains and losses on the assets of the Portfolio are reflected in its
net asset value, they are not expected to be of an amount which would affect
its $1.00 per share net asset value for purposes of purchases and redemptions.
See "Net Asset Value." Distributions from net realized short-term gains may be
declared and paid yearly or more frequently. See "Taxes." The Portfolio does
not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the Institution to AIFS, at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
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The Portfolio uses its best efforts to maintain its net asset value per share
at $1.00 for purposes of sales and redemptions. See "Net Asset Value." Should
the Fund incur or anticipate any unusual expense, loss or depreciation which
could adversely affect the income or net asset value of the Portfolio, the
Fund's 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 the then
prevailing circumstances. For example, under such unusual circumstances the
Board of Directors might reduce or suspend the daily dividend in order to
prevent, to the extent possible, the net asset value per share of the Portfolio
from being reduced below $1.00. Thus, such expenses, losses or depreciation may
result in a shareholder receiving no dividends for the period during which it
held its shares and cause such a shareholder to receive upon redemption a price
per share lower than the shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on November 1, 1995 which are subject to change
by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined
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by amortized cost, is higher or lower than the price the Portfolio would
receive if the security were sold. During such periods, the daily yield on
shares of the Portfolio, computed as described in "Purchases and Redemptions--
Performance Information" in the Statement of Additional Information, may differ
somewhat from an identical computation made by an investment company with
identical investments utilizing available indications as to market value to
value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
877-7745. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by an investor before
making an investment in the Portfolio.
For the seven-day period ended August 31, 1995, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.68% and 5.84%, 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.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation by its
Institution for each transaction unless otherwise specified by the shareholder.
13
<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and A I M Management Group Inc. ("AIM Management"), a holding company engaged
in the financial services business. Information concerning the Board of
Directors may be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 37 investment company portfolios. As of October 31, 1995,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $39.3 billion. AIM is a wholly-owned
subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1995, AIM received fees pursuant to the
Advisory Agreement from the Fund with respect to the Portfolio which
represented 0.06% of the Portfolio's average daily net assets. During such
fiscal year, the expenses of the Class, including AIM's fees, amounted to 0.17%
of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "AIM Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. As compensation to AIM for its services under the Administrative
Services Agreement, the Portfolio may reimburse AIM for expenses incurred by
AIM in connection with such services.
In addition, AIM and AIFS entered into an Administrative Services Agreement
pursuant to which AIFS was reimbursed by AIM for its costs in providing
shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $95,254 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995 AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $48,210.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year. FMC may in its discretion from time to time agree to waive voluntarily
its 12b-1 fee but will retain its ability to be reimbursed prior to the end of
the fiscal year.
DISTRIBUTOR
The Fund has entered into a Distribution Agreement dated as of October 18,
1993 (the "Distribution Agreement") with FMC, a registered broker-dealer and a
wholly-owned subsidiary of AIM, to act as the exclusive distributor of the
shares of the
14
<PAGE>
Class. The address of FMC is 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Certain directors and officers of the Fund are affiliated with FMC
and AIM. The Distribution Agreement provides that FMC has the exclusive right
to distribute shares of the Fund either directly or through other broker-
dealers. FMC is the distributor of several of the mutual funds managed or
advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or financial institutions who sell a
minimum dollar amount of the shares of the Class during a specific period of
time. In some instances, these incentives may be offered only to certain
dealers or financial institutions who have sold or may sell significant amounts
of shares. The total amount of such additional bonus payments or other
consideration shall not exceed 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 of the Class or the amount
received as proceeds from such sales. Sales of the shares of the Class may not
be used to qualify for any incentives to the extent that such incentives may be
prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of shares of the Class in an amount equal to
0.10% on an annualized basis of the average daily net assets of the Portfolio
attributable to the Class. Such amounts 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.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments to FMC would be characterized as an asset-based sales
charge pursuant to the 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 the Class. The Plan does not obligate the Fund to
reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund 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.
As required by Rule 12b-1 under the 1940 Act, the Plan was 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 Fund 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") on May 9, 1995. In
approving the continuance of the Plan, the directors considered various factors
and determined that there is a reasonable likelihood that the Plan will benefit
the Fund and the shareholders of the Class.
The Plan requires the officers of the Fund 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.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the shareholders of the outstanding
voting securities of the Class. Any change in the Plan that would increase
materially the distribution expenses paid by the Class requires shareholder
approval; otherwise the Plan may be amended by the Board of Directors,
including a majority of the Qualified Directors, by votes 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.
15
<PAGE>
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund which are not directly attributable to a specific class of shares
but are directly attributable to a specific portfolio are prorated among all
classes of such portfolio. Expenses of the Fund which are directly attributable
to a specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio is that of the Predecessor Portfolio. Shares of
common stock of the Fund are divided into eight classes. Five classes,
including the Class, represent interests in the Portfolio, and three classes
represent interests in the Liquid Assets Portfolio. Each class of shares has a
par value of $.001 per share. The other classes of the Fund may have different
sales charges and other expenses which may affect performance. An investor may
obtain information concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
16
<PAGE>
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 110 Washington Street, 8th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7745.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
<PAGE>
===================================== =======================================
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 877-7745 December 12, 1995
INVESTMENT ADVISOR
A I M ADVISORS, INC. SHORT-TERM
11 Greenway Plaza, Suite 1919 INVESTMENTS CO.
Houston, Texas 77046-1173
(713) 626-1919
DISTRIBUTOR PRIME PORTFOLIO
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 CASH MANAGEMENT CLASS
(800) 877-7745
TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
SUMMARY......................... 2
CUSTODIAN
THE BANK OF NEW YORK TABLE OF FEES AND EXPENSES...... 4
110 Washington Street
8th Floor FINANCIAL HIGHLIGHTS............ 5
New York, New York 10286
SUITABILITY FOR INVESTORS....... 6
TRANSFER AGENT
INVESTMENT PROGRAM.............. 6
PURCHASE OF SHARES.............. 9
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 REDEMPTION OF SHARES............ 11
Houston, Texas 77046-1173
DIVIDENDS....................... 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY TAXES........................... 12
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE NET ASSET VALUE................. 12
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR YIELD INFORMATION............... 13
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE REPORTS TO SHAREHOLDERS......... 13
FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN MANAGEMENT OF THE FUND.......... 14
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY GENERAL INFORMATION............. 16
NOT LAWFULLY BE MADE. </TABLE>
===================================== =======================================
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
CASH MANAGEMENT CLASS
OF THE
PRIME PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
(800) 877-7745
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 877-7745
--------------------
Statement of Additional Information dated December 12, 1995
Relating to the Prospectus dated December 12, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTION.......................................................... 1
GENERAL INFORMATION ABOUT THE FUND.................................... 1
The Fund and Its Shares........................................... 1
Directors and Officers............................................ 3
Remuneration of Directors......................................... 6
AIM Funds Retirement Plan for Eligible Directors/Trustees......... 7
Deferred Compensation Agreements.................................. 8
Investment Advisor................................................ 9
Administrator..................................................... 10
Expenses.......................................................... 10
Transfer Agent and Custodian...................................... 11
Reports........................................................... 11
Principal Holders of Securities................................... 12
PURCHASES AND REDEMPTIONS............................................. 16
Net Asset Value Determination..................................... 16
Distribution Agreement............................................ 16
Distribution Plan................................................. 17
Banking Regulations............................................... 17
Performance Information........................................... 18
Suspension of Redemption Rights................................... 19
INVESTMENT PROGRAM AND RESTRICTIONS................................... 19
Investment Program................................................ 19
Eligible Securities............................................... 20
Commercial Paper Ratings.......................................... 20
Bond Ratings...................................................... 21
Investment Restrictions........................................... 23
PORTFOLIO TRANSACTIONS................................................ 24
TAX MATTERS........................................................... 25
Qualification as a Regulated Investment Company................... 25
Excise Tax on Regulated Investment Companies...................... 26
Portfolio Distributions........................................... 27
Effect of Future Legislation; Local Tax Considerations............ 27
FINANCIAL STATEMENTS.................................................. FS
</TABLE>
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INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of
Short-Term Investments Co. (the "Fund"), a mutual fund. The rules and
regulations of the United States Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information is included in a Prospectus dated December 12, 1995 (the
"Prospectus"). Copies of the Prospectus and additional copies of this Statement
of Additional Information may be obtained without charge by writing the
distributor of the Portfolio's shares, Fund Management Company ("FMC"),
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or by calling
(800) 877-7745. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Cash Management
Class of the Portfolio. Some of the information required to be in this
Statement of Additional Information is also included in the Prospectus; thus, in
order to avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end diversified series management investment
company which was organized as a corporation under the laws of the State of
Maryland on May 3, 1993. On October 15, 1993, the Portfolio succeeded to the
assets and assumed the liabilities of the Prime Portfolio (the "Predecessor
Portfolio") of Short-Term Investments Co., a Massachusetts business trust
("STIC"), pursuant to an Agreement and Plan of Reorganization between the Fund
and STIC. All historical financial and other information contained in this
Statement of Additional Information for periods prior to October 15, 1993
relating to the Portfolio (or a class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are redeemable at their net asset value at the option of the shareholder or
at the option of the Fund in certain circumstances. For information concerning
the methods of redemption and the rights of share ownership, investors should
consult the Prospectus under the captions "General Information" and "Redemption
of Shares."
The Fund offers on a continuous basis shares representing an interest
in one of two portfolios: the Portfolio and the Liquid Assets Portfolio
(together, the "Portfolios"). The Portfolio consists of the following five
classes of shares: Resource Class, Cash Management Class, Private Investment
Class, Personal Investment Class and the Institutional Class. The Liquid Assets
Portfolio consists of three classes of shares. Each class of shares has
different shareholder qualifications and bears expenses differently. This
Statement of Additional Information and the Prospectus relate solely to shares
of the Cash Management Class (the "Class") of the Portfolio. Shares of the
other classes of the Portfolio and the classes of the Liquid Assets Portfolio
are offered pursuant to separate prospectuses and statements of additional
information.
As used in the Prospectus, the term "majority of the outstanding
shares" of the Fund, a particular portfolio or a particular class means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Fund, such portfolio or such class present at a meeting of the Fund's
shareholders, if the holders of more than 50% of the outstanding shares of the
Fund, such portfolio or such class are present or represented by proxy, or (ii)
more than 50% of the outstanding shares of the Fund, such portfolio or such
class.
1
<PAGE>
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
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 Charter of the Fund authorizes the issuance of 40 billion shares
with a par value of $.001 each, of which 16 billion shares represent an interest
in the Liquid Assets Portfolio (or class thereof) and 22 billion shares
represent an interest in the Portfolio (or class thereof). A share of a
Portfolio (or class) represents an equal proportionate interest in such
Portfolio (or class) with each other share of that Portfolio (or class) and is
entitled to a proportionate interest in the dividends and distributions from
that Portfolio (or class). Additional information concerning the rights of share
ownership is set forth in the Prospectus.
The assets received by the Fund for the issue or sale of shares of
each of the Portfolios and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated to that
Portfolio, and constitute the underlying assets of that Portfolio. The
underlying assets of each of the Portfolios are segregated and are charged with
the expenses with respect to that Portfolio and with a share of the general
expenses of the Fund. While the expenses of the Fund are allocated to the
separate books of account of each of the Portfolios, certain expenses may be
legally chargeable against the assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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 of the Fund, 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 Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
2
<PAGE>
Except as otherwise disclosed in the Prospectus and in this Statement
of Additional Information, the directors shall continue to hold office and may
appoint their successors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, A I M Global Management Company Limited and AIM Global Venture Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF & I Steel Corp., Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the Board of Equitable
Bancorporation.
**CARL FRISCHLlNG, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
- ------------------------
* A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
3
<PAGE>
***ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; Director and Executive
Vice President, A I M Distributors, Inc.; Director and Senior Vice President,
A I M Capital Management, Inc., A I M Fund Services, Inc., A I M Global
Associates, Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M
Institutional Fund Services, Inc. and Fund Management Company; and Senior Vice
President, AIM Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road - Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment companies). Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
- ------------------------
*** A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
4
<PAGE>
****JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Management Group Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Institutional Fund Services, Inc. and Fund Management Company; and Vice
President, AIM Global Advisors Limited, A I M Global Associates, Inc., A I M
Global Holdings, Inc. and AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc. and AIM Global Ventures
Co.; Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
****CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group
Inc., A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc. and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance Officer,
Charles Schwab Investment Management, Inc.; and Vice President, Integrated
Resources Life Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice
President, A I M Capital Management, Inc. and AIM Global Advisors Limited; and
Vice President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and
Fund Management Company; Director and Senior Vice President, A I M Advisors,
Inc.; and Senior Vice President, A I M Management Group Inc.
- --------------------------
**** Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for
meeting with the Portfolio's auditors to review audit procedures and results and
to consider any matters arising from an audit to be brought to the attention of
the directors as a whole with respect to the Portfolio's fund accounting or its
internal accounting controls, or for considering such matters as may from time
to time be set forth in a charter adopted by the Board of Directors and such
Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investments Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Company maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the Board of Directors and such Committee.
All of the Fund's directors also serve as directors or trustees of
some or all of the other investment companies managed or advised by A I M
Advisors, Inc. ("AIM") or distributed and administered by FMC. Most of the
Fund'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 attended. The directors
of the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each such director receives a fee, allocated among the AIM Funds for which he
serves as a director or trustee, which consists of an annual retainer component
and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each director of the Fund:
6
<PAGE>
<TABLE>
<CAPTION>
Retirement
Benefits Total
Aggregate Accrued Compensation
Director Compensation by all AIM from all AIM
from Fund(1) Funds(2) Funds(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- --------------------------------------------------------------------------------
Bruce L. Crockett 4,393 2,814 45,094
- --------------------------------------------------------------------------------
Owen Daly II 4,423 14,375 45,844
- --------------------------------------------------------------------------------
Carl Frischling 4,393 7,542 45,094
- --------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- --------------------------------------------------------------------------------
John F. Kroeger 4,423 20,517 45,844
- --------------------------------------------------------------------------------
Lewis F. Pennock 4,423 5,093 45,844
- --------------------------------------------------------------------------------
Ian W. Robinson 4,353 10,396 45,094
- --------------------------------------------------------------------------------
Louis S. Sklar 4,353 4,682 45,094
- --------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $18,174.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$11,985. Data reflects compensation earned for the calendar year ended
December 31, 1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
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, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 5% of such Director's compensation paid by the AIM Funds multiplied by
the number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is
payable to each eligible director in quarterly installments for a period of no
more than five years. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences, the
director's surviving spouse (if any) shall receive a quarterly survivor's
benefit equal to 50% of the amount payable to the
7
<PAGE>
deceased director, for no more than five 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 AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
Annual Compensation Paid
By All AIM Funds
<C> <C> <C>
$60,000 $65,000
========================================
Number of Years of Service with the AIM 10 $30,000 $32,500
Funds ========================================
9 $27,000 $29,250
========================================
8 $24,000 $26,000
========================================
7 $21,000 $22,750
========================================
6 $18,000 $19,500
========================================
5 $15,000 $16,250
========================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $42,334 in directors' fees
and expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees of
$3,247 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended
August 31, 1995, the Portfolio paid legal fees of $10,128 for services rendered
by that firm as counsel. A director of the Fund is a partner of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel and was a partner of the firm of Reid & Priest
prior to September 1994.
8
<PAGE>
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated as of October 18, 1993 (the "Advisory Agreement"). A prior
investment advisory agreement (the "Prior Advisory Agreement") with
substantially identical terms (including the fee schedules) to the Advisory
Agreement was previously in effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises or
manages 37 investment company portfolios. As of October 31, 1995, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $39.3 billion. AIM is a wholly-owned subsidiary
of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. Certain of the directors and officers of AIM
are also executive officers of the Fund and their affiliations are shown under
"Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews annually such reports
(including information on any substantial violations of the Code). Violations
of the Code may result in censure, monetary penalties, suspension or termination
of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services, AIM receives a monthly fee which is
calculated by applying the following annual rates to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets Rate
---------- ----
<S> <C>
First $100 million .20%
Over $100 million to $200 million .15%
Over $200 million to $300 million .10%
Over $300 million to $1.5 billion .06%
Over $1.5 billion .05%
</TABLE>
The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
The Advisory Agreement provides that, upon the request of the Fund's Board
of Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered
9
<PAGE>
into a master administrative services agreement under which AIM will provide the
additional services described below under the caption "Administrator."
For the fiscal years ended August 31, 1995, 1994 and 1993, AIM received
fees pursuant to the Advisory Agreement with respect to the Portfolio (and the
Predecessor Portfolio) in the amounts of $2,567,762, $2,599,662 and $2,647,096,
respectively.
The Advisory Agreement will continue in effect until June 30, 1996, and
from year to year thereafter provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a majority
of the directors who are not parties to the Advisory Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or AIM may terminate the Advisory Agreement on 60 days'
notice without penalty. The Advisory Agreement terminates automatically in the
event of its "assignment," as defined in the 1940 Act.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM performs accounting and
other administrative services for the Portfolio which are not required to be
performed by AIM under the advisory agreement. As full compensation for the
performance of such services, AIM is reimbursed for any personnel and other
costs (including the cost of applicable office space, facilities and equipment)
of furnishing the services of a principal financial officer of the Fund and of
persons working under his supervision for maintaining the financial accounts and
books and records of the Fund, 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 Fund's
Board of Directors.
The AIFS Administrative Services Agreement between AIM and AIFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provided that AIFS
could perform certain shareholder services for the Portfolio. For such
services, AIFS was entitled to receive from AIM reimbursement of its costs
associated with the Class. The AIFS Administrative Services Agreement was
terminated July 1, 1995. Beginning July 1, 1995, AIFS received fees with
respect to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the period July 1, 1995
through August 31, 1995 AIFS received transfer agency fees from AIM with respect
to the Portfolio in the amount of $48,210.
Under the terms of the Prior Advisory Agreement, AIM was reimbursed for the
fiscal year ended August 31, 1993 in the amount of $94,922 for fund accounting
services for the Portfolio. Pursuant to the Administrative Services Agreement,
AIM was reimbursed for the fiscal years ended August 31, 1995 and 1994 in the
amounts of $154,963 and $106,109, respectively, for fund accounting services for
the Portfolio. For the period from August 31, 1994 through June 30, 1995 and for
the period from June 1, 1994 through August 31, 1994, AIFS or its affiliates
received shareholder services fees from AIM with respect to the Portfolio in the
amounts of $95,254 and $14,651, respectively.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM
under the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent
10
<PAGE>
or agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and maintenance
of registration of the Fund and shares with the SEC and various states and other
jurisdictions (including filing and legal fees and disbursements of counsel);
the costs and expenses of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and directors' meetings and of preparing, printing and mailing of prospectuses,
proxy statements and reports to shareholders; fees and travel expenses of
directors and director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not "interested persons"
(as defined in the 1940 Act) of the Fund or AIM, and of independent accountants
in connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto). Except as disclosed under the caption "Distribution Plan,"
FMC bears the expenses of printing and distributing prospectuses and statements
of additional information (other than those prospectuses and statements of
additional information distributed to existing shareholders of the Fund) 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 Fund's
shares.
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of the Fund based
upon the relative net assets of each class. Expenses of the Fund which are not
directly attributable to a specific class of shares but are directly
attributable to one or both of the Portfolios are prorated among all classes of
such Portfolios based upon the relative net assets of each such class. The
expenses of the Portfolio are deducted from its total income before dividends
are paid. Expenses of the Fund which are directly attributable to a specific
class of shares are charged against the income available for distribution as
dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and
cash of the Portfolio. The Bank of New York receives such compensation from the
Fund for its services in such capacity as is agreed to from time to time by The
Bank of New York and the Fund. The address of The Bank of New York is 110
Washington Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .007% of average daily net assets
of the Fund, payable monthly. Such compensation may be changed from time to
time as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held by the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of October 25, 1995, and the percentage of the Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
INSTITUTIONAL CLASS
- -------------------
NationsBank of Texas 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. Bank of Oregon 13.23%
321 Southwest 6th Street
Portland, OR 97208
Trust Company Bank 8.19%
P.O. Box 105504
Atlanta, GA 30348
Texas Commerce Bank 7.62%
P.O. Box 2558
Houston, TX 77252-8098
Boatmen's Trust Company 7.27%
100 North Broadway
St. Louis, MO 63101
Frost National Bank 7.26%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corporation 71.90%**
41 South High Street
Columbus, OH 43287
Var & Co. 17.39%
180 East 5th Street
St. Paul, MN 55101
Frost National Bank 6.94%
P.O. Box 1600
San Antonio, TX 78296
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 67.37%**
440 Manaroneck Ave.
Harrison, NY 10528
Cullen/Frost Discount Brokers 30.94%**
P.O. Box 2358
San Antonio, TX 78299
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
CASH MANAGEMENT CLASS
- ---------------------
Piper Jaffray As Agent For Customer 35.24%**
101 California Street
Suite 1150
San Francisco, CA 94111
</TABLE>
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
13
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
Piper Jaffray As Agent For Customer 29.49%**
P.O. Box 160727
Sacramento, CA 95816-0727
Bank Of New York 10.75%
One Wall Street
New York, NY 10286
Citibank As Agent For Customer 8.38%
120 Wall Street 13th Floor
New York, NY 10043
</TABLE>
RESOURCE CLASS
- --------------
AIM provided the initial capitalization of the Resource Class of the
Prime Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
INSTITUTIONAL CLASS
- -------------------
Trust Company Bank 20.96%
P.O. Box 105504
Atlanta, GA 30348
</TABLE>
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
14
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
Wachovia Bank & Trust 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
NationsBank Dallas 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
Society National Bank 7.57%
127 Public Square
Cleveland, OH 44114-1306
Boatmen's Trust Company 6.56%
100 North Broadway
St. Louis, MO 63102
Firstar Bank of Madison 5.41%
P.O. Box 7900
Madison, WI 53707
</TABLE>
PRIVATE INVESTMENT CLASS
- ------------------------
AIM provided the initial capitalization of the Private Investment
Class of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Private Investment Class of the Liquid Assets Portfolio. Although
the Private Investment Class of the Liquid Assets Portfolio expects that the
sale of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid Assets
Portfolio, as defined in the 1940 Act.
CASH MANAGEMENT CLASS
- ---------------------
AIM provided the initial capitalization of the Cash Management Class
of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Cash Management Class of the Liquid Assets Portfolio. Although the
Cash Management Class of the Liquid Assets Portfolio expects that the sale of
its shares to the public pursuant to the Prospectus will reduce the percentage
of such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
15
<PAGE>
Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Portfolio are sold at the net asset value of such
shares. Shareholders may at any time redeem all or a portion of their shares at
net asset value. The investor's price for purchases and redemptions will be the
net asset value next determined following the receipt of an order to purchase or
a request to redeem shares.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Portfolio is permitted in accordance with applicable rules and
regulations of the SEC, including Rule 2a-7 under the 1940 Act, which require
the Portfolio to adhere to certain conditions. These rules require that the
Portfolio maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 calendar days
or less and invest only in securities determined by the Fund's Board of
Directors to be "Eligible Securities" and to present minimal credit risk to the
Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, 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's 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 existing holders of
the Portfolio's shares. In the event the Board of Directors determines that such
a deviation exists, it will take such corrective action as the Board of
Directors deems necessary and appropriate, including the sales of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
the average portfolio maturity; the withholding of dividends; redemption of
shares in kind; or the establishment of a net asset value per share by using
available market quotations.
DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. See "General Information about the Fund --
Directors and Officers" and "General Information about the Fund -- Investment
Advisor" for information as to the affiliation of certain directors and officers
of the Fund with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right
to distribute the shares of the Class either directly or through other broker-
dealers. The Distribution Agreement also provides that FMC will pay promotional
expenses, including the incremental costs of printing prospectuses and
statements of additional information, annual reports and other periodic reports
for distribution to persons who are not shareholders of the Portfolio 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 Class.
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The Distribution Agreement will continue in effect until June 30,
1996, and from year to year thereafter, provided that it is specifically
approved at least annually by the Fund'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 Fund 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.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund 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 the shares of the Class. These services may include among
other things: (i) answering customer inquiries regarding the shares of the Class
and the Portfolio; (ii) assisting customers in changing dividend options,
account designations and addresses; (iii) performing sub-accounting; (iv)
establishing and maintaining shareholder accounts and records; (v) processing
purchase and redemption transactions; (vi) automatic investment in shares of the
Class of customer cash accounting balances; (vii) providing periodic statements
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
such firm; (viii) arranging for bank wires; and (ix) such other services as the
Fund may request on behalf of the shares of the Class, to the extent such firms
are permitted to engage in such services by applicable statute, rule or
regulation. The Plan may only be used for the purposes specified above and as
stated in the Plan. Expenses may not be carried over from year to year.
For the fiscal year ended August 31, 1995 FMC received compensation
pursuant to the Plan in the amount of $14,646, or an amount equal to 0.08%, of
the average daily net assets of the Class. Of such amount, $11,672 (or an
amount equal to 0.06% of the average daily net assets of the Class) was paid to
dealers and financial institutions, and $2,974 (or an amount equal to 0.02% of
the average daily net assets of the Class) was retained by FMC.
FMC is a wholly-owned subsidiary of AIM which is a wholly-owned
subsidiary of AIM Management. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund, own shares of
AIM Management.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations, among
other things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers and
to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, shareholder clients of
such bank would be permitted to remain shareholders of the Fund and alternate
means for continuing the servicing of such shareholders would be sought. In
such event, changes in the operation of the Fund might occur and shareholders
serviced by such bank might no longer be able to avail themselves of any
automatic investment or other services then being provided by such bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.
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In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments more restrictive than the
restrictions described herein.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus,
yield information for the shares of the Class may be obtained by calling the
Fund at (800) 877-7745. The current yield quoted will be the net average
annualized yield for an identified period. Current yield will be computed by
assuming that an account was established with a single share (the "Single Share
Account") on the first day of the period. To arrive at the quoted yield, the net
change in the value of that Single Share Account for the period (which would
include dividends accrued with respect to the share, and dividends declared on
shares purchased with dividends accrued and paid, if any, but would not include
realized gains and losses or unrealized appreciation or depreciation) will be
multiplied by 365 and then divided by the number of days in the period, with the
resulting figure carried to the nearest hundredth of one percent. The Fund may
also furnish a quotation of effective yield for the Class that assumes the
reinvestment of dividends for a 365-day year and a return for the entire year
equal to the average annualized yield for the period, which will be computed by
compounding the unannualized current yield for the period by adding 1 to the
unannualized current yield, raising the sum to a power equal to 365 divided by
the number of days in the period, and then subtracting 1 from the result.
For the seven-day period ended August 31, 1995, the current yield and
the effective yield (which assumes the reinvestment of dividends for a 365-day
year and a return for the entire year equal to the annualized current yield for
the period) for the Class were 5.68% and 5.84%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
The Fund may compare the performance of the Class or the
performance of securities in which the Portfolio may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by IBC/Donoghue's
Money Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical
Services, Inc., a widely recognized independent service located in Summit, New
Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
. other fixed-income investments such as Certificates of Deposit
("CDs").
The principal value and interest rate of CDs and money market
securities are fixed at the time of purchase, whereas the Class's yield will
fluctuate. Unlike some CDs and certain other money market securities, money
market mutual funds are not insured by the FDIC. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
The Fund may reference the growth and variety of money market mutual
funds and AIM's innovation and participation in the industry.
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SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Portfolio may invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets of $1.5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible imposition
of United Kingdom withholding taxes on interest income payable on Eurodollar CDs
or Eurodollar time deposits, and the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on Eurodollar CDs and Eurodollar
time deposits.
Rule 2a-7 under the 1940 Act provides that a money market fund shall
not invest more than 5% of its total assets in securities issued by the issuer
of the security, provided that such fund may invest more than 5% of its total
assets in the First Tier securities of a single issuer for a period of up to 3
business days after the purchase thereof if the money market fund is a
diversified investment company, provided further, that the fund may not make
more than one investment in accordance with the foregoing proviso at any time.
Under Rule 2a-7, for purposes of determining the percentage of a fund's total
assets that are invested in securities of an issuer, a repurchase agreement
shall be deemed to be an acquisition of the underlying securities, provided that
the obligation of the seller to repurchase the securities from the money market
fund is fully collateralized. To be fully collateralized, the collateral must,
among other things, consist entirely of U.S. Government securities or securities
that, at the time the repurchase agreement is entered into, are rated in the
highest rating category by Requisite NRSROs.(1)
The Portfolio may also lend its portfolio securities in amounts up to
33-1/3% of its total assets to financial institutions in accordance with the
investment restrictions of the Portfolio. Such loans would involve risks of
delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be made
only to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
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(1) "Requisite NRSRO" shall mean (a) any two nationally recognized statistical
rating organizations that have issued a rating with respect to a security
or class of debt obligations of an issuer, or (b) if only one NRSRO has
issued a rating with respect to such security or issuer of such security,
that NRSRO. At present the NRSROs are: Standard & Poor's Corp. ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Duff and Phelps, Inc., Fitch
Investors Services, Inc. ("Fitch") and, with respect to certain types of
securities, IBCA Limited and its affiliate, IBCA Inc. Subcategories or
gradations in ratings (such as a "+" or "-") do not count as rating
categories.
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ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money
market funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that
is rated (or that has been issued by an issuer that is rated with
respect to a class of short-term debt obligations, or any security
within that class, that is comparable in priority and security with
the security) by the Requisite NRSROs in one of the two highest rating
categories for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term
security but that has a remaining maturity of 397 calendar days
or less, and
(B) whose issuer has received from the Requisite NRSROs
a rating, with respect to a class of short-term debt obligations
(or any security within that class) that is now comparable in
priority and security with the security, in one of the two
highest rating categories for short-term debt obligations (within
which there may be sub-categories or gradations indicating
relative standing); or
(iii) an unrated security(2) that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of
this section, as determined by the money market fund's board of
directors; provided, however, that:
(A) the board of directors may base its determination
that a standby commitment is an Eligible Security upon a finding that
the issuer of the commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-
term security but that has a remaining maturity of 397 calendar days
or less and that is an unrated security is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be sub-
categories or gradations indicating relative standing).
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the
commercial paper ratings of Moody's, S&P and Fitch.
Moody's -- The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the
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(2) An "unrated security" is a security (i) issued by an issuer that does
not have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of
comparable priority and security; (ii) that was a long-term security
at the time of issuance and whose issuer has not received from any
NRSRO a rating with respect to a class of short-term debt obligations
now comparable in priority and security; or (iii) a security that is
rated but which is the subject of an external credit support agreement
not in effect when the security was assigned its rating, provided that
a security is not an unrated security if any short-term debt
obligation issued by the issuer and comparable in priority and
security is rated by any NRSRO.
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management of the issuer; (2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationship which exists with the issuer;
and (8) recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following
characteristics. Liquidity ratios are adequate to meet cash requirements. Long-
term senior debt is rated "A" or better, although in some cases "BBB" credits
may be allowed. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management is unquestioned. The relative strength or weakness of the
above factors determine whether the issuer's commercial paper is rated A-1, A-2
or A-3.
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch's short-term ratings are as
follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated "F-
1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond
ratings of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of
Moody's.
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 edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to
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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 Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the two highest bond ratings of S&P.
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
FITCH -- 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 guaranties unless otherwise
indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
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<PAGE>
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate more than 25% of the value of its total assets in
the securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to investments in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
and bank instruments, such as CDs, bankers' acceptances, time deposits
and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations
of the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the
Portfolio's total assets would be invested in such issuer, except as
permitted by Rule 2a-7 under the 1940 Act, as such Rule may be amended
from time to time;
(3) borrow money or issue senior securities except (a) for
temporary or emergency purposes (e.g., in order to facilitate the
orderly sale of portfolio securities to accommodate abnormally heavy
redemption requests), the Portfolio may borrow money from banks or
obtain funds by entering into reverse repurchase agreements, and (b)
to the extent that entering into commitments to purchase securities in
accordance with the Portfolio's investment program may be considered
the issuance of senior securities, provided that the Portfolio will
not purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and
then only in an amount up to 33-1/3% of the value of its total assets
at the time of borrowing or entering into a reverse repurchase
agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's
investment program, (b) by entering into repurchase agreements, and
(c) by lending portfolio securities to the extent permitted by law or
regulation;
(6) underwrite securities issued by any other person, except to
the extent that the purchase of securities and the later disposition
of such securities in accordance with the Portfolio's investment
program may be deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase
and sell securities secured by real estate or interests therein or
issued by issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or
calls;
(9) invest in any obligation not payable as to principal and
interest in United States currency; or
(10) acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
Shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
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<PAGE>
State Law Restrictions The Fund may, from time to time in order to
qualify shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the Ohio Division
of Securities, the Portfolio will not purchase the securities of an issuer if
the officers or directors of the Fund who own more than 0.5% of the securities
of the issuer together own beneficially more than 5% of the securities of such
issuer.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
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 investment policy of the Portfolio requires that investments
mature in 60 days or less. Thus, there is likely to be relatively high portfolio
turnover, but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by AIM to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement of
portfolio transactions of other clients may be of value to AIM in fulfilling its
obligations to the Portfolio. AIM is of the opinion that the material received
is beneficial in supplementing AIM's research and analysis; and therefore, it
may benefit the Portfolio by improving the quality of AIM's investment advice.
The advisory fees paid by the Portfolio are not reduced because AIM receives
such services.
From time to time, the Fund may sell a security to, or purchase a
security from, an AIM Fund or another investment account advised by AIM or
A I M Capital Management, Inc. ("AIM Capital"), when such transactions comply
with applicable rules and regulations and are deemed consistent with the
investment objective(s) and policies of the investment accounts advised by AIM
or AIM Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have been
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Fund. Although such transactions may result in custodian, tax or other
related expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Fund from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The Fund
has
24
<PAGE>
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some
of which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing
and amount of purchase by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts and is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchased
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited
from dealing with the Portfolio as a 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 Fund from purchasing a
security being publicly underwritten by a syndicate of which persons affiliated
with the Fund are members except in accordance with certain conditions. These
conditions may restrict the ability of the Portfolio to purchase money market
obligations being publicly underwritten by such a syndicate, and the Portfolio
may be required to wait until the syndicate has been terminated before buying
such securities. At such time, the market price of the securities may be higher
or lower than the original offering price. A person affiliated with the Fund
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligations and be paid a fee by such issuer. The
Portfolio may purchase such money market obligations directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and such purchase is reviewed at least quarterly by
the Fund's Board of Directors and a determination is made that all such
purchases were effected in compliance with such procedures including a
determination that the placement fee or other remuneration paid by the issuer to
the person affiliated with the Fund was fair and reasonable in relation to the
fees charged by other performing similar services. During the fiscal year ended
August 31, 1995, no securities or instruments were purchased by the Portfolio
from issuers who paid placement fees or other compensation to a broker
affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Portfolio and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Portfolio or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made
25
<PAGE>
during the taxable year or, under specified circumstances, within twelve months
after the close of the taxable year, will be considered distributions of income
and gains for the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts, will
not be characterized as Short-Short Gains if they are directly related to the
regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is disregarded.
Interest (including original issue discount) received by a fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of a security
within the meaning of the Short-Short Gain Test. However, income that is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In addition to satisfying the requirements described above, a
regulated investment company must satisfy an asset diversification test in order
to qualify for tax purposes as a regulated investment company. Under this test,
at the close of each quarter of a fund's taxable year, at least 50% of the value
of a fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a fund has not invested more than 5% of the value
of a fund's total assets in securities of such issuer and as to which a fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any other issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which a fund controls and which are engaged in the same or similar trades or
businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
26
<PAGE>
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Portfolio may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions
will be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will not qualify for the 70% dividends
received deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, 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 the ordinary income dividends and capital gain
dividends, and in certain cases, 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."
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 November 1, 1995. Future legislative or administrative changes or
court decisions may significantly change the conclusions expressed herein, and
any such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisors as to the consequences of these and other state
and local tax rules affecting investment in the Portfolio.
27
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1995, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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
Prime Portfolio as of August 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the ten-year period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
October 6, 1995
FS-1
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 71.82%(a)
BASIC INDUSTRIES - 0.30%
MULTIPLE INDUSTRY - 0.30%
Philip Morris Companies, Inc.
5.75% 10/04/95 $ 12,500 $ 12,434,115
- ----------------------------------------------------------------------
Total Basic Industries 12,434,115
- ----------------------------------------------------------------------
BUSINESS SERVICES - 5.90%
POLLUTION CONTROL SERVICES - 2.15%
Browning-Ferris Industries, Inc.
5.69% 09/08/95 20,000 19,977,872
- ----------------------------------------------------------------------
5.75% 09/15/95 18,000 17,959,750
- ----------------------------------------------------------------------
5.73% 09/18/95 20,000 19,945,883
- ----------------------------------------------------------------------
5.75% 09/19/95 12,700 12,663,487
- ----------------------------------------------------------------------
5.73% 09/22/95 20,000 19,933,150
- ----------------------------------------------------------------------
90,480,142
- ----------------------------------------------------------------------
MISCELLANEOUS - 3.75%
Donnelley (R.R.) & Sons Co.
5.73% 09/22/95 53,000 52,822,848
- ----------------------------------------------------------------------
PHH Corp.
5.75% 09/13/95 47,100 47,009,725
- ----------------------------------------------------------------------
5.75% 10/11/95 58,000 57,629,445
- ----------------------------------------------------------------------
157,462,018
- ----------------------------------------------------------------------
Total Business Services 247,942,160
- ----------------------------------------------------------------------
CAPITAL GOODS - 2.35%
COMPUTERS & OFFICE EQUIPMENT - 1.40%
Xerox Corp.
5.75% 10/04/95 31,025 30,861,472
- ----------------------------------------------------------------------
Xerox Credit Corp.
5.73% 09/19/95 11,000 10,968,485
- ----------------------------------------------------------------------
5.74% 10/05/95 16,981 16,888,944
- ----------------------------------------------------------------------
58,718,901
- ----------------------------------------------------------------------
MACHINERY - 0.95%
Dover Corp.
5.75% 09/11/95 14,000 13,977,639
- ----------------------------------------------------------------------
5.75% 09/25/95 15,000 14,942,500
- ----------------------------------------------------------------------
5.77% 10/02/95 11,191 11,135,396
- ----------------------------------------------------------------------
40,055,535
- ----------------------------------------------------------------------
Total Capital Goods 98,774,436
- ----------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 2.52%
AUTOMOBILE - 2.52%
Daimler-Benz North America Corp.
5.68% 09/08/95 $ 66,000 $ 65,927,107
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.75% 10/06/95 40,000 39,776,389
- -------------------------------------------------------------------
Total Consumer Durables 105,703,496
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 3.32%
HOUSEHOLD PRODUCTS - 3.32%
Colgate-Palmolive Co.
5.70% 09/15/95 61,550 61,413,564
- -------------------------------------------------------------------
5.71% 09/18/95 20,000 19,946,072
- -------------------------------------------------------------------
5.72% 09/20/95 19,500 19,441,132
- -------------------------------------------------------------------
5.72% 09/21/95 38,800 38,676,702
- -------------------------------------------------------------------
Total Consumer Nondurables 139,477,470
- -------------------------------------------------------------------
CONSUMER SERVICES - 2.91%
MISCELLANEOUS - 2.91%
USL Capital Corp.
5.73% 09/07/95 21,000 20,979,945
- -------------------------------------------------------------------
5.74% 09/07/95 21,000 20,979,910
- -------------------------------------------------------------------
5.73% 09/19/95 9,000 8,974,215
- -------------------------------------------------------------------
5.77% 09/21/95 15,500 15,450,314
- -------------------------------------------------------------------
5.73% 10/05/95 31,016 30,848,152
- -------------------------------------------------------------------
5.74% 10/13/95 25,000 24,832,583
- -------------------------------------------------------------------
Total Consumer Services 122,065,119
- -------------------------------------------------------------------
ENERGY - 3.31%
NATURAL GAS - 1.45%
Colonial Pipeline Co.
5.72% 09/12/95 15,000 14,973,783
- -------------------------------------------------------------------
5.72% 09/19/95 13,800 13,760,532
- -------------------------------------------------------------------
5.76% 09/28/95 12,000 11,948,160
- -------------------------------------------------------------------
5.78% 09/29/95 20,100 20,009,639
- -------------------------------------------------------------------
60,692,114
- -------------------------------------------------------------------
OIL & GAS - 1.86%
ARCO Coal Australia Inc.
5.69% 09/12/95 9,501 9,484,482
- -------------------------------------------------------------------
5.70% 09/14/95 12,489 12,463,293
- -------------------------------------------------------------------
5.75% 09/15/95 14,788 14,754,932
- -------------------------------------------------------------------
5.72% 10/10/95 12,507 12,429,498
- -------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ENERGY--(continued)
OIL & GAS - (CONTINUED)
Mobil Australia Finance Company, Inc.
5.68% 09/01/95 $ 29,088 $ 29,088,000
- ------------------------------------------------------------------------
78,220,205
- ------------------------------------------------------------------------
Total Energy 138,912,319
- ------------------------------------------------------------------------
FINANCIAL - 47.89%
ASSET-BACKED SECURITIES - 22.81%
Asset Securitization Cooperative Corp.
5.70% 09/08/95 55,000 54,939,041
- ------------------------------------------------------------------------
5.72% 09/22/95 10,000 9,966,633
- ------------------------------------------------------------------------
5.72% 10/26/95 55,000 54,519,361
- ------------------------------------------------------------------------
5.71% 10/27/95 30,000 29,733,533
- ------------------------------------------------------------------------
Ciesco, L.P.
5.73% 09/06/95 15,000 14,988,063
- ------------------------------------------------------------------------
5.72% 10/18/95 40,000 39,701,289
- ------------------------------------------------------------------------
Clipper Receivables Corp.
5.77% 09/12/95 50,000 49,911,848
- ------------------------------------------------------------------------
5.77% 09/13/95 28,911 28,855,394
- ------------------------------------------------------------------------
5.77% 09/14/95 17,227 17,191,106
- ------------------------------------------------------------------------
5.77% 09/19/95 57,000 56,835,555
- ------------------------------------------------------------------------
5.77% 09/25/95 19,000 18,926,913
- ------------------------------------------------------------------------
Corporate Asset Funding Co. Inc.
5.73% 09/06/95 32,900 32,873,817
- ------------------------------------------------------------------------
5.74% 09/07/95 25,000 24,976,083
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.72% 09/18/95 16,228 16,184,166
- ------------------------------------------------------------------------
5.76% 09/25/95 12,134 12,087,405
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.75% 09/14/95 27,540 27,482,816
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.76% 09/11/95 15,325 15,300,480
- ------------------------------------------------------------------------
5.77% 09/20/95 25,000 24,923,868
- ------------------------------------------------------------------------
5.74% 10/04/95 31,425 31,259,653
- ------------------------------------------------------------------------
5.75% 10/04/95 15,050 14,970,674
- ------------------------------------------------------------------------
5.74% 10/12/95 15,825 15,721,548
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.75% 09/27/95 31,016 30,887,197
- ------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Preferred Receivables Funding Corp.
5.70% 09/08/95 $ 11,375 $ 11,362,393
- ------------------------------------------------------------------------
5.73% 09/14/95 20,875 20,831,806
- ------------------------------------------------------------------------
5.73% 09/18/95 30,125 30,043,487
- ------------------------------------------------------------------------
5.75% 10/05/95 81,275 80,833,633
- ------------------------------------------------------------------------
5.73% 10/20/95 30,125 29,890,050
- ------------------------------------------------------------------------
Sheffield Receivables Corp.
5.72% 09/06/95 25,800 25,779,503
- ------------------------------------------------------------------------
5.71% 09/12/95 24,700 24,656,905
- ------------------------------------------------------------------------
5.77% 09/13/95 46,000 45,911,528
- ------------------------------------------------------------------------
5.77% 09/14/95 40,000 39,916,656
- ------------------------------------------------------------------------
5.73% 09/19/95 26,900 26,822,931
- ------------------------------------------------------------------------
958,285,335
- ------------------------------------------------------------------------
BUSINESS CREDIT - 4.08%
CIT Group Holdings, Inc.
5.68% 09/06/95 30,000 29,976,333
- ------------------------------------------------------------------------
5.68% 09/07/95 30,000 29,971,600
- ------------------------------------------------------------------------
5.72% 09/21/95 75,000 74,761,667
- ------------------------------------------------------------------------
5.72% 10/20/95 37,000 36,711,934
- ------------------------------------------------------------------------
171,421,534
- ------------------------------------------------------------------------
INSURANCE - 2.33%
MetLife Funding, Inc.
5.72% 09/22/95 50,000 49,833,166
- ------------------------------------------------------------------------
5.74% 10/12/95 48,211 47,895,834
- ------------------------------------------------------------------------
97,729,000
- ------------------------------------------------------------------------
PERSONAL CREDIT - 7.68%
Associates Corp. of North America
5.73% 10/18/95 50,000 49,625,958
- ------------------------------------------------------------------------
5.73% 10/19/95 100,000 99,236,000
- ------------------------------------------------------------------------
AVCO Financial Services, Inc.
5.70% 09/15/95 50,000 49,889,167
- ------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Household Finance Corp.
5.75% 10/12/95 $ 50,000 $ 49,672,569
- --------------------------------------------------------------------
5.73% 10/20/95 50,000 49,610,042
- --------------------------------------------------------------------
Student Loan Corp.
5.73% 10/20/95 25,000 24,805,021
- --------------------------------------------------------------------
322,838,757
- --------------------------------------------------------------------
MISCELLANEOUS - 7.10%
Hertz Corp. (The)
5.69% 09/07/95 25,000 24,976,292
- --------------------------------------------------------------------
5.68% 09/08/95 20,000 19,977,911
- --------------------------------------------------------------------
5.70% 09/18/95 81,000 80,781,975
- --------------------------------------------------------------------
5.72% 10/06/95 35,000 34,805,361
- --------------------------------------------------------------------
5.75% 10/13/95 11,500 11,422,854
- --------------------------------------------------------------------
International Lease Finance Corp.
5.70% 09/15/95 19,000 18,957,883
- --------------------------------------------------------------------
5.71% 09/25/95 18,500 18,429,577
- --------------------------------------------------------------------
5.72% 10/05/95 6,570 6,534,507
- --------------------------------------------------------------------
5.72% 10/06/95 38,900 38,683,673
- --------------------------------------------------------------------
5.73% 10/13/95 44,000 43,705,860
- --------------------------------------------------------------------
298,275,893
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 3.89%
General Electric Capital Corp.
5.74% 09/07/95 23,500 23,477,518
- --------------------------------------------------------------------
5.72% 09/20/95 100,000 99,698,110
- --------------------------------------------------------------------
5.71% 10/06/95 40,500 40,275,169
- --------------------------------------------------------------------
163,450,797
- --------------------------------------------------------------------
Total Financial 2,012,001,316
- --------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.69% 09/12/95 20,424 20,388,491
- --------------------------------------------------------------------
5.73% 09/22/95 23,224 23,146,374
- --------------------------------------------------------------------
5.72% 10/10/95 26,556 26,391,441
- --------------------------------------------------------------------
5.74% 10/13/95 26,759 26,579,804
- --------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
OTHER--(continued)
DIVERSIFIED - (CONTINUED)
Cargill Inc.
5.69% 09/08/95 $ 12,000 $ 11,986,724
- ----------------------------------------------------------------------------
5.70% 09/11/95 16,300 16,274,192
- ----------------------------------------------------------------------------
5.73% 09/22/95 15,000 14,949,863
- ----------------------------------------------------------------------------
Total Other 139,716,889
- ----------------------------------------------------------------------------
Total Commercial Paper 3,017,027,320
- ----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 4.06%
Citicorp Securities, Inc.(b)
6.063% 09/13/95 6,000 6,000,000
- ----------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.(c)
5.988% 10/16/95 87,500 87,500,000
- ----------------------------------------------------------------------------
Morgan Stanley Group, Inc.(d)
5.893% 01/29/96 77,000 77,000,000
- ----------------------------------------------------------------------------
Total Master Note Agreements 170,500,000
- ----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENTS - 1.78%
Goldman, Sachs & Co.(e)
5.913% 01/29/96 75,000 75,000,000
- ----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 3,262,527,320
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 22.77%(f)
BT Securities Corp.(g)
5.83% -- 50,000 50,000,000
- ----------------------------------------------------------------------------
Daiwa Securities America, Inc.(h)
5.84% 09/01/95 91,528 91,528,472
- ----------------------------------------------------------------------------
Fuji Securities Inc.(i)
5.87% -- 115,000 115,000,000
- ----------------------------------------------------------------------------
Nesbitt Burns Securities, Inc.(j)
5.86% -- 100,000 100,000,000
- ----------------------------------------------------------------------------
Nikko Securities Co., Ltd.(k)
5.87% 09/01/95 200,000 200,000,000
- ----------------------------------------------------------------------------
Nomura Securities Co., Ltd.(l)
5.85% 09/01/95 100,000 100,000,000
- ----------------------------------------------------------------------------
SBC Government Securities, Inc.(m)
5.87% -- 200,000 200,000,000
- ----------------------------------------------------------------------------
UBS Securities Inc.(n)
5.85% -- 100,000 100,000,000
- ----------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
VALUE
<S> <C>
Total Repurchase Agreements $ 956,528,472
- ---------------------------------------------------------------------
TOTAL INVESTMENTS - 100.43% 4,219,055,792(o)
- ---------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.43)% (17,975,680)
- ---------------------------------------------------------------------
NET ASSETS - 100% $4,201,080,112
=====================================================================
</TABLE>
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon notice to the issuer. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
August 31, 1995.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven calendar days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on August 31, 1995.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Purchase Agreement will become
payable. Interest rates on master notes are redetermined periodically. Rate
shown is the rate in effect on August 31, 1995.
