<PAGE>
SHORT-TERM INVESTMENTS CO.
PRIME PORTFOLIO
PERSONAL INVESTMENT CLASS
Supplement dated June 29, 1995
to the Prospectus
dated December 30, 1994
Effective July 1, 1995, A I M Institutional Fund Services, Inc. ("AIFS"), a
wholly-owned subsidiary of A I M Advisors, Inc. and a registered transfer agent,
will become the exclusive transfer agent and dividend disbursing agent for the
Personal Investment Class (the "Class") of the Prime Portfolio (the "Portfolio")
of Short-Term Investments Co. (the "Fund"). Since September 16, 1994, AIFS has
been acting as a transfer agent for the Class providing certain limited transfer
agency services for shares of the Class. The phone number of AIFS is
(800) 877-4744.
AIFS will provide such transfer agency services pursuant to a Transfer
Agency and Service Agreement, dated September 16, 1994, as amended July 1, 1995,
and the Administrative Services Agreement, dated September 16, 1994, between
A I M Advisors, Inc. and AIFS will terminate.
Effective July 17, 1995, purchase orders and redemption requests received
by the Fund after 4:00 p.m. Eastern Time on a business day of the Portfolio
will be effected at the net asset value determined on the next business day.
Also effective July 17, 1995: (1) the net asset value per share of the
Portfolio will be determined daily as of 4:00 p.m. Eastern Time, (2) dividends
from the net income of the Portfolio will be declared daily to shareholders of
record of the Class of the Portfolio immediately after 4:00 p.m. Eastern Time,
and (3) 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.
<PAGE>
SHORT-TERM
INVESTMENTS CO.
Prospectus
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PRIME The Prime Portfolio (the "Portfolio") is a
PORTFOLIO 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
PERSONAL to achieve its objective by investing in high
INVESTMENT grade money market instruments such as U.S.
CLASS Government obligations, bank obligations,
commercial instruments and repurchase agreements.
The instruments purchased by the Portfolio will
DECEMBER 30, 1994 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 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 and the Cash Management Class, as
well as shares 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 30, 1994,
HAS BEEN FILED WITH THE 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) 877-4744.
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.
[AIM LOGO APPEARS HERE]
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7744
<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
another portfolio, the Liquid Assets Portfolio, exclusively to institutions,
pursuant to a separate prospectus. The portfolios of the Fund are referred to
collectively as the "Portfolios."
Because the Portfolio declares dividends on a daily basis, shares of each
class of the Portfolio have the same net asset value (proportionate interest in
the net assets of the Portfolio) and bear equally those expenses, such as the
advisory fee, that are allocated to the Portfolio as a whole. All classes of
the Portfolio share a common investment objective and portfolio of investments.
However, different classes of the Portfolio have different shareholder
qualifications and are separately allocated certain class expenses, such as
those associated with the distribution of their shares. Therefore, each class
will have a different dividend payment and a different yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient 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
3:00 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 3:00 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 4:00 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
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INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. 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 asset value of the Portfolio attributable to 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 "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."
3
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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 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)*...................................................................... .02%
----
Total Portfolio Operating Expenses --
Personal Investment Class.......................................................................................... .58%
====
</TABLE>
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* Had there been no fee waivers and no expense reimbursements, 12b-1 Fees and
Other Expenses would have been 0.75% and 1.58%, 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............................................................ $32
10 years........................................................... $73
</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 except that 12b-1
fees have been restated to reflect current fee waivers. There can be no
assurance that future waivers of 12b-1 fees (if any) will not vary from the
figures reflected in the Fee Table. 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 three year period ended
August 31, 1994 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>
1994 1993 1992 1991
------ ----- ----- -----
<S> <C> <C> <C> <C>
Net asset value, beginning of period......................... $ 1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income....................................... 0.03 .03 .04 .002
------ ----- ----- -----
Total from investment operations............................ 0.03 .03 .04 .002
Less distributions:
Dividends from net investment income........................ (0.03) (.03) (.04) (.002)
------ ----- ----- -----
Net asset value, end of period............................... $ 1.00 $1.00 $1.00 $1.00
====== ===== ===== =====
Total return................................................. 3.12% 2.74% 3.94% 5.02%(a)
====== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period (000s omitted).................... $3,065 $ 904 $ 727 $ 270
====== ===== ===== =====
Ratio of expenses to average net assets(b).................. 0.58%(c) 0.52% 0.54% 0.80%(a)
====== ===== ===== =====
Ratio of net investment income to average net assets(b)..... 3.34%(c) 2.71% 3.75% 5.03%(a)
====== ===== ===== =====
</TABLE>
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(a) Annualized.
(b) Had there been no expense reimbursements, the ratios of expenses and net
investment income to average net assets would have been 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 $1,437,993.
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 that securities subject to repurchase agreements 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. 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 Instruments
The following list of descriptions illustrates the types of instruments in
which the Portfolio intends to invest. The list does not purport to be an
exhaustive list of such instruments, 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, since it is not obligated to do so by law.
6
<PAGE>
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
7
<PAGE>
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 adviser 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.
8
<PAGE>
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.
For industry classification purposes, bank broker-dealers are considered to
be part of the banking industry.
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
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. Purchase
requests with