(e) The Portfolio may demand prepayment of Note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1995.
(f) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds managed
by the investment advisor.
(g) Open repurchase agreement entered into 02/27/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $95,150,000 U.S. Treasury STRIPS, due 08/15/04 to
08/15/05.
(h) Joint repurchase agreement entered into 08/31/95 with a maturing value of
$209,464,857. Collateralized by $204,224,000 U.S. Treasury obligations, 0%
to 10.75% due 11/30/95 to 05/15/16.
(i) Open joint repurchase agreement entered into 12/12/94; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $332,491,000 U.S. Treasury
obligations, 0% to 9.25% due 05/15/97 to 02/15/16.
(j) Open joint repurchase agreement entered into 08/16/95; however, either
party may terminate the agreement upon demand. Interest rates are
redetermined daily. Collateralized by $270,681,000 U.S. Treasury STRIPS,
due 11/15/95 to 11/15/21.
(k) Entered into 08/31/95 with a maturing value of $200,032,611. Collateralized
by $271,592,502 U.S. Government agency obligations, 6.583% to 9.50% due
09/01/98 to 08/01/25.
(l) Entered into 08/31/95 with a maturing value of $100,016,250. Collateralized
by $102,805,000 U.S. Government agency obligations, 0% to 8.25% due
10/02/95 to 05/12/05.
(m) Open repurchase agreement entered into 08/16/95; however, either party may
terminate the agreement upon demand. Interest rates are redetermined daily.
Collateralized by $232,765,728 U.S. Government agency obligations, 5.997%
to 9.00% due 11/01/21 to 02/01/31 and $8,000,000 U.S. Treasury Bills due
03/07/96.
(n) Open joint repurchase agreement entered into 08/18/95; however, either
party may terminate the agreement upon demand. Collateralized by
$249,645,000 U.S. Treasury Bills, due 12/14/95 to 01/18/96.
(o) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $3,262,527,320
- ------------------------------------------------------------------------
Repurchase agreements 956,528,472
- ------------------------------------------------------------------------
Interest receivable 1,395,798
- ------------------------------------------------------------------------
Investment for deferred compensation plan 31,965
- ------------------------------------------------------------------------
Other assets 1,351,229
- ------------------------------------------------------------------------
Total assets 4,221,834,784
- ------------------------------------------------------------------------
LIABILITIES:
Dividends payable 20,375,980
- ------------------------------------------------------------------------
Deferred compensation payable 31,965
- ------------------------------------------------------------------------
Accrued advisory fees 213,136
- ------------------------------------------------------------------------
Accrued distribution fees 88,951
- ------------------------------------------------------------------------
Accrued transfer agent fees 5,493
- ------------------------------------------------------------------------
Accrued operating expenses 39,147
- ------------------------------------------------------------------------
Total liabilities 20,754,672
- ------------------------------------------------------------------------
NET ASSETS $4,201,080,112
========================================================================
NET ASSETS:
Institutional Class $3,752,693,248
========================================================================
Private Investment Class $ 154,277,704
========================================================================
Personal Investment Class $ 99,630,235
========================================================================
Cash Management Class $ 194,478,925
========================================================================
NET ASSET VALUE PER SHARE:
Shares outstanding, $0.001 par value per share:
Institutional Class 3,752,704,848
========================================================================
Private Investment Class 154,278,185
========================================================================
Personal Investment Class 99,629,606
========================================================================
Cash Management Class 194,479,527
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-9
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $246,526,258
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 2,567,762
- -------------------------------------------------------------------
Custodian fees 329,212
- -------------------------------------------------------------------
Administrative services fees 250,216
- -------------------------------------------------------------------
Directors' fees and expenses 42,334
- -------------------------------------------------------------------
Registration fees 262,523
- -------------------------------------------------------------------
Transfer agent fees 89,684
- -------------------------------------------------------------------
Distribution fees (Note 2) 795,232
- -------------------------------------------------------------------
Other 348,810
- -------------------------------------------------------------------
Total expenses 4,685,773
- -------------------------------------------------------------------
Less expenses assumed by advisor (50,900)
===================================================================
Net expenses 4,634,873
===================================================================
Net investment income 241,891,385
===================================================================
Net increase in net assets resulting from operations $241,891,385
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 241,891,385 $ 155,832,059
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 241,891,385 155,832,059
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (241,891,385) (155,832,059)
- ----------------------------------------------------------------------------
Share transactions-net 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets 86,066,761 (253,692,887)
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,115,013,351 4,368,706,238
- ----------------------------------------------------------------------------
End of period $4,201,080,112 $4,115,013,351
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,201,092,165 $4,115,025,404
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (12,053) (12,053)
- ----------------------------------------------------------------------------
$4,201,080,112 $4,115,013,351
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, the Prime Portfolio, which offers separate classes
of shares, and the Liquid Assets Portfolio. Information presented in these
financial statements pertains only to the Prime Portfolio (the "Portfolio").
The assets, liabilities and operations of each portfolio are accounted for
separately. The Portfolio consists of four different classes of shares: the
Institutional Class, the Private Investment Class, the Personal Investment
Class, and the Cash Management Class.
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
- -----------------------------------------------------------------------
<S> <C>
First $100 million 0.20%
- -----------------------------------------------------------------------
Over $100 million to $200 million 0.15%
- -----------------------------------------------------------------------
Over $200 million to $300 million 0.10%
- -----------------------------------------------------------------------
Over $300 million to $1.5 billion 0.06%
- -----------------------------------------------------------------------
Over $1.5 billion 0.05%
- -----------------------------------------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $14,000 on the Prime Portfolio-Private Investment Class, $13,300 on
the Prime Portfolio-Personal Investment Class and $23,600 on the Prime
Portfolio-Cash Management Class during the year ended August 31, 1995.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1995,
the Portfolio reimbursed AIM $154,963 for such services. During the year ended
August 31, 1995, the Fund paid A I M Institutional Fund
FS-12
<PAGE>
Services, Inc. ("AIFS") $143,464 for shareholder and transfer agency services.
Effective July 1, 1995, AIFS became the exclusive transfer agent of the
Portfolio.
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 and the Cash Management Class
of the Portfolio. The Plan provides that the Portfolio's Private Investment
Class, the Personal Investment Class and the Cash Management Class may pay up
to a 0.50%, 0.75% and 0.10%, respectively, maximum annual rate of the average
daily net assets attributable to such class. Of this amount, the Fund may pay
an asset-based sales charge to FMC and the Fund may pay a service fee of (a)
0.25% of the average daily net assets of each of the Private Investment Class
and the Personal Investment Class and (b) 0.10% of the average daily net assets
of the Cash Management 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 or the Cash Management Class. Any amounts not
paid as a service fee under such Plan would constitute an asset-based sales
charge. During the year ended August 31, 1995, the Prime Portfolio-Private
Investment Class, the Prime Portfolio-Personal Investment Class and Prime
Portfolio-Cash Management Class accrued $367,522, $413,064 and $14,646,
respectively, for compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1995, the Portfolio paid legal fees of $3,247
for services rendered by Reid & Priest as counsel to the Board of Directors. In
September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was appointed
as counsel to the Board of Directors. During the year ended August 31,1995, the
Portfolio paid legal fees of $10,128 for services rendered by that firm as
counsel. A director of the Fund is a member of Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel and was a member of the firm of Reid & Priest prior to
September 1994.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-SHARE INFORMATION
Changes in shares outstanding during the years ended August 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 30,516,627,315 $30,516,627,315 33,826,759,958 $33,826,759,958
- -------------------------------------------------------------------------------------------
Private Investment
Class 1,403,913,359 1,403,913,359 120,927,192 120,927,192
- -------------------------------------------------------------------------------------------
Personal Investment
Class 881,857,651 881,857,651 15,823,134 15,823,134
- -------------------------------------------------------------------------------------------
Cash Management Class* 307,521,987 307,521,987 25,113,434 25,113,434
- -------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 3,106,371 3,106,371 527,557 527,557
- -------------------------------------------------------------------------------------------
Private Investment
Class 4,691,704 4,691,704 3,982 3,982
- -------------------------------------------------------------------------------------------
Personal Investment
Class 4,299,720 4,299,720 39,701 39,701
- -------------------------------------------------------------------------------------------
Cash Management Class* 896,094 896,094 5,586 5,586
- -------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (30,847,783,300) (30,847,783,300) (34,096,489,905) (34,096,489,905)
- -------------------------------------------------------------------------------------------
Private Investment
Class (1,285,160,664) (1,285,160,664) (107,954,443) (107,954,443)
- -------------------------------------------------------------------------------------------
Personal Investment
Class (789,592,898) (789,592,898) (13,702,087) (13,702,087)
- -------------------------------------------------------------------------------------------
Cash Management Class* (114,310,578) (114,310,578) (24,746,996) (24,746,996)
- -------------------------------------------------------------------------------------------
Net increase (decrease) 86,066,761 $ 86,066,761 (253,692,887) $ (253,692,887)
===========================================================================================
</TABLE>
* The Prime Portfolio-Cash Management Class commenced operations on June 30,
1994.
FS-13
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Prime Portfolio-Cash Management Class during the year ended August 31, 1995
and the period June 30, 1994 (date operations commenced) through August 31,
1994.
<TABLE>
<CAPTION>
1995 1994
-------- -----
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $1.00
- ---------------------------------------------------- -------- -----
Income from investment operations:
Net investment income 0.06 0.01
==================================================== ======== =====
Total from investment operations 0.06 0.01
==================================================== ======== =====
Less distributions:
Dividends from net investment income (0.06) (0.01)
- ---------------------------------------------------- -------- -----
Net asset value, end of period $ 1.00 $1.00
==================================================== ======== =====
Total return 5.71% 4.34%(a)
==================================================== ======== =====
Ratios/supplemental data:
Net assets, end of period (000s omitted) $194,479 $372
==================================================== ======== =====
Ratio of expenses to average net assets 0.17%(b) 0.14%(c)
==================================================== ======== =====
Ratio of net investment income to average net assets 5.69%(b) 4.26%(c)
==================================================== ======== =====
</TABLE>
(a) Annualized.
(b) After expense reimbursements. Ratios are based on average net assets of
$18,307,649. The ratios of expenses and net investment income prior to
expense reimbursements are 0.30% and 5.56%, respectively.
(c) Ratios are annualized. After expense reimbursements. The ratios of expenses
and net investment income prior to expense reimbursements are 0.65% and
3.75%, respectively.
FS-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUBJECT TO COMPLETION DATED NOVEMBER 8, 1995
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment
objective is the maximization of current income to the extent consistent with
RESOURCE the preservation of capital and the maintenance of liquidity. The Portfolio
CLASS seeks to achieve its objective by investing in high grade money market
instruments, such as U.S. Government obligations, bank obligations, commercial
DECEMBER 12, 1995 instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less.
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end, diversified, series management investment company. This
Prospectus relates solely to the Resource Class of the Portfolio, a class of
shares designed to be a convenient vehicle in which institutional customers of
banks, certain broker-dealers and other financial institutions can invest in a
diversified, money market fund.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class, the Private Investment Class,
the Personal Investment Class and the Cash Management Class, as well as shares
of classes of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE RESOURCE CLASS OF THE PORTFOLIO
AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF ADDITIONAL
INFORMATION, DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY REFERENCE. FOR
A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION, WRITE TO THE ADDRESS BELOW
OR CALL (800) 825-6858.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 825-6858
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS +
+ BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED +
+ PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+ SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+ OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Resource Class (the "Class") of the Portfolio.
The Portfolio is a money market fund which invests in money market instruments,
such as U.S. Government obligations, bank obligations, commercial instruments
and repurchase agreements. The instruments purchased by the Portfolio will have
maturities of sixty days or less. The investment objective of the Portfolio is
the maximization of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which institutional
customers of banks, certain broker-dealers and other financial institutions can
invest in a diversified open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $10,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in funds immediately available to the Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing the securities of the
Portfolio and rounds the per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
2
<PAGE>
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
0.20% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions as compensation for distribution-related services. See "Purchase
of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- RESOURCE CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................ None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)....................................................... None
Deferred Sales Load (as a percentage of original purchase price or re-
demption proceeds, as applicable)..................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable).... None
Exchange Fee........................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- RESOURCE CLASS (AS A PERCENTAGE OF
AVERAGE NET ASSETS)*
Management Fees........................................................ 0.06%
12b-1 Fees (after fee waivers)**....................................... 0.16%
Other Expenses......................................................... 0.03%
----
Total Portfolio Operating Expenses --Resource Class.................... 0.25%
====
</TABLE>
- ------
* The fees and expenses set forth in the table are based on estimated average
net assets of the Class' first period of operations.
** Had there been no fee waivers, 12b-1 fees would have been 0.20%.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.
1 year................................... $ 3
3 years.................................. $ 8
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The other expenses and
12b-1 fees figure is based upon estimated costs and the estimated size of the
Class and estimated fees to be charged for the current fiscal year. Thus,
actual expenses may be greater or less than such estimates. To the extent any
service providers assume expenses of the Class, such assumption will have the
effect of lowering the Class' overall expense ratio and increasing its yield to
investors. Beneficial owners of shares of the Class should also consider the
effect of any charges imposed by the institution maintaining their accounts. As
a result of 12b-1 fees, a long-term shareholder of the Class may pay more than
the economic equivalent of the maximum front-end sales charges permitted by the
Rules of the National Association of Securities Dealers, Inc.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Resource Class" remain the same in the years
shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
4
<PAGE>
SUITABILITY FOR INVESTORS
The shares of the Class are intended for use primarily by institutional
customers of banks, certain broker-dealers and other financial institutions who
seek a convenient vehicle in which to invest in an open-end diversified money
market fund. It is expected that the shares of the Class may be particularly
suitable investments for corporate cash managers, municipalities or other
public entities. The minimum initial investment is $10,000.
Investors in the shares of the Class have the opportunity to receive a
somewhat higher yield than might be obtainable through direct investment in
money market instruments, and enjoy the benefits of diversification, economies
of scale and same-day liquidity. Generally, higher interest rates can be
obtained on the purchase of very large blocks of money market instruments. Of
course, any such relative increase in interest rates may be offset to some
extent by the operating expenses of the shares of the Class.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations that may be available in the money markets. Such obligations
include U.S. Treasury obligations, which include Treasury bills, notes and
bonds, and repurchase agreements relating to such securities. These
instruments, which are collectively referred to as "Money Market Obligations,"
are briefly described below. The Portfolio may also engage in the investment
practices described below. The market values of the money market instruments
held by the Portfolio will be affected by changes in the yields available on
similar securities. If yields have increased since a security was purchased,
the market value of such security will generally have decreased. Conversely, if
yields have decreased, the market value of such security will generally have
increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
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BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposit, over 5% of the Portfolio's total
assets would be invested in time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"), as such Rule may
be amended from time to time. Generally, "First Tier" securities are securities
that are rated in the highest rating category by two nationally recognized
statistical rating organizations ("NRSROs") or, if only rated by one NRSRO, are
rated in the highest rating category by that NRSRO or, if unrated, are
determined by AIM (under the supervision of and pursuant to guidelines
established by the Board of Directors) to be of comparable quality to a rated
security that meets the foregoing quality standards. Commercial paper consists
of short-term promissory notes issued by corporations. Commercial paper may be
traded in the secondary market after its issuance. Master notes are unsecured
demand notes that permit the investment of fluctuating amounts of money at
varying rates of interest pursuant to arrangements with issuers who meet the
quality criteria of the Portfolio. The interest rate on a master note may
fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master demand notes, if such notes have a
demand feature, the payee may demand payment of the principal amount of the
note upon relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. The
Portfolio may enter into repurchase agreements only with institutions believed
by the Fund's Board of Directors to present minimal credit risk. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the seller's failure to repurchase
the obligation in accordance with the terms of the agreement), the Portfolio
could experience both delays in liquidating the underlying securities and
losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities. For
additional information, see the Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the
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repurchase price of the securities sold by the Portfolio which it is obligated
to repurchase. The risk, if encountered, could cause a reduction in the net
asset value of the Portfolio's shares. Reverse repurchase agreements are
considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES.The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered 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 payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreements or when-issued commitments. If
the market value of such securities declines, additional cash or securities
will be segregated on a daily basis so that the market value of the account
will equal the amount of the Portfolio's delayed delivery agreements and when-
issued commitments. To the extent that funds are segregated, they will not be
available for new investment or to meet redemptions. Investment in securities
on a when-issued basis and use of delayed delivery agreements may increase the
Portfolio's exposure to market fluctuation, or may increase the possibility
that the Portfolio will incur a short-term loss, if the Portfolio must engage
in portfolio transactions in order to honor a when-issued commitment or accept
delivery of a security under a delayed delivery agreement. The Portfolio will
employ techniques designed to minimize these risks. No additional delayed
delivery agreements or when-issued commitments will be made by the Portfolio
if, as a result, more than 25% of the Portfolio's net assets would become so
committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations.
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INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The
United States Securities and Exchange Commission (the "SEC") has proposed
certain changes to Rule 2a-7. While such proposed changes may have a
prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
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Shares of the Class are sold to institutional customers of banks, certain
broker-dealers and other financial institutions (individually an "Institution"
and collectively, "Institutions"). Individuals, corporations, partnerships and
other businesses that maintain qualified accounts at an Institution may invest
in the shares of the Class. Each Institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Class. Such services may include, among other things, establishment and
maintenance of shareholder accounts and records; assistance in processing
purchase and redemption transactions in shares of the Class; providing periodic
statements showing a customer's account balance in shares of the 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.
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
shares of the Class through an Institution in accordance with the procedures
established by such Institution. Each Institution separately determines the
rules applicable to accounts in the shares of the Class opened with it,
including minimum initial and subsequent investment requirements and the
procedures to be followed by investors to effect purchases of shares of the
Class. The minimum initial investment is $10,000, and there is no minimum
amount for subsequent purchases of shares of the Class by an Institution on
behalf of its customers. An investor who proposes to open a Portfolio account
with an Institution should consult with a representative of such Institution to
obtain a description of the rules governing such an account. The Institution
holds shares of the Class registered in its name, as agent for the customer, on
the books of the Institution. A statement with regard to the customer's shares
of the Class is supplied to the customer periodically, and confirmations of all
transactions for the account of the customer are provided by the Institution to
the customer promptly upon request. In addition, the Institution sends to each
customer proxies, periodic reports and other information with regard to the
customer's shares of the Class. The customer's shares of the Class are fully
assignable and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his 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 Class directly, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be 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 Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Resource Class of the Prime Portfolio," otherwise any funds
received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request. Certificates (in
full shares only) will be issued without charge and may be redeposited at any
time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
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<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the net asset value per share of the Portfolio will remain constant
at $1.00. See "Net Asset Value." Redemption requests with respect to shares of
the Class for which certificates have not been issued are normally made through
a customer's Institution.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will 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 Portfolio's best interest to do so.
Shares of the Class are not redeemable at the option of the Fund unless the
Board of Directors of the Fund determines in its sole discretion that failure
to so redeem may have materially adverse consequences to the shareholders of
the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, transfer
agent fees or registration fees that may be unique to the Class. Although
realized gains and losses on the assets of the Portfolio are reflected in its
net asset value, they are not expected to be of an amount which would affect
its $1.00 per share net asset value for purposes of purchases and redemptions.
See "Net Asset Value." Distributions from net realized short-term gains may be
declared and paid yearly or more frequently. See "Taxes." The Portfolio does
not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the Institution to AIFS at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
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The Portfolio uses its best efforts to maintain its net asset value per share
at $1.00 for purposes of sales and redemptions. See "Net Asset Value." Should
the Fund incur or anticipate any unusual expense, loss or depreciation which
could adversely affect the income or net asset value of the Portfolio, the
Fund's 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 the then
prevailing circumstances. For example, under such unusual circumstances the
Board of Directors might reduce or suspend the daily dividend in order to
prevent, to the extent possible, the net asset value per share of the Portfolio
from being reduced below $1.00. Thus, such expenses, losses or depreciation may
result in a shareholder receiving no dividends for the period during which it
held its shares and cause such a shareholder to receive upon redemption a price
per share lower than the shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on November 1, 1995 Prospectus which are subject
to change by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined
11
<PAGE>
by amortized cost, is higher or lower than the price the Portfolio would
receive if the security were sold. During such periods, the daily yield on
shares of the Portfolio, computed as described in "Purchases and Redemptions--
Performance Information" in the Statement of Additional Information, may differ
somewhat from an identical computation made by an investment company with
identical investments utilizing available indications as to market value to
value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
825-6858. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by an investor before
making an investment in the Portfolio.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation by its
Institution for each transaction unless otherwise specified by the shareholder.
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MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and A I M Management Group Inc. ("AIM Management"), a holding company engaged
in the financial services business. Information concerning the Board of
Directors may be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 37 investment company portfolios. As of October 31, 1995,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $39.3 billion. AIM is a wholly-owned
subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1995, AIM received fees pursuant to the
Advisory Agreement from the Fund with respect to the Portfolio which
represented 0.06% of the Portfolio's average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "AIM Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. As compensation to AIM for its services under the Administrative
Services Agreement, the Portfolio may reimburse AIM for expenses incurred by
AIM in connection with such services.
In addition, AIM and AIFS entered into an Administrative Services Agreement
pursuant to which AIFS was reimbursed by AIM for its costs in providing
shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $95,254 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995 AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $48,210.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year. FMC may in its discretion from time to time agree to waive voluntarily
its 12b-1 fee but will retain its ability to be reimbursed prior to the end of
the fiscal year.
DISTRIBUTOR
The Fund has entered into a Distribution Agreement dated as of October 18,
1993 (the "Distribution Agreement") with FMC, a registered broker-dealer and a
wholly-owned subsidiary of AIM, to act as the exclusive distributor of the
shares of the
13
<PAGE>
Class. The address of FMC is 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Certain directors and officers of the Fund are affiliated with FMC
and AIM. The Distribution Agreement provides that FMC has the exclusive right
to distribute shares of the Fund either directly or through other broker-
dealers. FMC is the distributor of several of the mutual funds managed or
advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or financial institutions who sell a
minimum dollar amount of the shares of the Class during a specific period of
time. In some instances, these incentives may be offered only to certain
dealers or financial institutions who have sold or may sell significant amounts
of shares. The total amount of such additional bonus payments or other
consideration shall not exceed 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 of the Class or the amount
received as proceeds from such sales. Sales of the shares of the Class may not
be used to qualify for any incentives to the extent that such incentives may be
prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of shares of the Class in an amount equal to
0.20% on an annualized basis of the average daily net assets of the Portfolio
attributable to the Class. Such amounts 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.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments to FMC would be characterized as an asset-based sales
charge pursuant to the 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 the Class. The Plan does not obligate the Fund to
reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund 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.
As required by Rule 12b-1 under the 1940 Act, the Plan was 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 Fund 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") on September 19, 1995.
In approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund 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.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the shareholders of the outstanding
voting securities of the Class. Any change in the Plan that would increase
materially the distribution expenses paid by the Class requires shareholder
approval; otherwise the Plan may be amended by the Board of Directors,
including a majority of the Qualified Directors, by votes 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.
14
<PAGE>
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund which are not directly attributable to a specific class of shares
but are directly attributable to a specific portfolio are prorated among all
classes of such portfolio. Expenses of the Fund which are directly attributable
to a specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio is that of the Predecessor Portfolio. Shares of
common stock of the Fund are divided into eight classes. Five classes,
including the Class, represent interests in the Portfolio, and three classes
represent interests in the Liquid Assets Portfolio. Each class of shares has a
par value of $.001 per share. The other classes of the Fund may have different
sales charges and other expenses which may affect performance. An investor may
obtain information concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
15
<PAGE>
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 110 Washington Street, 8th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 825-6858.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
16
<PAGE>
====================================== ======================================
SHORT-TERM INVESTMENTS CO.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 825-6858 PROSPECTUS
INVESTMENT ADVISOR
A I M ADVISORS, INC. December 12, 1995
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(713) 626-1919
SHORT-TERM
DISTRIBUTOR INVESTMENTS CO.
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 825-6858 ------------
AUDITORS PRIME PORTFOLIO
KPMG PEAT MARWICK LLP
NationsBank Building ------------
700 Louisiana
Houston, Texas 77002
CUSTODIAN RESOURCE CLASS
THE BANK OF NEW YORK
110 Washington Street
8th Floor TABLE OF CONTENTS
New York, New York 10286
<TABLE>
TRANSFER AGENT <CAPTION>
A I M INSTITUTIONAL FUND SERVICES, INC. PAGE
11 Greenway Plaza, Suite 1919 ----
Houston, Texas 77046-1173 <S> <C>
Summary........................ 2
NO PERSON HAS BEEN AUTHORIZED TO GIVE Table of Fees and Expenses..... 4
ANY INFORMATION OR TO MAKE ANY Suitability For Investors...... 5
REPRESENTATIONS NOT CONTAINED IN THIS Investment Program............. 5
PROSPECTUS IN CONNECTION WITH THE Purchase of Shares............. 8
OFFERING MADE BY THIS PROSPECTUS, AND Redemption of Shares........... 10
IF GIVEN OR MADE, SUCH INFORMATION OR Dividends...................... 10
REPRESENTATIONS MUST NOT BE RELIED Taxes.......................... 11
UPON AS HAVING BEEN AUTHORIZED BY THE Net Asset Value................ 11
FUND OR THE DISTRIBUTOR. THIS Yield Information.............. 12
PROSPECTUS DOES NOT CONSTITUTE AN Reports to Shareholders........ 12
OFFER IN ANY JURISDICTION TO ANY Management of the Fund......... 13
PERSON TO WHOM SUCH OFFERING MAY General Information............ 15
NOT LAWFULLY BE MADE. </TABLE>
====================================== ======================================
<PAGE>
SUBJECT TO COMPLETION
DATED NOVEMBER 8, 1995
STATEMENT OF
ADDITIONAL INFORMATION
RESOURCE CLASS
OF THE
PRIME PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 877-7745
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 825-6858
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 12, 1995
RELATING TO THE PROSPECTUS DATED DECEMBER 12, 1995
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR ANY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES+
+EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A +
+PROSPECTUS. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTION .................................................... 1
GENERAL INFORMATION ABOUT THE FUND............................... 1
The Fund and Its Shares..................................... 1
Directors and Officers...................................... 3
Remuneration of Directors................................... 6
AIM Funds Retirement Plan for Eligible Directors/Trustees... 7
Deferred Compensation Agreements............................ 8
Investment Advisor.......................................... 9
Administrator............................................... 10
Expenses.................................................... 10
Transfer Agent and Custodian................................ 11
Reports..................................................... 11
Principal Holders of Securities............................. 12
PURCHASES AND REDEMPTIONS........................................ 16
Net Asset Value Determination............................... 16
Distribution Agreement...................................... 16
Distribution Plan........................................... 17
Banking Regulations......................................... 17
Performance Information..................................... 17
Suspension of Redemption Rights............................. 18
INVESTMENT PROGRAM AND RESTRICTIONS.............................. 18
Investment Program.......................................... 18
Eligible Securities......................................... 19
Commercial Paper Ratings.................................... 20
Bond Ratings................................................ 21
Investment Restrictions..................................... 22
PORTFOLIO TRANSACTIONS........................................... 23
TAX MATTERS...................................................... 25
Qualification as a Regulated Investment Company............. 25
Excise Tax on Regulated Investment Companies................ 26
Portfolio Distributions..................................... 26
Effect of Future Legislation; Local Tax Considerations...... 27
FINANCIAL STATEMENTS.......................................... NONE
</TABLE>
<PAGE>
INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of Short-
Term Investments Co. (the "Fund"), a mutual fund. The rules and regulations of
the United States Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning the
activities of the fund being considered for investment. This information is
included in a Prospectus dated December 12, 1995 (the "Prospectus"). Copies of
the Prospectus and additional copies of this Statement of Additional Information
may be obtained without charge by writing the distributor of the Portfolio's
shares, Fund Management Company ("FMC"), 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173, or by calling (800) 825-6858. Investors must receive a
Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Resource Class of the
Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993. On October 15, 1993, the Portfolio succeeded to the assets and
assumed the liabilities of the Prime Portfolio (the "Predecessor Portfolio") of
Short-Term Investments Co., a Massachusetts business trust ("STIC"), pursuant to
an Agreement and Plan of Reorganization between the Fund and STIC. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to October 15, 1993 relating to the
Portfolio (or a class thereof) is that of the Predecessor Portfolio (or the
corresponding class thereof). Shares of common stock of the Fund are redeemable
at their net asset value at the option of the shareholder or at the option of
the Fund in certain circumstances. For information concerning the methods of
redemption and the rights of share ownership, investors should consult the
Prospectus under the captions "General Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Liquid Assets Portfolio (together,
the "Portfolios"). The Portfolio consists of the following five classes of
shares: Resource Class, Cash Management Class, Private Investment Class,
Personal Investment Class and the Institutional Class. The Liquid Assets
Portfolio consists of three classes of shares. Each class of shares has
different shareholder qualifications and bears expenses differently. This
Statement of Additional Information and the Prospectus relate solely to shares
of the Resource Class (the "Class") of the Portfolio. Shares of the other
classes of the Portfolio and the classes of the Liquid Assets Portfolio are
offered pursuant to separate prospectuses and statements of additional
information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
1
<PAGE>
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
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 Charter of the Fund authorizes the issuance of 40 billion shares with a
par value of $.001 each, of which 16 billion shares, represent an interest in
the Liquid Assets Portfolio (or class thereof) and 22 billion shares, represent
an interest in the Portfolio (or class thereof). A share of a Portfolio (or
class) represents an equal proportionate interest in such Portfolio (or class)
with each other share of that Portfolio (or class) and is entitled to a
proportionate interest in the dividends and distributions from that Portfolio
(or class). Additional information concerning the rights of share ownership is
set forth in the Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Portfolio, and
constitute the underlying assets of that Portfolio. The underlying assets of
each of the Portfolios are segregated and are charged with the expenses with
respect to that Portfolio and with a share of the general expenses of the Fund.
While the expenses of the Fund are allocated to the separate books of account of
each of the Portfolios, certain expenses may be legally chargeable against the
assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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 of the Fund, 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 Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
2
<PAGE>
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, A I M Global Management Company Limited and AIM Global Venture Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director, CF
& I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
**CARL FRISCHLlNG, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
- -----------
* A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
3
<PAGE>
***ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Executive Vice
President, A I M Distributors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Fund Services, Inc., A I M Global Associates,
Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Senior Vice President, AIM
Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road - Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment companies). Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
- ---------------
*** A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
4
<PAGE>
****JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice President
and Treasurer, A I M Management Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc. and
AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and Senior
Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M Global
Associates, Inc., A I M Global Holdings, Inc. and AIM Global Ventures Co.;
Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
****CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group Inc.,
A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc. and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and Assistant
Vice President, A I M Distributors, Inc. and Fund Management Company. Formerly,
Vice President, Charles Schwab & Co., Inc.; Assistant Secretary, Charles Schwab
Family of Funds and Schwab Investments; Chief Compliance Officer, Charles Schwab
Investment Management, Inc.; and Vice President, Integrated Resources Life
Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice President,
A I M Capital Management, Inc. and AIM Global Advisors Limited; and Vice
President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and Fund
Management Company; Director and Senior Vice President, A I M Advisors, Inc.;
and Senior Vice President, A I M Management Group Inc.
- -------------
**** Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the directors as
a whole with respect to the Portfolio's fund accounting or its internal
accounting controls, or for considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Company maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the Board of Directors and such Committee.
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. Most of the Fund'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 attended. The directors of
the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each such director receives a fee, allocated among the AIM Funds for which he
serves as a director or trustee, which consists of an annual retainer component
and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each director of the Fund:
6
<PAGE>
<TABLE>
<CAPTION>
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
DIRECTOR FROM FUND(1) BY ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- ---------------------------------------------------------------------------------------
Bruce L. Crockett 4,393 2,814 45,094
- ---------------------------------------------------------------------------------------
Owen Daly II 4,423 14,375 45,844
- ---------------------------------------------------------------------------------------
Carl Frischling 4,393 7,542 45,094
- ---------------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- ---------------------------------------------------------------------------------------
John F. Kroeger 4,423 20,517 45,844
- ---------------------------------------------------------------------------------------
Lewis F. Pennock 4,423 5,093 45,844
- ---------------------------------------------------------------------------------------
Ian W. Robinson 4,353 10,396 45,094
- ---------------------------------------------------------------------------------------
Louis S. Sklar 4,353 4,682 45,094
- ---------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $18,174.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$11,985. Data reflects compensation earned for the calendar year ended
December 31, 1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
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, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 5% of such Director's compensation paid by the AIM Funds multiplied by
the number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is
payable to each eligible director in quarterly installments for a period of no
more than five years. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences, 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 five 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 AIM Fund.
7
<PAGE>
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
Annual Compensation Paid
By All AIM Funds
<S> <C> <C> <C>
$60,000 $65,000
=====================
Number of Years of 10 $30,000 $32,500
Service with the ---------------------
AIM Funds 9 $27,000 $29,250
---------------------
8 $24,000 $26,000
---------------------
7 $21,000 $22,750
---------------------
6 $18,000 $19,500
---------------------
5 $15,000 $16,250
=====================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $42,334 in directors' fees
and expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees of
$3,247 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended
August 31, 1995, the Portfolio paid legal fees of $10,128 for services rendered
by that firm as counsel. A director of the Fund is a partner of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel and was a partner of the firm of Reid & Priest
prior to September 1994.
8
<PAGE>
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated as of October 18, 1993 (the "Advisory Agreement"). A prior
investment advisory agreement (the "Prior Advisory Agreement") with
substantially identical terms (including the fee schedules) to the Advisory
Agreement was previously in effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises or
manages 37 investment company portfolios. As of October 31, 1995, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $39.3 billion. AIM is a wholly-owned subsidiary
of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. Certain of the directors and officers of AIM
are also executive officers of the Fund and their affiliations are shown under
"Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews annually such reports
(including information on any substantial violations of the Code). Violations
of the Code may result in censure, monetary penalties, suspension or termination
of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services, AIM receives a monthly fee which is
calculated by applying the following annual rates to the average daily net
assets of the Portfolio:
NET ASSETS RATE
---------- ----
First $100 million .20%
Over $100 million to $200 million .15%
Over $200 million to $300 million .10%
Over $300 million to $1.5 billion .06%
Over $1.5 billion .05%
The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
The Advisory Agreement provides that, upon the request of the Fund's Board
of Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered
9
<PAGE>
into a master administrative services agreement under which AIM will provide the
additional services described below under the caption "Administrator."
For the fiscal years ended August 31, 1995, 1994 and 1993, AIM received
fees pursuant to the Advisory Agreement with respect to the Portfolio (and the
Predecessor Portfolio) in the amounts of $2,567,762, $2,599,662 and $2,647,096,
respectively.
The Advisory Agreement will continue in effect until June 30, 1996, and
from year to year thereafter provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a majority
of the directors who are not parties to the Advisory Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or AIM may terminate the Advisory Agreement on 60 days'
notice without penalty. The Advisory Agreement terminates automatically in the
event of its "assignment," as defined in the 1940 Act.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM performs accounting and
other administrative services for the Portfolio which are not required to be
performed by AIM under the advisory agreement. As full compensation for the
performance of such services, AIM is reimbursed for any personnel and other
costs (including the cost of applicable office space, facilities and equipment)
of furnishing the services of a principal financial officer of the Fund and of
persons working under his supervision for maintaining the financial accounts and
books and records of the Fund, 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 Fund's
Board of Directors.
The AIFS Administrative Services Agreement between AIM and AIFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provided that AIFS
could perform certain shareholder services for the Portfolio. For such
services, AIFS was entitled to receive from AIM reimbursement of its costs
associated with the Class. The AIFS Administrative Services Agreement was
terminated July 1, 1995. Beginning July 1, 1995, AIFS received fees with
respect to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Services Agreement with the Fund. For the period July 1,
1995 through August 31, 1995 AIFS received transfer agency fees from AIM with
respect to the Portfolio in the amount of $48,210.
Under the terms of the Prior Advisory Agreement, AIM was reimbursed for the
fiscal year ended August 31, 1993 in the amount of $94,922 for fund accounting
services for the Portfolio. Pursuant to the Administrative Services Agreement,
AIM was reimbursed for the fiscal years ended August 31, 1995 and 1994 in the
amounts of $154,963 and $106,109, respectively, for fund accounting services for
the Portfolio. For the period from August 31, 1994 through June 30, 1995 and
for the period from June 1, 1994 through August 31, 1994, AIFS or its affiliates
received shareholder services fees from AIM with respect to the Portfolio in the
amounts of $95,254 and $14,651, respectively.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM
under the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting
10
<PAGE>
agent or agents appointed by the Fund; brokers' commissions chargeable to the
Fund in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to federal, state or other governmental agencies; the costs
and expenses of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and maintenance
of registration of the Fund and shares with the SEC and various states and other
jurisdictions (including filing and legal fees and disbursements of counsel);
the costs and expenses of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and directors' meetings and of preparing, printing and mailing of prospectuses,
proxy statements and reports to shareholders; fees and travel expenses of
directors and director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not "interested persons"
(as defined in the 1940 Act) of the Fund or AIM, and of independent accountants
in connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto). Except as disclosed under the caption "Distribution Plan," FMC
bears the expenses of printing and distributing prospectuses and statements of
additional information (other than those prospectuses and statements of
additional information distributed to existing shareholders of the Fund) 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 Fund's
shares.
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of the Fund based
upon the relative net assets of each class. Expenses of the Fund which are not
directly attributable to a specific class of shares but are directly
attributable to one or both of the Portfolios are prorated among all classes of
such Portfolios based upon the relative net assets of each such class. The
expenses of the Portfolio are deducted from its total income before dividends
are paid. Expenses of the Fund which are directly attributable to a specific
class of shares are charged against the income available for distribution as
dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and
cash of the Portfolio. The Bank of New York receives such compensation from the
Fund for its services in such capacity as is agreed to from time to time by The
Bank of New York and the Fund. The address of The Bank of New York is 110
Washington Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .007% of average daily net assets
of the Fund, payable monthly. Such compensation may be changed from time to
time as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held by the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of October 25, 1995, and the percentage of the Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
INSTITUTIONAL CLASS
- -------------------
NationsBank of Texas 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. Bank of Oregon 13.23%
321 Southwest 6th Street
Portland, OR 97208
Trust Company Bank 8.19%
P.O. Box 105504
Atlanta, GA 30348
Texas Commerce Bank 7.62%
P.O. Box 2558
Houston, TX 77252-8098
Boatmen's Trust Company 7.27%
100 North Broadway
St. Louis, MO 63101
Frost National Bank 7.26%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
- -------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corporation 71.90%**
41 South High Street
Columbus, OH 43287
Var & Co. 17.39%
180 East 5th Street
St. Paul, MN 55101
Frost National Bank 6.94%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 67.37%**
440 Manaroneck Ave.
Harrison, NY 10528
Cullen/Frost Discount Brokers 30.94%**
P.O. Box 2358
San Antonio, TX 78299
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
CASH MANAGEMENT CLASS
- ---------------------
Piper Jaffray As Agent For Customer 35.24%**
101 California Street
Suite 1150
San Francisco, CA 94111
</TABLE>
- -----------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
13
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
Piper Jaffray As Agent For Customer 29.49%**
P.O. Box 160727
Sacramento, CA 95816-0727
Bank Of New York 10.75%
One Wall Street
New York, NY 10286
Citibank As Agent For Customer 8.38%
120 Wall Street 13th Floor
New York, NY 10043
</TABLE>
RESOURCE CLASS
- --------------
AIM provided the initial capitalization of the Resource Class of the
Prime Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
INSTITUTIONAL CLASS
- -------------------
Trust Company Bank 20.96%
P.O. Box 105504
Atlanta, GA 30348
</TABLE>
- -----------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
14
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- ------------
<S> <C>
Wachovia Bank & Trust 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
NationsBank Dallas 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
Society National Bank 7.57%
127 Public Square
Cleveland, OH 44114-1306
Boatmen's Trust Company 6.56%
100 North Broadway
St. Louis, MO 63102
Firstar Bank of Madison 5.41%
P.O. Box 7900
Madison, WI 53707
</TABLE>
PRIVATE INVESTMENT CLASS
- ------------------------
AIM provided the initial capitalization of the Private Investment
Class of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Private Investment Class of the Liquid Assets Portfolio. Although
the Private Investment Class of the Liquid Assets Portfolio expects that the
sale of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid Assets
Portfolio, as defined in the 1940 Act.
CASH MANAGEMENT CLASS
- ---------------------
AIM provided the initial capitalization of the Cash Management Class
of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Cash Management Class of the Liquid Assets Portfolio. Although the
Cash Management Class of the Liquid Assets Portfolio expects that the sale of
its shares to the public pursuant to the Prospectus will reduce the percentage
of such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
- -----------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
15
<PAGE>
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Portfolio are sold at the net asset value of such
shares. Shareholders may at any time redeem all or a portion of their shares at
net asset value. The investor's price for purchases and redemptions will be the
net asset value next determined following the receipt of an order to purchase or
a request to redeem shares.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Portfolio is permitted in accordance with applicable rules and
regulations of the SEC, including Rule 2a-7 under the 1940 Act, which require
the Portfolio to adhere to certain conditions. These rules require that the
Portfolio maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 calendar days
or less and invest only in securities determined by the Fund's Board of
Directors to be "Eligible Securities" and to present minimal credit risk to the
Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, 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's 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 existing holders of
the Portfolio's shares. In the event the Board of Directors determines that such
a deviation exists, it will take such corrective action as the Board of
Directors deems necessary and appropriate, including the sales of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
the average portfolio maturity; the withholding of dividends; redemption of
shares in kind; or the establishment of a net asset value per share by using
available market quotations.
DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. See "General Information about the Fund --
Directors and Officers" and "General Information about the Fund -- Investment
Advisor" for information as to the affiliation of certain directors and officers
of the Fund with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right
to distribute the shares of the Class either directly or through other broker-
dealers. The Distribution Agreement also provides that FMC will pay promotional
expenses, including the incremental costs of printing prospectuses and
statements of additional information, annual reports and other periodic reports
for distribution to persons who are not shareholders of the Portfolio 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 Class.
The Distribution Agreement will continue in effect until June 30,
1996, and from year to year thereafter, provided that it is specifically
approved at least annually by the Fund'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 Fund or FMC may
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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.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund 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 the shares of the Class. These services may include among
other things: (i) answering customer inquiries regarding the shares of the Class
and the Portfolio; (ii) assisting customers in changing dividend options,
account designations and addresses; (iii) performing sub-accounting; (iv)
establishing and maintaining shareholder accounts and records; (v) processing
purchase and redemption transactions; (vi) automatic investment in shares of the
Class of customer cash accounting balances; (vii) providing periodic statements
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
such firm; (viii) arranging for bank wires; and (ix) such other services as the
Fund may request on behalf of the shares of the Class, to the extent such firms
are permitted to engage in such services by applicable statute, rule or
regulation. The Plan may only be used for the purposes specified above and as
stated in the Plan. Expenses may not be carried over from year to year.
FMC is a wholly-owned subsidiary of AIM which is a wholly-owned
subsidiary of AIM Management. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund, own shares of
AIM Management.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations, among
other things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers and
to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, shareholder clients of
such bank would be permitted to remain shareholders of the Fund and alternate
means for continuing the servicing of such shareholders would be sought. In
such event, changes in the operation of the Fund might occur and shareholders
serviced by such bank might no longer be able to avail themselves of any
automatic investment or other services then being provided by such bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.
In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments more restrictive than the
restrictions described herein.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus,
yield information for the shares of the Class may be obtained by calling the
Fund at (800) 825-6858. The current yield quoted will be the net average
annualized yield for an identified period. Current yield will be computed by
assuming that an account was established with a single share (the "Single Share
Account") on the first day of the period. To arrive at the quoted yield, the net
change in the value of that Single Share Account for the period (which
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would include dividends accrued with respect to the share, and dividends
declared on shares purchased with dividends accrued and paid, if any, but would
not include realized gains and losses or unrealized appreciation or
depreciation) will be multiplied by 365 and then divided by the number of days
in the period, with the resulting figure carried to the nearest hundredth of one
percent. The Fund may also furnish a quotation of effective yield for the Class
that assumes the reinvestment of dividends for a 365-day year and a return for
the entire year equal to the average annualized yield for the period, which will
be computed by compounding the unannualized current yield for the period by
adding 1 to the unannualized current yield, raising the sum to a power equal to
365 divided by the number of days in the period, and then subtracting 1 from the
result.
The Fund may compare the performance of the Class or the performance
of securities in which the Portfolio may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by IBC/Donoghue's
Money Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical
Services, Inc., a widely recognized independent service located in Summit, New
Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
. other fixed-income investments such as Certificates of Deposit
("CDs").
The principal value and interest rate of CDs and money market
securities are fixed at the time of purchase, whereas the Class's yield will
fluctuate. Unlike some CDs and certain other money market securities, money
market mutual funds are not insured by the FDIC. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
The Fund may reference the growth and variety of money market mutual
funds and AIM's innovation and participation in the industry.
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Portfolio may invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets of $1.5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve
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risks that are different in some respects from those incurred by an investment
company which invests only in debt obligations of U.S. domestic issuers. Such
risks include future political and economic developments, the possible seizure
or nationalization of foreign deposits, the possible imposition of United
Kingdom withholding taxes on interest income payable on Eurodollar CDs or
Eurodollar time deposits, and the possible establishment of exchange controls or
the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on Eurodollar CDs and Eurodollar
time deposits.
Rule 2a-7 under the 1940 Act provides that a money market fund shall
not invest more than 5% of its total assets in securities issued by the issuer
of the security, provided that such fund may invest more than 5% of its total
assets in the First Tier securities of a single issuer for a period of up to 3
business days after the purchase thereof if the money market fund is a
diversified investment company, provided further, that the fund may not make
more than one investment in accordance with the foregoing proviso at any time.
Under Rule 2a-7, for purposes of determining the percentage of a fund's total
assets that are invested in securities of an issuer, a repurchase agreement
shall be deemed to be an acquisition of the underlying securities, provided that
the obligation of the seller to repurchase the securities from the money market
fund is fully collateralized. To be fully collateralized, the collateral must,
among other things, consist entirely of U.S. Government securities or securities
that, at the time the repurchase agreement is entered into, are rated in the
highest rating category by Requisite NRSROs.(1)
The Portfolio may also lend its portfolio securities in amounts up to
33-1/3% of its total assets to financial institutions in accordance with the
investment restrictions of the Portfolio. Such loans would involve risks of
delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be made
only to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money
market funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that
is rated (or that has been issued by an issuer that is rated with respect
to a class of short-term debt obligations, or any security within that
class, that is comparable in priority and security with the security) by
the Requisite NRSROs in one of the two highest rating categories for short-
term debt obligations (within which there may be sub-categories or
gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security
but that has a remaining maturity of 397 calendar days or less, and
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(1) "Requisite NRSRO" shall mean (a) any two nationally recognized statistical
rating organizations that have issued a rating with respect to a security
or class of debt obligations of an issuer, or (b) if only one NRSRO has
issued a rating with respect to such security or issuer of such security,
that NRSRO. At present the NRSROs are: Standard & Poor's Corp. ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Duff and Phelps, Inc., Fitch
Investors Services, Inc. ("Fitch") and, with respect to certain types of
securities, IBCA Limited and its affiliate, IBCA Inc. Subcategories or
gradations in ratings (such as a "+" or "-") do not count as rating
categories.
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(B) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of short-term debt obligations (or any
security within that class) that is now comparable in priority and
security with the security, in one of the two highest rating
categories for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
(iii) an unrated security(2) that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of this
section, as determined by the money market fund's board of directors;
provided, however, that:
(A) the board of directors may base its determination that a
standby commitment is an Eligible Security upon a finding that the
issuer of the commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-term
security but that has a remaining maturity of 397 calendar days or
less and that is an unrated security is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be sub-
categories or gradations indicating relative standing).
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the
commercial paper ratings of Moody's, S&P and Fitch.
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following
characteristics. Liquidity ratios are adequate to meet cash requirements. Long-
term senior debt is rated "A" or better, although in some cases "BBB" credits
may be allowed. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management is unquestioned. The relative strength or weakness of the
above factors determine whether the issuer's commercial paper is rated A-1, A-2
or A-3.
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(2) An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of comparable
priority and security; (ii) that was a long-term security at the time of
issuance and whose issuer has not received from any NRSRO a rating with
respect to a class of short-term debt obligations now comparable in
priority and security; or (iii) a security that is rated but which is the
subject of an external credit support agreement not in effect when the
security was assigned its rating, provided that a security is not an
unrated security if any short-term debt obligation issued by the issuer and
comparable in priority and security is rated by any NRSRO.
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FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch's short-term ratings are as
follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond
ratings of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of
Moody's.
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 edge." Interest payments are protected by a large or 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 Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the two highest bond ratings of S&P.
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AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
FITCH -- 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 guaranties unless otherwise
indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate more than 25% of the value of its total assets in
the securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations
of the U.S. Government, its agencies or instrumentalities) if, immediately
after such purchase, more than 5%
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of the value of the Portfolio's total assets would be invested in such
issuer, except as permitted by Rule 2a-7 under the 1940 Act, as such Rule
may be amended from time to time;
(3) borrow money or issue senior securities except (a) for
temporary or emergency purposes (e.g., in order to facilitate the orderly
sale of portfolio securities to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities, provided that the Portfolio will not purchase portfolio
securities while borrowings in excess of 5% of its total assets are
outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and then
only in an amount up to 33-1/3% of the value of its total assets at the
time of borrowing or entering into a reverse repurchase agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements, and (c) by lending
portfolio securities to the extent permitted by law or regulation;
(6) underwrite securities issued by any other person, except to
the extent that the purchase of securities and the later disposition of
such securities in accordance with the Portfolio's investment program may
be deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase
and sell securities secured by real estate or interests therein or issued
by issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or calls;
(9) invest in any obligation not payable as to principal and
interest in United States currency; or
(10) acquire for value the securities of any other investment
company, except in connection with a merger, consolidation, reorganization
or acquisition of assets.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
Shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
State Law Restrictions The Fund may, from time to time in order to
qualify shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the Ohio Division
of Securities, the Portfolio will not purchase the securities of an issuer if
the officers or directors of the Fund who own more than 0.5% of the securities
of the issuer together own beneficially more than 5% of the securities of such
issuer.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions.
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Portfolio securities are normally purchased directly from the issuer or from a
market maker for the securities. The purchase price paid to dealers serving as
market makers may include a spread between the bid and asked prices. The
Portfolio may also purchase securities from underwriters at prices which include
a commission paid by the issuer to the underwriter.
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 investment policy of the Portfolio requires that investments
mature in 60 days or less. Thus, there is likely to be relatively high portfolio
turnover, but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by AIM to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement of
portfolio transactions of other clients may be of value to AIM in fulfilling its
obligations to the Portfolio. AIM is of the opinion that the material received
is beneficial in supplementing AIM's research and analysis; and therefore, it
may benefit the Portfolio by improving the quality of AIM's investment advice.
The advisory fees paid by the Portfolio are not reduced because AIM receives
such services.
From time to time, the Fund may sell a security to, or purchase a
security from, an AIM Fund or another investment account advised by AIM or A I M
Capital Management, Inc. ("AIM Capital"), when such transactions comply with
applicable rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by AIM or AIM
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have been
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Fund. Although such transactions may result in custodian, tax or other
related expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Fund from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The Fund
has obtained an order of exemption from the SEC which permits the Fund to engage
in certain transactions with such 5% holder, if the Fund complies with
conditions and procedures designed to ensure that such transactions are executed
at fair market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some
of which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing
and amount of purchase by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts and is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and
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combination of simultaneous securities purchased on behalf of the Portfolio will
be made in the same way that such purchases are allocated among or combined with
those of other AIM accounts. Simultaneous transactions could adversely affect
the ability of the Portfolio to obtain or dispose of the full amount of a
security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited
from dealing with the Portfolio as a 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 Fund from purchasing a
security being publicly underwritten by a syndicate of which persons affiliated
with the Fund are members except in accordance with certain conditions. These
conditions may restrict the ability of the Portfolio to purchase money market
obligations being publicly underwritten by such a syndicate, and the Portfolio
may be required to wait until the syndicate has been terminated before buying
such securities. At such time, the market price of the securities may be higher
or lower than the original offering price. A person affiliated with the Fund
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligations and be paid a fee by such issuer. The
Portfolio may purchase such money market obligations directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and such purchase is reviewed at least quarterly by
the Fund's Board of Directors and a determination is made that all such
purchases were effected in compliance with such procedures, including a
determination that the placement fee or other remuneration paid by the issuer to
the person affiliated with the Fund was fair and reasonable in relation to the
fees charged by other performing similar services. During the fiscal year ended
August 31, 1995, no securities or instruments were purchased by the Portfolio
from issuers who paid placement fees or other compensation to a broker
affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Portfolio and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Portfolio or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from
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the sale or other disposition of stock, securities or foreign currencies (or of
options, futures or forward contracts thereon) held for less than three months
(the "Short-Short Gain Test"). However, foreign currency gains, including those
derived from options, futures and forward contracts, will not be characterized
as Short-Short Gains if they are directly related to the regulated investment
company's principal business of investing in stock or securities (or in options
or futures thereon). Because of the Short-Short Gain Test, a fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent a fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded. Interest (including
original issue discount) received by a fund at maturity or upon the disposition
of a security held for less than three months will not be treated as gross
income derived from the sale or other disposition of a security within the
meaning of the Short-Short Gain Test. However, income that is attributable to
realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
In addition to satisfying the requirements described above, a
regulated investment company must satisfy an asset diversification test in order
to qualify for tax purposes as a regulated investment company. Under this test,
at the close of each quarter of a fund's taxable year, at least 50% of the value
of a fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a fund has not invested more than 5% of the value
of a fund's total assets in securities of such issuer and as to which a fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any other issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which a fund controls and which are engaged in the same or similar trades or
businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions
will be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will not qualify for the 70% dividends
received deduction for corporations.
26
<PAGE>
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, 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 the ordinary income dividends and capital gain
dividends, and in certain cases, 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."
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 November 1, 1995. Future legislative or administrative changes or
court decisions may significantly change the conclusions expressed herein, and
any such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisors as to the consequences of these and other state
and local tax rules affecting investment in the Portfolio.
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- --------------------------------------------------------------------------------------------------------------------------------
LIQUID ASSETS The Liquid Assets Portfolio (the "Portfolio") is a money market fund whose investment objective is
PORTFOLIO to provide as high a level of current income as is consistent with the preservation of capital and
liquidity. The Portfolio seeks to achieve its objective by investing in high quality money market
INSTITUTIONAL instruments such as U.S. Government obligations, bank obligations, commercial instruments and
CLASS repurchase agreements.
DECEMBER 12, 1995 The Portfolio is a series portfolio of Short-Term Investments Co. (the "Fund"), an open-end diversified
series management investment company. This Prospectus relates solely to the Institutional Class of the
Portfolio, a class of shares designed to be a convenient and economical vehicle in which institutions can
invest short-term cash reserves.
The Fund also offers shares of other classes of the Portfolio pursuant to separate prospectuses: the
Cash Management Class and the Private Investment Class, as well as shares of classes of another
portfolio, the Prime Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING
IN SHARES OF THE INSTITUTIONAL CLASS OF THE PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY REFERENCE. A COPY OF THE
STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO FUND MANAGEMENT
COMPANY AT 11 GREENWAY PLAZA, SUITE 1919, HOUSTON, TEXAS 77046.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND
THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE
THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF THE
PORTFOLIO INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
[LOGO APPEARS HERE]
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 659-1005
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Institutional Class
(the "Class") of the Portfolio at net asset value. The Portfolio is a money
market fund which invests in money market instruments, such as U.S. Government
Agencies obligations, bank obligations, commercial instruments and repurchase
agreements. The investment objective of the Portfolio is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Prime Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as "Portfolios."
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical vehicle in which
institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Class may not be purchased by individuals
directly, institutions may purchase shares for accounts maintained for
individuals. See "Suitability for Investors."
PURCHASE OF SHARES
Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $10,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in federal funds or other funds immediately available to the Portfolio.
See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 4:00 p.m. Eastern Time will normally be made on the same day.
See"Redemption of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "Net Asset
Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
DISTRIBUTOR
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. FMC does not receive any fee from the Fund with respect to
the shares of the Class. See "Management of the Fund--Distributor."
2
<PAGE>
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of
foreign branches of major domestic banks and in repurchase agreements. The
Portfolio may purchase delayed delivery or when-issued securities. Accordingly,
an investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--INSTITUTIONAL CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)--INSTITUTIONAL CLASS
Management Fees*........................................................ 0.06%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... 0.03%
----
Total Portfolio Operating Expenses--Institutional Class................. 0.09%
====
</TABLE>
- ------
* Had there been no fee waivers, Management Fees would have been 0.15%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year.......................................................... $ 1
3 years......................................................... $ 3
5 years......................................................... $ 5
10 years......................................................... $12
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Class will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) Expenses are based on actual costs and
fees charged to the Class for the fiscal year ended August 31, 1995 except that
Management Fees have been restated to reflect current fee waivers. There can be
no assurance that future waivers of fees (if any) will not vary from the
figures reflected in the Table of Fees and Expenses. To the extent any service
providers assume expenses of the Class, such assumption of expenses will have
the effect of lowering the Class' overall expense ratio and increasing its
yield to investors. Beneficial owners of shares of the Class should also
consider the effect of any charges imposed by the institution maintaining their
accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Institutional Class" remain the same in the years
shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for the fiscal year ended August 31, 1995 and the period
November 4, 1993 (date operations commenced) through August 31, 1994. The data
has been audited by KPMG Peat Marwick LLP, independent auditors, whose report
on the financial statements and the related notes appears in the Statement of
Additional Information.
<TABLE>
<CAPTION>
NOVEMBER 4,1993
(COMMENCEMENT
OF OPERATIONS)
TO AUGUST 31,
1995 1994
---------- ---------------
<S> <C> <C>
Net asset value, beginning of period........... $ 1.00 $ 1.00
Income from investment operations:
Net investment income........................ 0.06 0.03
---------- ----------
Less distributions:
Dividends from net investment income......... (0.06) (0.03)
---------- ----------
Net asset value, end of period................. $ 1.00 $ 1.00
========== ==========
Total return................................... 5.83% 3.83%(a)
========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted)....... $1,287,463 $1,028,350
========== ==========
Ratio of expenses to average net assets........ 0.11%(b) 0.05%(c)
========== ==========
Ratio of net investment income to average net
assets........................................ 5.69%(b) 3.85%(c)
========== ==========
</TABLE>
(a) Annualized.
(b) After waiver of advisory fees. Ratios are based on average net assets of
$1,634,097,113. Ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 0.18% and 5.62%, respectively.
(c) After waiver of advisory fees. Annualized ratios of expenses and net
investment income to average net assets prior to waiver of advisory fees
are 0.18% and 3.72%, respectively.
4
<PAGE>
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or other
similar capacity. It is designed to be a convenient and economical vehicle in
which such institutions can invest short-term cash reserves. Shares of the
Class may not be purchased directly by individuals, although institutions may
purchase shares for accounts maintained by individuals. Prospective investors
should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day. Sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Portfolio seeks to achieve its objective by investing in a diversified
portfolio of high quality U.S. dollar-denominated money market instruments and
other similar instruments with maturities of 397 days or less from the date of
purchase. The Portfolio will maintain a weighted average maturity of 90 days or
less.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of U.S. Government and foreign
government obligations, and bank and commercial instruments that may be
available in the money markets. Such obligations include U.S. Treasury
obligations and repurchase agreements. The Portfolio intends to invest in
bankers' acceptances, certificates of deposit, time deposits and commercial
paper, and U.S. Government direct obligations and U.S. Government agencies
securities. Certain U.S. Government obligations with floating or variable
interest rates may have longer maturities. Commercial obligations may include
both domestic and foreign issuers that are U.S. dollar-denominated. Bankers'
acceptances, certificates of deposit and time deposits may be purchased from
U.S. or foreign banks. These instruments, which are collectively referred to as
"Money Market Obligations," are briefly described below.
The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 (the "1940 Act"), as such Rule may be amended from time to time.
Generally, "First Tier" securities are securities that are rated in the highest
rating category by two nationally recognized statistical rating organizations
("NRSROs"), or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Fund's Board of
Directors) to be of comparable quality to a rated security that meets the
foregoing quality standards.
The Portfolio will not invest more than 10% of its net assets in illiquid
securities.
5
<PAGE>
In managing the Portfolio's investments, AIM may indicate to dealers or
issuers its interest in acquiring certain securities for the Portfolio for
settlement beyond a customary settlement date thereafter. In some cases, the
Portfolio may agree to purchase such securities at stated prices and yields.
(In such cases, these securities are considered "delayed delivery" securities
when traded in the secondary market or "when-issued" securities if they are an
initial issuance of securities.) Since this is done to facilitate the
acquisition of portfolio securities and is not for the purpose of investment
leverage, the amount of delayed delivery or when-issued securities involved may
not exceed the estimated amount of funds available for investment on the
settlement date. Until the settlement date, assets of the Portfolio with a
dollar value sufficient at all times to make payment for the delayed delivery
or when-issued securities will be set aside in a segregated account. (The total
amount of assets in the segregated account may not exceed 25% of the
Portfolio's total assets.) The delayed delivery securities, which will not
begin to accrue interest until the settlement date, and the when-issued
securities will be recorded as an asset of the Portfolio and will be subject to
the risks of market value fluctuations. The purchase price of the delayed
delivery or when-issued securities will be recorded as a liability of the
Portfolio until settlement. AIM may also transact sales of securities on a
"forward commitment" basis. In such a transaction, AIM agrees to sell portfolio
securities at a future date at specified prices and yields. Securities subject
to sale on a forward commitment basis will continue to accrue interest until
sold and will be subject to the risks of market value fluctuations. Absent
extraordinary circumstances, the Portfolio's right to acquire delayed delivery
and when-issued securities or its obligation to sell securities on a forward-
commitment basis will not be divested prior to the settlement date.
The Portfolio may invest up to 100% of its total assets in obligations issued
by banks. While the Portfolio will limit its investments in bank instruments to
U.S.dollar-denominated obligations, it may invest in Eurodollar obligations
(i.e., U.S. dollar-denominated obligations issued by a foreign branch of a
domestic bank), Yankee dollar obligations (i.e., U.S. dollar-denominated
obligations issued by a domestic branch of a foreign bank) and obligations of
foreign branches of foreign banks, including time deposits. The Portfolio will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total
assets at the time of purchase, provided that there is no limitation upon the
Portfolio's investments in (a) Eurodollar obligations, if the domestic parent
of the foreign branch issuing the obligation is unconditionally liable in the
event that the foreign branch for any reason fails to pay on the Eurodollar
obligation; and (b) Yankee dollar obligations, if the U.S. branch of the
foreign bank is subject to the same regulation as U.S. banks.
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets of $5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of foreign country withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.
The Portfolio may also lend its portfolio securities in amounts up to 33 1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Portfolio reserves the right to invest in Money
Market Obligations other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS--These are bills, notes, and bonds issued
by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES--Certain federal agencies (such as the
Federal National Mortgage Association, the Small Business Administration and
the Resolution Trust Corporation) have been established as instrumentalities of
the U.S. Government to supervise and finance certain types of activities.
Issues of these agencies, while not direct obligations of the U.S.
6
<PAGE>
Government, are (a) backed by the full faith and credit of the United States,
(b) guaranteed by the U.S. Treasury or (c) supported by the issuing agencies'
right to borrow from the U.S. Treasury.
FOREIGN GOVERNMENT OBLIGATIONS--These are U.S. dollar-denominated obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by
AIM to be of comparable quality to the other obligations in which the Portfolio
may invest. These obligations are often, but not always, supported by the full
faith and credit of the foreign governments, or their subdivisions, agencies or
instrumentalities, that issue them. Such securities also include debt
obligations of supranational entities. Such debt obligations are ordinarily
backed by the full faith and credit of the entities that issue them.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples of supranational entities include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of the Portfolio's assets invested in securities issued by
foreign governments will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.
BANKERS' ACCEPTANCES--A bankers' acceptance is a bill of exchange or time
draft drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods and to furnish
dollar exchange. These instruments generally mature in six months or less.
CERTIFICATES OF DEPOSIT--A certificate of deposit is a negotiable interest-
bearing instrument with a specific maturity. Certificates of deposit are issued
by banks and savings and loan institutions in exchange for the deposit of
funds, and normally can be traded in the secondary market prior to maturity.
TIME DEPOSITS--A time deposit is a non-negotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market.
EURODOLLAR OBLIGATIONS--A Eurodollar obligation is a U.S. dollar-denominated
obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS--A Yankee dollar obligation is a U.S. dollar-
denominated obligation issued by a domestic branch of a foreign bank.
SHORT AND MEDIUM TERM NOTES--Short and medium term notes are obligations that
have fixed coupons and maturities that can be targeted to meet investor
requirements. They are issued in the capital markets either publicly under a
shelf registration pursuant to Rule 415 promulgated by the United States
Securities and Exchange Commission (the "SEC") , or privately without such a
registration.
COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note on relatively short notice.
REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. The Portfolio may enter into repurchase agreements only with
institutions believed by the Fund's Board of Directors to present minimal
credit risk. With regard to repurchase transactions, in the event of a
bankruptcy or other default of a seller of a repurchase agreement (such as the
seller's failure to
7
<PAGE>
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying securities
and losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities, U.S.
Government agency securities (including, but not limited to, those which have
been stripped of their interest payments and mortgage-backed securities) and
commercial paper. For additional information on the use of repurchase
agreements, see the Statement of Additional Information.
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS--Reverse repurchase agreements
involve the sale by the Portfolio of a portfolio security at an agreed-upon
price, date and interest payment. The Portfolio will borrow money or enter into
reverse repurchase agreements solely for temporary or defensive purposes to
facilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests should they occur. The Portfolio will use reverse
repurchase agreements when the interest income to be earned from the securities
that would otherwise have to be liquidated to meet redemption requests is
greater than the interest expense of the reverse repurchase transaction. The
Portfolio may enter into reverse repurchase agreements in amounts not exceeding
10% of the value of its total assets. Reverse repurchase agreements involve the
risk that the market value of securities retained by the Portfolio in lieu of
liquidation may decline below the repurchase price of the securities sold by
the Portfolio which it is obligated to repurchase. The risk, if encountered,
could cause a reduction in the net asset value of the Portfolio's shares.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as amended from time to time; or
3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions
set forth above (as well as certain others set forth in the Statement of
Additional Information) are matters of fundamental policy which may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Portfolio.
In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein.
8
<PAGE>
The SEC has proposed certain changes to Rule 2a-7. While such proposed
changes may have a prospective impact on the investments of the Portfolio, the
Portfolio anticipates no difficulty in complying with any proposed change if
adopted by the SEC. A description of further investment restrictions applicable
to the Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below and notice of such order is
provided to the Portfolio's transfer agent or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which is
not accepted by the Portfolio and any funds received for which an order has not
been received will be returned to the sending institution. An order to purchase
shares of the Class must specify that the "Institutional Class of the Liquid
Assets Portfolio" is being purchased; otherwise, any funds received will be
returned to the sending institution.
The minimum initial investment in the Class is $10,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
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's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS") at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
Banks 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.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
9
<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00 per share. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made by calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Portfolio to be
redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by AIFS after 4:00 p.m. Eastern
Time or on other than a business day of the Portfolio, the redemption will be
effected at the net asset value of the Portfolio determined as of 4:00 p.m.
Eastern Time on the next business day of the Portfolio, and the proceeds of
such redemption will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Portfolio may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Portfolio
unless the Board of Directors of the Fund determines in its sole discretion
that failure to so redeem may have materially adverse consequences to the
shareholders of the Portfolio.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. Net income of the Portfolio consists of interest
accrued and discount earned (including both original issue and market discount)
on securities held by the Portfolio, less amortization of market premium and
the accrued expenses of the Portfolio. Although realized gains and losses on
the assets of the Portfolio are reflected in the net asset value of the
Portfolio, they are not expected to be of an amount which would affect the
Portfolio's net asset value of $1.00 per share for purposes of purchases and
redemptions. See "Net Asset Value." Distributions from net realized short-term
gains may be declared and paid yearly or more frequently. See "Taxes." The
Portfolio does not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Portfolio at the net asset value
of such shares as of 4:00 p.m. Eastern Time on the last business day of the
month. Such election, or any revocation thereof, must be made in writing by the
shareholder to AIFS at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173
and will become effective with dividends paid after its receipt by AIFS. If a
shareholder redeems all the shares in its account at any time during the month,
all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
10
<PAGE>
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's 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 the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent to the extent possible the net asset value per share of the
Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
TAXES
The Portfolio's policy is to distribute to its shareholders at least 90% of
its investment company taxable income for each year and consistent therewith to
meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Portfolio. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend before February 1 of the next
year, a shareholder will be treated for tax purposes as having received the
dividend in the year in which it is declared rather than in January when it is
paid. It is anticipated that no portion of distributions will be eligible for
the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
For purposes of determining taxable income, distribution requirements and
other requirements of Subchapter M, the Portfolio will be treated as a separate
corporation. Therefore, one portfolio of the Fund may not offset its gains
against the other portfolio's losses and each portfolio must specifically
comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
The foregoing discussion of federal income tax consequences is only a summary
based on tax laws and regulations in effect on November 1, 1995 which are
subject to change by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Portfolio. Net asset value per
share is determined by dividing the value of the Portfolio's securities, cash
and other assets (including interest accrued but not collected), less all its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if the security were
sold. During such periods, the daily yield on shares of the Portfolio, computed
as described in "Purchases and Redemptions--Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
11
<PAGE>
YIELD INFORMATION
Yield information for the Class can be obtained by calling FMC at (800) 659-
1005. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Portfolio. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
For the seven-day period ended August 31, 1995, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.81% and 5.98%, 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.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Certain directors and officers of the Fund are
affiliated with AIM and A I M Management Group Inc. ("AIM Management"), a
holding company engaged in the financial services business. Information
concerning the Board of Directors may be found in the Statement of Additional
Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages, advises or administers 37 investment company portfolios. As of October
31, 1995, the total assets of such investment company portfolios were
approximately $39.3 billion. AIM is a wholly-owned subsidiary of AIM
Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
12
<PAGE>
For the fiscal year ended August 31, 1995, AIM received fees with respect to
the Portfolio which represented 0.08% of the Portfolio's average daily net
assets. During such fiscal year, the expenses of the Class, including AIM's
fees, amounted to 0.11% of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Fund's Board of
Directors for providing specified administrative services. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services, as well as the services of
staff responding to various shareholder inquiries.
In addition, AIM and AIFS entered into an Administrative Services Agreement
pursuant to which AIFS was reimbursed by AIM for its costs in providing
shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $38,870 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995, AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $9,045.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM Management. The Distribution Agreement provides
that FMC has the exclusive right to distribute shares of the Portfolio either
directly or through other broker-dealers, and receives no fees for its services
with respect to the Portfolio pursuant to the Distribution Agreement. FMC is
the distributor of several other mutual funds managed or advised by AIM.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund which are not directly attributable to a
specific class of shares but are directly attributable to one or both of the
Portfolios are prorated among all classes of such Portfolios. Expenses of the
Fund which are directly attributable to a specific class of shares are charged
against the income available for distribution as dividends to the holders of
such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
13
<PAGE>
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into eight classes, of which three represent interests
in the Portfolio and the remaining five represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable to or allocated to
the respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and cash
of the Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173, acts as transfer agent for shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 659-1005.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
14
<PAGE>
===================================== ========================================
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 12, 1995
(800) 659-1005
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 INSTITUTIONAL CLASS
Houston, Texas 77046-1173
(800) 659-1005 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
Summary.......................... 2
CUSTODIAN
THE BANK OF NEW YORK Table of Fees and Expenses....... 3
110 Washington Street
8th Floor Financial Highlights............. 4
New York, New York 10286
Suitability For Investors........ 5
TRANSFER AGENT
Investment Program............... 5
Purchase of Shares............... 9
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 Redemption of Shares............. 10
Houston, Texas 77046-1173
Dividends........................ 10
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY Taxes............................ 11
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE Net Asset Value.................. 11
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR Yield Information................ 12
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY Reports to Shareholders.......... 12
THE FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN Management of the Fund........... 12
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY General Information.............. 14
NOT LAWFULLY BE MADE. </TABLE>
===================================== ========================================
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
INSTITUTIONAL CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
(800) 659-1005
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS, COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA, SUITE 1919, HOUSTON, TEXAS 77046-
1173 OR CALLING (800) 659-1005
--------------------
Statement of Additional Information dated December 12, 1995 Relating to the
Prospectus dated December 12, 1995
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION..................................................... 1
GENERAL INFORMATION ABOUT THE FUND............................... 1
The Fund and Its Shares..................................... 1
Directors and Officers...................................... 3
Remuneration of Directors................................... 6
AIM Funds Retirement Plan for Eligible Directors/Trustees... 7
Deferred Compensation Agreements............................ 8
Investment Advisor.......................................... 9
Administrator............................................... 10
Expenses.................................................... 10
Transfer Agent and Custodian................................ 11
Reports..................................................... 11
Fee Waivers................................................. 11
Principal Holders of Securities............................. 12
PURCHASES AND REDEMPTIONS........................................ 16
Net Asset Value Determination............................... 16
The Distribution Agreement.................................. 16
Performance Information..................................... 17
Redemptions in Kind......................................... 18
Suspension of Redemption Rights............................. 18
INVESTMENT PROGRAM AND RESTRICTIONS.............................. 18
Eligible Securities......................................... 18
Commercial Paper Ratings.................................... 19
Bond Ratings................................................ 20
Repurchase Agreements....................................... 22
Investment Restrictions..................................... 22
PORTFOLIO TRANSACTIONS........................................... 23
TAX MATTERS...................................................... 25
Qualification as a Regulated Investment Company............. 25
Excise Tax On Regulated Investment Companies................ 26
Portfolio Distributions..................................... 26
Effect of Future Legislation; Local Tax Considerations...... 27
FINANCIAL STATEMENTS............................................. FS
1
<PAGE>
INTRODUCTION
The Liquid Assets Portfolio (the "Portfolio") is an investment
portfolio of Short-Term Investments Co. (the "Fund"), a mutual fund. The rules
and regulations of the United States Securities and Exchange Commission (the
"SEC") require all mutual funds to furnish prospective investors certain
information concerning the activities of the fund being considered for
investment. This information is included in a Prospectus dated December 12, 1995
(the "Prospectus"). Copies of the Prospectus and additional copies of this
Statement of Additional Information may be obtained without charge by writing
the distributor of the Portfolio's shares, Fund Management Company ("FMC"), 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 or by calling (800) 659-
1005. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Institutional
Class of the Portfolio. Some of the information required to be in this Statement
of Additional Information is also included in the Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end, diversified series management investment
company which was organized as a corporation under the laws of the State of
Maryland on May 3, 1993, and had no operations prior to November 4, 1993. Shares
of common stock of the Fund are redeemable at their net asset value at the
option of the shareholder or at the option of the Fund in certain circumstances.
For information concerning the methods of redemption and the rights of share
ownership, investors should consult the Prospectus under the captions "General
Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest
in one of two portfolios: the Portfolio and the Prime Portfolio (together, the
"Portfolios"). The Prime Portfolio consists of five classes of shares, each
having different shareholder qualifications and bearing expenses differently.
The Portfolio consists of the following three classes of shares: Institutional
Class, Private Investment Class and Cash Management Class. Each such class has
different shareholder qualifications and bears expenses differently. This
Statement of Additional Information and the associated Prospectus relate solely
to shares of the Institutional Class (the "Class") of the Portfolio. Shares of
the other classes of the Portfolio and the classes of the Prime Portfolio are
offered pursuant to separate prospectuses and statements of additional
information.
As used in the Prospectus, the term "majority of the outstanding
shares" of the Fund, a particular portfolio or a particular class means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Fund, such portfolio or such class present at a meeting of the Fund's
shareholders, if the holders of more than 50% of the outstanding shares of the
Fund, such portfolio or such class are present or represented by proxy, or (ii)
more than 50% of the outstanding shares of the Fund, such portfolio or such
class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
1
<PAGE>
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 (the "1940 Act").
The Charter of the Fund authorizes the issuance of 40 billion shares
with a par value of $.001 each, of which 16 billion shares represent an interest
in the Portfolio (or class thereof) and 22 billion shares represent an interest
in the Prime Portfolio (or class thereof). A share of a portfolio (or class)
represents an equal proportionate interest in such Portfolio (or class) with
each other share of that Portfolio (or class) and is entitled to a proportionate
interest in the dividends and distributions from that Portfolio (or class).
Additional information concerning the rights of share ownership is set forth in
the Prospectus.
The assets received by the Fund for the issue or sale of shares of
each of the Portfolios and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated to that
Portfolio, and constitute the underlying assets of that Portfolio. The
underlying assets of the Portfolios are segregated and each Portfolio is charged
with the expenses with respect to that portfolio and with a share of the general
expenses of the Fund. While the expenses of the Fund are allocated to the
separate books of account of each of the Portfolios, certain expenses may be
legally chargeable against the assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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
Fund has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).
Except as otherwise disclosed in the Prospectus and in this Statement
of Additional Information, the directors shall continue to hold office and may
appoint their successors.
2
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, A I M Global Management Company Limited and AIM Global Venture Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF & I Steel Corp., Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the Board of Equitable
Bancorporation.
**CARL FRISCHLlNG, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
________________
* A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
3
<PAGE>
***ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; Director and Executive
Vice President, A I M Distributors, Inc.; Director and Senior Vice President, A
I M Capital Management, Inc., A I M Fund Services, Inc., A I M Global
Associates, Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M
Institutional Fund Services, Inc. and Fund Management Company; and Senior Vice
President, AIM Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road - Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment companies). Formerly, Consultant, Wendell
& Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
______________
*** A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
4
<PAGE>
****JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc. and
AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc. and AIM Global Ventures
Co.; Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
****CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group
Inc., A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc. and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance Officer,
Charles Schwab Investment Management, Inc.; and Vice President, Integrated
Resources Life Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice
President, A I M Capital Management, Inc. and AIM Global Advisors Limited; and
Vice President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and
Fund Management Company; Director and Senior Vice President, A I M Advisors,
Inc.; and Senior Vice President, A I M Management Group Inc.
______________
****Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
The Board of Directors has an Audit Committee, an Investments
Committee, and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for meeting
with the Portfolio's auditors to review audit procedures and results and to
consider any matters arising from an audit to be brought to the attention of the
directors as a whole with respect to the Portfolio's fund accounting or its
internal accounting controls, or for considering such matters as may from time
to time be set forth in a charter adopted by the Board of Directors and such
Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investments Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Fund maintains a distribution plan pursuant to rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the board and such Committee.
All of the Fund's directors also serve as directors or trustees of
some or all of the other investment companies managed or advised by A I M
Advisors, Inc. ("AIM") or distributed and administered by FMC. Most of the
Fund'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 attended. The directors
of the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each such director receives a fee, allocated among the AIM Funds for which he
serves as a director or trustee, which consists of an annual retainer component
and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each director of the Fund:
6
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
Retirement
Aggregate Benefits Total
Director Compensation Accrued Compensation
from Fund(1) by all AIM Funds(2) from all AIM Funds(3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- --------------------------------------------------------------------------------------------------
Bruce L. Crockett 2,091 2,814 45,094
- --------------------------------------------------------------------------------------------------
Owen Daly II 2,096 14,375 45,844
- --------------------------------------------------------------------------------------------------
Carl Frischling 2,091 7,542 45,094
- --------------------------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- --------------------------------------------------------------------------------------------------
John F. Kroeger 2,096 20,517 45,844
- --------------------------------------------------------------------------------------------------
Lewis F. Pennock 2,096 5,093 45,844
- --------------------------------------------------------------------------------------------------
Ian W. Robinson 2,071 10,396 45,094
- --------------------------------------------------------------------------------------------------
Louis S. Sklar 2,071 4,682 45,094
==================================================================================================
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $8,448.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$4,583. Data reflects compensation earned for the calendar year ended
December 31, 1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
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, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 5% of such Director's compensation paid by the AIM Funds multiplied by
the number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is payable
to each eligible director in quarterly installments for a period of no more than
five years. If an eligible director dies after attaining the normal retirement
date but before receipt of any benefits under the Plan commences, 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 five 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 AIM
Fund.
7
<PAGE>
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service as
of December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION PAID
BY ALL AIM FUNDS
$60,000 $65,000
================================================================
<S> <C> <C> <C>
Number of Years of 10 $30,000 $32,500
Service with the ----------------------------------------------------------------
AIM Funds 9 $27,000 $29,250
----------------------------------------------------------------
8 $24,000 $26,000
----------------------------------------------------------------
7 $21,000 $22,750
----------------------------------------------------------------
6 $18,000 $19,500
----------------------------------------------------------------
5 $15,000 $16,250
================================================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $14,116 in directors'
fees and expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees
of $1,317 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended August
31, 1995, the Portfolio paid legal fees of $4,721 for services rendered by that
firm as counsel. A director of the Fund is a partner of Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel and was a partner of the firm of Reid & Priest prior to
September 1994.
8
<PAGE>
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as
the Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated October 18, 1993 (the "Advisory Agreement"). A prior investment
advisory agreement (the "Prior Advisory Agreement") with substantially identical
terms (including the fee schedules) to the Advisory Agreement was previously in
effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises,
manages or administers 37 investment company portfolios. As of October 31, 1995
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $39.3 billion. AIM is a wholly-owned
subsidiary of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Certain of the directors and officers of
AIM are also executive officers of the Fund and their affiliations are shown
under "Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires
investment personnel (a) to pre-clear all personal securities transactions, (b)
to file reports regarding such transactions, and (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and (iii) transactions involving securities being considered for
investment by an AIM Fund. The Code also prohibits investment personnel from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Directors reviews annually
such reports (including information on any substantial violations of the Code).
Violations of the Code may result in censure, monetary penalties, suspension or
termination of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the
investment of the Portfolio's assets. AIM obtains and evaluates economic,
statistical and financial information to formulate and implement investment
policies for the Portfolio. Any investment program undertaken by AIM will at all
times be subject to the policies and control of the Fund's Board of Directors.
AIM shall not be liable to the Fund or its shareholders for any act or omission
by AIM or for any loss sustained by the Fund or its shareholders except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of duty.
As compensation for its services with respect to the Portfolio, AIM
receives a fee at the annual rate of 0.15% of the average daily net assets of
the Portfolio. The Advisory Agreement requires AIM to reduce its fee to the
extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
During the period November 4, 1993 (date operations commenced) through
August 31, 1994, AIM voluntarily waived fees of $1,500,977, which it was
entitled to receive pursuant to the Advisory Agreement with respect to the
Portfolio. During the fiscal year ended August 31, 1995, AIM received fees
pursuant to the Advisory Agreement in the amount of $1,323,637 and AIM
voluntarily waived fees of $1,127,509, which it was entitled to receive pursuant
to the Advisory Agreement with respect to the Portfolio.
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered into the Master Administrative Services Agreement under
which AIM will provide the additional services described below under the caption
"Administrator."
9
<PAGE>
The Advisory Agreement will continue in effect until June 30, 1996 and
from year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a majority
of the directors who are not parties to the Advisory Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or AIM may terminate the Agreement on 60 days' notice without
penalty. The Advisory Agreement terminates automatically in the event of its
"assignment," as defined in the 1940 Act.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement, dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM has agreed to perform
or arrange for the performance of certain accounting, shareholder servicing and
other administrative services for the Portfolio which are not required to be
performed by AIM under the Advisory Agreement. For such services, AIM would be
entitled to receive from the Fund reimbursement of AIM's costs or such
reasonable compensation as may be approved by the Fund's Board of Directors. The
Administrative Services Agreement provides that such agreement will continue in
effect until June 30, 1996, and shall continue in effect from year to year
thereafter only if such continuance is specifically approved at least annually
by the Fund's Board of Directors, including the Non-Interested Directors, by
votes cast in person at a meeting called for such purpose. The Administrative
Services Agreement was last approved by the Fund's Board of Directors (including
the Non-Interested Directors) on May 9, 1995.
Pursuant to the Administrative Services Agreement, AIM was reimbursed
for the fiscal years ended August 31, 1995 and 1994 in the amounts of $97,044
and $39,492, respectively.
The AIFS Administrative Services Agreement between AIM and AIFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provided that AIFS
perform certain shareholder services for the Portfolio. For such services, AIFS
was entitled to receive from AIM reimbursement of its costs associated with the
Class. The AIFS Administrative Services Agreement was terminated July 1, 1995.
Beginning July 1, 1995, AIFS received fees with respect to the Portfolio for its
provision of shareholder services pursuant to a Transfer Agency and Service
Agreement with the Fund. For the period from August 31, 1994 through June 30,
1995 and for the period from June 1, 1994 through August 31, 1994, AIFS or its
affiliates received shareholder services fees from AIM with respect to the
Portfolio in the amounts of $38,870 and $5,110, respectively. For the period
July 1, 1995 through August 31, 1995, AIFS received transfer agency fees from
AIM with respect to the Portfolio in the amount of $9,045.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM
under the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and shares with the SEC
and various states and other jurisdictions (including filing and legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting, and distributing prospectuses and statements of additional
information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders'
10
<PAGE>
and directors' meetings and of preparing, printing and mailing of prospectuses,
proxy statements and reports to shareholders; fees and travel expenses of
directors and director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not "interested persons"
(as defined in the 1940 Act) of the Fund or AIM, and of independent accountants
in connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto). FMC bears the expenses of printing and distributing
prospectuses and statements of additional information (other than those
prospectuses and statements of additional information distributed to existing
shareholders of the Fund) 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 Fund's shares.
Expenses of the Fund which are not directly attributable to the
operations of either of the Portfolios are prorated among all classes of the
Fund based upon the relative net assets of each class. Expenses of the Fund
which are not directly attributable to a specific class of shares but are
directly attributable to one or both of the Portfolios are prorated among all
classes of such Portfolios based upon the relative net assets of each such
class. The expenses of the Portfolio are deducted from its total income before
dividends are paid. Expenses of the Fund which are directly attributable to a
specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities
and cash of the Portfolio. The Bank of New York receives such compensation from
the Fund for its services in such capacity as is agreed to from time to time by
The Bank of New York and the Fund. The address of The Bank of New York is 110
Washington Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 770461173 serves as a transfer agent and dividend
disbursing agent for the shares of the Class and receives an annual fee from the
Fund for its services in such capacity in the amount of .007% of average daily
net assets of the Fund, payable monthly. Such compensation may be changed from
time to time as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
FEE WAIVERS
AIM may, from time to time, agree to waive voluntarily all or any
portion of its fees or reimburse the Portfolio for certain of its expenses. Such
waivers or reimbursements may be discontinued at any time. Shareholders of the
Portfolio will receive notice 30 days prior to the effective date of any
substantial change in such waivers or reimbursements.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the
Portfolio as of October 25, 1995, and the percentage of the Portfolio's
outstanding shares owned by such shareholders as of such date are as follows:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
INSTITUTIONAL CLASS
- -------------------
NationsBank of Texas 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. Bank of Oregon 13.23%
321 Southwest 6th Street
Portland, OR 97208
Trust Company Bank 8.19%
P.O. Box 105504
Atlanta, GA 30348
Texas Commerce Bank 7.62%
P.O. Box 2558
Houston, TX 77252-8098
Boatmen's Trust Company 7.27%
100 North Broadway
St. Louis, MO 63101
Frost National Bank 7.26%
P.O. Box 1600
San Antonio, TX 78296
______________
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corporation 71.90%**
41 South High Street
Columbus, OH 43287
Var & Co. 17.39%
180 East 5th Street
St. Paul, MN 55101
Frost National Bank 6.94%
P.O. Box 1600
San Antonio, TX 78296
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 67.37%**
440 Manaroneck Ave.
Harrison, NY 10528
Cullen/Frost Discount Brokers 30.94%**
P.O. Box 2358
San Antonio, TX 78299
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
CASH MANAGEMENT CLASS
- ---------------------
Piper Jaffray As Agent For Customer 35.24%**
101 California Street
Suite 1150
San Francisco, CA 94111
______________
* The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
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<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
Piper Jaffray As Agent For Customer 29.49%**
P.O. Box 160727
Sacramento, CA 95816-0727
Bank Of New York 10.75%
One Wall Street
New York, NY 10286
Citibank As Agent For Customer 8.38%
120 Wall Street 13th Floor
New York, NY 10043
RESOURCE CLASS
- --------------
AIM provided the initial capitalization of the Resource Class of the
Prime Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
INSTITUTIONAL CLASS
- -------------------
Trust Company Bank 20.96%
P.O. Box 105504
Atlanta, GA 30348
______________
* The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
14
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
Wachovia Bank & Trust 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
NationsBank Dallas 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
Society National Bank 7.57%
127 Public Square
Cleveland, OH 44114-1306
Boatmen's Trust Company 6.56%
100 North Broadway
St. Louis, MO 63102
Firstar Bank of Madison 5.41%
P.O. Box 7900
Madison, WI 53707
PRIVATE INVESTMENT CLASS
- ------------------------
AIM provided the initial capitalization of the Private Investment
Class of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Private Investment Class of the Liquid Assets Portfolio. Although
the Private Investment Class of the Liquid Assets Portfolio expects that the
sale of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid Assets
Portfolio, as defined in the 1940 Act.
CASH MANAGEMENT CLASS
- ---------------------
AIM provided the initial capitalization of the Cash Management Class
of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Cash Management Class of the Liquid Assets Portfolio. Although the
Cash Management Class of the Liquid Assets Portfolio expects that the sale of
its shares to the public pursuant to the Prospectus will reduce the percentage
of such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
______________
* The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
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<PAGE>
Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Portfolio is permitted in accordance with applicable rules and
regulations of the SEC, including Rule 2a-7 under the 1940 Act, which require
the Portfolio to adhere to certain conditions. These rules require that the
Portfolio maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 calendar days
or less and invest only in securities determined by the Board of Directors to be
"Eligible Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, 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's 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 existing holders of
the shares. In the event the Board of Directors determines that such a deviation
exists, it will take such corrective action as the Board of Directors deems
necessary and appropriate, including the sales of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity; the withholding of dividends; redemption of shares in kind; or the
establishment of a net asset value per share by using available market
quotations.
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. See "General Information about the Fund -- Directors
and Officers" and "General Information about the Fund -- Investment Advisor" for
information as to the affiliation of certain directors and officers of the Fund
with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right
to distribute shares either directly or through other broker-dealers. The
Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Portfolio 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 Class. FMC does
not receive any fees with respect to the shares of the Class pursuant to the
Distribution Agreement.
16
<PAGE>
The Distribution Agreement will continue in effect until June 30, 1996
and from year to year thereafter, provided that it is specifically approved at
least annually by the Fund'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 Fund 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.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus,
yield information for the shares of the Class may be obtained by calling the
Fund at (800) 659-1005. The current yield quoted will be the net average
annualized yield for an identified period. Current yield will be computed by
assuming that an account was established with a single share (the "Single Share
Account") on the first day of the period. To arrive at the quoted yield, the net
change in the value of that Single Share Account for the period (which would
include dividends accrued with respect to the share, and dividends declared on
shares purchased with dividends accrued and paid, if any, but would not include
realized gains and losses or unrealized appreciation or depreciation) will be
multiplied by 365 and then divided by the number of days in the period, with the
resulting figure carried to the nearest hundredth of one percent. The Portfolio
may also furnish a quotation of effective yield that assumes the reinvestment of
dividends for a 365-day year and a return for the entire year equal to the
average annualized yield for the period, which will be computed by compounding
the unannualized current yield for the period by adding 1 to the unannualized
current yield, raising the sum to a power equal to 365 divided by the number of
days in the period, and then subtracting 1 from the result.
For the seven-day period ended August 31, 1995, the current yield and
the effective yield (which assumes the reinvestment of dividends for a 365-day
year and a return for the entire year equal to the annualized current yield for
the period) for the Class were 5.81% and 5.98%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
The Portfolio may compare the performance of the Class or the
performance of securities in which it may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by IBC/Donoghue's
Money Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical
Services, Inc., a widely recognized independent service located in Summit, New
Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
. other fixed-income investments such as Certificates of
Deposit ("CDs").
The principal value and interest rate of CDs and money market
securities are fixed at the time of purchase whereas the Class' yield will
fluctuate. Unlike some CDs and certain other money market securities, money
market mutual funds are not insured by the FDIC. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
17
<PAGE>
The Portfolio may reference the growth and variety of money market
mutual funds and AIM's innovation and participation in the industry.
REDEMPTIONS IN KIND
The Fund will not redeem shares representing an interest in the
Portfolio in kind (i.e., by distributing its portfolio securities).
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
The Portfolio may lend its portfolio securities in amounts up to
33-1/3% of its total assets to financial institutions in accordance with the
investment restrictions of the Portfolio. Such loans would involve risks of
delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be made
only to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money
market funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that is
rated (or that has been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
that is comparable in priority and security with the security) by the
Requisite NRSROs(1) in one of the two highest rating categories for short-
term debt obligations (within which there may be sub-categories or
gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security but
that has a remaining maturity of 397 calendar days or less, and
______________
(1) "Requisite NRSRO" 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 of such security,
that NRSRO. At present the NRSROs are: Standard & Poor's Corp., Moody's
Investors Service, Inc., Duff and Phelps, Inc., Fitch Investors Services,
Inc. and, with respect to certain types of securities, IBCA Limited and its
affiliate, IBCA Inc. Subcategories or gradations in ratings (such as a "+"
or "-") do not count as rating categories.
18
<PAGE>
(B) whose issuer has received from the Requisite NRSROs a rating,
with respect to a class of short-term debt obligations (or any
security within that class) that is now comparable in priority and
security with the security, in one of the two highest rating
categories for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
(iii) an unrated security(2) that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of this
section, as determined by the money market fund's board of directors;
provided, however, that:
(A) the board of directors may base its determination that a
standby commitment is an Eligible Security upon a finding that the
issuer of the commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-term
security but that has a remaining maturity of 397 calendar days or
less and that is an unrated security is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be sub-
categories or gradations indicating relative standing).
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the
commercial paper ratings of Moody's, S&P and Fitch Investors Service, Inc.
("Fitch").
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following
characteristics. Liquidity ratios are adequate to meet cash requirements. Long-
term senior debt is rated "A" or better, although in some cases "BBB" credits
may be allowed. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management is unquestioned. The relative strength or weakness of the
above factors determine whether the issuer's commercial paper is rated A-1, A-2
or A-3.
- --------------
(2) An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of comparable
priority and security; (ii) that was a long-term security at the time of
issuance and whose issuer has not received from any NRSRO a rating with
respect to a class of short-term debt obligations now comparable in
priority and security; or (iii) a security that is rated but which is the
subject of an external credit support agreement not in effect when the
security was assigned its rating, provided that a security is not an
unrated security if any short-term debt obligation issued by the issuer and
comparable in priority and security is rated by any NRSRO.
19
<PAGE>
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch short-term ratings are as
follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated "F-
1."
Plus(+) and Minus (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond
ratings of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of Moody's.
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 edge." Interest payments are protected by a large or 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 Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the four highest bond ratings of S&P; the
lower two of which are referred to in the foregoing description of its
commercial paper ratings.
20
<PAGE>
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A
Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are regarded
as safe. They predominantly reflect money rates in their market behavior, but to
some extent, also economic conditions.
BBB
The BBB, or medium grade category, is borderline between definitely
sound obligations and those where the speculative element begins to predominate.
These bonds have adequate asset coverage and normally are protected by
satisfactory earnings. Their susceptibility to changing conditions, particularly
to depressions, necessitates constant watching. Market values of these bonds are
more responsive to business and trade conditions than to interest rates. This
group is the lowest which qualifies for commercial bank investment.
Fitch - 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 guaranties unless otherwise
indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch 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.
21
<PAGE>
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
REPURCHASE AGREEMENTS
Rule 2a-7 under the 1940 Act provides that a money market fund shall
not invest more than five percent of its total assets in securities issued by
the issuer of the security, provided that such a fund may invest more than five
percent of its total assets in the First Tier securities of a single issuer for
a period of up to three business days after the purchase thereof if the money
market fund is a diversified investment company, provided further, that the fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of a
fund's total assets that are invested in securities of an issuer, a repurchase
agreement shall be deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the securities from the
money market fund is fully collateralized. To be fully collateralized, the
collateral must, among other things, consist entirely of U.S. Government
securities or securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by Requisite NRSROs.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in
the securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to investments in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
and bank instruments, such as CDs, bankers' acceptances, time deposits
and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations
of the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the
Portfolio's total assets would be invested in such issuer, except as
permitted by Rule 2a-7 under the 1940 Act, as amended from time to
time;
(3) borrow money or issue senior securities except (a) for
temporary or emergency purposes (e.g., in order to facilitate the
orderly sale of portfolio securities or to accommodate abnormally
heavy redemption requests), the Portfolio may borrow money from banks
or obtain funds by entering into reverse repurchase agreements, and
(b) to the extent that entering into commitments to purchase
securities in accordance with the Portfolio's investment program may
be considered the issuance of senior securities, provided that the
Portfolio will not purchase portfolio securities while borrowings in
excess of 5% of its total assets are outstanding;
22
<PAGE>
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and
then only in an amount up to 33-1/3% of the value of its total assets
at the time of borrowing or entering into a reverse repurchase
agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's
investment program, (b) by entering into repurchase agreements and (c)
by lending portfolio securities to the extent permitted by law or
regulation;
(6) underwrite securities issued by any other person, except to
the extent that the purchase of securities and the later disposition
of such securities in accordance with the Portfolio's investment
program may be deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase
and sell securities secured by real estate or interests therein or
issued by issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or
calls;
(9) invest in any obligation not payable as to principal and
interest in United States currency; or
(10) Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its directors pursuant to any deferred compensation plan
existing at any time between the Fund and its directors.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
State Law Restrictions The Fund may, from time to time in order to
qualify shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the State
Securities Board of Texas, the Portfolio (i) will not invest in limited
partnership interests in real property, and (ii) will not issue any class of
senior security or borrow money unless immediately after such issuance or
borrowing there is asset coverage of at least 300%.
Pursuant to an undertaking made to the Ohio Division of Securities,
the Portfolio will not: (i) purchase the securities of an issuer if the officers
or directors of the Fund who own more than 0.5% of the securities of the issuer
together own beneficially more than 5% of the securities of such issuer; and
(ii) purchase the securities of any issuer if, as to 75% of the total assets of
the Portfolio, more than 10% of the voting securities of such issuer would be
held by the Portfolio at the time of purchase.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
23
<PAGE>
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
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 market. For example, market
conditions frequently result in similar securities trading at different prices.
AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by AIM to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement of
portfolio transactions of other clients may be of value to AIM in fulfilling its
obligations to the Portfolio. AIM is of the opinion that the material received
is beneficial in supplementing AIM's research and analysis; and therefore, it
may benefit the Portfolio by improving the quality of AIM's investment advice.
The advisory fees paid by the Portfolio are not reduced because AIM receives
such services.
From time to time, the Fund may sell a security to, or purchase a
security from, an AIM Fund or another investment account advised by AIM or A I M
Capital Management, Inc. ("AIM Capital"), when such transactions comply with
applicable rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by AIM or AIM
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have been
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Fund. Although such transactions may result in custodian, tax or other
related expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Fund from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The Fund
has obtained an order of exemption from the SEC which permits the Fund to engage
in certain transactions with such 5% holder, if the Fund complies with
conditions and procedures designed to ensure that such transactions are executed
at fair market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some
of which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing and
amount of purchase by each account will also be determined by its cash position.
If the purchase or sale of securities is consistent with the investment policies
of the Portfolio and one or more of these accounts is considered at or about the
same time, transactions in such securities will be allocated in good faith among
such accounts, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution. The allocation and
combination of simultaneous securities purchases on behalf of the Portfolio will
be made in the same way that such
24
<PAGE>
purchases are allocated among or combined with those of other AIM accounts.
Simultaneous transactions could adversely affect the ability of the Portfolio to
obtain or dispose of the full amount of a security which it seeks to purchase or
sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited
from dealing with the Portfolio as a 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 Fund from purchasing a security
being publicly underwritten by a syndicate of which persons affiliated with the
Fund are members except in accordance with certain conditions. These conditions
may restrict the ability of the Portfolio to purchase money market obligations
being publicly underwritten by such a syndicate, and the Portfolio may be
required to wait until the syndicate has been terminated before buying such
securities. At such time, the market price of the securities may be higher or
lower than the original offering price. A person affiliated with the Fund may,
from time to time, serve as placement agent or financial advisor to an issuer of
money market obligations and be paid a fee by such issuer. The Portfolio may
purchase such money market obligations directly from the issuer, provided that
the purchase is made in accordance with procedures adopted by the Fund's Board
of Directors and such purchase is reviewed at least quarterly by the Fund's
Board of Directors and a determination is made that all such purchases were
effected in compliance with such procedures, including a determination that the
placement fee or other remuneration paid by the issuer to the person affiliated
with the Fund was fair and reasonable in relation to the fees charged by other
performing similar services. During the fiscal year ended August 31, 1995, no
securities or instruments were purchased by the Portfolio from issuers who paid
placement fees or other compensation to a broker affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Portfolio and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Portfolio or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward
25
<PAGE>
contracts thereon) held for less than three months (the "Short-Short Gain
Test"). However, foreign currency gains, including those derived from options,
futures and forward contracts, will not be characterized as Short-Short Gains if
they are directly related to the regulated investment company's principal
business of investing in stock or securities (or in options or futures thereon).
Because of the Short-Short Gain Test, a fund may have to limit the sale of
appreciated securities that it has held for less than three months. However, the
Short-Short Gain Test will not prevent a fund from disposing of investments at a
loss, since the recognition of a loss before the expiration of the three-month
holding period is disregarded. Interest (including original issue discount)
received by a fund at maturity or upon the disposition of a security held for
less than three months will not be treated as gross income derived from the sale
or other disposition of a security within the meaning of the Short-Short Gain
Test. However, income that is attributable to realized market appreciation will
be treated as gross income from the sale or other disposition of securities for
this purpose.
In addition to satisfying the requirements described above, a
regulated investment company must satisfy an asset diversification test in order
to qualify for tax purposes as a regulated investment company. Under this test,
at the close of each quarter of a fund's taxable year, at least 50% of the value
of a fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a fund has not invested more than 5% of the value
of a fund's total assets in securities of such issuer and as to which a fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any other issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which a fund controls and which are engaged in the same or similar trades or
businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will not qualify for the 70% dividends
received deduction for corporations.
26
<PAGE>
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 Class. Shareholders receiving a distribution in the
form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Portfolio) on December
31 of such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Portfolio will be required in certain cases to withhold and remit
to the U.S. Treasury 31% of the ordinary income dividends and capital gain
dividends and, in certain cases, 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 Fund that it
is not subject to backup withholding or that it is a corporation or other
"exempt recipient."
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 November 1, 1995. Future legislative or administrative changes or
court decisions may significantly change the conclusions expressed herein, and
any such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisors as to the consequences of these and other state
and local tax rules affecting an investment in the Portfolio.
27
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Liquid Assets Portfolio (a series Portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1995, and the related
statement of operations for the year then ended, and the statement of changes
in net assets and financial highlights for the year then ended and the period
November 4, 1993 (date operations commenced) through August 31, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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
Liquid Assets Portfolio as of August 31, 1995, the results of its operations
for the year then ended, and the changes in its net assets and financial
highlights for the year then ended and the period November 4, 1993 (date
operations commenced) through August 31, 1994, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
October 6, 1995
Houston, Texas
FS-1
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1995
<TABLE>
<CAPTION>
MATURITY PAR(000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 35.84%(a)
CONSUMER DURABLES - 9.17%
AUTOMOBILE - 7.94%
Daimler-Benz North America Corp.
5.90% 11/07/95 $ 33,200 $ 32,835,445
- ----------------------------------------------------------------------
5.90% 11/08/95 25,000 24,721,389
- ----------------------------------------------------------------------
Ford Motor Credit Co.
5.90% 09/20/95 25,000 24,922,153
- ----------------------------------------------------------------------
5.95% 11/01/95 20,000 19,798,362
- ----------------------------------------------------------------------
102,277,349
- ----------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION - 1.23%
Weyerhaeuser Real Estate Co.
5.90% 11/13/95 16,000 15,808,578
- ----------------------------------------------------------------------
Total Consumer Durables 118,085,927
- ----------------------------------------------------------------------
CONSUMER NONDURABLES - 3.44%
PUBLISHING - 1.54%
McGraw-Hill Inc.
5.64% 02/28/96 20,500 19,921,900
- ----------------------------------------------------------------------
MULTIPLE INDUSTRY - 1.90%
PepsiCo Inc.
5.53% 01/29/96 25,000 24,423,958
- ----------------------------------------------------------------------
Total Consumer Nondurables 44,345,858
- ----------------------------------------------------------------------
ENERGY - 2.39%
OIL & GAS - 2.39%
ARCO Coal Australia Inc.
6.04% 10/23/95 15,540 15,404,422
- ----------------------------------------------------------------------
6.07% 10/30/95 15,493 15,338,875
- ----------------------------------------------------------------------
Total Energy 30,743,297
- ----------------------------------------------------------------------
FINANCIAL - 15.50%
ASSET-BACKED SECURITIES - 2.94%
Delaware Funding Corp.
5.85% 09/22/95 18,389 18,326,247
- ----------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.64% 01/22/96 20,000 19,551,933
- ----------------------------------------------------------------------
37,878,180
- ----------------------------------------------------------------------
BUSINESS CREDIT - 4.24%
CIT Group Holdings, Inc.
5.90% 09/20/95 25,000 24,922,153
- ----------------------------------------------------------------------
National Rural Utilities Cooperative
Finance Corp.
5.90% 09/08/95 10,000 9,988,528
- ----------------------------------------------------------------------
5.72% 12/04/95 20,000 19,701,289
- ----------------------------------------------------------------------
54,611,970
- ----------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR(000) VALUE
<S> <C> <C> <C>
INSURANCE - 4.87%
Marsh & McLennan Companies Inc.
5.42% 02/27/96 $ 10,000 $ 9,730,506
- ----------------------------------------------------------------------------
5.42% 03/14/96 9,380 9,104,619
- ----------------------------------------------------------------------------
5.42% 03/29/96 16,350 15,833,067
- ----------------------------------------------------------------------------
5.51% 04/12/96 14,000 13,520,018
- ----------------------------------------------------------------------------
5.62% 04/25/96 15,000 14,445,025
- ----------------------------------------------------------------------------
62,633,235
- ----------------------------------------------------------------------------
MISCELLANEOUS - 0.62%
International Lease Finance Corp.
5.85% 09/12/95 8,000 7,985,700
- ----------------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.83%
General Electric Capital Corp.
5.84% 09/14/95 11,500 11,475,747
- ----------------------------------------------------------------------------
5.88% 09/22/95 25,000 24,914,250
- ----------------------------------------------------------------------------
36,389,997
- ----------------------------------------------------------------------------
Total Financial 199,499,082
- ----------------------------------------------------------------------------
RETAIL - 2.01%
FOOD STORES - 2.01%
Winn-Dixie Stores Inc.
5.87% 10/05/95 26,000 25,855,859
- ----------------------------------------------------------------------------
UTILITIES - 1.43%
ELECTRIC SERVICES - 1.43%
Citizens Utilities Co.
5.85% 09/07/95 18,500 18,481,963
- ----------------------------------------------------------------------------
OTHER - 1.90%
MISCELLANEOUS - 1.90%
Cargill Financial Services Corp.
5.60% 12/18/95 10,000 9,832,000
- ----------------------------------------------------------------------------
5.68% 02/12/96 15,000 14,611,867
- ----------------------------------------------------------------------------
Total Other 24,443,867
- ----------------------------------------------------------------------------
Total Commercial Paper 461,455,853
- ----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 15.54%
Federal National Mortgage Association -
10.18%
5.58%(b) 06/02/99 131,000 131,000,000
- ----------------------------------------------------------------------------
Student Loan Marketing Association - 5.36%
5.71%(b) 01/13/99 54,000 54,000,000
- ----------------------------------------------------------------------------
5.71%(b) 02/08/99 15,000 15,000,000
- ----------------------------------------------------------------------------
69,000,000
- ----------------------------------------------------------------------------
Total U.S. Government Agencies 200,000,000
- ----------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR(000) VALUE
<S> <C> <C> <C>
PROMISSORY AND MASTER NOTE AGREEMENTS -
25.52%
Citicorp Securities, Inc.
6.0625%(c) 09/13/95 $ 94,000 $ 94,000,000
- --------------------------------------------------------------------------------
Goldman Sachs Group L.P. (The)
5.9125%(d) 01/29/96 75,000 75,000,000
- --------------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.9875%(e) 10/16/95 86,510 86,510,000
- --------------------------------------------------------------------------------
Morgan Stanley Group, Inc.
5.8925%(f) 01/29/96 73,000 73,000,000
- --------------------------------------------------------------------------------
Total Promissory and Master Note
Agreements 328,510,000
- --------------------------------------------------------------------------------
Total Investments, excluding Repurchase
Agreements 989,965,853
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 23.33%(g)
Fuji Securities Inc.
5.87%(h) -- 75,000 75,000,000
- --------------------------------------------------------------------------------
Goldman, Sachs & Co., Inc.
6.00%(i) 09/01/95 75,410 75,409,615
- --------------------------------------------------------------------------------
6.14%(j) 10/10/95 50,000 50,000,000
- --------------------------------------------------------------------------------
Harris-Nesbitt Thomson Securities Inc.
6.05%(k) 09/01/95 100,000 100,000,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements 300,409,615
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.23% 1,290,375,468(1)
- --------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.23%) (2,912,810)
- --------------------------------------------------------------------------------
NET ASSETS - 100.00% $1,287,462,658
================================================================================
</TABLE>
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) Interest rates are redetermined weekly. Rates shown are the rates in effect
on August 31, 1995.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Agreement upon notice to the issuer. Interest rates on master notes
are redetermined periodically. Rates shown are the rates in effect on
August 31, 1995.
(d) The Portfolio may demand prepayment of notes upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1995.
(e) The Portfolio may demand prepayment of notes purchased under the Master
Note Agreement upon seven calendar days' notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
August 31, 1995.
(f) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Agreement will become payable.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on August 31, 1995.
(g) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102 percent of the
sales price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds managed by the investment advisor.
(h) Open joint repurchase agreement entered into on 08/30/95; however, either
party may terminate the agreement upon demand. Collateralized by
$332,491,000 U.S. Treasury obligations, 0.00% to 9.25% due 05/15/97 to
02/15/16.
(i) Entered into on 08/31/95 with a maturing value of $75,422,183.
Collateralized by $80,567,000 U.S. Treasury obligations, 5.875% to 6.87%
due 07/31/96 to 08/28/00.
(j) Term repurchase agreement entered into 04/11/95 with a maturity date of
10/10/95; however, either party may terminate the agreement as of any
business day not less than seven days' after receipt of written notice from
the terminating party. Collateralized by $43,260,000 U.S. Treasury
obligations, 7.25% to 8.75% due 05/01/16 to 08/15/20.
(k) Entered into on 08/31/95 with a maturing value of $100,016,806.
Collateralized by $90,778,000 U.S. Treasury obligations, 0.00% to 9.25% due
11/15/95 to 05/15/21.
(l) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $ 989,965,853
- ------------------------------------------------------------------------
Repurchase agreements 300,409,615
- ------------------------------------------------------------------------
Interest receivable 5,290,124
- ------------------------------------------------------------------------
Investment for deferred compensation plan 11,407
- ------------------------------------------------------------------------
Other assets 20,348
- ------------------------------------------------------------------------
Total assets 1,295,697,347
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 8,081,656
- ------------------------------------------------------------------------
Deferred compensation 11,407
- ------------------------------------------------------------------------
Accrued advisory fees 91,097
- ------------------------------------------------------------------------
Accrued directors' fees 2,034
- ------------------------------------------------------------------------
Accrued administrative services fees 5,219
- ------------------------------------------------------------------------
Accrued transfer agent fees 10,645
- ------------------------------------------------------------------------
Accrued operating expenses 32,631
- ------------------------------------------------------------------------
Total liabilities 8,234,689
- ------------------------------------------------------------------------
NET ASSETS $1,287,462,658
========================================================================
NET ASSET VALUE PER SHARE:
Capital stock, $.001 par value per share 1,287,599,788
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $94,760,422
- ------------------------------------------------------------------
EXPENSES:
Advisory fees 2,451,146
- ------------------------------------------------------------------
Custodian fees 59,910
- ------------------------------------------------------------------
Administrative services fees 97,044
- ------------------------------------------------------------------
Directors' fees and expenses 14,116
- ------------------------------------------------------------------
Filing fees 255,172
- ------------------------------------------------------------------
Transfer agent fees 34,915
- ------------------------------------------------------------------
Other 61,991
- ------------------------------------------------------------------
Total expenses 2,974,294
- ------------------------------------------------------------------
Less advisory fees waived (1,127,509)
- ------------------------------------------------------------------
Net expenses 1,846,785
- ------------------------------------------------------------------
Net investment income 92,913,637
- ------------------------------------------------------------------
Net realized gain (loss) on sales of investments (74,934)
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $92,838,703
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended August 31, 1995 and the period November 4, 1993 (date
operations commenced) through August 31, 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 92,913,637 $ 44,215,233
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments (74,934) (62,196)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 92,838,703 44,153,037
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (92,913,637) (44,215,233)
- ----------------------------------------------------------------------------
Share transactions -- net 259,187,785 1,028,412,003
- ----------------------------------------------------------------------------
Net increase in net assets 259,112,851 1,028,349,807
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,028,349,807 --
- ----------------------------------------------------------------------------
End of period $1,287,462,658 $1,028,349,807
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,287,599,788 $1,028,412,003
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (137,130) (62,196)
- ----------------------------------------------------------------------------
$1,287,462,658 $1,028,349,807
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series, diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, each of which offers separate series of shares:
the Liquid Assets Portfolio and the Prime Portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Liquid Assets
Portfolio (the "Portfolio").
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of 397 days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $90,712 (which may be carried forward to offset future
taxable gains, if any) which expires, if not previously utilized, through
the year 2003. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a fee, paid monthly, with respect to the Portfolio at the annual rate
of 0.15% of the average daily net assets of the Portfolio.
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. During the year ended
August 31, 1995, AIM voluntarily waived fees of $1,127,509.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1995,
the Portfolio reimbursed AIM $58,174 for such services.
During the year ended August 31, 1995, the Fund paid A I M Institutional Fund
Services, Inc. ("AIFS") $47,915 for shareholder and transfer agency services.
Effective July 1, 1995, AIFS became the exclusive transfer agent of the
Portfolio. Certain officers and directors of the Fund are officers and
directors of AIM, AIFS and Fund Management Company, the Portfolio's
distributor.
During the year ended August 31, 1995, the Portfolio paid legal fees of $4,721
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Fund's directors. A member of that firm is a director of the
Fund.
FS-8
<PAGE>
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests 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 during the year ended August 31, 1995 and the period
November 4, 1993 (date operations commenced) through August 31, 1994 were as
follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------------- --------------------------------
SHARES AMOUNT SHARES VALUE
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold 32,408,905,435 $ 32,408,905,435 20,765,848,248 $20,765,848,248
- --------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends 2,458,920 2,458,920 587,397 587,397
- --------------------------------------------------------------------------------------------
Reacquired (32,152,176,570) (32,152,176,570) (19,738,023,642) (19,738,023,642)
============================================================================================
Net increase 259,187,785 $ 259,187,785 1,028,412,003 $ 1,028,412,003
============================================================================================
</TABLE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of capital stock
of the Portfolio outstanding during the year ended August 31, 1995 and the
period November 4, 1993 (date operations commenced) through August 31, 1994.
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- --------------------------------------------- ---------- ----------
Income from investment operations:
Net investment income 0.06 0.03
- --------------------------------------------- ---------- ----------
Less distributions:
Dividends from net investment income (0.06) (0.03)
- --------------------------------------------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00
============================================= ========== ==========
Total return 5.83% 3.83%(a)
============================================= ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,287,463 $1,028,350
============================================= ========== ==========
Ratio of expenses to average net assets 0.11%(b) 0.05%(c)
============================================= ========== ==========
Ratio of net investment income to average net
assets 5.69%(b) 3.85%(c)
============================================= ========== ==========
</TABLE>
(a) Annualized.
(b) After waiver of advisory fees. Ratios are based on average net assets of
$1,634,097,113. Ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 0.18% and 5.62%, respectively.
(c) After waiver of advisory fees. Annualized ratios of expenses and net
investment income to average net assets prior to waiver of advisory fees
are 0.18% and 3.72%, respectively.
FS-9
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
SHORT-TERM SUBJECT TO COMPLETION DATED NOVEMBER 8, 1995
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
LIQUID ASSETS The Liquid Assets Portfolio (the "Portfolio") is a money market fund whose
PORTFOLIO investment objective is to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. The Portfolio seeks
to achieve its objective by investing in high quality money market instruments
such as U.S. Government obligations, bank obligations, commercial instruments
and repurchase agreements.
PRIVATE The Portfolio is a series portfolio of Short-Term Investments Co. (the
INVESTMENT "Fund"), an open-end diversified series management investment company. This
CLASS Prospectus relates solely to the Private Investment Class of the Portfolio, a
class of shares designed to be a convenient and economical vehicle in which
institutions can invest short-term cash reserves.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class and the Cash Management Class,
as well as shares of classes of another portfolio, the Prime Portfolio.
DECEMBER 12, 1995 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE PRIVATE INVESTMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY
REFERENCE. A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO FUND MANAGEMENT COMPANY AT 11 GREENWAY
PLAZA, SUITE 1919, HOUSTON, TEXAS 77046.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
[LOGO APPEARS HERE]
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7748
</TABLE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Private Investment
Class (the "Class") of the Portfolio at net asset value. The Portfolio is a
money market fund which invests in money market instruments, such as U.S.
Government Agencies obligations, bank obligations, commercial instruments and
repurchase agreements. The investment objective of the Portfolio is to provide
as high a level of current income as is consistent with the preservation of
capital and liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Prime Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as "Portfolios."
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical vehicle in which
institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Class may not be purchased by individuals
directly, institutions may purchase shares for accounts maintained for
individuals. See "Suitability for Investors."
PURCHASE OF SHARES
Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $10,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in federal funds or other funds immediately available to the Portfolio.
See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 4:00 p.m. Eastern Time will normally be made in federal funds on the
same day. See "Redemption of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "Net Asset
Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
.50% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions as compensation for distribution-related services. See "Purchase
of Shares" and "Management of the Fund--Distribution Plan."
2
<PAGE>
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of
foreign branches of major domestic banks and in repurchase agreements. The
Portfolio may purchase delayed delivery or when-issued securities. Accordingly,
an investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--PRIVATE INVESTMENT CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)--PRIVATE INVESTMENT CLASS*
Management Fees (after waivers)......................................... 0.06%
12b-1 Fees (after waivers)**............................................ 0.30%
Other Expenses (estimated).............................................. 0.03%
----
Total Portfolio Operating Expenses--Private Investment Class............ 0.39%
====
</TABLE>
- ------
* The fees and expenses set forth in the tables are based on estimated average
net assets of the Class' first period of operation. Had there been no
waivers, Management Fees and 12b-1 Fees would be 0.15% and 0.50%,
respectively.
** As a result of 12b-1 fees, a long-term shareholder of the Class may pay more
than the economic equivalent of the maximum front-end sales charges
permitted by the Rules of the National Association of Securities Dealers,
Inc.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year........................................................... $ 4
3 years.......................................................... $13
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Class will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) The other expenses and 12b-1 fees figure
is based upon estimated costs and the estimated size of the Class and estimated
fees to be charged for the current fiscal year. Thus, actual expenses may be
greater or less than such estimates. There can be no assurance that future
waivers of fees (if any) will not vary from the figures reflected in the Table
of Fees and Expenses. To the extent any service providers assume expenses of
the Class, such assumption of expenses will have the effect of lowering the
Class' overall expense ratio and increasing its yield to investors. Beneficial
owners of shares of the Class should also consider the effect of any charges
imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Private Investment Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
3
<PAGE>
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or other
similar capacity. It is designed to be a convenient and economical vehicle in
which such institutions can invest short-term cash reserves. Shares of the
Class may not be purchased directly by individuals, although institutions may
purchase shares for accounts maintained by individuals. Prospective investors
should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day. Sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Portfolio seeks to achieve its objective by investing in a diversified
portfolio of high quality U.S. dollar-denominated money market instruments and
other similar instruments with maturities of 397 days or less from the date of
purchase. The Portfolio will maintain a weighted average maturity of 90 days or
less.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of U.S. Government and foreign
government obligations, and bank and commercial instruments that may be
available in the money markets. Such obligations include U.S. Treasury
obligations and repurchase agreements. The Portfolio intends to invest in
bankers' acceptances, certificates of deposit, time deposits and commercial
paper, and U.S. Government direct obligations and U.S. Government agencies
securities. Certain U.S. Government obligations with floating or variable
interest rates may have longer maturities. Commercial obligations may include
both domestic and foreign issuers that are U.S. dollar-denominated. Bankers'
acceptances, certificates of deposit and time deposits may be purchased from
U.S. or foreign banks. These instruments, which are collectively referred to as
"Money Market Obligations," are briefly described below.
The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 (the "1940 Act"), as such Rule may be amended from time to time.
Generally, "First Tier" securities are securities that are rated in the highest
rating category by two nationally recognized statistical rating organizations
("NRSROs"), or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Fund's Board of
Directors) to be of comparable quality to a rated security that meets the
foregoing quality standards.
The Portfolio will not invest more than 10% of its net assets in illiquid
securities.
4
<PAGE>
In managing the Portfolio's investments, AIM may indicate to dealers or
issuers its interest in acquiring certain securities for the Portfolio for
settlement beyond a customary settlement date thereafter. In some cases, the
Portfolio may agree to purchase such securities at stated prices and yields.
(In such cases, these securities are considered "delayed delivery" securities
when traded in the secondary market or "when-issued" securities if they are an
initial issuance of securities.) Since this is done to facilitate the
acquisition of portfolio securities and is not for the purpose of investment
leverage, the amount of delayed delivery or when-issued securities involved may
not exceed the estimated amount of funds available for investment on the
settlement date. Until the settlement date, assets of the Portfolio with a
dollar value sufficient at all times to make payment for the delayed delivery
or when-issued securities will be set aside in a segregated account. (The total
amount of assets in the segregated account may not exceed 25% of the
Portfolio's total assets.) The delayed delivery securities, which will not
begin to accrue interest until the settlement date, and the when-issued
securities will be recorded as an asset of the Portfolio and will be subject to
the risks of market value fluctuations. The purchase price of the delayed
delivery or when-issued securities will be recorded as a liability of the
Portfolio until settlement. AIM may also transact sales of securities on a
"forward commitment" basis. In such a transaction, AIM agrees to sell portfolio
securities at a future date at specified prices and yields. Securities subject
to sale on a forward commitment basis will continue to accrue interest until
sold and will be subject to the risks of market value fluctuations. Absent
extraordinary circumstances, the Portfolio's right to acquire delayed delivery
and when-issued securities or its obligation to sell securities on a forward-
commitment basis will not be divested prior to the settlement date.
The Portfolio may invest up to 100% of its total assets in obligations issued
by banks. While the Portfolio will limit its investments in bank instruments to
U.S.dollar-denominated obligations, it may invest in Eurodollar obligations
(i.e., U.S. dollar-denominated obligations issued by a foreign branch of a
domestic bank), Yankee dollar obligations (i.e., U.S. dollar-denominated
obligations issued by a domestic branch of a foreign bank) and obligations of
foreign branches of foreign banks, including time deposits. The Portfolio will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total
assets at the time of purchase, provided that there is no limitation upon the
Portfolio's investments in (a) Eurodollar obligations, if the domestic parent
of the foreign branch issuing the obligation is unconditionally liable in the
event that the foreign branch for any reason fails to pay on the Eurodollar
obligation; and (b) Yankee dollar obligations, if the U.S. branch of the
foreign bank is subject to the same regulation as U.S. banks.
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets of $5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of foreign country withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.
The Portfolio may also lend its portfolio securities in amounts up to 33 1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Portfolio reserves the right to invest in Money
Market Obligations other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS--These are bills, notes, and bonds issued
by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES--Certain federal agencies (such as the
Federal National Mortgage Association, the Small Business Administration and
the Resolution Trust Corporation) have been established as instrumentalities of
the U.S. Government to supervise and finance certain types of activities.
Issues of these agencies, while not direct obligations of the U.S.
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Government, are (a) backed by the full faith and credit of the United States,
(b) guaranteed by the U.S. Treasury or (c) supported by the issuing agencies'
right to borrow from the U.S. Treasury.
FOREIGN GOVERNMENT OBLIGATIONS--These are U.S. dollar-denominated obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by
AIM to be of comparable quality to the other obligations in which the Portfolio
may invest. These obligations are often, but not always, supported by the full
faith and credit of the foreign governments, or their subdivisions, agencies or
instrumentalities, that issue them. Such securities also include debt
obligations of supranational entities. Such debt obligations are ordinarily
backed by the full faith and credit of the entities that issue them.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples of supranational entities include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of the Portfolio's assets invested in securities issued by
foreign governments will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.
BANKERS' ACCEPTANCES--A bankers' acceptance is a bill of exchange or time
draft drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods and to furnish
dollar exchange. These instruments generally mature in six months or less.
CERTIFICATES OF DEPOSIT--A certificate of deposit is a negotiable interest-
bearing instrument with a specific maturity. Certificates of deposit are issued
by banks and savings and loan institutions in exchange for the deposit of
funds, and normally can be traded in the secondary market prior to maturity.
TIME DEPOSITS--A time deposit is a non-negotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market.
EURODOLLAR OBLIGATIONS--A Eurodollar obligation is a U.S. dollar-denominated
obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS--A Yankee dollar obligation is a U.S. dollar-
denominated obligation issued by a domestic branch of a foreign bank.
SHORT AND MEDIUM TERM NOTES--Short and medium term notes are obligations that
have fixed coupons and maturities that can be targeted to meet investor
requirements. They are issued in the capital markets either publicly under a
shelf registration pursuant to Rule 415 promulgated by the United States
Securities and Exchange Commission (the "SEC"), or privately without such a
registration.
COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note on relatively short notice.
REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. The Portfolio may enter into repurchase agreements only with
institutions believed by the Fund's Board of Directors to present minimal
credit risk. With regard to repurchase transactions, in the event of a
bankruptcy or other default of a seller of a repurchase agreement (such as the
seller's failure to
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<PAGE>
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying securities
and losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities, U.S.
Government agency securities (including, but not limited to, those which have
been stripped of their interest payments and mortgage-backed securities) and
commercial paper. For additional information on the use of repurchase
agreements, see the Statement of Additional Information.
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS--Reverse repurchase agreements
involve the sale by the Portfolio of a portfolio security at an agreed-upon
price, date and interest payment. The Portfolio will borrow money or enter into
reverse repurchase agreements solely for temporary or defensive purposes to
facilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests should they occur. The Portfolio will use reverse
repurchase agreements when the interest income to be earned from the securities
that would otherwise have to be liquidated to meet redemption requests is
greater than the interest expense of the reverse repurchase transaction. The
Portfolio may enter into reverse repurchase agreements in amounts not exceeding
10% of the value of its total assets. Reverse repurchase agreements involve the
risk that the market value of securities retained by the Portfolio in lieu of
liquidation may decline below the repurchase price of the securities sold by
the Portfolio which it is obligated to repurchase. The risk, if encountered,
could cause a reduction in the net asset value of the Portfolio's shares.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as amended from time to time; or
3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions
set forth above (as well as certain others set forth in the Statement of
Additional Information) are matters of fundamental policy which may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Portfolio.
In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein.
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The SEC has proposed certain changes to Rule 2a-7. While such proposed changes
may have a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below and notice of such order is
provided to the Portfolio's transfer agent or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which is
not accepted by the Portfolio and any funds received for which an order has not
been received will be returned to the sending institution. An order to purchase
shares of the Class must specify that the "Private Investment Class of the
Liquid Assets Portfolio" is being purchased; otherwise, any funds received will
be returned to the sending institution.
The minimum initial investment in the Class is $10,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
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's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS") at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
Banks 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.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
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<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00 per share. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made by calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Portfolio to be
redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by AIFS after 4:00 p.m. Eastern
Time or on other than a business day of the Portfolio, the redemption will be
effected at the net asset value of the Portfolio determined as of 4:00 p.m.
Eastern Time on the next business day of the Portfolio, and the proceeds of
such redemption will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Portfolio may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Portfolio are not redeemable at the option of the Portfolio
unless the Board of Directors of the Fund determines in its sole discretion
that failure to so redeem may have materially adverse consequences to the
shareholders of the Portfolio.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. Net income of the Portfolio consists of interest
accrued and discount earned (including both original issue and market discount)
on securities held by the Portfolio, less amortization of market premium and
the accrued expenses of the Portfolio. Although realized gains and losses on
the assets of the Portfolio are reflected in the net asset value of the
Portfolio, they are not expected to be of an amount which would affect the
Portfolio's net asset value of $1.00 per share for purposes of purchases and
redemptions. See "Net Asset Value." Distributions from net realized short-term
gains may be declared and paid yearly or more frequently. See "Taxes." The
Portfolio does not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Portfolio at the net asset value
of such shares as of 4:00 p.m. Eastern Time on the last business day of the
month. Such election, or any revocation thereof, must be made in writing by the
shareholder to AIFS at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173
and will become effective with dividends paid after its receipt by AIFS. If a
shareholder redeems all the shares in its account at any time during the month,
all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
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The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's 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 the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent to the extent possible the net asset value per share of the
Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
TAXES
The Portfolio's policy is to distribute to its shareholders at least 90% of
its investment company taxable income for each year and consistent therewith to
meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Portfolio. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend before February 1 of the next
year, a shareholder will be treated for tax purposes as having received the
dividend in the year in which it is declared rather than in January when it is
paid. It is anticipated that no portion of distributions will be eligible for
the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
For purposes of determining taxable income, distribution requirements and
other requirements of Subchapter M, the Portfolio will be treated as a separate
corporation. Therefore, one portfolio of the Fund may not offset its gains
against the other portfolio's losses and each portfolio must specifically
comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
The foregoing discussion of federal income tax consequences is only a summary
based on tax laws and regulations in effect on November 1, 1995 which are
subject to change by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Portfolio. Net asset value per
share is determined by dividing the value of the Portfolio's securities, cash
and other assets (including interest accrued but not collected), less all its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if the security were
sold. During such periods, the daily yield on shares of the Portfolio, computed
as described in "Purchases and Redemptions--Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
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<PAGE>
YIELD INFORMATION
Yield information for the Class can be obtained by calling FMC at (800) 877-
7748. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Portfolio. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Certain directors and officers of the Fund are
affiliated with AIM and A I M Management Group Inc. ("AIM Management"), a
holding company engaged in the financial services business. Information
concerning the Board of Directors may be found in the Statement of Additional
Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages, advises or administers 37 investment company portfolios. As of October
31, 1995, the total assets of such investment company portfolios were
approximately $39.3 billion. AIM is a wholly-owned subsidiary of AIM
Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
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For the fiscal year ended August 31, 1995, AIM received fees with respect to
the Portfolio which represented 0.08% of the Portfolio's average daily net
assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Fund's Board of
Directors for providing specified administrative services. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services, as well as the services of
staff responding to various shareholder inquiries.
In addition, AIM and AIFS entered into an Administrative Services Agreement
pursuant to which AIFS was reimbursed by AIM for its costs in providing
shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $38,870 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995, AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $9,045.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year. FMC may in its discretion from time to time agree to waive voluntarily
its 12b-1 fee but will retain its ability to be reimbursed prior to the end of
the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and is a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM Management. The Distribution Agreement provides
that FMC has the exclusive right to distribute shares of the Portfolio either
directly or through other broker-dealers, and receives no fees for its services
with respect to the Portfolio pursuant to the Distribution Agreement. FMC is
the distributor of several other mutual funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the 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 payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.50% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund and may be used to finance
such distribution-related services as expenses of organizing and conducting
sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Plan.
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<PAGE>
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments retained by FMC would be characterized as an asset-
based sales charge pursuant to the 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 the Class. The Plan does not obligate the
Fund to reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund 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.
As required by Rule 12b-1 under the 1940 Act, the Plan was 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 Fund 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") on December 4, 1995. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund 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.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes 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.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund which are not directly attributable to a
specific class of shares but are directly attributable to one or both of the
Portfolios are prorated among all classes of such Portfolios. Expenses of the
Fund which are directly attributable to a specific class of shares are charged
against the income available for distribution as dividends to the holders of
such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
13
<PAGE>
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into eight classes, of which three represent interests
in the Portfolio and the remaining five represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable to or allocated to
the respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and cash
of the Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173, acts as transfer agent for shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7748.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
14
<PAGE>
===================================== =====================================
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 877-7748 December 12, 1995
INVESTMENT ADVISOR
A I M ADVISORS, INC. SHORT-TERM
11 Greenway Plaza, Suite 1919 INVESTMENTS CO.
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO
DISTRIBUTOR PRIVATE INVESTMENT CLASS
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 TABLE OF CONTENTS
(800) 877-7748
<TABLE>
AUDITORS <CAPTION>
KPMG PEAT MARWICK LLP PAGE
NationsBank Building ----
700 Louisiana <S> <C>
Houston, Texas 77002 Summary......................... 2
CUSTODIAN Table of Fees and Expenses...... 3
THE BANK OF NEW YORK
110 Washington Street Suitability For Investors....... 4
8th Floor
New York, New York 10286 Investment Program.............. 4
TRANSFER AGENT Purchase of Shares.............. 8
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 Redemption of Shares............ 9
Houston, Texas 77046-1173
Dividends....................... 9
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY Taxes........................... 10
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE Net Asset Value................. 10
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR Yield Information............... 11
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE Reports to Shareholders......... 11
FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN Management of the Fund.......... 11
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY General Information............. 14
NOT LAWFULLY BE MADE. </TABLE>
===================================== =====================================
<PAGE>
SUBJECT TO COMPLETION STATEMENT OF
DATED NOVEMBER 8, 1995 ADDITIONAL INFORMATION
PRIVATE INVESTMENT CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 877-7748
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 12, 1995
RELATING TO THE PROSPECTUS DATED DECEMBER 12, 1995
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR ANY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT +
+CONSTITUTE A PROSPECTUS. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION..................................................... 1
GENERAL INFORMATION ABOUT THE FUND............................... 1
The Fund and Its Shares..................................... 1
Directors and Officers...................................... 3
Remuneration of Directors................................... 6
AIM Funds Retirement Plan for Eligible Directors/Trustees... 7
Deferred Compensation Agreements............................ 8
Investment Advisor.......................................... 8
Administrator............................................... 10
Expenses.................................................... 10
Transfer Agent and Custodian................................ 11
Reports..................................................... 11
Fee Waivers................................................. 11
Principal Holders of Securities............................. 12
PURCHASES AND REDEMPTIONS........................................ 16
Net Asset Value Determination............................... 16
The Distribution Agreement.................................. 16
Distribution Plan........................................... 17
Banking Regulations......................................... 17
Performance Information..................................... 18
Redemptions in Kind......................................... 18
Suspension of Redemption Rights............................. 18
INVESTMENT PROGRAM AND RESTRICTIONS.............................. 19
Eligible Securities......................................... 19
Commercial Paper Ratings.................................... 20
Bond Ratings................................................ 21
Repurchase Agreements....................................... 23
Investment Restrictions..................................... 23
PORTFOLIO TRANSACTIONS........................................... 24
TAX MATTERS...................................................... 26
Qualification as a Regulated Investment Company............. 26
Excise Tax On Regulated Investment Companies................ 27
Portfolio Distributions..................................... 27
Effect of Future Legislation; Local Tax Considerations...... 28
FINANCIAL STATEMENTS............................................. NONE
</TABLE>
i
<PAGE>
INTRODUCTION
The Liquid Assets Portfolio (the "Portfolio") is an investment portfolio of
Short-Term Investments Co. (the "Fund"), a mutual fund. The rules and
regulations of the United States Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information is included in a Prospectus dated December 12, 1995 (the
"Prospectus"). Copies of the Prospectus and additional copies of this Statement
of Additional Information may be obtained without charge by writing the
distributor of the Portfolio's shares, Fund Management Company ("FMC"), 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 or by calling (800) 877-
7748. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Private Investment Class of
the Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end, diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993, and had no operations prior to November 4, 1993. Shares of common
stock of the Fund are redeemable at their net asset value at the option of the
shareholder or at the option of the Fund in certain circumstances. For
information concerning the methods of redemption and the rights of share
ownership, investors should consult the Prospectus under the captions "General
Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Prime Portfolio (together, the
"Portfolios"). The Prime Portfolio consists of five classes of shares, each
having different shareholder qualifications and bearing expenses differently.
The Portfolio consists of the following three classes of shares: Institutional
Class, Private Investment Class and Cash Management Class. Each such class has
different shareholder qualifications and bears expenses differently. This
Statement of Additional Information and the associated Prospectus relate solely
to shares of the Private Investment Class (the "Class") of the Portfolio.
Shares of the other classes of the Portfolio and the classes of the Prime
Portfolio are offered pursuant to separate prospectuses and statements of
additional information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
1
<PAGE>
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 (the "1940 Act").
The Charter of the Fund authorizes the issuance of 40 billion shares with a
par value of $.001 each, of which 16 billion shares represent an interest in the
Portfolio (or class thereof) and 22 billion shares represent an interest in the
Prime Portfolio (or class thereof). A share of a portfolio (or class)
represents an equal proportionate interest in such Portfolio (or class) with
each other share of that Portfolio (or class) and is entitled to a proportionate
interest in the dividends and distributions from that Portfolio (or class).
Additional information concerning the rights of share ownership is set forth in
the Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Portfolio, and
constitute the underlying assets of that Portfolio. The underlying assets of the
Portfolios are segregated and each Portfolio is charged with the expenses with
respect to that portfolio and with a share of the general expenses of the Fund.
While the expenses of the Fund are allocated to the separate books of account of
each of the Portfolios, certain expenses may be legally chargeable against the
assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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 Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
2
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, A I M Global Management Company Limited and AIM Global Venture Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director,
CF & I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
**CARL FRISCHLlNG, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
- ---------------------
* A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
**A director who is an "interested person" of the Fund as defined in the
1940 Act.
3
<PAGE>
***ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Executive Vice
President, A I M Distributors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Fund Services, Inc., A I M Global Associates,
Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Senior Vice President, AIM
Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road - Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment companies). Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
- ---------------------
***A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
4
<PAGE>
****JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice President
and Treasurer, A I M Management Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc. and
AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and Senior
Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M Global
Associates, Inc., A I M Global Holdings, Inc. and AIM Global Ventures Co.;
Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
****CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group Inc.,
A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc. and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and Assistant
Vice President, A I M Distributors, Inc. and Fund Management Company. Formerly,
Vice President, Charles Schwab & Co., Inc.; Assistant Secretary, Charles Schwab
Family of Funds and Schwab Investments; Chief Compliance Officer, Charles Schwab
Investment Management, Inc.; and Vice President, Integrated Resources Life
Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice President,
A I M Capital Management, Inc. and AIM Global Advisors Limited; and Vice
President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and Fund
Management Company; Director and Senior Vice President, A I M Advisors, Inc.;
and Senior Vice President, A I M Management Group Inc.
- ---------------------
****Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
The Board of Directors has an Audit Committee, an Investments Committee,
and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the directors as
a whole with respect to the Portfolio's fund accounting or its internal
accounting controls, or for considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Fund maintains a distribution plan pursuant to rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the board and such Committee.
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. Most of the Fund'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 attended. The directors of
the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each such director receives a fee, allocated among the AIM Funds for which he
serves as a director or trustee, which consists of an annual retainer component
and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each director of the Fund:
6
<PAGE>
<TABLE>
<CAPTION>
===================================================================================
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
DIRECTOR FROM FUND(1) BY ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- -----------------------------------------------------------------------------------
Bruce L. Crockett 2,091 2,814 45,094
- -----------------------------------------------------------------------------------
Owen Daly II 2,096 14,375 45,844
- -----------------------------------------------------------------------------------
Carl Frischling 2,091 7,542 45,094
- -----------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- -----------------------------------------------------------------------------------
John F. Kroeger 2,096 20,517 45,844
- -----------------------------------------------------------------------------------
Lewis F. Pennock 2,096 5,093 45,844
- -----------------------------------------------------------------------------------
Ian W. Robinson 2,071 10,396 45,094
- -----------------------------------------------------------------------------------
Louis S. Sklar 2,071 4,682 45,094
===================================================================================
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $8,448.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$4,583. Data reflects compensation earned for the calendar year ended
December 31, 1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
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, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 5% of such Director's compensation paid by the AIM Funds multiplied by
the number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is
payable to each eligible director in quarterly installments for a period of no
more than five years. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences, 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 five 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 AIM Fund.
7
<PAGE>
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
Annual Compensation Paid By All AIM Funds
<S> <C> <C> <C>
$60,000 $65,000
========================================================
Number of 10 $30,000 $32,500
Years of --------------------------------------------------------
Service with 9 $27,000 $29,250
the --------------------------------------------------------
AIM Funds 8 $24,000 $26,000
--------------------------------------------------------
7 $21,000 $22,750
--------------------------------------------------------
6 $18,000 $19,500
--------------------------------------------------------
5 $15,000 $16,250
========================================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $14,116 in directors' fees
and expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees of
$1,317 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended
August 31, 1995, the Portfolio paid legal fees of $4,721 for services rendered
by that firm as counsel. A director of the Fund is a partner of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel and was a partner of the firm of Reid & Priest
prior to September 1994.
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated October 18, 1993 (the
8
<PAGE>
"Advisory Agreement"). A prior investment advisory agreement (the "Prior
Advisory Agreement") with substantially identical terms (including the fee
schedules) to the Advisory Agreement was previously in effect with respect to
the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises,
manages or administers 37 investment company portfolios. As of October 31,
1995, the total assets of the investment company portfolios managed or advised
by AIM and its affiliates were approximately $39.3 billion. AIM is a wholly-
owned subsidiary of A I M Management Group Inc. ("AIM Management"), 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046-1173. Certain of the directors and
officers of AIM are also executive officers of the Fund and their affiliations
are shown under "Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews annually such reports
(including information on any substantial violations of the Code). Violations
of the Code may result in censure, monetary penalties, suspension or termination
of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services with respect to the Portfolio, AIM
receives a fee at the annual rate of 0.15% of the average daily net assets of
the Portfolio. The Advisory Agreement requires AIM to reduce its fee to the
extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
During the period November 4, 1993 (date operations commenced) through
August 31, 1994, AIM voluntarily waived fees of $1,500,977, which it was
entitled to receive pursuant to the Advisory Agreement with respect to the
Portfolio. During the fiscal year ended August 31, 1995, AIM received fees
pursuant to the Advisory Agreement in the amount of $1,323,637 and AIM
voluntarily waived fees of $1,127,509, which it was entitled to receive pursuant
to the Advisory Agreement with respect to the Portfolio.
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered into the Master Administrative Services Agreement under
which AIM will provide the additional services described below under the caption
"Administrator."
The Advisory Agreement will continue in effect until June 30, 1996 and from
year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a majority
of the directors who are not parties to the Advisory Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or AIM may
9
<PAGE>
terminate the Agreement on 60 days' notice without penalty. The Advisory
Agreement terminates automatically in the event of its "assignment," as defined
in the 1940 Act.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement, dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM has agreed to perform or
arrange for the performance of certain accounting, shareholder servicing and
other administrative services for the Portfolio which are not required to be
performed by AIM under the Advisory Agreement. For such services, AIM would be
entitled to receive from the Fund reimbursement of AIM's costs or such
reasonable compensation as may be approved by the Fund's Board of Directors.
The Administrative Services Agreement provides that such agreement will continue
in effect until June 30, 1996, and shall continue in effect from year to year
thereafter only if such continuance is specifically approved at least annually
by the Fund's Board of Directors, including the Non-Interested Directors, by
votes cast in person at a meeting called for such purpose. The Administrative
Services Agreement was last approved by the Fund's Board of Directors (including
the Non-Interested Directors) on May 9, 1995.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for
the fiscal years ended August 31, 1995 and 1994 in the amounts of $97,044 and
$39,492, respectively.
The AIFS Administrative Services Agreement between AIM and AIFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provided that AIFS
could perform certain shareholder services for the Portfolio. For such
services, AIFS was entitled to receive from AIM reimbursement of its costs
associated with the Class. The AIFS Administrative Services Agreement was
terminated July 1, 1995. Beginning July 1, 1995, AIFS received fees with
respect to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the period from August
31, 1994 through June 30, 1995 and for the period from June 1, 1994 through
August 31, 1994, AIFS or its affiliates received shareholder services fees from
AIM with respect to the Portfolio in the amounts of $38,870 and $5,110,
respectively. For the period July 1, 1995 through August 31, 1995, AIFS
received transfer agency fees from AIM with respect to the Portfolio in the
amount of $9,045.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM
under the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and shares with the SEC
and various states and other jurisdictions (including filing and legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting, and distributing prospectuses and statements of additional
information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing of prospectuses, proxy statements and reports to shareholders; fees and
travel expenses of directors and director members of any advisory board or
committee; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's
10
<PAGE>
shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not "interested persons" (as defined in the 1940
Act) of the Fund or AIM, and of independent accountants in connection with any
matter relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and directors) of the Fund which inure to its benefit; and
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto).
Except as disclosed under the caption "Distribution Plan," FMC bears the
expenses of printing and distributing prospectuses and statements of additional
information (other than those prospectuses and statements of additional
information distributed to existing shareholders of the Fund) 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 Fund's shares.
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of the Fund based
upon the relative net assets of each class. Expenses of the Fund which are not
directly attributable to a specific class of shares but are directly
attributable to one or both of the Portfolios are prorated among all classes of
such Portfolios based upon the relative net assets of each such class. The
expenses of the Portfolio are deducted from its total income before dividends
are paid. Expenses of the Fund which are directly attributable to a specific
class of shares are charged against the income available for distribution as
dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and
cash of the Portfolio. The Bank of New York receives such compensation from the
Fund for its services in such capacity as is agreed to from time to time by The
Bank of New York and the Fund. The address of The Bank of New York is 110
Washington Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .007% of average daily net assets
of the Fund, payable monthly. Such compensation may be changed from time to
time as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
FEE WAIVERS
AIM may, from time to time, agree to waive voluntarily all or any portion
of its fees or reimburse the Portfolio for certain of its expenses. Such
waivers or reimbursements may be discontinued at any time. Shareholders of the
Portfolio will receive notice 30 days prior to the effective date of any
substantial change in such waivers or reimbursements.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of October 25, 1995, and the percentage of the Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
NationsBank of Texas 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. Bank of Oregon 13.23%
321 Southwest 6th Street
Portland, OR 97208
Trust Company Bank 8.19%
P.O. Box 105504
Atlanta, GA 30348
Texas Commerce Bank 7.62%
P.O. Box 2558
Houston, TX 77252-8098
Boatmen's Trust Company 7.27%
100 North Broadway
St. Louis, MO 63101
Frost National Bank 7.26%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
- ---------------------
*The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
<S> <C> <C>
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corporation 71.90%**
41 South High Street
Columbus, OH 43287
Var & Co. 17.39%
180 East 5th Street
St. Paul, MN 55101
Frost National Bank 6.94%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
<S> <C> <C>
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 67.37%**
440 Manaroneck Ave.
Harrison, NY 10528
Cullen/Frost Discount Brokers 30.94%**
P.O. Box 2358
San Antonio, TX 78299
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
<S> <C> <C>
CASH MANAGEMENT CLASS
- ---------------------
Piper Jaffray As Agent For Customer 35.24%**
101 California Street
Suite 1150
San Francisco, CA 94111
</TABLE>
- ---------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
13
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
<S> <C> <C>
Piper Jaffray As Agent For Customer 29.49%**
P.O. Box 160727
Sacramento, CA 95816-0727
Bank Of New York 10.75%
One Wall Street
New York, NY 10286
Citibank As Agent For Customer 8.38%
120 Wall Street 13th Floor
New York, NY 10043
</TABLE>
RESOURCE CLASS
- --------------
AIM provided the initial capitalization of the Resource Class of the
Prime Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
Trust Company Bank 20.96%
P.O. Box 105504
Atlanta, GA 30348
</TABLE>
- ---------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
14
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- --------------
<S> <C> <C>
Wachovia Bank & Trust 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
NationsBank Dallas 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
Society National Bank 7.57%
127 Public Square
Cleveland, OH 44114-1306
Boatmen's Trust Company 6.56%
100 North Broadway
St. Louis, MO 63102
Firstar Bank of Madison 5.41%
P.O. Box 7900
Madison, WI 53707
</TABLE>
PRIVATE INVESTMENT CLASS
- ------------------------
AIM provided the initial capitalization of the Private Investment
Class of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Private Investment Class of the Liquid Assets Portfolio. Although
the Private Investment Class of the Liquid Assets Portfolio expects that the
sale of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid Assets
Portfolio, as defined in the 1940 Act.
CASH MANAGEMENT CLASS
- ---------------------
AIM provided the initial capitalization of the Cash Management Class
of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Cash Management Class of the Liquid Assets Portfolio. Although the
Cash Management Class of the Liquid Assets Portfolio expects that the sale of
its shares to the public pursuant to the Prospectus will reduce the percentage
of such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
- ---------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
15
<PAGE>
Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Portfolio is permitted in accordance with applicable rules and
regulations of the SEC, including Rule 2a-7 under the 1940 Act, which require
the Portfolio to adhere to certain conditions. These rules require that the
Portfolio maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 calendar days
or less and invest only in securities determined by the Board of Directors to be
"Eligible Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, 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's 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 existing holders of
the shares. In the event the Board of Directors determines that such a deviation
exists, it will take such corrective action as the Board of Directors deems
necessary and appropriate, including the sales of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity; the withholding of dividends; redemption of shares in kind; or the
establishment of a net asset value per share by using available market
quotations.
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. See "General Information about the Fund -- Directors
and Officers" and "General Information about the Fund -- Investment Advisor" for
information as to the affiliation of certain directors and officers of the Fund
with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right
to distribute shares either directly or through other broker-dealers. The
Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Portfolio 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 Class.
16
<PAGE>
The Distribution Agreement will continue in effect until June 30,
1996, and from year to year thereafter, provided that it is specifically
approved at least annually by the Fund'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 Fund 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.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund 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 the shares of the Class. These services may include among
other things: (i) answering customer inquiries regarding shares of the Class and
the Portfolio; (ii) assisting customers in changing dividend options, account
designations and addresses; (iii) performing sub-accounting; (iv) establishing
and maintaining shareholder accounts and records; (v) processing purchase and
redemption transactions; (vi) automatic investment of customer cash accounting
balances in shares of the Class; (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 Fund
may request on behalf of the Class, to the extent such firms are permitted to
engage in such services by applicable statute, rule or regulation. The Plan may
only be used for the purposes specified above and as stated in the Plan.
Expenses may not be carried over from year to year.
FMC is a wholly-owned subsidiary of AIM, which is a wholly-owned
subsidiary of AIM Management. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund, own shares of
A I M Management Group Inc.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations among
other things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers and
to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, shareholder clients of
such bank would be permitted to remain shareholders of the Fund and alternate
means for continuing the servicing of such shareholders would be sought. In
such event, changes in the operation of the Fund might occur and shareholders
serviced by such bank might no longer be able to avail themselves of any
automatic investment or other services then being provided by such bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.
In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments more restrictive than the
restrictions described herein. These restrictions are not matters of fundamental
policy, and should the Fund determine that any such commitment is no longer in
the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the states involved.
17
<PAGE>
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus,
yield information for the shares of the Class may be obtained by calling the
Fund at (800) 877-7748. The current yield quoted will be the net average
annualized yield for an identified period. Current yield will be computed by
assuming that an account was established with a single share (the "Single Share
Account") on the first day of the period. To arrive at the quoted yield, the net
change in the value of that Single Share Account for the period (which would
include dividends accrued with respect to the share, and dividends declared on
shares purchased with dividends accrued and paid, if any, but would not include
realized gains and losses or unrealized appreciation or depreciation) will be
multiplied by 365 and then divided by the number of days in the period, with the
resulting figure carried to the nearest hundredth of one percent. The Portfolio
may also furnish a quotation of effective yield that assumes the reinvestment of
dividends for a 365-day year and a return for the entire year equal to the
average annualized yield for the period, which will be computed by compounding
the unannualized current yield for the period by adding 1 to the unannualized
current yield, raising the sum to a power equal to 365 divided by the number of
days in the period, and then subtracting 1 from the result.
The Portfolio may compare the performance of the Class or
the performance of securities in which it may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by IBC/Donoghue's
Money Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical
Services, Inc., a widely recognized independent service located in Summit, New
Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
. other fixed-income investments such as Certificates of Deposit
("CDs").
The principal value and interest rate of CDs and money market
securities are fixed at the time of purchase whereas the Class' yield will
fluctuate. Unlike some CDs and certain other money market securities, money
market mutual funds are not insured by the FDIC. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
The Portfolio may reference the growth and variety of money market
mutual funds and AIM's innovation and participation in the industry.
REDEMPTIONS IN KIND
The Fund will not redeem shares representing an interest in the
Portfolio in kind (i.e., by distributing its portfolio securities).
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined
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by the SEC exists making disposition of portfolio securities or the valuation of
the net assets of the Portfolio not reasonably practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
The Portfolio may lend its portfolio securities in amounts up to 33-1/3% of
its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by AIM to be of good standing and only when, in AIM's judgment,
the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money market
funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that is
rated (or that has been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
that is comparable in priority and security with the security) by the
Requisite NRSROs(1) in one of the two highest rating categories for short-
term debt obligations (within which there may be sub-categories or
gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security but
that has a remaining maturity of 397 calendar days or less, and
(B) whose issuer has received from the Requisite NRSROs a rating,
with respect to a class of short-term debt obligations (or any
security within that class) that is now comparable in priority and
security with the security, in one of the two highest rating
categories for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
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(1) "Requisite NRSRO" 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 of such security,
that NRSRO. At present the NRSROs are: Standard & Poor's Corp., Moody's
Investors Service, Inc., Duff and Phelps, Inc., Fitch Investors Services,
Inc. and, with respect to certain types of securities, IBCA Limited and its
affiliate, IBCA Inc. Subcategories or gradations in ratings (such as a "+"
or "-") do not count as rating categories.
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(iii) an unrated security(2) that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of this
section, as determined by the money market fund's board of directors;
provided, however, that:
(A) the board of directors may base its determination that a
standby commitment is an Eligible Security upon a finding that the
issuer of the commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-term
security but that has a remaining maturity of 397 calendar days or
less and that is an unrated security is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be sub-
categories or gradations indicating relative standing).
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the commercial
paper ratings of Moody's, S&P and Fitch Investors Service, Inc. ("Fitch").
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
- ---------------------
(2) An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of comparable
priority and security; (ii) that was a long-term security at the time of
issuance and whose issuer has not received from any NRSRO a rating with
respect to a class of short-term debt obligations now comparable in
priority and security; or (iii) a security that is rated but which is the
subject of an external credit support agreement not in effect when the
security was assigned its rating, provided that a security is not an
unrated security if any short-term debt obligation issued by the issuer and
comparable in priority and security is rated by any NRSRO.
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than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch short-term ratings are as
follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings
of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of Moody's.
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
edge." Interest payments are protected by a large or 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 Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the four highest bond ratings of S&P; the lower
two of which are referred to in the foregoing description of its commercial
paper ratings.
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
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AA
Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
A
Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior, but to some extent,
also economic conditions.
BBB
The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate. These
bonds have adequate asset coverage and normally are protected by satisfactory
earnings. Their susceptibility to changing conditions, particularly to
depressions, necessitates constant watching. Market values of these bonds are
more responsive to business and trade conditions than to interest rates. This
group is the lowest which qualifies for commercial bank investment.
FITCH - 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 guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch 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.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
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AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
REPURCHASE AGREEMENTS
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than five percent of its total assets in securities issued by the
issuer of the security, provided that such a fund may invest more than five
percent of its total assets in the First Tier securities of a single issuer for
a period of up to three business days after the purchase thereof if the money
market fund is a diversified investment company, provided further, that the fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of a
fund's total assets that are invested in securities of an issuer, a repurchase
agreement shall be deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the securities from the
money market fund is fully collateralized. To be fully collateralized, the
collateral must, among other things, consist entirely of U.S. Government
securities or securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by Requisite NRSROs.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of
the U.S. Government, its agencies or instrumentalities) if, immediately
after such purchase, more than 5% of the value of the Portfolio's total
assets would be invested in such issuer, except as permitted by Rule 2a-7
under the 1940 Act, as amended from time to time;
(3) borrow money or issue senior securities except (a) for temporary
or emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities, provided that the Portfolio will not purchase portfolio
securities while borrowings in excess of 5% of its total assets are
outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and then
only in an amount up to 33-1/3% of the value of its total assets at the
time of borrowing or entering into a reverse repurchase agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements and (c) by lending
portfolio securities to the extent permitted by law or regulation;
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(6) underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Portfolio's investment program may be
deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase and
sell securities secured by real estate or interests therein or issued by
issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or calls;
(9) invest in any obligation not payable as to principal and interest
in United States currency; or
(10) Acquire for value the securities of any other investment company,
except in connection with a merger, consolidation, reorganization or
acquisition of assets and except for the investment in such securities of
funds representing compensation otherwise payable to its directors pursuant
to any deferred compensation plan existing at any time between the Fund and
its directors.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
State Law Restrictions The Fund may, from time to time in order to qualify
----------------------
shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the State
Securities Board of Texas, the Portfolio (i) will not invest in limited
partnership interests in real property, and (ii) will not issue any class of
senior security or borrow money unless immediately after such issuance or
borrowing there is asset coverage of at least 300%.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
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 market. For example, market
conditions frequently result in similar securities trading at different prices.
AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. 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
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market instruments, the high rate of portfolio turnover is not expected to have
a material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by AIM to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement of
portfolio transactions of other clients may be of value to AIM in fulfilling its
obligations to the Portfolio. AIM is of the opinion that the material received
is beneficial in supplementing AIM's research and analysis; and therefore, it
may benefit the Portfolio by improving the quality of AIM's investment advice.
The advisory fees paid by the Portfolio are not reduced because AIM receives
such services.
From time to time, the Fund may sell a security to, or purchase a security
from, an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital"), when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Fund.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing
and amount of purchase by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchases
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolio as a 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 Fund from purchasing a security being
publicly underwritten by a syndicate of which persons affiliated with the Fund
are members except in accordance with certain conditions. These conditions may
restrict the ability of the Portfolio to purchase money market obligations being
publicly underwritten by such a syndicate, and the Portfolio may be required to
wait until the syndicate has been terminated before buying such securities. At
such time, the market price of the securities may be higher or lower than the
original offering price. A person affiliated with the Fund
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<PAGE>
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligations and be paid a fee by such issuer. The
Portfolio may purchase such money market obligations directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and such purchase is reviewed at least quarterly by
the Fund's Board of Directors and a determination is made that the placement fee
or other remuneration paid by the issuer to the person affiliated with the Fund
was fair and reasonable in relation to the fees charged by other performing
similar services. During the fiscal year ended August 31, 1995, no securities or
instruments were purchased by the Portfolio from issuers who paid placement fees
or other compensation to a broker affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts, will
not be characterized as Short-Short Gains if they are directly related to the
regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is disregarded.
Interest (including original issue discount) received by a fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of a security
within the meaning of the Short-Short Gain Test. However, income that is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
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In addition to satisfying the requirements described above, a regulated
investment company must satisfy an asset diversification test in order to
qualify for tax purposes as a regulated investment company. Under this test, at
the close of each quarter of a fund's taxable year, at least 50% of the value of
a fund's assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which a fund has not invested more than 5% of the value of a
fund's total assets in securities of such issuer and as to which a fund does not
hold more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the securities
of any other issuer (other than U.S. Government securities and securities of
other regulated investment companies), or in two or more issuers which a fund
controls and which are engaged in the same or similar trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, 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 the ordinary income dividends and capital gain
dividends and, in certain cases, the proceeds of redemption of
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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
Fund that it is not subject to backup withholding or that it is a corporation or
other "exempt recipient."
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 November
1, 1995. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolio.
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM SUBJECT TO COMPLETION DATED NOVEMBER 8, 1995
INVESTMENTS CO.
Prospectus
- ----------------------------------------------------------------------------------------------------------
The Liquid Assets Portfolio (the "Portfolio") is a money market fund whose
investment objective is to provide as high a level of current income as is
LIQUID ASSETS consistent with the preservation of capital and liquidity. The Portfolio seeks
PORTFOLIO to achieve its objective by investing in high quality money market instruments
such as U.S. Government obligations, bank obligations, commercial instruments
CASH and repurchase agreements.
MANAGEMENT
CLASS The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end diversified series management investment company. This
DECEMBER 12, 1995 Prospectus relates solely to the Cash Management Class of the Portfolio, a
class of shares designed to be a convenient and economical vehicle in which
institutions can invest short-term cash reserves.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class and the Private Investment
Class, as well as shares of classes of another portfolio, the Prime Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE CASH MANAGEMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 12, 1995, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY
REFERENCE. A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO FUND MANAGEMENT COMPANY AT 11 GREENWAY
PLAZA, SUITE 1919, HOUSTON, TEXAS 77046.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7745
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS +
+ BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED +
+ PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+ SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, +
+ SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Cash Management
Class (the "Class") of the Portfolio at net asset value. The Portfolio is a
money market fund which invests in money market instruments, such as U.S.
Government Agencies obligations, bank obligations, commercial instruments and
repurchase agreements. The investment objective of the Portfolio is to provide
as high a level of current income as is consistent with the preservation of
capital and liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Prime Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as "Portfolios."
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical vehicle in which
institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Class may not be purchased by individuals
directly, institutions may purchase shares for accounts maintained for
individuals. See "Suitability for Investors."
PURCHASE OF SHARES
Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $10,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in federal funds or other funds immediately available to the Portfolio.
See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 4:00 p.m. Eastern Time will normally be made on the same day. See
"Redemption of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "Net Asset
Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
.10% of the average daily net assets of the Portfolio attributable to the
shares of the
2
<PAGE>
Class to FMC as well as certain broker-dealers or other financial institutions
as compensation for distribution-related services. See "Purchase of Shares" and
"Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of
foreign branches of major domestic banks and in repurchase agreements. The
Portfolio may purchase delayed delivery or when-issued securities. Accordingly,
an investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK AND AIM INSTITUTIONAL FUNDS ARE REGISTERED
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--CASH MANAGEMENT CLASS
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)--CASH MANAGEMENT CLASS*
Management Fees (after waivers)......................................... 0.06%
12b-1 Fees (after waivers)**............................................ 0.08%
Other Expenses (estimated).............................................. 0.03%
----
Total Portfolio Operating Expenses--Cash Management Class............... 0.17%
====
</TABLE>
- ------
* The fees and expenses set forth in the table are based on estimated average
net assets of the Class' first period of operation. Had there been no
waivers, Management Fees and 12b-1 Fees would be 0.15% and 0.10%,
respectively.
** As a result of 12b-1 fees, a long-term shareholder of the Class may pay more
than the economic equivalent of the maximum front-end sales charges
permitted by the Rules of the National Association of Securities Dealers,
Inc.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year........................................................... $ 2
3 years.......................................................... $ 5
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Class will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) The other expenses and 12b-1 fees figure
is based upon estimated costs and the estimated size of the Class and estimated
fees to be charged for the current fiscal year. Thus, actual expenses may be
greater or less than such estimates. There can be no assurance that future
waivers of fees (if any) will not vary from the figures reflected in the Table
of Fees and Expenses. To the extent any service providers assume expenses of
the Class, such assumption of expenses will have the effect of lowering the
Class' overall expense ratio and increasing its yield to investors. Beneficial
owners of shares of the Class should also consider the effect of any charges
imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Cash Management Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
3
<PAGE>
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or other
similar capacity. It is designed to be a convenient and economical vehicle in
which such institutions can invest short-term cash reserves. Shares of the
Class may not be purchased directly by individuals, although institutions may
purchase shares for accounts maintained by individuals. Prospective investors
should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day. Sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Portfolio seeks to achieve its objective by investing in a diversified
portfolio of high quality U.S. dollar-denominated money market instruments and
other similar instruments with maturities of 397 days or less from the date of
purchase. The Portfolio will maintain a weighted average maturity of 90 days or
less.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of U.S. Government and foreign
government obligations, and bank and commercial instruments that may be
available in the money markets. Such obligations include U.S. Treasury
obligations and repurchase agreements. The Portfolio intends to invest in
bankers' acceptances, certificates of deposit, time deposits and commercial
paper, and U.S. Government direct obligations and U.S. Government agencies
securities. Certain U.S. Government obligations with floating or variable
interest rates may have longer maturities. Commercial obligations may include
both domestic and foreign issuers that are U.S. dollar-denominated. Bankers'
acceptances, certificates of deposit and time deposits may be purchased from
U.S. or foreign banks. These instruments, which are collectively referred to as
"Money Market Obligations," are briefly described below.
The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 (the "1940 Act"), as such Rule may be amended from time to time.
Generally, "First Tier" securities are securities that are rated in the highest
rating category by two nationally recognized statistical rating organizations
("NRSROs"), or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Fund's Board of
Directors) to be of comparable quality to a rated security that meets the
foregoing quality standards.
The Portfolio will not invest more than 10% of its net assets in illiquid
securities.
4
<PAGE>
In managing the Portfolio's investments, AIM may indicate to dealers or
issuers its interest in acquiring certain securities for the Portfolio for
settlement beyond a customary settlement date thereafter. In some cases, the
Portfolio may agree to purchase such securities at stated prices and yields.
(In such cases, these securities are considered "delayed delivery" securities
when traded in the secondary market or "when-issued" securities if they are an
initial issuance of securities.) Since this is done to facilitate the
acquisition of portfolio securities and is not for the purpose of investment
leverage, the amount of delayed delivery or when-issued securities involved may
not exceed the estimated amount of funds available for investment on the
settlement date. Until the settlement date, assets of the Portfolio with a
dollar value sufficient at all times to make payment for the delayed delivery
or when-issued securities will be set aside in a segregated account. (The total
amount of assets in the segregated account may not exceed 25% of the
Portfolio's total assets.) The delayed delivery securities, which will not
begin to accrue interest until the settlement date, and the when-issued
securities will be recorded as an asset of the Portfolio and will be subject to
the risks of market value fluctuations. The purchase price of the delayed
delivery or when-issued securities will be recorded as a liability of the
Portfolio until settlement. AIM may also transact sales of securities on a
"forward commitment" basis. In such a transaction, AIM agrees to sell portfolio
securities at a future date at specified prices and yields. Securities subject
to sale on a forward commitment basis will continue to accrue interest until
sold and will be subject to the risks of market value fluctuations. Absent
extraordinary circumstances, the Portfolio's right to acquire delayed delivery
and when-issued securities or its obligation to sell securities on a forward-
commitment basis will not be divested prior to the settlement date.
The Portfolio may invest up to 100% of its total assets in obligations issued
by banks. While the Portfolio will limit its investments in bank instruments to
U.S.dollar-denominated obligations, it may invest in Eurodollar obligations
(i.e., U.S. dollar-denominated obligations issued by a foreign branch of a
domestic bank), Yankee dollar obligations (i.e., U.S. dollar-denominated
obligations issued by a domestic branch of a foreign bank) and obligations of
foreign branches of foreign banks, including time deposits. The Portfolio will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total
assets at the time of purchase, provided that there is no limitation upon the
Portfolio's investments in (a) Eurodollar obligations, if the domestic parent
of the foreign branch issuing the obligation is unconditionally liable in the
event that the foreign branch for any reason fails to pay on the Eurodollar
obligation; and (b) Yankee dollar obligations, if the U.S. branch of the
foreign bank is subject to the same regulation as U.S. banks.
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets of $5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of foreign country withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.
The Portfolio may also lend its portfolio securities in amounts up to 33 1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Portfolio reserves the right to invest in Money
Market Obligations other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS--These are bills, notes, and bonds issued
by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES--Certain federal agencies (such as the
Federal National Mortgage Association, the Small Business Administration and
the Resolution Trust Corporation) have been established as instrumentalities of
the U.S. Government to supervise and finance certain types of activities.
Issues of these agencies, while not direct obligations of the U.S.
5
<PAGE>
Government, are (a) backed by the full faith and credit of the United States,
(b) guaranteed by the U.S. Treasury or (c) supported by the issuing agencies'
right to borrow from the U.S. Treasury.
FOREIGN GOVERNMENT OBLIGATIONS--These are U.S. dollar-denominated obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by
AIM to be of comparable quality to the other obligations in which the Portfolio
may invest. These obligations are often, but not always, supported by the full
faith and credit of the foreign governments, or their subdivisions, agencies or
instrumentalities, that issue them. Such securities also include debt
obligations of supranational entities. Such debt obligations are ordinarily
backed by the full faith and credit of the entities that issue them.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples of supranational entities include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of the Portfolio's assets invested in securities issued by
foreign governments will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.
BANKERS' ACCEPTANCES--A bankers' acceptance is a bill of exchange or time
draft drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods and to furnish
dollar exchange. These instruments generally mature in six months or less.
CERTIFICATES OF DEPOSIT--A certificate of deposit is a negotiable interest-
bearing instrument with a specific maturity. Certificates of deposit are issued
by banks and savings and loan institutions in exchange for the deposit of
funds, and normally can be traded in the secondary market prior to maturity.
TIME DEPOSITS--A time deposit is a non-negotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market.
EURODOLLAR OBLIGATIONS--A Eurodollar obligation is a U.S. dollar-denominated
obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS--A Yankee dollar obligation is a U.S. dollar-
denominated obligation issued by a domestic branch of a foreign bank.
SHORT AND MEDIUM TERM NOTES--Short and medium term notes are obligations that
have fixed coupons and maturities that can be targeted to meet investor
requirements. They are issued in the capital markets either publicly under a
shelf registration pursuant to Rule 415 promulgated by the United States
Securities and Exchange Commission (the "SEC"), or privately without such a
registration.
COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note on relatively short notice.
REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. The Portfolio may enter into repurchase agreements only with
institutions believed by the Fund's Board of Directors to present minimal
credit risk. With regard to repurchase transactions, in the event of a
bankruptcy or other default of a seller of a repurchase agreement (such as the
seller's failure to
6
<PAGE>
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying securities
and losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities, U.S.
Government agency securities (including, but not limited to, those which have
been stripped of their interest payments and mortgage-backed securities) and
commercial paper. For additional information on the use of repurchase
agreements, see the Statement of Additional Information.
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS--Reverse repurchase agreements
involve the sale by the Portfolio of a portfolio security at an agreed-upon
price, date and interest payment. The Portfolio will borrow money or enter into
reverse repurchase agreements solely for temporary or defensive purposes to
facilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests should they occur. The Portfolio will use reverse
repurchase agreements when the interest income to be earned from the securities
that would otherwise have to be liquidated to meet redemption requests is
greater than the interest expense of the reverse repurchase transaction. The
Portfolio may enter into reverse repurchase agreements in amounts not exceeding
10% of the value of its total assets. Reverse repurchase agreements involve the
risk that the market value of securities retained by the Portfolio in lieu of
liquidation may decline below the repurchase price of the securities sold by
the Portfolio which it is obligated to repurchase. The risk, if encountered,
could cause a reduction in the net asset value of the Portfolio's shares.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as amended from time to time; or
3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions
set forth above (as well as certain others set forth in the Statement of
Additional Information) are matters of fundamental policy which may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Portfolio.
In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein.
7
<PAGE>
The SEC has proposed certain changes to Rule 2a-7. While such proposed
changes may have a prospective impact on the investments of the Portfolio, the
Portfolio anticipates no difficulty in complying with any proposed change if
adopted by the SEC. A description of further investment restrictions applicable
to the Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been accepted by the Portfolio. Although
there is no sales charge imposed on the purchase of shares of the Class, banks
and other institutions may charge a recordkeeping, account maintenance or other
fee to their customers. Beneficial holders of shares of the Class should
consult with the institutions maintaining their accounts to obtain a schedule
of applicable fees. To facilitate the investment of proceeds of purchase
orders, investors are urged to place their orders as early in the day as
possible. Purchase orders will be accepted for execution on the day the order
is placed, provided that the order is properly submitted and received by the
Portfolio prior to 4:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below and notice of such order is
provided to the Portfolio's transfer agent or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which is
not accepted by the Portfolio and any funds received for which an order has not
been received will be returned to the sending institution. An order to purchase
shares of the Class must specify that the "Cash Management Class of the Liquid
Assets Portfolio" is being purchased; otherwise, any funds received will be
returned to the sending institution.
The minimum initial investment in the Class is $10,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
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's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS") at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
Banks 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.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
8
<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK(R), a personal computer application software product.
Normally, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00 per share. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made by calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Portfolio to be
redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by AIFS after 4:00 p.m. Eastern
Time or on other than a business day of the Portfolio, the redemption will be
effected at the net asset value of the Portfolio determined as of 4:00 p.m.
Eastern Time on the next business day of the Portfolio, and the proceeds of
such redemption will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Portfolio may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. Net income of the Portfolio consists of interest
accrued and discount earned (including both original issue and market discount)
on securities held by the Portfolio, less amortization of market premium and
the accrued expenses of the Portfolio. Although realized gains and losses on
the assets of the Portfolio are reflected in the net asset value of the
Portfolio, they are not expected to be of an amount which would affect the
Portfolio's net asset value of $1.00 per share for purposes of purchases and
redemptions. See "Net Asset Value." Distributions from net realized short-term
gains may be declared and paid yearly or more frequently. See "Taxes." The
Portfolio does not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Portfolio at the net asset value
of such shares as of 4:00 p.m. Eastern Time on the last business day of the
month. Such election, or any revocation thereof, must be made in writing by the
shareholder to AIFS at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173
and will become effective with dividends paid after its receipt by AIFS. If a
shareholder redeems all the shares in its account at any time during the month,
all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
9
<PAGE>
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's 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 the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent to the extent possible the net asset value per share of the
Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
TAXES
The Portfolio's policy is to distribute to its shareholders at least 90% of
its investment company taxable income for each year and consistent therewith to
meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Portfolio. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend before February 1 of the next
year, a shareholder will be treated for tax purposes as having received the
dividend in the year in which it is declared rather than in January when it is
paid. It is anticipated that no portion of distributions will be eligible for
the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
For purposes of determining taxable income, distribution requirements and
other requirements of Subchapter M, the Portfolio will be treated as a separate
corporation. Therefore, one portfolio of the Fund may not offset its gains
against the other portfolio's losses and each portfolio must specifically
comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.
The foregoing discussion of federal income tax consequences is only a summary
based on tax laws and regulations in effect on November 1, 1995 which are
subject to change by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Portfolio. Net asset value per
share is determined by dividing the value of the Portfolio's securities, cash
and other assets (including interest accrued but not collected), less all its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if the security were
sold. During such periods, the daily yield on shares of the Portfolio, computed
as described in "Purchases and Redemptions--Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
10
<PAGE>
YIELD INFORMATION
Yield information for the Class can be obtained by calling FMC at (800) 877-
7745. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Portfolio. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Portfolio. Such a
practice will have the effect of increasing the Portfolio's yield and total
return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Certain directors and officers of the Fund are
affiliated with AIM and A I M Management Group Inc. ("AIM Management"), a
holding company engaged in the financial services business. Information
concerning the Board of Directors may be found in the Statement of Additional
Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages, advises or administers 37 investment company portfolios. As of October
31, 1995, the total assets of such investment company portfolios were
approximately $39.3 billion. AIM is a wholly-owned subsidiary of AIM
Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
11
<PAGE>
For the fiscal year ended August 31, 1995, AIM received fees with respect to
the Portfolio which represented 0.08% of the Portfolio's average daily net
assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Fund's Board of
Directors for providing specified administrative services. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services, as well as the services of
staff responding to various shareholder inquiries.
In addition, AIM and AIFS have entered into an Administrative Services
Agreement pursuant to which AIFS was reimbursed by AIM for its costs in
providing shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $38,870 with respect to the
Portfolio for the period August 31, 1994 through June 30, 1995 which
represented 0.002% of the Portfolio's average daily net assets. The
Administrative Services Agreement between AIM and AIFS was terminated July 1,
1995. Beginning July 1, 1995, AIFS received fees with respect to the Portfolio
for its provision of shareholder services pursuant to a Transfer Agency and
Service Agreement with the Fund. For the period July 1, 1995 through August 31,
1995, AIFS received transfer agency fees from AIM with respect to the Portfolio
in the amount of $9,045.
FEE WAIVERS
AIM may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee and/or assume certain expenses of the Portfolio
but will retain its ability to be reimbursed prior to the end of the fiscal
year. FMC may in its discretion from time to time agree to waive voluntarily
its 12b-1 fee but will retain its ability to be reimbursed prior to the end of
the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM Management. The Distribution Agreement provides
that FMC has the exclusive right to distribute shares of the Portfolio either
directly or through other broker-dealers, and receives no fees for its services
with respect to the Portfolio pursuant to the Distribution Agreement. FMC is
the distributor of several other mutual funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the 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 payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.10% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund 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.
12
<PAGE>
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments retained by FMC would be characterized as an asset-
based sales charge pursuant to the 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 the Class. The Plan does not obligate the
Fund to reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund 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.
As required by Rule 12b-1 under the 1940 Act, the Plan was 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 Fund 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") on December 4, 1995. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund 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.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes 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.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund which are not directly attributable to a
specific class of shares but are directly attributable to one or both of the
Portfolios are prorated among all classes of such Portfolios. Expenses of the
Fund which are directly attributable to a specific class of shares are charged
against the income available for distribution as dividends to the holders of
such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
13
<PAGE>
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into eight classes, of which three represent interests
in the Portfolio and the remaining five represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable to or allocated to
the respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and cash
of the Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173, acts as transfer agent for shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7745.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
14
<PAGE>
====================================== ======================================
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 12, 1995
(800) 877-7745
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173 LIQUID ASSETS PORTFOLIO
(713) 626-1919 ------------
DISTRIBUTOR CASH MANAGEMENT CLASS
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 TABLE OF CONTENTS
(800) 877-7745
<TABLE>
AUDITORS <CAPTION>
KPMG PEAT MARWICK LLP PAGE
NationsBank Building ----
700 Louisiana <S> <C>
Houston, Texas 77002 Summary........................ 2
CUSTODIAN Table of Fees and Expenses..... 3
THE BANK OF NEW YORK
110 Washington Street Suitability For Investors...... 4
8th Floor
New York, New York 10286 Investment Program............. 4
TRANSFER AGENT Purchase of Shares............. 8
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 Redemption of Shares........... 9
Houston, Texas 77046-1173
Dividends...................... 9
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY Taxes.......................... 10
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE Net Asset Value................ 10
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR Yield Information.............. 11
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE Reports to Shareholders........ 11
FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN Management of the Fund......... 11
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY General Information............ 14
NOT LAWFULLY BE MADE. </TABLE>
====================================== ======================================
<PAGE>
SUBJECT TO COMPLETION
DATED NOVEMBER 8, 1995
STATEMENT OF
ADDITIONAL INFORMATION
CASH MANAGEMENT CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 877-7745
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 12, 1995
RELATING TO THE PROSPECTUS DATED DECEMBER 12, 1995
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR ANY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES+
+EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A +
+PROSPECTUS. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION..................................................... 1
GENERAL INFORMATION ABOUT THE FUND............................... 1
The Fund and Its Shares..................................... 1
Directors and Officers...................................... 3
Remuneration of Directors................................... 6
AIM Funds Retirement Plan for Eligible Directors/Trustees... 7
Deferred Compensation Agreements............................ 8
Investment Advisor.......................................... 9
Administrator............................................... 10
Expenses.................................................... 10
Transfer Agent and Custodian................................ 11
Reports..................................................... 11
Fee Waivers................................................. 11
Principal Holders of Securities............................. 12
PURCHASES AND REDEMPTIONS........................................ 16
Net Asset Value Determination............................... 16
The Distribution Agreement.................................. 16
Distribution Plan........................................... 17
Banking Regulations......................................... 17
Performance Information..................................... 18
Redemptions in Kind......................................... 18
Suspension of Redemption Rights............................. 19
INVESTMENT PROGRAM AND RESTRICTIONS.............................. 19
Eligible Securities......................................... 19
Commercial Paper Ratings.................................... 20
Bond Ratings................................................ 21
Repurchase Agreements....................................... 23
Investment Restrictions..................................... 23
PORTFOLIO TRANSACTIONS........................................... 24
TAX MATTERS...................................................... 26
Qualification as a Regulated Investment Company............. 26
Excise Tax On Regulated Investment Companies................ 27
Portfolio Distributions..................................... 27
Effect of Future Legislation; Local Tax Considerations...... 28
FINANCIAL STATEMENTS............................................. NONE
</TABLE>
i
<PAGE>
INTRODUCTION
The Liquid Assets Portfolio (the "Portfolio") is an investment portfolio of
Short-Term Investments Co. (the "Fund"), a mutual fund. The rules and
regulations of the United States Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information is included in a Prospectus dated December 12, 1995 (the
"Prospectus"). Copies of the Prospectus and additional copies of this Statement
of Additional Information may be obtained without charge by writing the
distributor of the Portfolio's shares, Fund Management Company ("FMC"), 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 or by calling (800) 877-
7745. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Cash Management Class of
the Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the 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 the
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 FUND
THE FUND AND ITS SHARES
The Fund is an open-end, diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993, and had no operations prior to November 4, 1993. Shares of common
stock of the Fund are redeemable at their net asset value at the option of the
shareholder or at the option of the Fund in certain circumstances. For
information concerning the methods of redemption and the rights of share
ownership, investors should consult the Prospectus under the captions "General
Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Prime Portfolio (together, the
"Portfolios"). The Prime Portfolio consists of five classes of shares, each
having different shareholder qualifications and bearing expenses differently.
The Portfolio consists of the following three classes of shares: Institutional
Class, Private Investment Class and Cash Management Class. Each such class has
different shareholder qualifications and bears expenses differently. This
Statement of Additional Information and the associated Prospectus relate solely
to shares of the Cash Management Class (the "Class") of the Portfolio. Shares
of the other classes of the Portfolio and the classes of the Prime Portfolio are
offered pursuant to separate prospectuses and statements of additional
information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
1
<PAGE>
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 (the "1940 Act").
The Charter of the Fund authorizes the issuance of 40 billion shares with a
par value of $.001 each, of which 16 billion shares represent an interest in the
Portfolio (or class thereof) and 22 billion shares represent an interest in the
Prime Portfolio (or class thereof). A share of a portfolio (or class)
represents an equal proportionate interest in such Portfolio (or class) with
each other share of that Portfolio (or class) and is entitled to a proportionate
interest in the dividends and distributions from that Portfolio (or class).
Additional information concerning the rights of share ownership is set forth in
the Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Portfolio, and
constitute the underlying assets of that Portfolio. The underlying assets of the
Portfolios are segregated and each Portfolio is charged with the expenses with
respect to that portfolio and with a share of the general expenses of the Fund.
While the expenses of the Fund are allocated to the separate books of account of
each of the Portfolios, certain expenses may be legally chargeable against the
assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. 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. 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 Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
2
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046.
*CHARLES T. BAUER, Director and Chairman (76)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Director, AIM Global Advisors
Limited, A I M Global Management Company Limited and AIM Global Venture Co.
BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (71)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director,
CF & I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
**CARL FRISCHLlNG, Director (58)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
- ----------------------
* A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
3
<PAGE>
***ROBERT H. GRAHAM, Director and President (49)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Executive Vice
President, A I M Distributors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Fund Services, Inc., A I M Global Associates,
Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Senior Vice President, AIM
Global Advisors Limited.
JOHN F. KROEGER, Director (71)
24875 Swan Road - Martingham
Box 464
St. Michaels, MD 21663
Trustee, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment companies). Formerly, Consultant,
Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (53)
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
- --------------------
*** A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
4
<PAGE>
****JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice President
and Treasurer, A I M Management Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc. and
AIM Global Ventures Co.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and Senior
Vice President, A I M Management Group Inc., A I M Advisors, Inc., A I M Global
Associates, Inc., A I M Global Holdings, Inc. and AIM Global Ventures Co.;
Director, A I M Distributors, Inc.; and Senior Vice President, AIM Global
Advisors Limited.
****CAROL F. RELIHAN, Vice President and Secretary (41)
Vice President, General Counsel and Secretary, A I M Management Group Inc.,
A I M Advisors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; Vice President and Secretary, A I M
Distributors, Inc., A I M Global Associates, Inc. and A I M Global Holdings,
Inc.; Vice President and Assistant Secretary, AIM Global Advisors Limited and
AIM Global Ventures Co.; and Secretary, A I M Capital Management, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and Assistant
Vice President, A I M Distributors, Inc. and Fund Management Company. Formerly,
Vice President, Charles Schwab & Co., Inc.; Assistant Secretary, Charles Schwab
Family of Funds and Schwab Investments; Chief Compliance Officer, Charles Schwab
Investment Management, Inc.; and Vice President, Integrated Resources Life
Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Director, A I M Global Management Company Limited; Senior Vice President,
A I M Capital Management, Inc. and AIM Global Advisors Limited; and Vice
President, A I M Advisors, Inc. and AIM Global Ventures Co.
J. ABBOTT SPRAGUE, Vice President (40)
Director and President, A I M Institutional Fund Services, Inc. and Fund
Management Company; Director and Senior Vice President, A I M Advisors, Inc.;
and Senior Vice President, A I M Management Group Inc.
- ---------------------
**** Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
The Board of Directors has an Audit Committee, an Investments Committee,
and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the directors as
a whole with respect to the Portfolio's fund accounting or its internal
accounting controls, or for considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Fund maintains a distribution plan pursuant to rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the board and such Committee.
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. Most of the Fund'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 attended. The directors of
the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM Funds").
Each such director receives a fee, allocated among the AIM Funds for which he
serves as a director or trustee, which consists of an annual retainer component
and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each director of the Fund:
6
<PAGE>
<TABLE>
<CAPTION>
===================================================================================
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
DIRECTOR FROM FUND(1) BY ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- -----------------------------------------------------------------------------------
Bruce L. Crockett 2,091 2,814 45,094
- -----------------------------------------------------------------------------------
Owen Daly II 2,096 14,375 45,844
- -----------------------------------------------------------------------------------
Carl Frischling 2,091 7,542 45,094
- -----------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- -----------------------------------------------------------------------------------
John F. Kroeger 2,096 20,517 45,844
- -----------------------------------------------------------------------------------
Lewis F. Pennock 2,096 5,093 45,844
- -----------------------------------------------------------------------------------
Ian W. Robinson 2,071 10,396 45,095
- -----------------------------------------------------------------------------------
Louis S. Sklar 2,071 4,682 45,094
===================================================================================
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1995, including interest earned
thereon, was $8,448.
(2) During the fiscal year ended August 31, 1995, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$4,583. Data reflects compensation earned for the calendar year ended
December 31, 1994.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation earned for the calendar year ended
December 31, 1994.
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, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 5% of such Director's compensation paid by the AIM Funds multiplied by
the number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is
payable to each eligible director in quarterly installments for a period of no
more than five years. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences, 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 five 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 AIM Fund.
7
<PAGE>
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1994 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
Annual Compensation Paid
By All AIM Funds
<S> <C> <C> <C>
$60,000 $65,000
==========================================
Number of Years of Service with the AIM 10 $30,000 $32,500
Funds ------------------------------------------
9 $27,000 $29,250
------------------------------------------
8 $24,000 $26,000
------------------------------------------
7 $21,000 $22,750
------------------------------------------
6 $18,000 $19,500
------------------------------------------
5 $15,000 $16,250
==========================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, 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 account 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 years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's 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 Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The 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 Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1995, $14,116 directors' fees and
expenses were allocated to the Portfolio.
During the year ended August 31, 1995, the Portfolio paid legal fees of
$1,317 for services rendered by Reid & Priest as counsel to the Board of
Directors. In September 1994, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
was appointed as counsel to the Board of Directors. During the year ended
August 31, 1995, the Portfolio paid legal fees of $4,721 for services rendered
by that firm as counsel. A director of the Fund is a partner of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel and was a partner of the firm of Reid & Priest
prior to September 1994.
8
<PAGE>
INVESTMENT ADVISOR
AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated October 18, 1993 (the "Advisory Agreement"). A prior investment
advisory agreement (the "Prior Advisory Agreement") with substantially identical
terms (including the fee schedules) to the Advisory Agreement was previously in
effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises,
manages or administers 37 investment company portfolios. As of October 31,
1995, the total assets of the investment company portfolios managed or advised
by AIM and its affiliates were approximately $39.3 billion. AIM is a wholly-
owned subsidiary of A I M Management Group Inc. ("AIM Management"), 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046-1173. Certain of the directors and
officers of AIM are also executive officers of the Fund and their affiliations
are shown under "Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews annually such reports
(including information on any substantial violations of the Code). Violations of
the Code may result in censure, monetary penalties, suspension or termination of
employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services with respect to the Portfolio, AIM
receives a fee at the annual rate of 0.15% of the average daily net assets of
the Portfolio. The Advisory Agreement requires AIM to reduce its fee to the
extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
During the period November 4, 1993 (date operations commenced) through
August 31, 1994, AIM voluntarily waived fees of $1,500,977, which it was
entitled to receive pursuant to the Advisory Agreement with respect to the
Portfolio. During the fiscal year ended August 31, 1995, AIM received fees
pursuant to the Advisory Agreement in the amount of $1,323,637 and AIM
voluntarily waived fees of $1,127,509, which it was entitled to receive pursuant
to the Advisory Agreement with respect to the Portfolio.
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered into the Master Administrative Services Agreement under
which AIM will provide the additional services described below under the caption
"Administrator."
9
<PAGE>
The Advisory Agreement will continue in effect until June 30, 1996 and from
year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a majority
of the directors who are not parties to the Advisory Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or AIM may terminate the Agreement on 60 days' notice without
penalty. The Advisory Agreement terminates automatically in the event of its
"assignment," as defined in the 1940 Act.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement"). In addition, AIM and A I M
Institutional Fund Services, Inc. ("AIFS") entered into an administrative
services agreement, dated as of September 16, 1994 (the "AIFS Administrative
Services Agreement").
Under the Administrative Services Agreement, AIM has agreed to perform or
arrange for the performance of certain accounting, shareholder servicing and
other administrative services for the Portfolio which are not required to be
performed by AIM under the Advisory Agreement. For such services, AIM would be
entitled to receive from the Fund reimbursement of AIM's costs or such
reasonable compensation as may be approved by the Fund's Board of Directors.
The Administrative Services Agreement provides that such agreement will continue
in effect until June 30, 1996, and shall continue in effect from year to year
thereafter only if such continuance is specifically approved at least annually
by the Fund's Board of Directors, including the Non-Interested Directors, by
votes cast in person at a meeting called for such purpose. The Administrative
Services Agreement was last approved by the Fund's Board of Directors (including
the Non-Interested Directors) on May 9, 1995.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for
the fiscal years ended August 31, 1995 and 1994 in the amounts of $97,044 and
$39,492, respectively.
The AIFS Administrative Services Agreement between AIM and AIFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provided that AIFS
could perform certain shareholder services for the Portfolio. For such
services, AIFS was entitled to receive from AIM reimbursement of its costs
associated with the Class. The AIFS Administrative Services Agreement was
terminated July 1, 1995. Beginning July 1, 1995, AIFS received fees with
respect to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the period from August
31, 1994 through June 30, 1995 and for the period from June 1, 1994 through
August 31, 1994, AIFS or its affiliates received shareholder services fees from
AIM with respect to the Portfolio in the amounts of $38,870 and $5,110,
respectively. For the period July 1, 1995 through August 31, 1995, AIFS
received transfer agency fees from AIM with respect to the Portfolio in the
amount of $9,045.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM
under the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and shares with the SEC
and various states and other jurisdictions (including filing and legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting, and distributing prospectuses and statements of additional
10
<PAGE>
information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing of prospectuses, proxy statements and reports to shareholders; fees and
travel expenses of directors and director members of any advisory board or
committee; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's shares; charges and expenses
of legal counsel, including counsel to the directors of the Fund who are not
"interested persons" (as defined in the 1940 Act) of the Fund or AIM, and of
independent accountants in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; and extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto). Except as disclosed under the
caption "Distribution Plan," FMC bears the expenses of printing and distributing
prospectuses and statements of additional information (other than those
prospectuses and statements of additional information distributed to existing
shareholders of the Fund) 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 Fund's shares.
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of the Fund based
upon the relative net assets of each class. Expenses of the Fund which are not
directly attributable to a specific class of shares but are directly
attributable to one or both of the Portfolios are prorated among all classes of
such Portfolios based upon the relative net assets of each such class. The
expenses of the Portfolio are deducted from its total income before dividends
are paid. Expenses of the Fund which are directly attributable to a specific
class of shares are charged against the income available for distribution as
dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York acts as custodian for the portfolio securities and
cash of the Portfolio. The Bank of New York receives such compensation from the
Fund for its services in such capacity as is agreed to from time to time by The
Bank of New York and the Fund. The address of The Bank of New York is 110
Washington Street, 8th Floor, New York, New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .007% of average daily net assets
of the Fund, payable monthly. Such compensation may be changed from time to
time as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
FEE WAIVERS
AIM may, from time to time, agree to waive voluntarily all or any portion
of its fees or reimburse the Portfolio for certain of its expenses. Such
waivers or reimbursements may be discontinued at any time. Shareholders of the
Portfolio will receive notice 30 days prior to the effective date of any
substantial change in such waivers or reimbursements.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of October 25, 1995, and the percentage of the Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
NationsBank of Texas 13.81%
P.O. Box 831000
Dallas, TX 75283-1000
U.S. Bank of Oregon 13.23%
321 Southwest 6th Street
Portland, OR 97208
Trust Company Bank 8.19%
P.O. Box 105504
Atlanta, GA 30348
Texas Commerce Bank 7.62%
P.O. Box 2558
Houston, TX 77252-8098
Boatmen's Trust Company 7.27%
100 North Broadway
St. Louis, MO 63101
Frost National Bank 7.26%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
- ---------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corporation 71.90%**
41 South High Street
Columbus, OH 43287
Var & Co. 17.39%
180 East 5th Street
St. Paul, MN 55101
Frost National Bank 6.94%
P.O. Box 1600
San Antonio, TX 78296
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 67.37%**
440 Manaroneck Ave.
Harrison, NY 10528
Cullen/Frost Discount Brokers 30.94%**
P.O. Box 2358
San Antonio, TX 78299
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
CASH MANAGEMENT CLASS
- ---------------------
Piper Jaffray As Agent For Customer 35.24%**
101 California Street
Suite 1150
San Francisco, CA 94111
</TABLE>
- ---------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
13
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
Piper Jaffray As Agent For Customer 29.49%**
P.O. Box 160727
Sacramento, CA 95816-0727
Bank Of New York 10.75%
One Wall Street
New York, NY 10286
Citibank As Agent For Customer 8.38%
120 Wall Street 13th Floor
New York, NY 10043
</TABLE>
RESOURCE CLASS
- --------------
AIM provided the initial capitalization of the Resource Class of the
Prime Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of common stock of the Resource
Class of the Prime Portfolio. Although the Resource Class of the Prime
Portfolio expects that the sale of its shares to the public pursuant to the
Prospectus will reduce the percentage of such shares owned by AIM to less than
1% of the total shares outstanding, as long as AIM owns over 25% of the shares
of the Resource Class of the Prime Portfolio that are outstanding, it may be
presumed to be in "control" of the Resource Class of the Prime Portfolio, as
defined in the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of October 25, 1995, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
Trust Company Bank 20.96%
P.O. Box 105504
Atlanta, GA 30348
</TABLE>
- ---------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
14
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
Wachovia Bank & Trust 14.33%
P.O. Box 3075
Winston-Salem, NC 27150
</TABLE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C> <C>
INSTITUTIONAL CLASS
- -------------------
NationsBank Dallas 11.09%
P.O. Box 831000
Dallas, TX 75283-1000
Society National Bank 7.57%
127 Public Square
Cleveland, OH 44114-1306
Boatmen's Trust Company 6.56%
100 North Broadway
St. Louis, MO 63102
Firstar Bank of Madison 5.41%
P.O. Box 7900
Madison, WI 53707
</TABLE>
PRIVATE INVESTMENT CLASS
- ------------------------
AIM provided the initial capitalization of the Private Investment
Class of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Private Investment Class of the Liquid Assets Portfolio. Although
the Private Investment Class of the Liquid Assets Portfolio expects that the
sale of its shares to the public pursuant to the Prospectus will reduce the
percentage of such shares owned by AIM to less than 1% of the total shares
outstanding, as long as AIM owns over 25% of the shares of the Private
Investment Class of the Liquid Assets Portfolio that are outstanding, it may be
presumed to be in "control" of the Private Investment Class of the Liquid Assets
Portfolio, as defined in the 1940 Act.
- ---------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
15
<PAGE>
CASH MANAGEMENT CLASS
- ---------------------
AIM provided the initial capitalization of the Cash Management Class
of the Liquid Assets Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of common
stock of the Cash Management Class of the Liquid Assets Portfolio. Although the
Cash Management Class of the Liquid Assets Portfolio expects that the sale of
its shares to the public pursuant to the Prospectus will reduce the percentage
of such shares owned by AIM to less than 1% of the total shares outstanding, as
long as AIM owns over 25% of the shares of the Cash Management Class of the
Liquid Assets Portfolio that are outstanding, it may be presumed to be in
"control" of the Cash Management Class of the Liquid Assets Portfolio, as
defined in the 1940 Act.
To the best of the knowledge of the Fund, as of October 25, 1995, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Portfolio is permitted in accordance with applicable rules and
regulations of the SEC, including Rule 2a-7 under the 1940 Act, which require
the Portfolio to adhere to certain conditions. These rules require that the
Portfolio maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 calendar days
or less and invest only in securities determined by the Board of Directors to be
"Eligible Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, 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's 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 existing holders of
the shares. In the event the Board of Directors determines that such a deviation
exists, it will take such corrective action as the Board of Directors deems
necessary and appropriate, including the sales of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity; the withholding of dividends; redemption of shares in kind; or the
establishment of a net asset value per share by using available market
quotations.
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. See "General Information about the Fund --
Directors and Officers" and "General Information about the Fund -- Investment
Advisor" for information as to the affiliation of certain directors and officers
of the Fund with FMC, AIM and AIM Management.
16
<PAGE>
The Distribution Agreement provides that FMC has the exclusive right
to distribute shares either directly or through other broker-dealers. The
Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Portfolio 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 Class.
The Distribution Agreement will continue in effect until June 30, 1996
and from year to year thereafter, provided that it is specifically approved at
least annually by the Fund'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 Fund 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.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund 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 the shares of the Class. These services may include among
other things: (i) answering customer inquiries regarding shares of the Class and
the Portfolio; (ii) assisting customers in changing dividend options, account
designations and addresses; (iii) performing sub-accounting; (iv) establishing
and maintaining shareholder accounts and records; (v) processing purchase and
redemption transactions; (vi) automatic investment of customer cash accounting
balances in shares of the Class; (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 Fund
may request on behalf of the Class, to the extent such firms are permitted to
engage in such services by applicable statute, rule or regulation. The Plan may
only be used for the purposes specified above and as stated in the Plan.
Expenses may not be carried over from year to year.
FMC is a wholly-owned subsidiary of AIM, which is a wholly-owned
subsidiary of AIM Management. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund, own shares of
AIM Management.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations among
other things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers and
to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well as
changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, shareholder clients of
such bank would be permitted to remain shareholders of the Fund and alternate
means for continuing the servicing of such shareholders would be sought. In
such event, changes in the operation of the Fund might occur and shareholders
serviced by such bank might no longer be able to avail themselves of any
automatic investment or other services then being provided by such bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.
17
<PAGE>
In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments more restrictive than the
restrictions described herein. These restrictions are not matters of fundamental
policy, and should the Fund determine that any such commitment is no longer in
the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the states involved.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus,
yield information for the shares of the Class may be obtained by calling the
Fund at (800) 877-7745. The current yield quoted will be the net average
annualized yield for an identified period. Current yield will be computed by
assuming that an account was established with a single share (the "Single Share
Account") on the first day of the period. To arrive at the quoted yield, the net
change in the value of that Single Share Account for the period (which would
include dividends accrued with respect to the share, and dividends declared on
shares purchased with dividends accrued and paid, if any, but would not include
realized gains and losses or unrealized appreciation or depreciation) will be
multiplied by 365 and then divided by the number of days in the period, with the
resulting figure carried to the nearest hundredth of one percent. The Portfolio
may also furnish a quotation of effective yield that assumes the reinvestment of
dividends for a 365-day year and a return for the entire year equal to the
average annualized yield for the period, which will be computed by compounding
the unannualized current yield for the period by adding 1 to the unannualized
current yield, raising the sum to a power equal to 365 divided by the number of
days in the period, and then subtracting 1 from the result.
The Portfolio may compare the performance of the Class or the
performance of securities in which it may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of
various types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment
objectives. These comparisons may be based on data published by IBC/Donoghue's
Money Fund Report(R) of Holliston, Massachusetts or by Lipper Analytical
Services, Inc., a widely recognized independent service located in Summit, New
Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
. other fixed-income investments such as Certificates of Deposit
("CDs").
The principal value and interest rate of CDs and money market
securities are fixed at the time of purchase whereas the Class' yield will
fluctuate. Unlike some CDs and certain other money market securities, money
market mutual funds are not insured by the FDIC. Investors should give
consideration to the quality and maturity of the portfolio securities of the
respective investment companies when comparing investment alternatives.
The Portfolio may reference the growth and variety of money market
mutual funds and AIM's innovation and participation in the industry.
REDEMPTIONS IN KIND
The Fund will not redeem shares representing an interest in the
Portfolio in kind (i.e., by distributing its portfolio securities).
18
<PAGE>
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
The Portfolio may lend its portfolio securities in amounts up to 33-1/3% of
its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by AIM to be of good standing and only when, in AIM's judgment,
the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money market
funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that is
rated (or that has been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
that is comparable in priority and security with the security) by the
Requisite NRSROs1 in one of the two highest rating categories for short-
term debt obligations (within which there may be sub-categories or
gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security but
that has a remaining maturity of 397 calendar days or less, and
(B) whose issuer has received from the Requisite NRSROs a rating,
with respect to a class of short-term debt obligations (or any
security within that class) that is now comparable in priority and
security with the security, in one of the two highest rating
categories for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
- ---------------------
1 "Requisite NRSRO" 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 of such security, that NRSRO.
At present the NRSROs are: Standard & Poor's Corp., Moody's Investors
Service, Inc., Duff and Phelps, Inc., Fitch Investors Services, Inc. and,
with respect to certain types of securities, IBCA Limited and its affiliate,
IBCA Inc. Subcategories or gradations in ratings (such as a "+" or "-") do
not count as rating categories.
19
<PAGE>
(iii) an unrated security2 that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of this
section, as determined by the money market fund's board of directors;
provided, however, that:
(A) the board of directors may base its determination that a
standby commitment is an Eligible Security upon a finding that the
issuer of the commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a long-term
security but that has a remaining maturity of 397 calendar days or
less and that is an unrated security is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be sub-
categories or gradations indicating relative standing).
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the commercial
paper ratings of Moody's, S&P and Fitch Investors Service, Inc. ("Fitch").
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch short-term ratings are as
follows:
- ---------------------
2 An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of comparable
priority and security; (ii) that was a long-term security at the time of
issuance and whose issuer has not received from any NRSRO a rating with
respect to a class of short-term debt obligations now comparable in
priority and security; or (iii) a security that is rated but which is the
subject of an external credit support agreement not in effect when the
security was assigned its rating, provided that a security is not an
unrated security if any short-term debt obligation issued by the issuer and
comparable in priority and security is rated by any NRSRO.
20
<PAGE>
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings
of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of Moody's.
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
edge." Interest payments are protected by a large or 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 Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the four highest bond ratings of S&P; the lower
two of which are referred to in the foregoing description of its commercial
paper ratings.
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
21
<PAGE>
AA
Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
A
Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior, but to some extent,
also economic conditions.
BBB
The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate. These
bonds have adequate asset coverage and normally are protected by satisfactory
earnings. Their susceptibility to changing conditions, particularly to
depressions, necessitates constant watching. Market values of these bonds are
more responsive to business and trade conditions than to interest rates. This
group is the lowest which qualifies for commercial bank investment.
FITCH - 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 guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch 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.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
22
<PAGE>
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
REPURCHASE AGREEMENTS
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than five percent of its total assets in securities issued by the
issuer of the security, provided that such a fund may invest more than five
percent of its total assets in the First Tier securities of a single issuer for
a period of up to three business days after the purchase thereof if the money
market fund is a diversified investment company, provided further, that the fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of a
fund's total assets that are invested in securities of an issuer, a repurchase
agreement shall be deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the securities from the
money market fund is fully collateralized. To be fully collateralized, the
collateral must, among other things, consist entirely of U.S. Government
securities or securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by Requisite NRSROs.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of
the U.S. Government, its agencies or instrumentalities) if, immediately
after such purchase, more than 5% of the value of the Portfolio's total
assets would be invested in such issuer, except as permitted by Rule 2a-7
under the 1940 Act, as amended from time to time;
(3) borrow money or issue senior securities except (a) for temporary
or emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities, provided that the Portfolio will not purchase portfolio
securities while borrowings in excess of 5% of its total assets are
outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and then
only in an amount up to 331/3% of the value of its total assets at the
time of borrowing or entering into a reverse repurchase agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements and (c) by lending
portfolio securities to the extent permitted by law or regulation;
23
<PAGE>
(6) underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Portfolio's investment program may be
deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase and
sell securities secured by real estate or interests therein or issued by
issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or calls;
(9) invest in any obligation not payable as to principal and interest
in United States currency; or
(10) Acquire for value the securities of any other investment company,
except in connection with a merger, consolidation, reorganization or
acquisition of assets and except for the investment in such securities of
funds representing compensation otherwise payable to its directors pursuant
to any deferred compensation plan existing at any time between the Fund and
its directors.
The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.
State Law Restrictions The Fund may, from time to time in order to qualify
----------------------
shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the State
Securities Board of Texas, the Portfolio (i) will not invest in limited
partnership interests in real property, and (ii) will not issue any class of
senior security or borrow money unless immediately after such issuance or
borrowing there is asset coverage of at least 300%.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
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 market. For example, market
conditions frequently result in similar securities trading at different prices.
AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. 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
24
<PAGE>
market instruments, the high rate of portfolio turnover is not expected to have
a material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by AIM to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement of
portfolio transactions of other clients may be of value to AIM in fulfilling its
obligations to the Portfolio. AIM is of the opinion that the material received
is beneficial in supplementing AIM's research and analysis; and therefore, it
may benefit the Portfolio by improving the quality of AIM's investment advice.
The advisory fees paid by the Portfolio are not reduced because AIM receives
such services.
From time to time, the Fund may sell a security to, or purchase a security
from, an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital"), when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Fund.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing
and amount of purchase by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchases
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolio as a 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 Fund from purchasing a security being
publicly underwritten by a syndicate of which persons affiliated with the Fund
are members except in accordance with certain conditions. These conditions may
restrict the ability of the Portfolio to purchase money market obligations
being publicly underwritten by such a syndicate, and the Portfolio may be
required to wait until the syndicate has been terminated before buying such
securities. At such time, the market price of the securities may be higher or
lower than the original offering price. A person affiliated with the Fund
25
<PAGE>
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligatons and be paid a fee by such issuer. The
Portfolio may purchase such money market obligatons directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and such purchase is reviewed at least quarterly by
the Fund's Board of Directors and a determination is made that all such
purchases were effected in compliance with such procedures, including a
determination that the placement fee or other remuneration paid by the issuer to
the person affiliated with the Fund was fair and reasonable in relation to the
fees charged by other performing similar services. During the fiscal year ended
August 31, 1995, no securities or instrument were purchased by the Portfolio
from issuers who paid placement fees or other compensation to a broker
affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts, will
not be characterized as Short-Short Gains if they are directly related to the
regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is disregarded.
Interest (including original issue discount) received by a fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of a security
within the meaning of the Short-Short Gain Test. However, income that is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
26
<PAGE>
In addition to satisfying the requirements described above, a regulated
investment company must satisfy an asset diversification test in order to
qualify for tax purposes as a regulated investment company. Under this test, at
the close of each quarter of a fund's taxable year, at least 50% of the value of
a fund's assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which a fund has not invested more than 5% of the value of a
fund's total assets in securities of such issuer and as to which a fund does not
hold more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the securities
of any other issuer (other than U.S. Government securities and securities of
other regulated investment companies), or in two or more issuers which a fund
controls and which are engaged in the same or similar trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, 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 the ordinary income dividends and capital gain
dividends and, in certain cases, the proceeds of redemption of
27
<PAGE>
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
Fund that it is not subject to backup withholding or that it is a corporation or
other "exempt recipient."
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 November
1, 1995. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolio.
28
<PAGE>
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24.(a) Financial Statements:
<S> <C> <C>
(1) Prime Portfolio - Institutional Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1995
(3) Statement of Assets and Liabilities as of August 31, 1995
(4) Statement of Operations for the year ended August 31, 1995
(5) Statement of Changes in Net Assets for the years ended
August 31, 1995 and 1994
In Part C: None
(2) Prime Portfolio - Personal Investment Class
In Part A: Financial Higlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1995
(3) Statement of Assets and Liabilities as of August 31, 1995
(4) Statement of Operations for the year ended August 31, 1995
(5) Statement of Changes in Net Assets for the years ended
August 31, 1995 and 1994
In Part C: None
(3) Prime Portfolio - Private Investment Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1995
(3) Statement of Assets and Liabilities as of August 31, 1995
(4) Statement of Operations for the year ended August 31, 1995
(5) Statement of Changes in Net Assets for the years ended
August 31, 1995 and 1994
In Part C: None
(4) Prime Portfolio - Cash Management Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1995
</TABLE>
C-1
<PAGE>
(3) Statement of Assets and Liabilities as of
August 31, 1995
(4) Statement of Operations for the year ended
August 31, 1995
(5) Statement of Changes in Net Assets for the
years ended August 31, 1995 and 1994
In Part C: None
(5) Prime Portfolio - Resource Class
In Part A: None
In Part B: None
In Part C: None
(6) Liquid Assets Portfolio - Institutional Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of
August 31, 1995
(3) Statement of Assets and Liabilities as of
August 31, 1995
(4) Statement of Operations for the year ended
August 31, 1995
(5) Statement of Changes in Net Assets for the
year ended August 31, 1995 and for the
period ended November 4, 1993 (date
operations commenced) through
August 31, 1994
In Part C: None
(7) Liquid Assets Portfolio - Private Investment Class
In Part A: None
In Part B: None
In Part C: None
(8) Liquid Assets Portfolio - Cash Management Class
In Part A: None
In Part B: None
In Part C: None
Exhibit
Number Description
(1) - (a) Articles of Incorporation of Registrant were filed as an
exhibit to Registrant's Registration Statement on
July 19, 1993, and are filed herewith electronically.
C-2
<PAGE>
<TABLE>
<S> <C>
(b) Certificate of Correction of Registrant was filed as an
exhibit to Registrant's Registration Statement on
July 19, 1993, and is filed herewith electronically.
(c) Articles of Amendment of Registrant were filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and are filed herewith electronically.
(d) Articles Supplementary of Registrant are filed herewith
electronically.
(e) Articles Supplementary of Registrant are filed herewith
electronically.
(f) Articles of Amendment of Registrant are filed herewith
electronically.
(g) Certificate of Correction of Registrant is filed herewith
electronically.
(2) - (a) By-Laws of Registrant were filed as an exhibit to
Registrant's Registration Statement on July 19, 1993, and
are filed herewith electronically.
(b) First Amendment, dated March 14, 1995, to By-Laws of
Registrant is filed herewith electronically.
(3) - Voting Trust Agreements - None.
(4) - (a) Form of Specimen Certificate for Liquid Assets Portfolio
was filed as an exhibit to Registrant's Pre-Effective
Amendment No. 1 on October 1, 1993, and is hereby
incorporated by reference.
(b) Form of Specimen Certificate for Prime Portfolio -
Personal Investment Class was filed as an exhibit to
Registrant's Post-Effective Amendment No. 1 on October
15, 1993, and is hereby incorporated by reference.
(c) Form of Specimen Certificate for Prime Portfolio -
Private Investment Class was filed as an exhibit to
Registrant's Post-Effective Amendment No. 1 on October
15, 1993, and is hereby incorporated by reference.
(d) Form of Specimen Certificate for Prime Portfolio -
Institutional Class was filed as an exhibit to
Registrant's Post-Effective Amendment No. 1 on October
15, 1993, and is hereby incorporated by reference.
(e) Form of Specimen Certificate for Prime Portfolio - Cash
Management Class was filed as an exhibit to Registrant's
Post-Effective Amendment No. 1 on October 15, 1993, and
is hereby incorporated by reference.
(f) Form of Specimen Certificate for Prime Portfolio -
Resource Class is filed herewith electronically.
(g) Form of Specimen Certificate for Liquid Assets Portfolio
- Private Investment Class is filed herewith
electronically.
(h) Form of Specimen Certificate for Liquid Assets
Portfolio - Cash Management Class is filed herewith
electronically.
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C>
(5) - (a) Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.
dated August 6, 1993 was filed as an exhibit to Registrant's Post-Effective Amendment No. 1
on October 15, 1993.
(b) Master Investment Advisory Agreement, dated October 18, 1993, between Registrant and
A I M Advisors, Inc. was filed as an exhibit to Registrant's Post-Effective Amendment No. 2
on August 22, 1994, and is hereby filed electronically.
(6) - (a) Master Distribution Agreement between Registrant and Fund Management Company dated August 6, 1993
was filed as an exhibit to Registrant's Post-Effective Amendment No. 1 on October 15, 1993.
(b) Master Distribution Agreement between Registrant and Fund Management Company, dated October 18,
1993, was filed as an exhibit to Registrant's Post-Effective Amendment No. 2 on August 22, 1994,
and is hereby filed electronically.
(c) Amendment No. 1, dated September 19, 1995, to Master Distribution Agreement between Registrant
and Fund Management Company, dated October 18, 1993, is filed herewith electronically.
(d) Form of Amendment No. 2 to Master Distribution Agreement between Registrant and Fund Management
Company, dated October 18, 1993, is filed herewith electronically.
(7) - (a) Retirement Plan for Eligible Directors/Trustees was filed as an exhibit to Registrant's
Post-Effective Amendment No. 2 on August 22, 1994, and is hereby incorporated by reference.
(b) Form of Deferred Compensation Agreement was filed as an exhibit to Registrant's Post-Effective
Amendment No. 2 on August 22, 1994, and is hereby incorporated by reference.
(8) - Custodian Agreement between the Registrant and The Bank of New York, dated October 19, 1993 was
filed as an exhibit to Registrant's Post-Effective Amendment No. 2 on August 22, 1994, and is hereby
incorporated by reference.
(9) - (a) Transfer Agency Agreement between the Registrant and State Street Bank and Trust Company, dated
October 15, 1993 was filed as an exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and is hereby incorporated by reference.
(b) Transfer Agency and Service Agreement between A I M Institutional Fund Services, Inc. and
Registrant dated September 16, 1994, is filed herewith electronically.
(c) Amendment No. 1, dated July 1, 1995, to Transfer Agency and Service Agreement between
A I M Institutional Fund Services, Inc. and Registrant, dated September 16, 1994, is filed
herewith electronically.
</TABLE>
C-4
<PAGE>
(d) Master Administrative Services Agreement between the Registrant and
A I M Advisors, Inc. dated August 6, 1993 was filed as an exhibit to
Registrant's Post-Effective Amendment No. 1 on October 15, 1993.
(e) Master Administrative Services Agreement between the Registrant and
A I M Advisors, Inc., dated October 18, 1993, was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on August 22,
1994, and is hereby filed electronically.
(f) Amendment No. 1, dated November 2, 1995, to Master Administrative
Services Agreement between the Registrant and A I M Advisors, Inc.,
dated October 18, 1993, is filed herewith electronically.
(g) Form of Amendment No. 2 to Master Administrative Services Agreement
between the Registrant and A I M Advisors, Inc., dated October 18,
1993, is filed herewith electronically.
(h) Administrative Service Agreement between A I M Advisors, Inc. and
A I M Fund Services, Inc., dated October 18, 1993, as amended on
May 11, 1994, was filed as an exhibit to Registrant's Post-Effective
Amendment No. 2 on August 22, 1994.
(i) Amendment No. 2 to Administrative Services Agreement between A I M
Advisors, Inc. and A I M Fund Services, Inc., date October 18, 1993,
as amended on May 11, 1994, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on December 21, 1994.
(j) Amendment No. 3 to Administrative Services Agreement between A I M
Advisors, Inc. and A I M Fund Services, Inc., date October 18, 1993,
as amended on May 11, 1994, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on December 21, 1994.
(k) Form of Administrative Services Agreement between A I M Advisors,
Inc. and A I M Institutional Fund Services, Inc., on behalf of the
Portfolios and Classes of the Registrant was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 3 on December 21, 1994.
(10) - Opinion of Ballard Spahr Andrews & Ingersoll was filed as an exhibit to
Registrant's Pre-Effective Amendment No. 1 on October 1, 1993.
(11) - (a) Consent of Ballard Spahr Andrews & Ingersoll is filed herewith
electronically.
(b) Consent of KPGM Peat Marwick LLP is filed herewith electronically.
(12) - Financial Statements - None.
(13) - Agreements Concerning Initial Capitalization - None.
(14) - Registrant's Retirement Plan Documents - None.
(15) - (a) Master Distribution Plan pursuant to Rule 12b-1 under the 1940 Act
for Registrant's Prime Portfolio - Personal Investment Class,
Private Investment Class and Cash Management Class, and related
forms of agreements were filed as an Exhibit to Registrant's Post-
Effective Amendment No. 3 on December 21, 1994 and are hereby filed
electronically.
(b) Amendment No. 1, dated September 19, 1995, to Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act for Registrant's
Prime Portfolio - Resource Class is filed herewith electronically.
C-5
<PAGE>
(c) Form of Amendment No. 2 to Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act for Registrant's Liquid Assets Portfolio -
Private Investment Class and Cash Management Class is filed
herewith electronically.
(16) - Schedule of Performance Quotations was filed as an exhibit to
Registrant's Registration Statement on July 19, 1993.
(18) - Rule 18f-3 Plan - None.
(27) - Financial Data Schedule is filed herewith electronically.
Item 25. Persons Controlled by or under Common Control With Registrant
------------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant and as to each such person
indicate (1) if a company, the state or other sovereign power under the laws of
which it is organized, and (2) the percentage of voting securities owned or
other basis of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities
------------------------------------
State in substantially the tabular form indicated, as of a specified date
within 90 days prior to the date of filing, the number of record holders of each
class of securities of the Registrant.
<TABLE>
<CAPTION>
Title of Class As of October 25, 1995
<S> <C>
Prime Portfolio - Institutional Class 50
Prime Portfolio - Personal Investment Class 3
Prime Portfolio - Private Investment Class 9
Prime Portfolio - Cash Management Class 18
Prime Portfolio - Resource Class 0
Liquid Assets Portfolio - Institutional Class 26
Liquid Assets Portfolio - Private Investment Class 0
Liquid Assets Portfolio - Cash Management Class 0
</TABLE>
Item 27. 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 in any manner against any liability which may be
incurred in such 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, employee or agent 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.
C-6
<PAGE>
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 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 hereby, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such issue.
Insurance coverage is provided under a joint Mutual Fund & Investment
Advisory Professional Directors & Officers Liability Policy, issued by ICI
Mutual Insurance Company, with a $15,000,000 limit of liability.
Item 28. Business and Other Connections of Investment Advisor
----------------------------------------------------
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his 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 in with the Advisor and its affiliated companies. Reference is
also made to the discussion under the captions "Management of the Fund" of
the Prospectus which comprises Part A of this Registration Statement, and
to the discussion under the caption "General Information about the Fund --
Investment Advisor" of the Statement of Additional Information which
comprises Part B of this Registration Statement, and to Item 29(b) of this
Part C of the Registration Statement.
Item 29. Principal Underwriters
----------------------
(a) Fund Management Company, the Registrant's principal underwriter,
also acts as a principal underwriter to the following investment
companies:
AIM Equity Funds, Inc. (Institutional Classes)
AIM Investment Securities Fund (Limited Maturity Treasury
Portfolio-Institutional Shares)
Short-Term Investments Trust
Tax-Free Investments Co.
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman and Director
J. Abbott Sprague President and Director Vice President
Robert H. Graham Senior Vice President and Director Director and President
</TABLE>
- --------------------
* 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173
C-7
<PAGE>
<TABLE>
<S> <C> <C>
Mark D. Santero Senior Vice President None
Carol F. Relihan Secretary, Vice President Secretary and Vice President
& General Counsel
John J. Arthur Treasurer & Vice President Senior Vice President & Treasurer
William H. Kleh Vice President & Director None
Mark E. McMeans Vice President None
Melville B. Cox Assistant Vice President Vice President
David E. Hessel Assistant Vice President, None
Assistant Treasurer &
Controller
Jeffrey L. Horne Assistant Vice President None
Margaret A. Reilly Assistant Vice President None
Dana R. Sutton Assistant Vice President Vice President & Assistant
& Assistant Treasurer Treasurer
Stephen I. Winer Assistant Vice President, Assistant Assistant Secretary
General Counsel & Assistant Secretary
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
Kathleen J. Pflueger Assistant Secretary Assistant Secretary
</TABLE>
(c) Not Applicable
Item 30. Location of Accounts and Records.
--------------------------------------
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, 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, 48
Wall Street, New York, New York 10286, and Transfer Agent, A I M
Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
C-8
<PAGE>
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any management-related
service contract not discussed in Part A or Part B of this Form (because the
contract was not believed to be of interest to a purchaser of securities of the
Registrant) under which services are provided to the Registrant, indicating the
parties to the contract, the total dollars paid and by whom, for the last three
fiscal years.
None.
Item 32. Undertakings
------------
(a) None.
(b) None.
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the applicable Portfolio's
latest annual report to shareholders, upon request and without
charge.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 8th day of
November, 1995.
Registrant: SHORT-TERM 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:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Charles T. Bauer Chairman & Director 11/08/95
- -------------------------
(Charles T. Bauer)
/s/ Robert H. Graham Director & President 11/08/95
- ------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ Bruce L. Crockett Director 11/08/95
- -------------------------
(Bruce L. Crockett)
/s/ Owen Daly II Director 11/08/95
- -------------------------
(Owen Daly II)
/s/ Carl Frischling Director 11/08/95
- -------------------------
(Carl Frischling)
/s/ John F. Kroeger Director 11/08/95
- -------------------------
(John F. Kroeger)
/s/ Lewis F. Pennock Director 11/08/95
- -------------------------
(Lewis F. Pennock)
/s/ Ian W. Robinson Director 11/08/95
- -------------------------
(Ian W. Robinson)
/s/ Louis S. Sklar Director 11/08/95
- -------------------------
(Louis S. Sklar)
/s/ John J. Arthur Senior Vice President & 11/08/95
- ------------------------- Treasurer (Principal Financial
(John J. Arthur) and Accounting Officer)
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No.
- -------
<S> <C>
1(a) Articles of Incorporation of Registrant
1(b) Certificate of Correction of Registrant
1(c) Articles of Amendment of Registrant
1(d) Articles Supplementary of Registrant
1(e) Articles Supplementary of Registrant
1(f) Articles of Amendment of Registrant
1(g) Certificate of Correction of Registrant
2(a) By-Laws of Registrant
2(b) First Amendment, dated March 14, 1995, to By-Laws of Registrant
4(f) Form of Specimen Certificate for Prime Portfolio - Resource Class
4(g) Form of Specimen Certificate for Liquid Assets Portfolio - Private
Investment Class
4(h) Form of Specimen Certificate for Liquid Assets Portfolio - Cash
Management Class
5(b) Master Investment Advisory Agreement between Registrant and A I M
Advisors, Inc. dated October 18, 1993
6(b) Master Distribution Agreement between Registrant and Fund Management
Company dated October 18, 1993
6(c) Amendment No. 1, dated September 19, 1995, to Master Distribution
Agreement dated October 18, 1993
6(d) Form of Amendment No. 2 to Master Distribution Agreement dated
October 18, 1993
9(b) Transfer Agency and Service Agreement between A I M Institutional
Fund Services, Inc. and Registrant dated September 16, 1994
9(c) Amendment No. 1, dated July 1, 1995, to Transfer Agency and Service
Agreement between A I M Institutional Fund Services, Inc. and
Registrant dated September 16, 1994
9(e) Master Administrative Services Agreement between Registrant and
A I M Advisors, Inc. dated October 18, 1993
9(f) Amendment No. 1, dated November 2, 1995, to Master Administrative
Services Agreement between Registrant and A I M Advisors, Inc. dated
October 18, 1993
9(g) Form of Amendment No. 2 to Master Administrative Services Agreement
between Registrant and A I M Advisors, Inc. dated October 18, 1993
11(a) Consent of Ballard Spahr Andrews & Ingersoll
11(b) Consent of KPMG Peat Marwick LLP
</TABLE>
<PAGE>
<TABLE>
<S> <C>
15(a) Master Distribution Plan pursuant to Rule 12b-1 under the 1940 Act
for Registrant's Prime Portfolio - Personal Investment Class,
Private Investment Class and Cash Management Class and related forms
of agreements
15(b) Amendment No. 1, dated September 19, 1995, to Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act for Registrant's
Prime Portfolio - Resource Class
15(c) Form of Amendment No. 2 to Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act for Registrant's Liquid Assets Portfolio -
Private Investment Class and Cash Management Class
27 Financial Data Schedules
</TABLE>
<PAGE>
EXHIBIT 1(a)
ARTICLES OF INCORPORATION
OF
SHORT-TERM INVESTMENTS CO.
FIRST: Incorporator. The undersigned, Carol F. Relihan, whose address is
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, being at least
eighteen years of age, does, under and by virtue of the general laws of the
State of Maryland authorizing the formation of corporations, hereby act as
incorporator with the intention of forming a corporation.
SECOND: Name. The name of the corporation (hereinafter called the
"Corporation") is SHORT-TERM INVESTMENTS CO.
THIRD: Purpose. The purpose for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it, is to act
as an open-end management investment company registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended (the
"1940 Act"), and to exercise and generally to enjoy all of the powers, rights
and privileges granted to, or conferred upon, corporations by the general laws
of the State of Maryland now or hereafter in force.
FOURTH: Principal Office and Resident Agent. The address of the principal
office of the Corporation in the State of Maryland is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the
resident agent of the Corporation in the State of Maryland is The Corporation
Trust Incorporated, and the address of such resident agent is 32 South Street,
Baltimore, Maryland 21202.
FIFTH: Capitalization. (a) The total number of shares of common stock
which the Corporation shall have the authority to issue is 30,000,000,000
shares, of which 10,000,000,000 shares are classified as Prime 1 Portfolio -
Institutional shares ("Prime 1 Institutional Shares"), 3,000,000,000 shares are
classified as Prime Portfolio - Personal shares ("Prime Personal Shares"),
3,000,000,000 shares are classified Prime Portfolio - Private shares ("Prime
Private Shares"), 10,000,000,000 shares are classified as Prime Portfolio -
Institutional shares ("Prime Institutional Shares"), 3,000,000,000 shares are
classified as Prime Portfolio - Cash Management shares ("Prime Cash Management
Shares"), and the balance of which are unclassified. The par value of common
stock is $.001, and the aggregate par value of all authorized shares of common
stock is $30,000,000. Unissued shares of common stock may be classified and
reclassified by the Board of Directors in the manner permitted by the Maryland
General Corporation Law.
(b) The assets of a class may be invested together with the assets
belonging to another class now or hereafter authorized in a currently existing
or hereafter created investment portfolio of the Corporation. Any and all
classes of shares of the Corporation that represent an interest in the same
investment portfolio of the Corporation are hereafter referred to as a "series"
of the Corporation. Subject to the power of the Board of Directors to
reclassify unissued shares, the shares of each class or series of stock of the
Corporation shall have the following preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption:
-1-
<PAGE>
(i) All consideration received by the Corporation for the issuance or sale
of shares of a particular class or series, together with all income, earnings,
profits and proceeds thereof, shall irrevocably belong to such class or series
for all purposes, subject only to the rights of creditors, and are herein
referred to as "assets belonging to" such class.
(ii) The assets belonging to such class or series shall be charged with the
liabilities of the Corporation in respect of such class or series, and with such
class' or series' respective share of the general liabilities of the
Corporation, in the latter case in the proportion that the net asset value of
such class or series bears to the net asset value of all classes or series. The
determination of the Board of Directors shall be conclusive as to the allocation
of liabilities, including accrued expenses and reserves, to a class or series.
(iii) Dividends or distributions on shares of any class or series, whether
payable in stock or cash, shall be paid only out of earnings, surplus or other
assets belonging to such class or series.
(iv) In the event of the liquidation or dissolution of the Corporation,
stockholders of each class or series shall be entitled to receive, as a class or
series, out of the assets of the Corporation available for distribution to
stockholders, the assets belonging to such class or series; and the assets so
distributable to the stockholders of such class or series shall be distributed
among such stockholders in proportion to the number of shares of such class or
series held by them and recorded on the books of the Corporation.
(v) On each matter submitted to a vote of the stockholders, each holder of
a share of stock shall be entitled to one vote for each such share of stock
standing in such holder's on the books of the Corporation, irrespective of the
class or series thereof, and all shares shall be voted in the aggregate and not
by class; provided, however, that to the extent class voting is required by the
1940 Act or Maryland law, or otherwise directed by the Board of Directors, as to
any such matter, shares shall be voted by individual class or series. No holder
of shares of any class or series of stock shall be entitled to vote on any
merger of another corporation with and into the Corporation if the consideration
for such merger consists solely of the shares of another class or series of
stock of the Corporation.
Except as provided above, all provisions of the charter relating to stock
of the Corporation shall apply to shares of and to the holders of shares of all
classes or series of stock, whether now or hereafter classified.
(c) To the extent that the Corporation has funds or property legally
available therefor, each holder of shares of stock of the Corporation, upon
proper written request (including signature guarantees, if required by the Board
of Directors) to the Corporation accompanied, when stock certificates
representing such shares are outstanding, by surrender of the appropriate stock
certificate or certificates in proper form for transfer, or any such form as the
Board of Directors may provide, shall be entitled to require the Corporation to
redeem all or any number of the shares outstanding in the name of such holder on
the books of the Corporation, at the net asset value of such shares.
Notwithstanding the foregoing, the Board of Directors of the Corporation may
suspend the right of the holders of the shares of stock of the Corporation to
require the Corporation to redeem such shares or to receive payment for redeemed
shares when permitted or required to
-2-
<PAGE>
do so by the 1940 Act or any rule or regulation of the Securities and Exchange
Commission promulgated thereunder.
The Corporation, without the vote or consent of the stockholders of the
Corporation, may redeem all shares of stock in any stockholder's account in
which the value of such shares is less than $500.00, or such other minimum
amount as the Board of Directors may from time to time establish in its
discretion; provided, that any such redemption is at a price determined in
accordance with the current prospectus of the class or series of stock to be
redeemed.
(d) All persons who shall acquire stock or securities of the Corporation
shall acquire the same subject to the provisions of the charter of the
Corporation.
SIXTH: Directors. The initial number of directors of the Corporation
shall be three (3), and the names of those who will serve as such until their
successors are duly elected and qualified are as follows:
Charles T. Bauer
Robert H. Graham
William H. Kleh
The By-Laws of the Corporation may from time to time fix the number of
directors at a number other than three (3), and may authorize the Board of
Directors, by the vote of a majority of the entire Board of Directors, to
increase or decrease the number of directors initially set by these Articles of
Incorporation or by the By-Laws (provided that in no case shall the number of
directors be less than three (3) or the number of stockholders, whichever is
less), and to fill vacancies created by any such increase in the number of
directors. Unless otherwise provided by the By-Laws of the Corporation, the
directors of the Corporation need not be stockholders thereof.
SEVENTH: Other Powers. In furtherance and not in limitation of the powers
conferred by the laws of the State of Maryland, the following provisions are
hereby adopted for the purpose of defining and regulating the powers of the
Corporation and of the directors and stockholders:
(a) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, and securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized, in each
case upon the terms and conditions and for such consideration as the Board of
Directors shall from time to time determine.
(b) No holder of shares of stock of the Corporation shall, as such holder,
have any preemptive or other right to purchase or subscribe for any shares of
stock of the Corporation, other than such rights, if any, as the Board of
Directors, in its discretion, may from time to time determine.
(c) The Board of Directors is hereby empowered to authorize the issuance
from time to time of fractional shares of stock of this Corporation, whether now
or hereafter authorized, and any fractional shares so issued shall entitle the
holder thereof to exercise voting rights, receive dividends and participate in
the distribution of assets of the Corporation in the event of liquidation or
dissolution to the extent of the proportionate interest represented by such
fractional shares. The Corporation shall not be obligated to issue stock
certificates evidencing fractional shares.
-3-
<PAGE>
(d) Except to the extent otherwise prohibited by applicable law, the
Corporation may enter into any management or investment advisory contract or
underwriting contract or any other type of contract with, and may otherwise
engage in any transaction or do business with, any person, firm or corporation
or any subsidiary or other affiliate of any such person, firm or corporation,
and may authorize such person, firm or corporation or such subsidiary or other
affiliate to enter into any other contracts or arrangements with any other
person, firm or corporation which relate to the Corporation or the conduct of
its business, notwithstanding that any directors or officers of the Corporation
are or may subsequently become partners, directors, officers, stockholders or
employees of such person, firm or corporation or of such subsidiary or other
affiliate or may have a material financial interest in any such contract,
transaction or business; and except to the extent otherwise provided by
applicable law, no such contract, transaction or business shall be invalidated
or voidable, or in any way affected thereby, nor shall any of such directors or
officers of the Corporation be liable to the Corporation or to any stockholder
or creditor thereof or to any other person for any loss incurred solely because
of the entering into and performance of such contract or the engaging in such
transaction or business or the existence of such material financial interest
therein, provided that such relationship to such person, firm or corporation or
such subsidiary or affiliate or such material financial interest was disclosed
or otherwise known to the Board of Directors prior to the Corporation's entering
into such contract or engaging in such transaction or business, and in the case
of directors of the Corporation, that Section 2-419 of the Maryland General
Corporation Law has been satisfied. Provided further, that nothing herein shall
protect any director or officer of the Corporation from liability to the
Corporation or its security holders to which he would be 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.
(e) The net asset value of a share of any class or series of stock of the
Corporation shall be determined by or in accordance with the determination of
the Board of Directors, which is authorized to determine the methods to be used
to value the assets of a class or series, the amount and allocation of
liabilities of the Corporation to each class or series, and all other matters in
connection therewith.
(f) Any determination made in good faith by or pursuant to the direction of
the Board of Directors as to the (i) amount of the assets, debts, obligations or
liabilities of the Corporation, (ii) amount of any reserves or charges set up
and the propriety thereof, (iii) time of or purpose for creating such reserves
or charges, (iv) use, alteration or cancellation of any reserves or charges
(whether or not any debt, obligation or liability for which such reserves or
charges shall have been created, shall have been paid or discharged, or shall be
then or thereafter required to be paid or discharged), (v) value of any security
or other asset owned or held by the Corporation, (vi) number of shares of the
Corporation outstanding, (vii) net investment income of the Corporation, or
(viii) other matters relating to the issuance, sale, purchase and/or other
acquisition or disposition of securities or shares of the Corporation or the
amount or payment of dividends, shall be final and conclusive, and shall be
binding upon the Corporation and all holders of its shares, past present and
future. Shares of the Corporation are issued and sold on the condition and
understanding, evidenced by acceptance of certificates for such shares, that any
and all determinations shall be binding as aforesaid.
(g) The stockholders of the Corporation may remove any director of the
Corporation prior to the expiration of such director's term of office, for
cause, and not otherwise, by the affirmative vote of a majority of all votes
entitled to be cast for the election of directors. "Cause"
-4-
<PAGE>
shall mean (a) material theft, fraud or embezzlement by the director or active
and deliberate dishonesty by the director; (b) habitual neglect of duty having a
material and adverse significance to the Company; or (c) the director's
conviction of a felony or of any crime involving moral turpitude.
(h) Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of the holders of a designated proportion
greater than a majority of the shares or votes entitled to be cast, such action
shall be effective and valid if taken or authorized by the affirmative vote of
the holders of a majority of the total number of shares entitled to vote
thereon.
NINTH: Limitation of Liability; Indemnification. (a) No director or
officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages, except (i) to the extent that it is proved that
such director or officer actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in money,
property or services actually received, or (ii) to the extent that a judgment or
other final adjudication adverse to such director or officer is entered in a
proceeding based on a finding in the proceeding that such director's or
officer's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Corporation against any liability to the
Corporation or its stockholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
office.
(b) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents of the Corporation
to the fullest extent permitted by the Maryland General Corporation Law.
(c) References to Maryland General Corporation Law in this Article are to
the law as amended from time to time. No further amendment to the Articles of
Incorporation shall affect any right of any person under this Article based on
any event, omission or proceeding prior to such amendment.
TENTH: Quorum. At any meeting of stockholders, thirty percent (30%) of
the outstanding shares of stock entitled to vote at such meeting, present in
person or represented by proxy, shall constitute a quorum; provided, that if
there is to be acted on at the meeting an action which requires the affirmative
vote of "a majority of the outstanding voting securities" as such phrase is
defined in the Investment Company Act of 1940, then a majority of the
outstanding shares of stock entitled to vote at such meeting, present in person
or represented by proxy, shall constitute a quorum. If any matter is to be
voted on by individual class or series, then a quorum shall be required as to
each such class or series.
ELEVENTH: Amendments. The Corporation reserves the right from time to
time to amend, alter, change, add to, or repeal any provision contained in these
Articles of Incorporation in the
-5-
<PAGE>
manner now or hereafter prescribed or permitted by statute, including any
amendment which alters the contract rights, as expressly set forth in these
Articles of Incorporation, of any outstanding stock, and all rights conferred on
stockholders and others herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator of SHORT-TERM INVESTMENTS
CO. who executed the foregoing Articles of Incorporation on the 30th day of
April, 1993, hereby acknowledges the same to be his act, and further
acknowledges that, to the best of his knowledge, information and belief, the
matters and facts set forth herein are true in all material respects and that
this statement is made under the penalties for perjury.
/s/ Carol F. Relihan
--------------------------------
Carol F. Relihan
Subscribed and sworn to before me
this 30th day of April, 1993
/s/ Beverly A. Cook
- ---------------------------------
Notary Public
-6-
<PAGE>
EXHIBIT 1(b)
SHORT-TERM INVESTMENTS CO.
--------------------------
CERTIFICATE OF CORRECTION
THIS IS TO CERTIFY THAT:
1. The undersigned, Carol F. Relihan, whose address is 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046-1173, is the sole incorporator of Short-
Term Investments Co.
2. The title of the document being corrected hereby is Articles of
Incorporation.
3. The Articles of Incorporation were filed on May 3, 1993.
4. The provisions of the Articles of Incorporation which are to be
corrected are Article Second and the first sentence of Article Fifth, which
currently read as follows:
SECOND: Name. The name of the corporation (hereinafter called the
"Corporation") is SHORT-TERM INVESTMENTS CO.
FIFTH: Capitalization. (a) The total number of shares of common
stock which the Corporation shall have the authority to issue is
30,000,000,000 shares, of which 10,000,000,000 shares are classified
as Prime 1 Portfolio - Institutional shares ("Prime 1 Institutional
Shares"), 3,000,000,000 shares are classified as Prime Portfolio -
Personal shares ("Prime Personal Shares"), 3,000,000,000 shares are
classified Prime Portfolio - Private shares ("Prime Private Shares"),
10,000,000,000 shares are classified as Prime Portfolio -
Institutional shares ("Prime Institutional Shares"), 3,000,000,000
shares are classified as Prime Portfolio - Cash Management shares
("Prime Cash Management Shares"), and the balance of which are
unclassified.
5. The corrected provisions of the Articles of Incorporation are as
follows:
SECOND: Name. The name of the corporation (hereinafter called the
"Corporation") is SHORT-TERM INVESTMENTS COMPANY.
FIFTH: Capitalization. (a) The total number of shares of common
stock which the Corporation shall have the authority to issue is
30,000,000,000 shares, of which 10,000,000,000 shares are classified
as Liquid Assets Portfolio - Institutional shares ("Liquid Assets
Institutional Shares"), 3,000,000,000 shares are classified as Prime
Portfolio - Personal shares ("Prime Personal Shares"), 3,000,000,000
shares are classified as Prime Portfolio - Private shares ("Prime
Private Shares"), 10,000,000,000 shares are classified as Prime
Portfolio - Institutional shares ("Prime Institutional Shares"),
3,000,000,000 shares are classified as Prime Portfolio - Cash
Management shares ("Prime Cash Management Shares"), and the balance
of which are unclassified.
-1-
<PAGE>
The undersigned acknowledges this Certificate of Correction to be her
act and as to all matters or facts required to be verified under oath, the
undersigned acknowledges that to the best of her knowledge, information and
belief, these matters are true in all material respects and that this statement
is made under the penalties for perjury.
IN WITNESS WHEREOF, I have signed this Certificate of Correction, and
I acknowledge the same to be my act on this 9th day of June, 1993.
/s/ Carol F. Relihan
-----------------------------
Carol F. Relihan
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<PAGE>
EXHIBIT 1(c)
ARTICLES OF AMENDMENT
SHORT-TERM INVESTMENTS COMPANY
(changing its name to Short-Term Investments Co.)
Short-Term Investments Company, a Maryland corporation having its principal
office in the State of Maryland in Baltimore City (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by deleting
Article SECOND and inserting in lieu thereof the following:
SECOND: NAME. The name of the corporation (hereinafter called the
"Corporation") is Short-Term Investments Co.
SECOND: The charter of the corporation is further amended by deleting
Article FIFTH (a) and inserting in lieu thereof the following:
FIFTH: Capitalization. (a) The total number of shares of common
stock which the Corporation shall have the authority to issue is
30,000,000,000 shares, of which 10,000,000,000 shares are classified
as Liquid Assets Portfolio shares, 3,000,000,000 shares are
classified as Prime Portfolio - Personal Investment Class shares,
3,000,000,000 shares are classified as Prime Portfolio - Private
Investment Class shares, 10,000,000,000 shares are classified as
Prime Portfolio - Institutional Class shares, 3,000,000,000 shares
are classified as Prime Portfolio - Cash Management Class shares,
and the balance of which are unclassified.*
THIRD: The foregoing amendments to the charter were advised by the Board
of Directors and approved by the sole stockholder.
The undersigned, President, acknowledges these Articles of Amendment to be
the corporate act of the Corporation and states to the best of his knowledge,
information and belief that the matters and facts set forth in these Articles
with respect to authorization and approval hereof are true in all material
respects and that this statement is made under the penalties of perjury.
* The par value of common stock is $.001, and the aggregate par value of all
authorized shares of common stock is $30,000,000. Unissued shares of common
stock may be classified and reclassified by the Board of Directors in the
manner permitted by the Maryland General Corporation Law.
-1-
<PAGE>
IN WITNESS WHEREOF, Short-Term Investments Company has caused these
Articles of Amendment to be signed in its name and on its behalf by its
President and witnessed by its Assistant Secretary on October 14, 1993.
SHORT-TERM INVESTMENTS COMPANY
By: /s/ Charles T. Bauer
---------------------
President
WITNESS:
/s/ Carol F. Relihan
- --------------------
Assistant Secretary
-2-
<PAGE>
EXHIBIT 1(d)
SHORT-TERM INVESTMENTS CO.
ARTICLES SUPPLEMENTARY
SHORT-TERM INVESTMENTS CO., a Maryland corporation registered as an open-
end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to Section 2-105(c) of the Maryland General Corporation
Law ("MGCL"), the Board of Directors of the Corporation hereby increases the
aggregate number of shares of common stock which the Corporation shall have the
authority to issue from 30,000,000,000 to 40,000,000,000 shares with a par value
of $.001 each.
SECOND: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue 30,000,000,000 shares with a par value of
$.001 each, of which ten billion (10,000,000,000) shares have been classified as
Liquid Assets Portfolio Shares, three billion (3,000,000,000) shares have been
classified as Prime Portfolio - Personal Investment Class Shares, three billion
(3,000,000,000) shares have been classified as Prime Portfolio - Private
Investment Class Shares, ten billion (10,000,000,000) shares have been
classified as Prime Portfolio - Institutional Class Shares, and three billion
(3,000,000,000) shares have been classified as Prime Portfolio - Cash Management
Class Shares. Of these shares, 1,948,591,377.37 shares of Liquid Assets
Portfolio, 93,791,472.89 shares of Prime Portfolio-Personal Investment Class,
162,830,529.27 shares of Prime Portfolio-Private Investment Class,
3,716,603,723.38 shares of Prime Portfolio-Institutional Class, and
108,898,016.85 shares of Prime Portfolio-Cash Management Class had been issued
as of August 9, 1995.
-1-
<PAGE>
THIRD: As of the filing of these Article Supplementary, the Corporation
shall have authority to issue 40,000,000,000 shares with a par value of $.001
each. Of the additional 10,000,000,000 shares, three billion (3,000,000,000)
shares are classified as Prime Portfolio - Resource Class Shares. The number of
shares of stock of each class specified in Article SECOND of these Articles
Supplementary remains unchanged.
FOURTH: All the shares of common stock of the Corporation, both classified
and unclassified, collectively have an aggregate par value of $40,000,000.
FIFTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the shares as set forth in ARTICLE FIFTH, paragraph
(b) of the Corporation's Charter, and in the provisions of the Charter relating
to stock of the Corporation generally, remain unchanged.
SIXTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SEVENTH: The Board of Directors of the Corporation has authorized and
classified the shares, under authority contained in the Charter of the
Corporation in accordance with Section 2-105(c) of the MGCL.
The undersigned President acknowledges these Articles Supplementary to be
the corporate act of the Corporation and states that to the best of his or her
knowledge, information and belief,
-2-
<PAGE>
the matters and facts set forth in these Articles with respect to authorization
and approval are true in all material respects and that this statement is made
under the penalties for perjury.
IN WITNESS WHEREOF, SHORT-TERM INVESTMENTS CO. has caused these Articles
Supplementary to be executed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on September 19, 1995.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ P. Michelle Grace By: /s/ Robert H. Graham
- ---------------------------- --------------------------------
Assistant Secretary President
-3-
<PAGE>
EXHIBIT 1(e)
SHORT-TERM INVESTMENTS CO.
ARTICLES SUPPLEMENTARY
SHORT-TERM INVESTMENTS CO., a Maryland corporation registered as an open-
end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation has adopted a resolution
------
increasing the number of shares of common stock that are classified (but not
increasing the aggregate number of authorized shares) into separate classes by:
classifying an additional three billion (3,000,000,000) shares of the
previously authorized, unissued and unclassified shares of the common
stock, par value $.001 per share, with an aggregate par value of three
million dollars ($3,000,000), as Assets Portfolio - Cash Management
Class Shares; and
classifying an additional three billion (3,000,000,000) shares of the
previously authorized, unissued and unclassified shares of the common
stock, par value $.001 per share, with an aggregate par value of three
million dollars ($3,000,000), as Assets Portfolio - Private
Investment Class Shares.
SECOND: A description of the Shares so classified with the preferences,
-------
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, as set or
changed by the Board of Directors of the Corporation, is as follows:
The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption of the shares of each class of the common
stock of the Corporation is set forth in ARTICLE FIFTH, paragraph (b)
of the Corporation's Charter, and has not been changed by the Board of
Directors of the Corporation.
THIRD: The Board of Directors of the Corporation has classified the
------
shares described above under the authority contained in the Charter of the
Corporation, in accordance with Section 2-105(c) of the Maryland General
Corporation Law.
<PAGE>
FOURTH: Immediately prior to the filing of these Articles Supplementary,
-------
the Corporation had authority to issue 40,000,000,000 shares with a par value of
$.001 each, and an aggregate par value of forty million dollars ($40,000,000).
Of these shares, ten billion (10,000,000,000) shares had been classified as
Assets Portfolio Shares, three billion (3,000,000,000) shares had been
classified as Prime Portfolio - Personal Investment Class Shares, three billion
(3,000,000,000) shares had been classified as Prime Portfolio - Private
Investment Class Shares, ten billion (10,000,000,000) shares had been classified
as Prime Portfolio - Institutional Class Shares, three billion (3,000,000,000)
shares had been classified as Prime Portfolio - Cash Management Class Shares,
and three billion (3,000,000,000) shares had been classified as Prime
Portfolio - Resource Class Shares.
FIFTH: As of the filing of these Articles Supplementary, the Corporation
------
shall have authority to issue 40,000,000,000 shares with a par value of $.001
each, and an aggregate par value of forty million dollars ($40,000,000). Of
these shares, three billion (3,000,000,000) shares are classified as Assets
Portfolio - Cash Management Class Shares, three billion (3,000,000,000) shares
are classified as Assets Portfolio - Private Investment Class Shares, ten
billion (10,000,000,000) shares (including all previously issued and outstanding
Assets Portfolio Shares) are classified as Liquid Assets Portfolio, three
billion (3,000,000,000) shares have been classified as Prime Portfolio -
Personal Investment Class Shares, three billion (3,000,000,000) shares have been
classified as Prime Portfolio - Private Investment Class Shares, ten billion
(10,000,000,000) shares have been classified as Prime Portfolio - Institutional
Class Shares, three billion (3,000,000,000) shares have been classified as Prime
Portfolio - Cash Management Class Shares, three billion (3,000,000,000) shares
have been classified as Prime Portfolio - Resource Class Shares, and two billion
(2,000,000,000) shares remain unclassified.
SIXTH: The Corporation is registered as an open-end company under the
------
Investment Company Act of 1940.
The undersigned President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
2
<PAGE>
IN WITNESS WHEREOF, SHORT-TERM INVESTMENT CO. has caused these Articles
Supplementary to be executed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on November 3, 1995.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ P. Michelle Grace /s/ Robert H. Graham
- ------------------------------ -------------------------------
Assistant Secretary President
3
<PAGE>
EXHIBIT 1(f)
SHORT-TERM INVESTMENTS CO.
ARTICLES OF AMENDMENT
SHORT-TERM INVESTMENTS CO., a Maryland corporation registered as an open-
end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: In Article FIFTH, Section (a) of the Corporation's charter (the
-----
"Charter"), the ten billion (10,000,000,000) shares of Liquid Assets Portfolio
shall be redesignated as Liquid Assets Portfolio - Institutional Shares.
SECOND: The Board of Directors of the Corporation unanimously adopted
------
resolutions in which were set forth the foregoing amendment (the "Amendment") to
the Charter in a telephonic meeting on November 2, 1995.
THIRD: This amendment is limited to a change expressly permitted by Section
-----
2-605(a)(4) of the Maryland General Corporation Law to be made without action by
stockholders, and the Corporation is registered as an open-end company under the
Investment Company Act of 1940.
The undersigned President acknowledges these Articles of Amendment to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, SHORT-TERM INVESTMENTS CO. has caused these Articles of
Amendment to be executed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on November 3, 1995.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ P. Michelle Grace By: /s/ Robert H. Graham
_____________________________ __________________________
Assistant Secretary President
<PAGE>
EXHIBIT 1(g)
SHORT-TERM INVESTMENTS CO.
CERTIFICATE OF CORRECTION
SHORT-TERM INVESTMENTS CO., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: This Certificate of Correction is being filed to correct the
-----
Articles Supplementary of the Corporation which were filed with the State of
Maryland on Monday, November 6, 1995.
SECOND: The provisions of the Articles Supplementary of the Corporation
------
that are being corrected originally read as follows:
FIRST: The Board of Directors of the Corporation has adopted a resolution
------
increasing the number of shares of common stock that are classified (but
not increasing the aggregate number of authorized shares) into separate
classes by:
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified shares
of the common stock, par value $.001 per
share, with an aggregate par value of three
million dollars ($3,000,000), as Assets
Portfolio - Cash Management Class Shares;
and
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified shares
of the common stock, par value $.001 per
share, with an aggregate par value of three
million dollars ($3,000,000), as Assets
Portfolio - Private Investment Class Shares.
****
FOURTH: Immediately prior to the filing of these Articles
-------
Supplementary, the Corporation had authority to issue 40,000,000,000
<PAGE>
shares with a par value of $.001 each, and an aggregate par value of forty
million dollars ($40,000,000). Of these shares, ten billion
(10,000,000,000) shares had been classified as Assets Portfolio Shares,
three billion (3,000,000,000) shares had been classified as Prime Portfolio
- Personal Investment Class Shares, three billion (3,000,000,000) shares
had been classified as Prime Portfolio - Private Investment Class Shares,
ten billion (10,000,000,000) shares had been classified as Prime Portfolio
- Institutional Class Shares, three billion (3,000,000,000) shares had been
classified as Prime Portfolio - Cash Management Class Shares, and three
billion (3,000,000,000) shares had been classified as Prime Portfolio -
Resource Class Shares.
FIFTH: As of the filing of these Articles Supplementary, the
------
Corporation shall have authority to issue 40,000,000,000 shares with a par
value of $.001 each, and an aggregate par value of forty million dollars
($40,000,000). Of these shares, three billion (3,000,000,000) shares are
classified as Assets Portfolio - Cash Management Class Shares, three
billion (3,000,000,000) shares are classified as Assets Portfolio -
Private Investment Class Shares, ten billion (10,000,000,000) shares
(including all previously issued and outstanding Assets Portfolio Shares)
are classified as Liquid Assets Portfolio, three billion (3,000,000,000)
shares have been classified as Prime Portfolio - Personal Investment Class
Shares, three billion (3,000,000,000) shares have been classified as Prime
Portfolio -Private Investment Class Shares, ten billion (10,000,000,000)
shares have been classified as Prime Portfolio - Institutional Class
Shares, three billion (3,000,000,000) shares have been classified as Prime
Portfolio - Cash Management Class Shares, three billion (3,000,000,000)
shares have been classified as Prime Portfolio - Resource Class Shares, and
two billion (2,000,000,000) shares remain unclassified.
THIRD: The foregoing provisions of the Articles Supplementary of the
-----
Corporation are hereby corrected to read as follows:
FIRST: The Board of Directors of the Corporation has adopted a resolution
------
increasing the number of shares of common stock that are classified (but
not increasing the aggregate number of authorized shares) into separate
classes by:
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified shares
of the common stock, par value $.001 per
share, with an aggregate par value of three
2
<PAGE>
million dollars ($3,000,000), as Liquid Assets
Portfolio - Cash Management Class Shares;
and
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified shares
of the common stock, par value $.001 per
share, with an aggregate par value of three
million dollars ($3,000,000), as Liquid Assets
Portfolio - Private Investment Class Shares.
****
FOURTH: Immediately prior to the filing of these Articles
-------
Supplementary, the Corporation had authority to issue 40,000,000,000 shares
with a par value of $.001 each, and an aggregate par value of forty million
dollars ($40,000,000). Of these shares, ten billion (10,000,000,000)
shares had been classified as Liquid Assets Portfolio Shares, three billion
(3,000,000,000) shares had been classified as Prime Portfolio - Personal
Investment Class Shares, three billion (3,000,000,000) shares had been
classified as Prime Portfolio - Private Investment Class Shares, ten
billion (10,000,000,000) shares had been classified as Prime Portfolio -
Institutional Class Shares, three billion (3,000,000,000) shares had been
classified as Prime Portfolio - Cash Management Class Shares, and three
billion (3,000,000,000) shares had been classified as Prime Portfolio -
Resource Class Shares.
FIFTH: As of the filing of these Articles Supplementary, the
------
Corporation shall have authority to issue 40,000,000,000 shares with a par
value of $.001 each, and an aggregate par value of forty million dollars
($40,000,000). Of these shares, three billion (3,000,000,000) shares are
classified as Liquid Assets Portfolio - Cash Management Class Shares, three
billion (3,000,000,000) shares are classified as Liquid Assets Portfolio -
Private Investment Class Shares, ten billion (10,000,000,000) shares
(including all previously issued and outstanding Liquid Assets Portfolio
Shares) are classified as Liquid Assets Portfolio Shares, three billion
(3,000,000,000) shares have been classified as Prime Portfolio -Personal
Investment Class Shares, three billion (3,000,000,000) shares have been
classified as Prime Portfolio - Private Investment Class Shares, ten
billion (10,000,000,000) shares have been classified as Prime Portfolio -
Institutional Class Shares, three billion (3,000,000,000) shares have been
classified as Prime Portfolio - Cash Management Class Shares, three billion
(3,000,000,000) shares have been classified as Prime
3
<PAGE>
Portfolio - Resource Class Shares, and two billion (2,000,000,000) shares
remain unclassified.
The undersigned President acknowledges this Certificate of Correction to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, SHORT-TERM INVESTMENTS CO. has caused this Certificate
of Correction to be executed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on November 7, 1995.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ P. Michelle Grace /s/ Robert H. Graham
- --------------------------------- ---------------------------------
Assistant Secretary President
Phebe Michelle Grace Robert H. Graham
4
<PAGE>
EXHIBIT 2(a)
SHORT-TERM INVESTMENTS CO.
a Maryland corporation
BY LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Time and Place of Meetings. Meetings of the stockholders of
the Corporation need not be held except as required under the general laws of
the State of Maryland, as the same may be amended from time to time. Meetings
of the stockholders shall be held at places within the United States designated
by the Board of Directors and set forth in the notice of the meeting.
Section 2. Annual Meetings. If a meeting of the stockholders of the
Corporation is required by the Investment Company Act of 1940, as amended, to
take action with respect to the election of directors, then such matter shall be
submitted to the stockholders at a special meeting called for such purpose,
which shall be deemed the annual meeting of stockholders for that year. In
years in which no such action by stockholders is so required, no annual meeting
of stockholders need be held.
Section 3. Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called by the Chairman of the Board of Directors, if
any, by the President or by a majority of the Board of Directors. In addition,
such special meetings shall be called by the Secretary upon receipt of a request
in writing, signed by stockholders entitled to cast at least 10% of all the
votes entitled to be cast at the meeting, which states the purpose of the
meeting and the matters proposed to be acted on at the meeting. Unless
requested by stockholders entitled to cast
-1-
<PAGE>
a majority of all the votes entitled to be cast at the meeting, a special
meeting need not be called to consider any matter which is substantially the
same as a matter voted on at a special meeting of the stockholders held during
the preceding twelve (12) months.
Section 4. Notice of Meeting of Stockholders. Written or printed notice
of every meeting of stockholders, stating the time and place thereof (and the
purpose of any special meeting), shall be given, not less than ten (10) days nor
more than ninety (90) days before the date of the meeting, to each stockholder
entitled to vote at the meeting and each other stockholder entitled to notice,
by delivering such notice personally, or leaving such notice at each
stockholder's residence or usual place of business, or by mailing such notice,
postage prepaid, addressed to each stockholder at such stockholder's address as
it appears upon the books of the Corporation. Each person who is entitled to
notice of any meeting shall be deemed to have waived notice if present at the
meeting in person or by proxy or if such person signs a waiver of notice (either
before or after the meeting) which is filed with the records of stockholders
meetings.
Section 5. Closing of Transfer Books, Record Dates. The Board of
Directors may set a record date for the purpose of making any proper
determination with respect to stockholders, including determining which
stockholders are entitled to notice of and to vote at a meeting, receive a
dividend or be allotted other rights. The record date may not be prior to the
close of business on the day the record date is fixed and shall be not more than
90 days before the date on which the action requiring the determination is
taken. In the case of a meeting of stockholders, the record date shall be at
least ten days before the date of the meeting. Only stockholders of record on
such date shall be entitled to notice of and to vote at such meeting, or to
receive such dividends or rights, as the case may be.
-2-
<PAGE>
Section 6. Manner of Acting; Adjournment of Meetings. A majority of all
votes cast at a meeting of stockholders at which a quorum is present shall be
sufficient to approve any matter which properly comes before the meeting, unless
otherwise provided by applicable law, the Charter of the Corporation or these By
Laws. A meeting of stockholders convened on the date for which it was called
may be adjourned from time to time without further notice, to a date not more
than 120 days after the original record date for such meeting, but no business
shall be transacted at any such adjourned meeting, except business which might
have been lawfully transacted had the meeting not been adjourned.
Section 7. Voting and Inspectors. (a) At all meetings of stockholders,
every stockholder of record entitled to vote may do so either in person or by
written proxy signed by such stockholder or such stockholder's duly authorized
attorney in fact. Unless a proxy provides otherwise, such proxy shall not be
valid more than eleven (11) months after its date.
(b) At any meeting of stockholders considering the election of directors,
the Board of Directors prior to the convening of such meeting may, or, if the
Board has not so acted, the Chairman of the meeting may, appoint two (2)
inspectors of election, who shall first subscribe an oath or affirmation to
execute faithfully the duties of inspectors at such election with strict
impartiality and according to the best of their ability, and shall after the
election certify the result of the vote taken. No candidate for election as a
director shall be appointed to act as an inspector of election.
(c) The Chairman of the meeting may cause a vote by ballot to be taken with
respect to any election or matter.
-3-
<PAGE>
Section 8. Conduct of Stockholders Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board, or if the
Chairman shall not be present or if there is no Chairman, by the President, or
if the President shall not be present, by a Vice-President, or if no Vice-
President is present, by a chairman elected for such purpose at the meeting.
The Secretary of the Corporation, if present, shall act as Secretary of such
meetings, or if the Secretary is not present, an Assistant Secretary of the
Corporation shall so act, and if no Assistant Secretary is present, then the
meeting shall elect a secretary for the meeting.
Section 9. Validity of Proxies and Ballots. At every meeting of the
stockholders, all proxies shall be received and maintained by, and all ballots
shall be received and canvassed by, the secretary of the meeting, who shall
decide all questions concerning the qualification of voters, the validity of
proxies, and the acceptance or rejection of votes, unless inspectors of election
shall have been appointed, in which case the inspectors of election shall decide
all such questions.
Section 10. Nominations and Stockholder Business.
(a) Annual Meetings of Stockholders. (1) Nominations of individuals for
election to the board of directors and the proposal of business to be considered
by the stockholders may be made at an annual meeting of stockholders (i)
pursuant to the corporation's notice of meeting, (ii) by or at the direction of
the directors or (iii) by any stockholder of the corporation who was a
stockholder of record at the time of giving of notice provided for in this
Section 10(a), who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 10(a).
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(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) or paragraph (a)(1) of
this Section 10, the stockholder must have given timely notice thereof in
writing to the secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the tenth day following
the day on which public announcement of the date of such meeting is first made.
Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner and (y) the class and number of shares of stock of the corporation which
are owned beneficially and of record by such stockholder and such beneficial
owner.
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(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
this Section 10 to the contrary, in the event that the number of directors to be
elected to the board of directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased board of directors made by the corporation at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Section 10(a) shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
corporation's notice of meeting (ii) by or at the direction of the board of
directors or (iii) provided that the board of directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 10(b), who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 10(b). In the
event the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the board of directors, any such stockholder
may nominate a person or persons (as the case may be) for election to such
position as specified in the corporation's notice of meeting, if the
stockholder's notice required by paragraph (a)(2) of this Section 10 shall be
delivered to the secretary at the principal executive offices of the corporation
not earlier than the 90th day prior to such special meeting and not later
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than the close of business on the later of the 60th day prior to such special
meeting or the tenth day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
directors to be elected at such meeting.
(c) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 10 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 10. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Section 10 and, if any proposed nomination or business is not in
compliance with this Section 10, to declare that such defective nomination or
proposal be disregarded.
(2) For purposes of this Section 10, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Sections 13,
14, or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 10, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 10. Nothing in this Section 10 shall be
deemed to affect any rights of stockholders to request inclusion of proposals in
the corporation's proxy statement pursuant to Rule 14a-8 under this Exchange
Act.
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<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors
initially consisting of three (3) directors, which number may be increased or
decreased as herein provided. Directors shall hold office until their
respective successors have been duly elected and qualify. Directors need not be
stockholders.
Section 2. Increase or Decrease in Number of Directors. The Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of directors to a number not exceeding fifteen (15), and may appoint
directors to fill the vacancies created by any increase in the number of
directors, and such appointed directors shall hold office until their successors
have been duly elected and qualify. The Board of Directors, by the vote of a
majority of the entire Board, may decrease the number of directors to a number
not less than three (3) or the number of stockholders, whichever is less, but
any such decrease shall not affect the term of office of any director.
Vacancies occurring other than by reason of any increase in the number of
directors shall be filled as provided by the Maryland General Corporation Law.
Section 3. Place of Meetings. The directors may hold their meetings and
keep the books of the Corporation outside the State of Maryland, at any office
or offices of the Corporation or at any other place as they may from time to
time determine; and in the case of meetings, as shall be specified in the
respective notices of such meetings.
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Section 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and on such notice, if any, as the directors may from
time to time determine.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be held from time to time upon call of the Chairman of the Board of
Directors, if any, the President, or any two (2) or more of the directors, by
oral, telegraphic or written notice duly given to each director not less than
one (1) business day before such meeting or, if sent or mailed to each director,
not less than three (3) business days before such meeting. Each director who is
entitled to notice shall be deemed to have waived notice if such director is
present at the meeting or, either before or after the meeting, such director
signs a waiver of notice which is filed with the minutes of the meeting. Such
notice or waiver of notice need not state the purpose or purposes of such
meeting.
Section 6. Quorum. One third (1/3) of the directors then in office (but
in no event less than two (2) directors) shall constitute a quorum of the Board
of Directors for the transaction of business. If at any meeting of the Board
there shall be less than a quorum present, a majority of those directors present
may adjourn the meeting from time to time until a quorum shall have been
attained. The action of a majority of the directors present at any meeting at
which there is a quorum shall be the action of the Board of Directors, except as
may be otherwise specifically provided by applicable law, the Charter or these
By Laws.
Section 7. Telephonic Meetings. The members of the Board of Directors, or
any committee of the Board of Directors, may participate in a meeting by means
of a conference telephone call or similar communications equipment if all
persons participating in such meeting can simultaneously
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hear each other, and participation in a meeting by these means constitutes
presence in person at such meeting.
Section 8. Executive Committee. The Board of Directors may appoint an
Executive Committee consisting of two (2) or more directors. Between meetings
of the Board of Directors, the Executive Committee, if any, shall have and may
exercise any or all of the powers of the Board of Directors with respect to the
management of the business and affairs of the Corporation, except (a) as
otherwise provided by law and (b) the power to increase or decrease the size of,
or fill vacancies on, the Board of Directors. The Executive Committee may
determine its own rules of procedure, and may meet when and as the Executive
Committee determines, or when directed by resolution of the Board of Directors.
The presence of a majority of the Executive Committee shall constitute a quorum.
The Board of Directors shall have the power at any time to change the members
and powers of, to fill vacancies on, and to dissolve the Executive Committee.
In the absence of any member of the Executive Committee, the members present at
any meeting, whether or not they constitute a quorum, may appoint a director to
act in the place of such absent member.
Section 9. Other Committees. The Board of Directors may appoint other
committees which shall in each case consist of such number of directors (not
less than two (2)), which shall have and may exercise such powers as the Board
may from time to time determine, subject to applicable law. A majority of all
members of any such committee may determine its action, and the time and place
of its meetings, unless the Board of Directors shall provide otherwise. The
Board of Directors shall have the power at any time to change the members and
powers of, to fill vacancies on, and to dissolve any such committee. In the
absence of any member of such committee, the members
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present at any meeting, whether or not they constitute a quorum, may appoint a
director to act in the place of such absent member.
Section 10. Informal Action by Directors. Except to the extent otherwise
specifically prohibited by applicable law, any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting, if a written consent to such action is signed by all
members of the Board or such committee, and such consent is filed with the
minutes of proceedings of the Board or such committee.
Section 11. Compensation of Directors. Directors shall be entitled to
receive such compensation from the Corporation for their services as directors
as the Board of Directors may from time to time determine.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The initial executive officers of the
Corporation shall be elected by the Board of Directors as soon as practicable
after the incorporation of the Corporation. The executive officers may include
a Chairman of the Board, and shall include a President, one or more Vice
Presidents (the number thereof to be determine by the Board of Directors), a
Secretary and a Treasurer. The Chairman of the Board, if any, shall be selected
from among the directors. The Board of Directors may also in its discretion
appoint Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers,
and other officers, agents and employees, who shall have such authority and
perform such duties as the Board may determine. The Board of Directors may fill
any
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vacancy which may occur in any office. Any two (2) offices, except those of
President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument on behalf of the Corporation
in more than one (1) capacity, if such instrument is required by law or by these
By Laws to be executed, acknowledged or verified by two (2) or more officers.
Section 2. Term of Office. Unless otherwise specifically determined by
the Board of Directors, the officers shall serve at the pleasure of the Board of
Directors. If the Board of Directors in its judgment finds that the best
interests of the Corporation will be served, the Board of Directors may remove
any officer of the Corporation at any time with or without cause.
Section 3. President. The President shall be the chief executive officer
of the Corporation and, subject to the Board of Directors, shall generally
manage the business and affairs of the Corporation. If there is no Chairman of
the Board, or if the Chairman of the Board has been appointed but is absent, the
President shall, if present, preside at all meetings of the stockholders and the
Board of Directors.
Section 4. Chairman of the Board. The Chairman of the Board, if any,
shall preside at all meetings of the stockholders and the Board of Directors, if
the Chairman of the Board is present. The Chairman of the Board shall have such
other powers and duties as shall be determined by the Board of Directors, and
shall undertake such other assignments as may be requested by the President.
Section 5. Other Officers. The Chairman of the Board or one or more Vice
Presidents shall have and exercise such powers and duties of the President in
the absence or inability to act of the
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<PAGE>
President, as may be assigned to them, respectively, by the Board of Directors
or, to the extent not so assigned, by the President. In the absence or inability
to act of the President, the powers and duties of the President not otherwise
assigned by the Board of Directors or the President shall devolve upon the
Chairman of the Board, or in the Chairman's absence, the Vice Presidents in the
order of their election.
Section 6. Secretary. The Secretary shall have custody of the seal of the
Corporation, and shall keep the minutes of the meetings of the stockholders,
Board of Directors and any committees thereof, and shall issue all notices of
the Corporation. The Secretary shall have charge of the stock records and such
other books and papers as the Board may direct, and shall perform such other
duties as may be incidental to the office or which are assigned by the Board of
Directors. The Secretary shall also keep or cause to be kept a stock book,
which may be maintained by means of computer systems, containing the names,
alphabetically arranged, of all persons who are stockholders of the Corporation,
showing their places of residence, the number and class or series of any class
of shares of stock held by them, respectively, and the dates when they became
the record owners thereof, and such book shall be open for inspection as
prescribed by the laws of the State of Maryland.
Section 7. Treasurer. The Treasurer shall have the care and custody of
the funds and securities of the Corporation and shall deposit the same in the
name of the Corporation in such bank or banks or other depositories, subject to
withdrawal in such manner as these By Laws or the Board of Directors may
determine. The Treasurer shall, if required by the Board of Directors, give
such bond for the faithful discharge of duties in such form as the Board of
Directors may require.
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<PAGE>
ARTICLE IV
STOCK
Section 1. Stock Certificates. Each stockholder of the Corporation shall
be entitled to a certificate or certificates for the full number of shares of
each class or series of stock of the Corporation owned by such stockholder, in
such form as the Board of Directors may from time to time determine, subject to
applicable law.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder(s) thereof, in person
or by such holder's duly authorized attorney or legal representative, upon
surrender and cancellation of certificates, if any, for the same number of
shares, duly endorsed or accompanied by proper instruments of assignment and
transfer, with such proof of the authenticity of the signature(s) as the
Corporation or its agents may reasonably require. In the case of shares not
represented by certificates, the same or similar requirements may be imposed by
the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them, respectively, shall be kept at the principal offices of the
Corporation, or if the Corporation has appointed a transfer agent, at the
offices of such transfer agent.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors
may determine the conditions upon which a new stock certificate of any class or
series may be issued in place of a certificate which is alleged to have been
lost, stolen or destroyed. The Board of Directors may
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in its discretion require the owner of such certificate to give bond, with
sufficient surety to the Corporation and the transfer agent, if any, to
indemnify the Corporation and such transfer agent against any and all losses or
claims which may arise by reason of the issuance of a replacement certificate.
ARTICLE V
CORPORATE SEAL
The Board of Directors may provide for a suitable corporate seal, in such
form and bearing such inscriptions as it may determine. In lieu of fixing the
Corporation's seal to a document, it is sufficient to meet the requirements of
any law, rule or regulation relating to a corporate seal to place the word
"(seal)" adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board of
Directors.
ARTICLE VII
INDEMNIFICATION AND ADVANCES FOR EXPENSES
Section 1. Indemnification of Directors and Officers. The Corporation
shall indemnify its directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify its officers to the same extent as its directors
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and to such further extent as is consistent with law. The Corporation shall
indemnify its directors and officers who while serving as directors or officers
also serve at the request of the Corporation as a director, officer, partner,
trustee, employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the fullest extent
consistent with law. The indemnification and other rights provided for by this
Article shall continue as to a person who has ceased to be a director or
officer, and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Corporation or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office ("disabling conduct").
Section 2. Advances. The Corporation shall advance payment to any current
or former director or officer of the Corporation for reasonable expenses
incurred in connection with any proceeding in which the individual is made a
party by reason of service as a director or officer in the manner and to the
fullest extent permissible under the Maryland General Corporation Law. Upon
receipt by the Corporation of a written affirmation of his or her good faith
belief that the standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking to repay any such advance if
it should ultimately be determined that the requisite standard of conduct has
not been met. In addition, at least one of the following conditions must be
satisfied: (a) the individual shall provide security in form and amount
acceptable to the Corporation for the foregoing undertaking, (b) the Corporation
shall be insured against losses arising by reason of the advance, or (c) a
majority of a quorum of directors of the Corporation who are neither "interested
persons," as defined in Section 2(a)(19) of the Investment Company Act of 1940,
as amended, nor parties to the proceeding ("disinterested non-party directors"),
or independent legal
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counsel in a written opinion, shall have determined, based on a review of facts
readily available to the Corporation at the time the advance is proposed to be
made, that there is reason to believe that the person seeking indemnification
will ultimately be found to meet the requisite standard of conduct.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct, or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by, (i) the vote of a majority of a quorum of disinterested
non-party directors, or (ii) an independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents. Employees and agents
who are not officers or directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940, as amended.
Section 5. Other Rights. The Board of Directors may make further
provision consistent with law for indemnification and advancement of expenses to
directors, officers, employees and agents by resolution, agreement or otherwise.
The indemnification provided for by this Article shall not be
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deemed exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled under any
insurance, other agreement, resolution of stockholders or disinterested
directors, or otherwise.
Section 6. Subsequent Changes to Law. References in this Article are to
the Maryland General Corporation Law and to the Investment Company Act of 1940
as from time to time amended. No amendment of these By Laws shall affect any
right of any person under this Article based on any event, omission or
proceeding occurring prior to such amendment.
ARTICLE VIII
AMENDMENT OF BY LAWS
These By Laws may be altered, amended or repealed by the Board of
Directors.
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EXHIBIT 2(b)
SHORT-TERM INVESTMENTS CO.
FIRST AMENDMENT, DATED MARCH 14, 1995,
TO BY-LAWS
Article I, Section 7(a) of the By-Laws of Short-Term Investments Co. is
hereby amended to read in full as follows:
"At all meetings of the stockholders, every stockholder of record
entitled to vote thereat shall be entitled to vote at such meeting either
in person or by written proxy signed by the stockholder or by his duly
authorized attorney in fact. A stockholder may duly authorize such
attorney in fact through written, electronic, telephonic, computerized,
facsimile, telecommunication, telex or oral communication or by any other
form of communication. Unless a proxy provides otherwise, such proxy is
not valid more than eleven months after its date."
<PAGE>
EXHIBIT 4(f)
NO. ________ SHARES
RESOURCE CLASS
OF THE
PRIME PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT:
CUSIP ________________
is the holder of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE OF $.001
PER SHARE
Shares of Common Stock of the above named Class of SHORT-TERM INVESTMENTS CO.
are transferable on the books of the Corporation by the holder hereof in
person or by duly authorized Attorney upon surrender of this Certificate
properly endorsed. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
[MARYLAND CORPORATE SEAL]
Dated Countersigned:
A I M INSTITUTIONAL FUND SERVICES,INC.
Transfer Agent
(Houston, Texas)
[SEAL]
/s/ Robert H. Graham)
President)
)
) FOR THE DIRECTORS
)
/s/ Carol F. Relihan) By _______________________________
Secretary) Authorized Signature
<PAGE>
The Corporation will furnish to any stockholder upon request and without charge
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption of the stock or each class
which the Corporation is authorized to issue, differences in the relative rights
and preferences between the shares of each series to the extent they have been
set, and authority of the Board of Directors to set the relative rights and
preferences of each series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT TEN -as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT-__________ Custodian ___________ under Uniform Gifts
(Cust) (Minor)
to Minors Act __________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________ hereby sell, assign and transfer
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
unto /__________________________/ ______________________________
Please print or type name and address including zip code of assignee.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
______________________________________________________________ shares
of common stock represented by the within certificate, and hereby
irrevocably constitute and appoint __________________________________
____________________________________________________________ attorney
to transfer the said shares on the books of the within mentioned
Corporation with full power of substitution in the premises.
Dated _____________________________________
___________________________________________
Signature guaranteed: _____________________
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the
Securities and Exchange Commission, and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the New York Stock Exchange Medallion
Signature Program, provided that in either event, the amount of the transaction
involved does not exceed the surety coverage amount indicated on the medallion.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enlargement, or any change whatever.
<PAGE>
EXHIBIT 4(g)
NO. ________ SHARES
PRIVATE INVESTMENT CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT:
CUSIP ________________
is the holder of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE OF $.001
PER SHARE
Shares of Common Stock of the above named Class of SHORT-TERM INVESTMENTS CO.
are transferable on the books of the Corporation by the holder hereof in
person or by duly authorized Attorney upon surrender of this Certificate
properly endorsed. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
[MARYLAND CORPORATE SEAL]
Dated Countersigned:
A I M INSTITUTIONAL FUND SERVICES,INC.
Transfer Agent
(Houston, Texas)
[SEAL]
/s/ Robert H. Graham)
President)
)
) FOR THE DIRECTORS
)
/s/ Carol F. Relihan) By _______________________________
Secretary) Authorized Signature
<PAGE>
The Corporation will furnish to any stockholder upon request and without charge
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption of the stock or each class
which the Corporation is authorized to issue, differences in the relative rights
and preferences between the shares of each series to the extent they have been
set, and authority of the Board of Directors to set the relative rights and
preferences of each series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT TEN -as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT-__________ Custodian ___________ under Uniform Gifts
(Cust) (Minor)
to Minors Act __________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________ hereby sell, assign and transfer
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
unto /__________________________/ ______________________________
Please print or type name and address including zip code of assignee.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
______________________________________________________________ shares
of common stock represented by the within certificate, and hereby
irrevocably constitute and appoint __________________________________
____________________________________________________________ attorney
to transfer the said shares on the books of the within mentioned
Corporation with full power of substitution in the premises.
Dated _______________________________________
_____________________________________________
Signature guaranteed: _______________________
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the
Securities and Exchange Commission, and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the New York Stock Exchange Medallion
Signature Program, provided that in either event, the amount of the transaction
involved does not exceed the surety coverage amount indicated on the medallion.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enlargement, or any change whatever.
<PAGE>
EXHIBIT 4(h)
NO. ________ SHARES
CASH MANAGEMENT CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT:
CUSIP ________________
is the holder of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE OF $.001
PER SHARE
Shares of Common Stock of the above named Class of SHORT-TERM INVESTMENTS CO.
are transferable on the books of the Corporation by the holder hereof in
person or by duly authorized Attorney upon surrender of this Certificate
properly endorsed. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
[MARYLAND CORPORATE SEAL]
Dated Countersigned:
A I M INSTITUTIONAL FUND SERVICES,INC.
Transfer Agent
(Houston, Texas)
[SEAL]
/s/ Robert H. Graham)
President)
)
) FOR THE DIRECTORS
)
/s/ Carol F. Relihan) By _______________________________
Secretary) Authorized Signature
<PAGE>
The Corporation will furnish to any stockholder upon request and without charge
a full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption of the stock or each class
which the Corporation is authorized to issue, differences in the relative rights
and preferences between the shares of each series to the extent they have been
set, and authority of the Board of Directors to set the relative rights and
preferences of each series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT TEN -as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT-__________ Custodian ___________ under Uniform Gifts
(Cust) (Minor)
to Minors Act __________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________ hereby sell, assign and transfer
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
unto /__________________________/ ______________________________
Please print or type name and address including zip code of assignee.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
______________________________________________________________ shares
of common stock represented by the within certificate, and hereby
irrevocably constitute and appoint __________________________________
____________________________________________________________ attorney
to transfer the said shares on the books of the within mentioned
Corporation with full power of substitution in the premises.
Dated _______________________________________
_____________________________________________
Signature guaranteed: _______________________
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the
Securities and Exchange Commission, and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the New York Stock Exchange Medallion
Signature Program, provided that in either event, the amount of the transaction
involved does not exceed the surety coverage amount indicated on the medallion.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enlargement, or any change whatever.
<PAGE>
EXHIBIT 5(b)
SHORT-TERM INVESTMENTS CO.
MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 18th day of October, 1993, by and between
Short-Term Investments Co., a Maryland corporation (the "Company") and A I M
Advisors, Inc., a Delaware corporation (the "Advisor").
RECITALS
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end, diversified management
investment company, consisting of multiple series of investment portfolios;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Company's charter authorizes the Board of Directors of the
Company to classify or reclassify authorized but unissued shares of the Company
and, as of the date of this Agreement, the Company's Board of Directors has
authorized the issuance of two series of shares representing interests in two
investment portfolios: the Prime Portfolio and the Liquid Assets Portfolio (such
portfolios and any other portfolios hereafter added to the Company being
referred to collectively herein as the "Portfolios"); and
WHEREAS, the Company and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Company upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for
each Portfolio and shall, in such capacity, supervise all aspects of the
Portfolios' operations, including the investment and reinvestment of the cash,
securities or other properties comprising the Portfolios, subject at all times
to the policies and control of the Company's Board of Directors. The Advisor
shall give the Company and the Portfolios the benefit of its best judgment,
efforts and facilities in rendering its services as investment advisor.
-1-
<PAGE>
2. Investment Analysis and Implementation. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Portfolios;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Portfolios, and whether concerning the individual issuers whose securities
are included in the Portfolios or the activities in which such issuers
engage, or with respect to securities which the Advisor considers desirable
for inclusion in the Portfolios;
(c) determine which issuers and securities shall be represented in
the Portfolios and regularly report thereon to the Company's Board of
Directors; and
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Company's Board of Directors;
and take, on behalf of the Company and the Portfolios, all actions which appear
to the Company and the Portfolios necessary to carry into effect such purchase
and sale programs and supervisory functions as aforesaid, including but not
limited to the placing of orders for the purchase and sale of securities of the
Portfolios.
3. Delegation of Responsibilities. Subject to the approval of the Board
of Directors and the shareholders of the Portfolios, the Advisor may delegate to
a sub-advisor certain of its duties enumerated in Section 2 hereof, provided
that the Advisor shall continue to supervise the performance of any such sub-
advisor.
4. Control by Board of Directors. Any investment program undertaken by
the Advisor pursuant to this Agreement, as well as any other activities
undertaken by the Advisor on behalf of the Portfolios, shall at all times be
subject to any directives of the Board of Directors of the Company.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act
and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Company, as
the same may be amended from time to time, under the Securities Act of 1933
and the 1940 Act;
(c) the provisions of the corporate charter of the Company, as the
same may be amended from time to time;
(d) the provisions of the by-laws of the Company, as the same may be
amended from time to time; and
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<PAGE>
(e) any other applicable provisions of state or federal law.
6. Broker-Dealer Relationships. The Advisor is responsible for decisions
to buy and sell securities for the Portfolios, broker-dealer selection, and
negotiation of brokerage commission rates. The Advisor's primary consideration
in effecting a security transaction will be execution at the most favorable
price. In selecting a broker-dealer to execute each particular transaction, the
Advisor will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the broker-
dealer; the size of and difficulty in executing the order; and the value of the
expected contribution of the broker-dealer to the investment performance of the
Portfolios on a continuing basis. Accordingly, the price to the Portfolios in
any transaction may be less favorable than that available from another broker-
dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may from time to time determine, the Advisor shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Portfolios to pay a broker
or dealer that provides brokerage and research services to the Advisor an amount
of commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Portfolios, and to other clients of the Advisor as to which the Advisor
exercises investment discretion. The Advisor is further authorized to allocate
the orders placed by it on behalf of the Portfolios to such brokers and dealers
who also provide research or statistical material, or other services to the
Portfolios, to the Advisor, or to any sub-advisor. Such allocation shall be in
such amounts and proportions as the Advisor shall determine and the Advisor will
report on said allocations regularly to the Board of Directors of the Company
indicating the brokers to whom such allocations have been made and the basis
therefor. In making decisions regarding broker-dealer relationships, the Advisor
may take into consideration the recommendations of any sub-advisor appointed to
provide investment research or advisory services in connection with the
Portfolios, and may take into consideration any research services provided to
such sub-advisor by broker-dealers.
7. Compensation. The Company shall pay the Advisor as compensation for
services rendered hereunder an annual fee, payable monthly, as set forth in
Appendix A to this Agreement. The Company acknowledges that the Advisor may from
time to time pay a fee to any sub-advisor engaged pursuant to Section 3 of this
Agreement, according to a fee schedule set forth in the applicable sub-advisory
agreement.
The average daily net asset value of the Portfolios shall be determined in
the manner set forth in the corporate charter and registration statement of the
Company, as amended from time to time.
8. Additional Services. Upon the request of the Company's Board of
Directors, the Advisor may perform certain accounting, shareholder servicing or
other administrative services on behalf of the Portfolios which are not required
by this Agreement. Such services will be performed on behalf of the Portfolios
and the Advisor may receive from the Portfolios such reimbursement for costs or
reasonable compensation for such services as may be agreed upon between the
Advisor and the Company's Board of Directors based on a finding by the Board of
Directors that the provision of such services by the Advisor is in the best
interests of the Portfolios and their
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<PAGE>
shareholders. Payment or assumption by the Advisor of any Portfolio expense that
the Advisor is not otherwise required to pay or assume under this Agreement
shall not relieve the Advisor of any of its obligations to the Portfolios nor
obligate the Advisor to pay or assume any similar Portfolio expense on any
subsequent occasions. Such services may include, but are not limited to:
(a) the services of a principal financial officer of the Company
(including applicable office space, facilities and equipment) whose normal
duties consist of maintaining the financial accounts and books and records
of the Company and the Portfolios, including the review and calculation of
daily net asset value and the preparation of tax returns; the services
(including applicable office space, facilities and equipment) of any of the
personnel operating under the direction of such principal financial
officer;
(b) the services of staff to respond to shareholder inquiries
concerning the status of their accounts; providing assistance to
shareholders in exchanges among the mutual funds managed or advised by the
Advisor; changing account designations or changing addresses; assisting in
the purchase or redemption of shares; supervising the operations of the
custodian, transfer agent(s) or dividend disbursing agent(s) for the
Portfolios; or otherwise providing services to shareholders of the
Portfolios; and
(c) such other administrative services as may be furnished from time
to time by the Advisor to the Company or the Portfolios at the request of
the Company's Board of Directors.
9. Expenses of the Portfolios. All of the ordinary business expenses
incurred in the operations of the Portfolios and the offering of their shares
shall be borne by the Portfolios unless specifically provided otherwise in this
Agreement. These expenses borne by the Portfolios include but are not limited to
brokerage commissions, taxes, legal, auditing, or governmental fees, the cost of
preparing share certificates, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to directors and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Company on behalf
of the Portfolios in connection with membership in investment company
organizations and the cost of printing copies of prospectuses and statements of
additional information distributed to the Portfolios' shareholders.
10. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expenses of the Portfolios, including all investment advisory
fees, but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses, such as litigation, would exceed the applicable expense
limitations imposed by state securities regulations in any state in which the
Portfolios' shares are qualified for sale, as such limitations may be raised or
lowered from time to time, the aggregate of all such investment advisory fees
shall be reduced by the amount of such excess. The amount of any such reduction
to be borne by the Advisor shall be deducted from the monthly investment
advisory fee otherwise payable to the Advisor during such fiscal year. If
required pursuant to such state securities regulations, the Advisor will, not
later than the last day of the first month of the next succeeding fiscal year,
reimburse the Portfolios for any such annual operating expenses (after reduction
of all investment advisory fees in excess of such limitation). For the purposes
of this paragraph, the term "fiscal year" shall exclude the portion of the
current fiscal year which shall have elapsed prior to the date hereof and shall
include the portion of the then current
-4-
<PAGE>
fiscal year which shall have elapsed at the date of termination of this
Agreement. The application of expense limitations shall be applied to each
Portfolio of the Company separately unless the laws or regulations of any state
shall require that the expense limitations be imposed with respect to the
Company as a whole.
11. Non-Exclusivity. The services of the Advisor to the Company and the
Portfolios are not to be deemed to be exclusive, and the Advisor shall be free
to render investment advisory and administrative or other services to others
(including other investment companies) and to engage in other activities. It is
understood and agreed that officers or directors of the Advisor may serve as
officers or directors of the Company, and that officers or directors of the
Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
12. Term and Approval. This Agreement shall become effective if approved
by the shareholders of the Portfolios, and if so approved, this Agreement shall
thereafter continue in force and effect until June 30, 1994, and may be
continued from year to year thereafter, provided that the continuation of the
Agreement is specifically approved at least annually:
(a) (i) by the Company's Board of Directors or (ii) by the vote of "a
majority of the outstanding voting securities" of the Portfolios (as
defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the directors who are
not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of a party to this Agreement (other than as Company directors),
by votes cast in person at a meeting specifically called for such purpose.
13. Termination. This Agreement may be terminated as to the Portfolios at
any time, without the payment of any penalty, by vote of the Company's Board of
Directors or by vote of a majority of the Portfolios' outstanding voting
securities, or by the Advisor, on sixty (60) days' written notice to the other
party. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate in the event of its assignment, the term
"assignment" for purposes of this paragraph having the meaning defined in
Section 2(a)(4) of the 1940 Act.
14. Liability of Advisor and Indemnification. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Company or to
the Portfolios or to any shareholder of the Portfolios for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Company
and that of the Advisor shall be 11 Greenway Plaza, Suite 1919, Houston, Texas,
77046.
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<PAGE>
16. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act or the Advisers Act shall be resolved
by reference to such term or provision of the 1940 Act or the Advisers Act and
to interpretations thereof, if any, by the United States Courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Acts.
In addition, where the effect of a requirement of the 1940 Act or the Advisers
Act reflected in any provision of the Agreement is revised by rule, regulation
or order of the Securities and Exchange Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
17. License Agreement. The Company shall be entitled to use the names
"Prime Portfolio" and "Liquid Assets Portfolio" to designate its classes of
shares only so long as A I M Advisors, Inc. serves as investment manager or
advisor to the Portfolios.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
SHORT-TERM INVESTMENTS CO.
(a Maryland corporation)
Attest:
/s/ Nancy L. Martin By: /s/ Charles T. Bauer
- ------------------------------ ------------------------
Assistant Secretary President
(SEAL) A I M ADVISORS, INC.
Attest:
/s/ Nancy L. Martin By: /s/ Robert H. Graham
- ------------------------------ ------------------------
Assistant Secretary President
(SEAL)
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<PAGE>
APPENDIX A TO MASTER INVESTMENT ADVISORY AGREEMENT
OF
SHORT-TERM INVESTMENTS CO.
The Company shall pay the Advisor as full compensation for all
services rendered and all facilities furnished hereunder, a management fee for
each Portfolio by applying the following annual rates to the average daily net
assets of each Portfolio for the calendar year, computed in the manner used for
the determination of the offering price of shares of the Portfolio.
PRIME PORTFOLIO
NET ASSETS RATE
First $100 million ............................................ 0.20%
Over $100 million to $200 million ............................. 0.15%
Over $200 million to $300 million ............................. 0.10%
Over $300 million to $1.5 billion ............................. 0.06%
Over $1.5 billion ............................................. 0.05%
LIQUID ASSETS PORTFOLIO
NET ASSETS RATE
All assets .................................................... 0.15%
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<PAGE>
EXHIBIT 6(b)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
SHORT-TERM INVESTMENTS CO.
AND
FUND MANAGEMENT COMPANY
THIS AGREEMENT is made this 18th day of October, 1993, by and between
SHORT-TERM INVESTMENTS CO., a Maryland corporation (hereinafter referred to as
the "Company"), and FUND MANAGEMENT COMPANY, a Texas corporation, (hereinafter
referred to as the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its exclusive
agent for the sale of the shares set forth in Appendix A attached hereto (the
"Shares") of the Company to the public through investment dealers in the United
States and throughout the world in accordance with the terms of the Company's
current prospectus applicable to the Shares.
SECOND: The Company shall not sell any Shares except through the
Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however,
(A) the Company may issue Shares of one or more classes of its shares
of common stock to any other investment company or personal holding company, or
to the shareholders thereof, in exchange for all or a majority of the shares or
assets of any such company; and
(B) the Company may issue Shares at their net asset value in
connection with certain categories of transactions or to certain categories of
persons, in accordance with Rule 22d-1 under the Investment Company Act of 1940,
as amended (the "1940 Act"), provided that any such category is specified in the
then current prospectuses of the Company.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Shares and agrees that it will use its best efforts to sell
such Shares; provided, however, that:
(A) the Distributor may, and when requested by the Company shall,
suspend its efforts to effectuate such sales at any time when, in the opinion of
the Distributor or of the Company, no sales should be made because of market or
other economic considerations or abnormal circumstance of any kind; and
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<PAGE>
(B) the Company may withdraw the offering of the Shares (i) at any time
with the consent of the Distributor, or (ii) without such consent when so
required by the provisions of any statute or of any order, rule or regulation of
any governmental body having jurisdiction. It is mutually understood and agreed
that the Distributor does not undertake to sell any specific amount of the
Shares. The Company shall have the right to specify minimum amounts for initial
and subsequent orders for the purchase of Shares.
FOURTH:
(A) The public offering price of Shares of the Company (the "offering
price") shall be the net asset value per Share. Net asset value per Share shall
be determined in accordance with the provisions of the then current Shares'
prospectus and statement of additional information.
(B) No provision of this Agreement shall be deemed to prohibit any
payments by the Company to the Distributor or by the Company or the Distributor
to investment dealers through whom the Shares are sold where such payments are
made under a distribution plan adopted by the Company, on behalf of the
applicable Shares, pursuant to Rule 12b-1 under the 1940 Act and approved by the
Company's directors and by the holders of the Shares in a manner consistent with
such rule.
FIFTH: The Distributor shall act as agent of the Company in
connection with the sale and repurchase of Shares of the Company. Except with
respect to such sales and repurchases, the Distributor shall act as principal in
all matters relating to the promotion of the sale of Shares of the Company and
shall enter into all of its own engagements, agreements and contracts as
principal on its own account. The Distributor shall enter into Selling Group
Agreements with investment dealers selected by the Distributor, authorizing such
investment dealers to offer and sell Shares of the Company to the public upon
the terms and conditions set forth therein, which shall not be inconsistent with
the provisions of this Agreement. Each Selling Group Agreement shall provide
that the investment dealer shall act as a principal, and not as an agent of the
Company.
SIXTH: The Company shall bear
(A) the expenses of qualification of the Shares for sale in connection
with such public offerings in such states as shall be selected by the
Distributor and of continuing the qualification therein until the Distributor
notifies the Company that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH: The Distributor shall bear
(A) the expenses of printing from the final proof and distributing
prospectuses and statements of additional information (including supplements
thereto) of the Company relating to the Shares in connection with public
offerings made by the Distributor pursuant to this Agreement
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<PAGE>
(which shall not include those prospectuses and statements of additional
information, and supplements thereto, to be distributed to shareholders by the
Company), and any other promotional or sales literature used by the Distributor
or furnished by the Distributor to dealers in connection with such public
offerings; and
(B) expenses of advertising in connection with such public offerings;
provided however, that the Distributor may be reimbursed for all or a portion of
the expenses described in sections (A) and (B) of this paragraph, or may receive
reasonable compensation for distribution related services, to the extent
permitted by a distribution plan adopted by the Company pursuant to Rule 12b-1
under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of Shares
only to the extent of purchase orders actually received and not in excess of
such orders, and it will not avail itself of any opportunity of making a profit
by expediting or withholding orders. It is mutually understood and agreed that
the Company may reject purchase orders where, in the judgment of the Company,
such rejection is in the best interest of the Company.
NINTH: The Company and the Distributor shall each comply with all
applicable provisions of the 1940 Act, the Securities Act of 1933 and of all
other federal and state laws, rules and regulations governing the issuance and
sale of the Shares.
TENTH:
(A) In absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company agrees to indemnify the Distributor against any and all
claims, demands, liabilities and expenses which the Distributor may incur under
the Securities Act of 1933, or common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in any
registration statement or prospectuses of the Company, or any omission to state
a material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance upon,
and in conformity with, information furnished to the Company in connection
therewith by or on behalf of the Distributor. The Distributor agrees to
indemnify the Company against any and all claims, demands, liabilities and
expenses which the Company may incur arising out of or based upon any act or
deed of the Distributor or its sales representatives which has not been
authorized by the Company in its prospectuses or in this Agreement.
(B) The Distributor agrees to indemnify the Company against any and
all claims, demands, liabilities and expenses which the Company may incur under
the Securities Act of 1933, or common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in any
registration statement or prospectuses of the Company, or any omission to state
a material fact therein if such statement or omission was made in reliance upon,
and in conformity with, information furnished to the Company in connection
therewith by or on behalf of the Distributor.
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<PAGE>
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Company's transfer agent
or for any failure of such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its charter or to any applicable statute
or regulation.
TWELFTH: This Agreement shall become effective at the close of
business on the date hereof, shall continue until June 30, 1994, and shall
continue in force and effect from year to year thereafter, provided, that such
continuance is specifically approved at least annually (a)(i) by the Board of
Directors of the Company, or (ii) by the vote of a majority of the Company's
outstanding voting securities (as defined in Section 2(a)(42) of the Investment
Company Act), and (b) by vote of a majority of the Company's directors who are
not parties to this Agreement or "interested persons" (as defined in Section
2(a)(19) of the Investment Company Act) of any party to this Agreement cast in
person at a meeting called for such purpose.
THIRTEENTH:
(A) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Directors of the Company or by vote of a
majority of the outstanding voting securities of the Company, or by the
Distributor, on sixty (60) days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning as defined in Section
2(a)(4) of the Investment Company Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed, postage paid, to the other party at such
address as such other party may designate for the receipt of such notices.
Until further notice to the other party, it is agreed that the address of both
the Company and the Distributor shall be Eleven Greenway Plaza, Suite 1919,
Houston, Texas 77046.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate as of the day and year first above written.
SHORT-TERM INVESTMENTS CO.
By: /s/ Charles T. Bauer
-----------------------------
President
Attest:
/s/ Nancy L. Martin
- -----------------------
FUND MANAGEMENT COMPANY
By: /s/ Carol F. Relihan
-----------------------------
Vice President
Attest:
/s/ Nancy L. Martin
- -----------------------
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<PAGE>
APPENDIX A TO
MASTER DISTRIBUTION AGREEMENT OF
SHORT-TERM INVESTMENTS CO.
Prime Portfolio
Institutional Class
Private Investment Class
Personal Investment Class
Cash Management Class
Liquid Assets Portfolio
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<PAGE>
EXHIBIT 6(c)
AMENDMENT NO. 1
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated October 18,
1993, by and between Short-Term Investments Co., a Maryland corporation, and
Fund Management Company, a Texas corporation, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"APPENDIX A
Prime Portfolio
Institutional Class
Personal Investment Class
Private Investment Class
Cash Management Class
Resource Class
Liquid Assets Portfolio"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: September 19, 1995
SHORT-TERM INVESTMENTS CO.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
----------------------------- ---------------------------
Assistant Secretary President
(SEAL)
FUND MANAGEMENT COMPANY
Attest: /s/ Nancy L. Martin By: /s/ J. Abbott Sprague
----------------------------- ---------------------------
Assistant Secretary President
(SEAL)
<PAGE>
EXHIBIT 6(d)
AMENDMENT NO. 2
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated October 18,
1993, by and between Short-Term Investments Co., a Maryland corporation, and
Fund Management Company, a Texas corporation, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"APPENDIX A
Prime Portfolio
Institutional Class
Personal Investment Class
Private Investment Class
Cash Management Class
Resource Class
Liquid Assets Portfolio
Institutional Class
Private Investment Class
Cash Management Class"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: ____________________, 1995
SHORT-TERM INVESTMENTS CO.
Attest: __________________________ By: ________________________________
Assistant Secretary President
(SEAL)
FUND MANAGEMENT COMPANY
Attest: __________________________ By: ________________________________
Assistant Secretary President
(SEAL)
<PAGE>
EXHIBIT 9(b)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
SHORT-TERM INVESTMENTS CO.
AND
A I M INSTITUTIONAL FUND SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT......... 1
ARTICLE 2 FEES AND EXPENSES.......................................... 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT....... 3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND................. 3
ARTICLE 5 INDEMNIFICATION............................................ 4
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT............... 5
ARTICLE 7 TERMINATION OF AGREEMENT................................... 6
ARTICLE 8 ADDITIONAL FUNDS........................................... 6
ARTICLE 9 ASSIGNMENT................................................. 6
ARTICLE 10 AMENDMENT.................................................. 6
ARTICLE 11 TEXAS LAW TO APPLY......................................... 6
ARTICLE 12 MERGER OF AGREEMENT........................................ 7
ARTICLE 13 COUNTERPARTS............................................... 7
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 16th day of September, 1994, by and between SHORT-
TERM INVESTMENTS CO., a Maryland corporation having its principal office and
place of business at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046 (the
"Fund"), and A I M Institutional Fund Services, Inc., a Delaware corporation
having its principal office and place of business at 11 Greenway Plaza, Suite
1919, Houston, Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities and
Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate series and
classes, with each such series representing interests in a separate portfolio of
securities and other assets and each such class having different distribution
arrangements; and
WHEREAS, the Fund on behalf of each class of each of the portfolios thereof
(the "Portfolios") desires to appoint the Transfer Agent as its transfer agent,
and agent in connection with certain other activities, with respect to the
Portfolios, and the Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
ARTICLE I
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Transfer Agent to act as, and the Transfer
Agent agrees to act as, its transfer agent for the authorized and issued shares
of common stock of the Fund representing interests in each class of each of the
respective Portfolios ("Shares"), dividend disbursing agent, and agent in
connection with any accumulation or similar plans provided to shareholders of
each of the Portfolios (the "Shareholders"), including without limitation any
periodic investment plan or periodic withdrawal program, as provided in the
currently effective prospectus and statement of additional information (the
"Prospectus") of the Fund on behalf of the Portfolios.
1.02 The Transfer Agent agrees that it will perform the following
services:
(a) The Transfer Agent shall, in accordance with procedures established
from time to time by agreement between the Fund on behalf of each of the
Portfolios, as applicable, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the Custodian of the Fund authorized pursuant to the
Charter of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
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(iii) receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) at the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over
or cause to be paid over in the appropriate manner such monies
as instructed by the Fund;
(v) effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the Shares;
(vii) maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-1O(e) a record of the total number
of Shares which are authorized, based upon data provided to it
by the Fund, and issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with the
total number of Shares which are authorized and issued and outstanding but shall
have no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to the issue
or sale of such Shares, which function shall be the sole responsibility of the
Fund.
(b) In addition to the services set forth in the above paragraph (a),
the Transfer Agent shall: (i) perform the customary services of a transfer
agent, including but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and prospectuses to current Shareholders, preparing
and mailing confirmation forms and statements of accounts to Shareholders for
all purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services in
Article 1 may be established from time to time by agreement between the Fund on
behalf of each Portfolio and the Transfer Agent. The Transfer Agent may at times
perform only a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this Agreement, the
Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent such
fees as may be agreed upon from time to time in a written agreement between the
Fund and the Transfer Agent.
2
<PAGE>
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees
to reimburse the Transfer Agent for such out-of-pocket expenses or advances
incurred by the Transfer Agent as may be agreed upon from time to time in a
written agreement between the Fund and the Transfer Agent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good standing
under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and in
Texas.
3.03 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
3.06 It is registered as a Transfer Agent as required by the federal
securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a business corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
4.03 All proceedings required by said Charter and By-Laws have been taken
to authorize it to enter into and perform this Agreement.
4.04 It is an open-end, management investment company registered under the
Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended, on behalf of each of the Portfolios is currently effective and will
remain effective, with respect to all Shares of the Fund being offered for sale.
3
<PAGE>
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund shall
on behalf of the applicable Portfolio, indemnify and hold the Transfer Agent
harmless from and against, any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of or attributable to:
(a) all actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct which
arise out of the breach of any representation or warranty of the Fund hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents or services which (i) are
received or relied upon by the Transfer Agent or its agents or subcontractors
and/or furnished to it or performed by on behalf of the Fund, and (ii) have been
prepared, maintained and/or performed by the Fund or any other person or firm on
behalf of the Fund; provided such actions are taken in good faith and without
negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or its
agents or subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio; provided such actions are taken in good faith and
without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless from
and against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as result of the Transfer Agent's lack
of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Transfer Agent
under this Agreement, and the Transfer Agent and its agents or subcontractors
shall not be liable to and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Transfer Agent shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided to the Transfer Agent or its agents or
subcontractors by machine readable input, telex, CRT data entry or other similar
means authorized by the Fund, and shall not be held to have notice of any change
of authority of any person, until receipt of written notice thereof from the
Fund.
4
<PAGE>
5.04 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of each of the Portfolios
promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of the Transfer Agent and the execution and
delivery of this Agreement; and
(b) a copy of the Charter and By-Laws of the Fund and all amendments
thereto.
6.02 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Transfer Agent agrees that all such records
prepared or maintained by the Transfer Agent relating to the services to be
performed by the Transfer Agent hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in accordance with
its request.
6.03 The Transfer Agent and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. The Transfer Agent reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
5
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ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty (60) days
written notice to the other.
7.02 Should the Fund exercise its right to terminate this Agreement, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Transfer Agent reserves the right to charge for any other reasonable
expenses associated with such termination and/or a charge equivalent to the
average of three (3) months' fees.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of Shares
in addition to the Portfolios with respect to which it desires to have the
Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
ARTICLE 9
ASSIGNMENT
9.01 Except as provided in Section 9.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
9.03 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with any entity which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that
the Transfer Agent shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
ARTICLE 10
AMENDMENT
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors of the Fund.
ARTICLE 11
TEXAS LAW TO APPLY
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Texas.
6
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ARTICLE 12
MERGER OF AGREEMENT
12.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
ARTICLE 13
COUNTERPARTS
13.01 This Agreement may be executed by the parties hereto on any number
of counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
SHORT-TERM INVESTMENTS CO.
By: /s/ Robert H. Graham
--------------------
President
ATTEST:
/s/ Stephen I. Winer
- --------------------------
Assistant Secretary
A I M INSTITUTIONAL FUND SERVICES, INC.
By: /s/ J. Abbott Sprague
---------------------
President
ATTEST:
/s/ Stephen I. Winer
- --------------------------
Assistant Secretary
8
<PAGE>
EXHIBIT 9(c)
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated
September 16, 1994, by and between Short-Term Investments Co., a Maryland
corporation and A I M Institutional Fund Services, Inc., a Delaware corporation,
is hereby amended as follows (terms used herein but not otherwise defined herein
have the meaning ascribed them in the Agreement):
1) Section 2.01 of the Agreement is hereby deleted in its entirety and
replaced with the following: "For performance by the Transfer Agent pursuant to
this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the
Transfer Agent an annual fee in the amount of .007% of average daily net assets,
payable monthly. Such fee may be changed from time to time subject to mutual
written agreements between the Fund and the Transfer Agent."
2) Section 2.02 of the Agreement is hereby deleted in its entirety and
replaced with the following: "The Fund agrees on behalf of each of the
Portfolios to pay all fees following the mailing of a billing notice."
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: July 1, 1995
SHORT-TERM INVESTMENTS CO.
Attest: /s/ Stephen I. Winer By: /s/ Robert H. Graham
----------------------------- -----------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M INSTITUTIONAL FUND SERVICES, INC.
Attest: /s/ Stephen I. Winer By: /s/ J. Abbott Sprague
----------------------------- -----------------------------
Assistant Secretary J. Abbott Sprague
President
(SEAL)
<PAGE>
EXHIBIT 9(e)
MASTER ADMINISTRATIVE SERVICES AGREEMENT
MASTER ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement"), dated as of the
18th day of October,1993 by and between A I M ADVISORS, INC., a Delaware
corporation (the "Administrator"), and SHORT-TERM INVESTMENTS CO., a Maryland
corporation (the "Company"), with respect to the separate series set forth from
time to time in Appendix A to this Agreement (the "Portfolios").
WITNESSETH:
WHEREAS, the Company is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Portfolios are separate series of common stock representing
interests in separate investment portfolios of the Company; and
WHEREAS, the Company, on behalf of the Portfolios, has retained the
Administrator to provide investment advisory services pursuant to a Master
Investment Advisory Agreement which provides that the Administrator may perform
(or arrange for the performance of) accounting, shareholder servicing and other
administrative services as well as investment advisory services to the
Portfolios, and that the Administrator may receive reasonable compensation or
may be reimbursed for its costs in providing such additional services, upon the
request of the Board of Directors and upon a finding by the Board of Directors
that the provision of such services is in the best interest of the Portfolios
and their shareholders; and
WHEREAS, the Board of Directors has found that the provision of such
administrative services is in the best interest of the Portfolios and their
shareholders, and has requested that the Administrator perform such services;
NOW, THEREFORE, the parties hereby agree as follows:
1. The Administrator hereby agrees to provide, or arrange for the
provision of, any or all of the following services by the Administrator or its
affiliates:
(a) the services of a principal financial officer of the Company
(including related office space, facilities and equipment) whose normal
duties consist of maintaining the financial accounts and books and records
of the Company and the Portfolios, including the review of daily net asset
value calculations and the preparation of tax returns; and the services
(including related office space, facilities and equipment) of any of the
personnel operating under the direction of such principal financial
officer;
(b) the services of staff to respond to shareholder inquiries
concerning the status of their accounts; providing assistance to
shareholders in exchanges among the mutual funds managed or advised by the
Administrator; changing account designations or changing addresses;
assisting in the purchase or redemption of shares of the Portfolios;
supervising
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<PAGE>
the operations of the custodian, transfer agent(s) or dividend agent(s) for
the Portfolios; or otherwise providing services to shareholders of the
Portfolios; and
(c) such other administrative services as may be furnished from time
to time by the Administrator to the Company or the Portfolios at the
request of the Company's Board of Directors.
2. The services provided hereunder shall at all times be subject to the
direction and supervision of the Company's Board of Directors.
3. As full compensation for the services performed and the facilities
furnished by or at the direction of the Administrator, the Portfolios shall
reimburse the Administrator for expenses incurred by them or their affiliates in
accordance with the methodologies established from time to time by the Company's
Board of Directors. Such amounts shall be paid to the Administrator on a
quarterly basis.
4. The Administrator shall not be liable for any error of judgment or for
any loss suffered by the Company or the Portfolios in connection with any matter
to which this Agreement relates, except a loss resulting from the
Administrator's willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement.
5. The Company and the Administrator each hereby represent and warrant,
but only as to themselves, that each has all requisite authority to enter into,
execute, deliver and perform its obligations under this Agreement and that this
Agreement is legal, valid and binding, and enforceable in accordance with its
terms.
6. Nothing in this Agreement shall limit or restrict the rights of any
director, officer or employee of the Administrator who may also be a director,
officer or employee of the Company to engage in any other business or to devote
his time and attention in part to the management or other aspects of any
business, whether of a similar or a dissimilar nature, nor limit or restrict the
right of the Administrator to engage in any other business or to render services
of any kind to any other corporation, firm, individual or association.
7. This Agreement shall continue in effect until June 30, 1994, and shall
continue in effect from year to year thereafter; provided that such continuance
is specifically approved at least annually:
(a) (i) by the Company's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Company (as defined in
Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Company's directors
who are not parties to this Agreement or interested persons of a party to
this Agreement, by votes cast in person at a meeting specifically called
for such purpose.
This Agreement shall terminate automatically in the event of its assignment
(as defined in Section 2(a)(4) of the 1940 Act) or, with respect to one or more
Portfolios in the event of termination
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<PAGE>
of the Master Investment Advisory Agreement relating to such Portfolio(s)
between the Company and the Administrator.
8. This Agreement may be amended or modified with respect to one or more
Portfolios, but only by a written instrument signed by both the Company and the
Administrator.
9. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (a) to the Administrator at Eleven Greenway Plaza, Suite 1919,
Houston, Texas 77046, Attention: President, with a copy to the General Counsel,
or (b) to the Company at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046,
Attention: President, with a copy to the General Counsel.
10. This Agreement contains the entire agreement between the parties
hereto and supersedes all prior agreements, understandings and arrangements with
respect to the subject matter hereof.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
A I M ADVISORS, INC.
Attest:
/s/ Nancy L. Martin By: /s/ Robert H. Graham
- ------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
SHORT-TERM INVESTMENTS CO.
Attest:
/s/ Nancy L. Martin By: /s/ Charles T. Bauer
- ------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
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<PAGE>
SHORT-TERM INVESTMENTS CO.
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
OCTOBER 18, 1993
Liquid Assets Portfolio
Prime Portfolio
Institutional Class
Private Investment Class
Personal Investment Class
Cash Management Class
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<PAGE>
EXHIBIT 9(f)
AMENDMENT NO.1
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated
October 18, 1993, by and between Short-Term Investments Co., a Maryland
corporation, and A I M Advisors, Inc., a Delaware corporation, is hereby amended
as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"SHORT-TERM INVESTMENTS CO.
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
Prime Portfolio
Institutional Class
Personal Investment Class
Private Investment Class
Cash Management Class
Resource Class
Liquid Assets Portfolio"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: November 2, 1995
-----------
SHORT-TERM INVESTMENTS CO.
Attest: /s/ Stephen I. Winer By: /s/ Robert H. Graham
-------------------------- --------------------------
Assistant Secretary President
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ Stephen I. Winer By: /s/ Robert H. Graham
-------------------------- --------------------------
Assistant Secretary President
(SEAL)
<PAGE>
EXHIBIT 9(g)
AMENDMENT NO. 2
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated
October 18, 1993, by and between Short-Term Investments Co., a Maryland
corporation, and A I M Advisors, Inc., a Delaware corporation, is hereby amended
as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"SHORT-TERM INVESTMENTS CO.
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
Prime Portfolio
Institutional Class
Personal Investment Class
Private Investment Class
Cash Management Class
Resource Class
Liquid Assets Portfolio
Institutional Class
Private Investment Class
Cash Management Class"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: ________________________________, 1995
SHORT-TERM INVESTMENTS CO.
Attest: _______________________ By: ____________________________
Assistant Secretary President
(SEAL)
A I M ADVISORS, INC.
Attest: _______________________ By: ____________________________
Assistant Secretary President
(SEAL)
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<PAGE>
EXHIBIT 11(a)
CONSENT OF COUNSEL
SHORT-TERM INVESTMENTS CO.
We hereby consent to the use of our name and to the references to our firm
under the captions "General Information -- Legal Counsel" in the Prospectuses
and "Miscellaneous Information -- Legal Matters" in the Statements of Additional
Information forming a part of Post-Effective Amendment No. 4 to the Registration
Statement under the Securities Act of 1933 (No. 33-66240) and Amendment No. 5 to
the Registration Statement under the Investment Company Act of 1940 (No.
811-7892) on Form N-1A of Short-Term Investments Co.
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
---------------------------------
Ballard Spahr Andrews & Ingersoll
Philadelphia, Pennsylvania
November 1, 1995
<PAGE>
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Short-Term Investments Co.
We consent to the use of our reports on the Prime Portfolio and the Liquid
Assets Portfolio (portfolios of Short-Term Investments Co.) dated October 6,
1995 included herein and to the references to our firm under the headings
"Financial Highlights" in the Prospectuses and "Reports" in the Statements of
Additional Information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
November 1, 1995
<PAGE>
EXHIBIT 15(a)
MASTER DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
SHORT-TERM INVESTMENTS CO.
WHEREAS, Short-Term Investments Co. (the "Company") is engaged in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the shares of common stock of the Company may be divided into a
number of separate series, including the Prime Portfolio (hereinafter referred
to as the "Portfolios"); and
WHEREAS, the Portfolio is comprised of a Private Investment Class, a
Personal Investment Class and a Cash Management Class (the "Retail Shares") and
an institutional class, and Retail Shares are offered to customers through
certain banks and broker-dealers that may offer special shareholder services to
such customers; and
WHEREAS, the Company desires to adopt, on behalf of the shares of common
stock set forth in Appendix A attached hereto (the "Shares"), a Plan pursuant to
Rule 12b-1 under the Act with respect to the Shares, and the directors of the
Company have determined that there is a reasonable likelihood that adoption of
this Plan will benefit the Company, the Portfolio and the holders of the Shares;
and
WHEREAS, the Company has employed A I M Advisors, Inc. ("AIM") as its
investment advisor with respect to the Portfolio to supply investment advice;
and
WHEREAS, the Company on behalf of the Portfolio has entered into a Master
Distribution Agreement (the "Distribution Agreement") designating a principal
distributor of the Shares (the "Distributor").
NOW THEREFORE, the Company hereby adopts, on behalf of the Portfolio, the
following terms constituting a Plan pursuant to Rule 12b-1 under the 1940 Act
with respect to the Classes of Shares set forth in Appendix A:
1. The Company may act as a distributor of the Shares of which the
Company is the issuer, pursuant to Rule 12b-1 under the 1940 Act, according to
the terms of this Distribution Plan (the "Plan").
2. Amounts set forth in Appendix A may be expended when and if authorized
in advance by the Company's Board of Directors. Such amounts may be used to
finance any activity which is primarily intended to result in the sale of the
Shares, including, but not limited to, expenses of organizing and conducting
sales seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, supplemental payments to the Distributor and the
costs of administering the Plan. All amounts expended pursuant to the Plan
shall be paid
-1-
<PAGE>
(i) to the Distributor, as an asset-based sales charge,
(ii) as a service fee to certain banks ("Service Providers") who offer
continuing personal shareholder services to their customers who
invest in the Shares, and who have entered into Shareholder Service
Agreements substantially in the form of Exhibit A hereto, and
(iii) as a service fee to certain broker-dealers and other financial
institutions ("Institutions") who offer continuing personal
shareholder services to their customers who invest in the Shares,
and who have entered into Shareholder Service Agreements
substantially in the form of Exhibit B hereto.
The maximum shareholder service fee payable to any Service Provider or
Institution shall not exceed twenty-five one hundredths of one percent (0.25%)
per annum. Amounts paid under the Plan that are not paid as service fees shall
be deemed to be asset-based sales charges.
The activities, the payment of which by the Company are intended to be
within the scope of the Plan, shall include, but not necessarily be limited to,
payments to the Distributor for its distribution-related activities and to
Service Providers and Institutions as asset-based sales charges or as a service
fee in respect of the Shares owned by shareholders with whom such Service
Provider or Institution has a shareholder servicing relationship. Shareholder
servicing may include, among other things: (i) answering client inquiries
regarding the Shares and the Portfolio; (ii) assisting clients in changing
dividend options, account designations and addresses; (iii) performing sub-
accounting; (iv) establishing and maintaining shareholder accounts and records;
(v) processing purchase and redemption transactions; (vi) automatic investment
in Shares of customer cash account balances; (vii) providing periodic statements
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
such firm; (viii) arranging for bank wires; and (ix) such other services as the
Company may request on behalf of the Shares, to the extent such firms are
permitted to engage in such services by applicable statute, rule or regulation.
3. No additional payments are to be made by the Company on behalf of the
Portfolio with respect to the Shares as a result of the Plan other than the
payments such Portfolio is otherwise obligated to make (i) to AIM pursuant to
the Master Investment Advisory Agreement and (ii) for the expenses otherwise
incurred by the Portfolio and the Company on behalf of the Shares in the normal
conduct of the Portfolio's business pursuant to the Master Investment Advisory
Agreement. However, to the extent any payments by the Company on behalf of the
Portfolio to AIM or such Portfolio's shareholder servicing and transfer agent;
by AIM to any Service Providers or Institutions pursuant to any Shareholder
Service Agreement; or, generally, by the Company on behalf of the Portfolio to
any party for the Portfolio's operating expenses, are deemed to be payments for
the financing of any activity primarily intended to result in the sale of the
Portfolio's shares within the context of Rule 12b-1 under the 1940 Act, then
such payments shall be deemed to be made pursuant to the Plan as set forth
herein.
-2-
<PAGE>
4. Notwithstanding any of the foregoing, while the Plan is in effect, the
following terms and provisions will apply:
a. The officers of the Company shall report quarterly in writing to the
Board of Directors on the amounts and purpose of payments for any of
the activities in paragraph 1 and shall furnish the Board of Directors
with such other information as the Board may reasonably request in
connection with such payments in order to enable the Board to make an
informed determination of the nature and value of such expenditures.
b. The Plan shall continue in effect for a period of more than one year
from the date written below only so long as such continuance is
specifically approved at least annually by the Company's Board of
Directors, including the non-interested directors, by vote cast in
person at a meeting called for the purpose of voting on the Plan.
c. The Plan may be terminated with respect to any class of Shares at any
time by vote of a majority of the non-interested directors or by vote
of a majority of the outstanding voting securities of the applicable
class of Shares, on not more than sixty (60) days' written notice to
any other party to the Plan.
d. The Plan may not be amended to materially increase the amount to be
spent hereunder or to permit the Company on behalf of the Portfolio to
make payments for distribution other than to the Distributor or with
respect to a Shareholder Service Agreement or without approval by the
holders of the applicable class of Shares, and all material amendments
to the Plan shall be approved by vote of the dis-interested directors
cast in person at a meeting called for the purpose of voting on such
amendment.
e. So long as the Plan is in effect, the selection and nomination of the
Company's dis-interested directors shall be committed to the
discretion of such dis-interested directors.
5. This Plan shall be subject to the laws of the State of Texas and shall
be interpreted and construed to further promote the operation of the Company as
an open-end investment company. As used herein the terms "Net Asset Value,"
"Offering Price," "Investment Company," "Open-End Investment Company,"
"Assignment," "Principal Underwriter," "Interested Person," "Parent,"
"Affiliated Person," and "Majority of the Outstanding Voting Securities" shall
have the meanings set forth in the Securities Act of 1933, as amended, or the
1940 Act, and the rules and regulations thereunder.
6. Nothing herein shall be deemed to protect the parties to any
Shareholder Service Agreement entered into pursuant to this Plan against any
liability to the Company or its shareholders to which they would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of their duties hereunder, or by reason of their reckless disregard
of their obligations and duties hereunder.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this document as
constituting a Plan pursuant to Rule 12b-1.
SHORT-TERM INVESTMENTS CO.
By: /s/ Charles T. Bauer
----------------------------
President
Effective Date: August 6, 1993
--------------------------
-4-
<PAGE>
APPENDIX A TO
MASTER DISTRIBUTION PLAN
OF
SHORT-TERM INVESTMENTS CO.
The Company shall pay the Distributor as full compensation for all
services rendered and all facilities furnished under the Distribution Plan for
each Class as designated below, a Distribution Fee* determined by applying the
annual rate set forth below as to each Class to the average daily net asset
value of the Class for the plan year, computed in a manner used for the
determination of the offering price of shares of the Class.
PRIME PORTFOLIO ANNUAL RATE
Personal Investment Class 0.75%
Private Investment Class 0.50%
Cash Management Class 0.10%
- ------------------------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Class. The amount of
the Distribution Fee is subject to any applicable limitations imposed from
time to time by applicable Rules of the National Association of Securities
Dealers, Inc.
-5-
<PAGE>
EXHIBIT A
[LOGO APPEARS HERE] FUND MANAGEMENT COMPANY
Fund Management Company SHAREHOLDER SERVICE AGREEMENT
(BANKS)
______________, 19__
Fund Management Company
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with Fund Management Company ("FMC")
as agent on behalf of the funds listed on Schedule A hereto (the "Funds"), for
the servicing of our clients who are shareholders of, and the administration of
accounts in, the Funds. We understand that this Shareholder Service Agreement
(the "Agreement") has been adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act") by each of the Funds, under a Distribution
Plan (the "Plan") adopted pursuant to said Rule, and is subject to applicable
rules of the National Association of Securities Dealers, Inc. ("NASD"). This
Agreement defines the services to be provided by us for which we are to receive
payments pursuant to the Plan. The Plan and the Agreement have been approved by
a majority of the directors or trustees of the applicable Fund, including a
majority of directors or trustees who are not interested persons of the
applicable Fund, and who have no direct or indirect financial interest in the
operation of the Plan or related agreements, by votes cast in person at a
meeting called for the purpose of voting on the Plan. Such approval included a
determination, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services and
administrative support services to our customers who may from time to time
own shares of the Funds of record or beneficially, including but not limited
to, forwarding sales literature, answering routine customer inquiries
regarding the Funds, assisting customers in changing dividend options,
account designations and addresses, and in enrolling into any of several
special investment plans offered in connection with the purchase of the
Funds, assisting in the establishment and maintenance of customer accounts
and records and in the processing of purchase and redemption transactions,
investing dividends and capital gains distributions automatically in shares
of the Funds and providing such other services as FMC or the customer may
reasonably request, you shall pay us a fee periodically. We represent that
we shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. Shares of the Funds purchased by us on behalf of our clients may be
registered in our name or the name of our nominee. The client will be the
beneficial owner of the shares of the
<PAGE>
Shareholder Service Agreement Page 2
(Banks)
Funds purchased and held by us in accordance with the client's instructions
and the client may exercise all applicable rights of a holder of such
Shares. We agree to transmit to FMC in a timely manner, all purchase orders
and redemption requests of our clients and to forward to each client all
proxy statements, periodic shareholder reports and other communications
received from FMC by us on behalf of our clients. FMC on behalf of the Funds
agrees to pay all out-of-pocket expenses actually incurred by us in
connection with the transfer by us of such proxy statements and reports to
our clients as required under applicable law or regulation.
3. We agree to transfer to the Funds' custodian in a timely manner as set forth
in the applicable prospectus, federal funds in an amount equal to the amount
of all purchase orders placed by us on behalf of our clients and accepted by
FMC. In the event that FMC fails to receive such federal funds on such date
(other than through the fault of FMC or the Fund's custodian), we shall
indemnify the applicable Fund or FMC against any expense (including
overdraft charges) incurred by the applicable Fund or FMC as a result of the
failure to receive such federal funds.
4. We agree to make available upon FMC's request, such information relating to
our clients who are beneficial owners of Fund shares and their transactions
in such shares as may be required by applicable laws and regulations or as
may be reasonably requested by FMC.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record ownership
will be promptly transferred to the client in the event that the person or
entity ceases to be our client.
6. We acknowledge that we are solely responsible for the registration of
account information for FMC's subaccounting customers through AIM LINK(TM),
and that neither FMC, A I M Institutional Fund Services, Inc. ("AIFS") nor
any Fund is responsible for the accuracy of such information; and we will
indemify and hold harmless FMC, AIFS and the Funds for any claims or
expenses resulting from the inaccuracy or inadequacy of such information.
7. We shall provide such facilities and personnel (which may be all or any part
of the facilities currently used in our business, or all or any personnel
employed by us) as may be necessary or beneficial in carrying out the
purposes of this Agreement.
8. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those contained in
the then current applicable prospectus applicable to the Funds, copies of
which will be supplied to us by FMC; and we shall have no authority to act
as agent for any Fund. Neither a Fund, nor A I M Advisors, Inc. ("AIM") will
be a party, nor will they be represented as a party, to any agreement that
we may enter into with our clients and neither a Fund nor AIM shall
participate, directly or indirectly,
<PAGE>
Shareholder Service Agreement Page 3
(Banks)
in any compensation that we may receive from our clients in connection with
our acting on their behalf with respect to this Agreement.
9. In consideration of the services and facilities described herein, we shall
receive a maximum annual service fee and asset-based sales charge, payable
monthly, as set forth on Schedule A. We understand that this Agreement and
the payment of such service fees and asset-based sales charge has been
authorized and approved by the Board of Directors or Trustees of the
applicable Fund, and that the payment of fees thereunder is subject to
limitations imposed by the rules of the NASD. Service fees may be remitted
to us net of any amounts due and payable to FMC, AIFS or the Funds from us.
A schedule of fees relating to subaccounting is attached hereto as
Schedule B.
10. FMC reserves the right, at its discretion and without notice, to suspend
the sale of any Fund or withdraw the sale of shares of a Fund.
11. FMC may amend this Agreement or Schedule A hereto without our prior consent
by mailing a copy of an amendment to us at the address set forth below.
Such amendment shall become effective on the date set forth in such
amendment unless we terminate this Agreement within thirty (30) days of our
receipt of such amendment.
12. This Agreement may be terminated at any time by FMC on not less than 60
days' written notice to us at our principal place of business. We, on 60
days' written notice addressed to FMC at its principal place of business,
may terminate this Agreement. FMC may also terminate this Agreement for
cause on violation by us of any of the provisions of this Agreement, said
termination to become effective on the date of mailing notice to us of such
termination. FMC's failure to terminate for any cause shall not constitute
a waiver of FMC's right to terminate at a later date for any such cause.
This Agreement shall terminate automatically in the event of its
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a) (4) of the 1940 Act.
13. All communications to FMC shall be sent to it at 11 Greenway Plaza, Suite
1919, Houston, Texas 77046. Any notice to us shall be duly given if mailed
or telegraphed to us at the address shown on this Agreement.
14. We represent that our activities on behalf of our clients and pursuant to
this Agreement either (i) are not such as to require our registration as a
broker-dealer in the state(s) in which we engage in such activities, or
(ii) we are registered as a broker-dealer in the state(s) in which we
engage in such activities.
<PAGE>
Shareholder Service Agreement Page 4
(Banks)
15. This Agreement shall become effective as of the date when it is executed
and dated below by FMC. This Agreement and all rights and obligations of
the parties hereunder shall be governed by and construed under the laws of
the State of Texas.
________________________________________________
(Firm Name)
________________________________________________
(Address)
________________________________________________
City/State/Zip/County
BY:_____________________________________________
Name:___________________________________________
Title:__________________________________________
Dated:__________________________________________
ACCEPTED:
FUND MANAGEMENT COMPANY
BY: ________________________________
Name: ________________________________
Title: ________________________________
Dated: ________________________________
<PAGE>
Shareholder Service Agreement Page 5
(Banks)
SCHEDULE A
FUNDS FEE
Short-Term Investments Company
Prime Portfolio - Personal Investment Class .40%
Prime Portfolio - Private Investment Class .25%
Prime Portfolio - Cash Management Class .08%
Short-Term Investments Trust
Treasury Portfolio - Personal Investment Class .40%
Treasury Portfolio - Private Investment Class .25%
Treasury Portfolio - Cash Management Class .08%
Treasury TaxAdvantage Portfolio - Private Investment Class .25%
Tax-Free Investments Co.
Tax-Free Cash Reserve Portfolio - Private Investment Class .25%
<PAGE>
Shareholder Service Agreement Page 6
(Banks)
SCHEDULE B
SUBACCOUNTING FEES
We will be assessed a fee, payable monthly, in the amount of ______
basis points of our monthly average net assets managed by you. As described in
the attached Shareholder Service Agreement, we understand that the amount of any
service fees remitted to us will be net of any amounts due and payable to FMC,
AIFS or the Funds, including the ______ basis points of monthly average net
assets related to subaccounting services provided to us by AIFS.
<PAGE>
EXHIBIT B
[LOGO APPEARS HERE] FUND MANAGEMENT COMPANY
Fund Management Company SHAREHOLDER SERVICE AGREEMENT
(BROKER-DEALERS)
__________, 19__
Fund Management Company
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with Fund Management Company
("FMC") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the provision of continuing personal shareholder services to our
clients who are shareholders of, and the administration of accounts in, the
Funds. We understand that this Shareholder Service Agreement (the "Agreement")
has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "1940 Act") by each of the Funds, under a Distribution Plan (the "Plan")
adopted pursuant to said Rule, and is subject to applicable rules of the
National Association of Securities Dealers, Inc. ("NASD"). This Agreement
defines the services to be provided by us for which we are to receive payments
pursuant to the Plan. The Plan and the Agreement have been approved by a
majority of the directors or trustees of the applicable Fund, including a
majority of directors or trustees who are not interested persons of the Fund,
and who have no direct or indirect financial interest in the operation of the
Plan or related agreements, by votes cast in person at a meeting called for the
purpose of voting on the Plan. Such approval included a determination, in the
exercise of their reasonable business judgement and in light of their fiduciary
duties, that there is a reasonable likelihood that the Plan will benefit the
Fund and the holders of its Shares. The terms and conditions of this Agreement
shall be as follows:
1. We shall provide continuing personal shareholder services and
administrative support services to our customers who may from time to time
beneficially own shares of the Funds, including but not limited to,
forwarding sales literature, answering routine customer inquiries regarding
the Funds, assisting customers in changing dividend options, account
designations and addresses, and in enrolling into any of several special
investment plans offered in connection with the purchase of the Funds,
assisting in the establishment and maintenance of customer accounts and
records and in the processing of purchase and redemption transactions,
investing dividends and capital gains distributions automatically in shares
of the Funds and providing such other services as FMC or the customer may
reasonably request, and you shall pay us a fee periodically. We represent
that we will accept payment of fees hereunder only so long as we continue
to provide such personal shareholder services.
2. Shares of the Funds purchased by us on behalf of our clients may be
registered in our name or the name of our nominee. The client will be the
beneficial owner of the shares of the Funds purchased and held by us in
accordance with the client's instructions and the client
<PAGE>
Shareholder Service Agreement Page 2
(Broker-Dealers)
may exercise all applicable rights of a holder of such Shares. We agree to
transmit to FMC in a timely manner, all purchase orders and redemption
requests of our clients and to forward to each client all proxy statements,
periodic shareholder reports and other communications received from FMC by
us on behalf of our clients. FMC on behalf of the Funds agrees to pay all
out-of-pocket expenses actually incurred by us in connection with the
transfer by us of such proxy statements and reports to our clients as
required under applicable law or regulation.
3. We agree to transfer to the Funds' custodian, in a timely manner as set
forth in the applicable prospectus, federal funds in an amount equal to the
amount of all purchase orders placed by us on behalf of our clients and
accepted by FMC. In the event that FMC fails to receive such federal funds
on such date (other than through the fault of FMC or the Fund's custodian),
we shall indemnify the applicable Fund or FMC against any expense
(including overdraft charges) incurred by the applicable Fund or FMC as a
result of the failure to receive such federal funds.
4. We agree to make available, upon FMC's request, such information relating
to our clients who are beneficial owners of Fund shares and their
transactions in such shares as may be required by applicable laws and
regulations or as may be reasonably requested by FMC.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record ownership
will be promptly transferred to the client in the event that the person or
entity ceases to be our client.
6. We acknowledge that we are solely responsible for the registration of
account information for FMC's subaccounting customers through AIM LINK(TM),
and that neither FMC, A I M Institutional Fund Services, Inc. ("AIFS") nor
any Fund is responsible for the accuracy of such information; and we will
indemify and hold harmless FMC, AIFS and the Funds for any claims or
expenses resulting from the inaccuracy or inadequacy of such information.
7. We shall provide such facilities and personnel (which may be all or any
part of the facilities currently used in our business, or all or any
personnel employed by us) as may be necessary or beneficial in carrying out
the purposes of this Agreement.
8. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those contained
in the then current applicable prospectus applicable to the Funds, copies
of which will be supplied to us by FMC; and we shall have no authority to
act as agent for any Fund. Neither a Fund nor A I M Advisors, Inc. ("AIM")
will be a party, nor will they be represented as a party, to any agreement
that we may enter into with our clients and neither a Fund nor AIM shall
participate, directly or indirectly,
<PAGE>
Shareholder Service Agreement Page 3
(Broker-Dealers)
in any compensation that we may receive from our clients in connection with
our acting on their behalf with respect to this Agreement.
9. In consideration of the services and facilities described herein, we shall
receive a maximum annual service fee, payable monthly, as set forth in
Schedule A. We understand that this Agreement and the payment of such fees
has been authorized and approved by the Board of Directors or Trustees of
the applicable Fund, and that the payment of fees hereunder is subject to
limitations imposed by the rules of the NASD. Service fees may be remitted
to us net of any amounts due and payable to FMC, AIFS or the Funds from us.
A schedule of fees relating to subaccounting is attached hereto as
Schedule B.
10. FMC reserves the right, at its discretion and without notice, to suspend
the sale of any Fund shares or withdraw the sale of shares of a Fund.
11. We represent that we are a member in good standing of the NASD, and agree
to abide by the Rules of Fair Practice of the NASD and all other federal
and state rules and regulations that are now or may become applicable to
transactions hereunder. Our expulsion from the NASD will automatically
terminate this agreement without notice. Our suspension from the NASD or a
violation by us of applicable state and federal laws and rules and
regulations of authorized regulatory agencies will terminate this agreement
effective upon notice received by us from FMC.
12. This Agreement or Schedule A hereto may be amended at any time without our
prior consent by FMC, by mailing a copy of an amendment to us at the
address set forth below. Such amendment shall become effective on the date
set forth in such amendment unless we terminate this Agreement within
thirty (30) days of our receipt of such amendment.
13. This Agreement may be terminated at any time by FMC on not less than 60
days' written notice to us at our principal place of business. We, on 60
days' written notice addressed to FMC at its principal place of business,
may terminate this Agreement. FMC may also terminate this Agreement for
cause on violation by us of any of the provisions of this Agreement, said
termination to become effective on the date of mailing notice to us of such
termination. FMC's failure to terminate for any cause shall not constitute
a waiver of FMC's right to terminate at a later date for any such cause.
This Agreement shall terminate automatically in the event of its
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a) (4) of the 1940 Act.
14. All communications to FMC shall be sent to it at P.O. Box 4333, Houston,
Texas 77210-4333. Any notice to us shall be duly given if mailed or
telegraphed to us at the address shown on this Agreement.
<PAGE>
Shareholder Service Agreement Page 4
(Broker-Dealers)
15. This Agreement shall become effective as of the date when it is executed
and dated below by FMC. This Agreement and all rights and obligations of
the parties hereunder shall be governed by and construed under the laws of
the State of Texas.
________________________________________
(Firm Name)
________________________________________
(Address)
________________________________________
City/State/Zip/County
BY: ____________________________________
Name:___________________________________
Title:__________________________________
Dated:__________________________________
ACCEPTED:
FUND MANAGEMENT COMPANY
BY: ______________________________
Name: ______________________________
Title: ______________________________
Dated: ______________________________
<PAGE>
Shareholder Service Agreement Page 5
(Broker-Dealers)
SCHEDULE A
FUNDS FEE
Short-Term Investments Company
Prime Portfolio - Personal Investment Class .40%
Prime Portfolio - Private Investment Class .25%
Prime Portfolio - Cash Management Class .08%
Short-Term Investments Trust
Treasury Portfolio - Personal Investment Class .40%
Treasury Portfolio - Private Investment Class .25%
Treasury Portfolio - Cash Management Class .08%
Treasury TaxAdvantage Portfolio - Private Investment Class .25%
Tax-Free Investments Co.
Tax-Free Cash Reserve Portfolio - Private Investment Class .25%
<PAGE>
Shareholder Service Agreement Page 6
(Broker-Dealers)
SCHEDULE B
SUBACCOUNTING FEES
We will be assessed a fee, payable monthly, in the amount of ____ basis
points of our monthly average net assets managed by you. As described in the
attached Shareholder Service Agreement, we understand that the amount of any
service fees remitted to us will be net of any amounts due and payable to FMC,
AIFS or the Funds, including the ____ basis points of monthly average net assets
related to subaccounting services provided to us by AIFS.
<PAGE>
EXHIBIT 15(b)
AMENDMENT NO. 1
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), pursuant to Rule 12b-1 of Short-
Term Investments Co., a Maryland corporation, is hereby amended as follows:
Appendix A of the Plan is hereby deleted in its entirety and replaced with
the following:
"APPENDIX A TO
MASTER DISTRIBUTION PLAN
OF
SHORT-TERM INVESTMENTS CO.
The Company shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each Class
as designed below, a Distribution Fee* determined by applying the annual rate
set forth below as to each Class to the average daily net asset value of the
Class for the plan year, computed in a manner used for the determination of the
offering price of shares of the Class.
<TABLE>
<CAPTION>
Prime Portfolio Annual Rate
<S> <C>
Personal Investment Class 0.75%
Private Investment Class 0.50%
Resource Class 0.20%
Cash Management Class 0.10%
</TABLE>
- --------------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Class. The amount of the
Distribution Fee is subject to any applicable limitations imposed from time to
time by applicable Rules of the National Association of Securities Dealers,
Inc."
<PAGE>
All other terms and provisions of the Plan not amended herein shall remain
in full force and effect.
Dated: September 19, 1995
SHORT-TERM INVESTMENTS CO.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
------------------------------- ------------------------------
Assistant Secretary President
(SEAL)
-2-
<PAGE>
EXHIBIT 15(c)
AMENDMENT NO. 2
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), pursuant to Rule 12b-1 of Short-
Term Investments Co., a Maryland corporation, is hereby amended as follows:
Appendix A of the Plan is hereby deleted in its entirety and replaced with
the following:
"APPENDIX A TO
MASTER DISTRIBUTION PLAN
OF
SHORT-TERM INVESTMENTS CO.
The Company shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each Class
as designed below, a Distribution Fee* determined by applying the annual rate
set forth below as to each Class to the average daily net asset value of the
Class for the plan year, computed in a manner used for the determination of the
offering price of shares of the Class.
<TABLE>
<CAPTION>
PRIME PORTFOLIO ANNUAL RATE
<S> <C>
Personal Investment Class 0.75%
Private Investment Class 0.50%
Resource Class 0.20%
Cash Management Class 0.10%
LIQUID ASSETS PORTFOLIO ANNUAL RATE
Private Investment Class 0.50%
Cash Management Class 0.10%
</TABLE>
- ---------------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Class. The amount of the
Distribution Fee is subject to any applicable limitations imposed from time to
time by applicable Rules of the National Association of Securities Dealers,
Inc."
<PAGE>
All other terms and provisions of the Plan not amended herein shall remain
in full force and effect.
Dated ______________________, 1995
SHORT-TERM INVESTMENTS CO.
Attest: ______________________ By: _________________________
Assistant Secretary President
(SEAL)
2
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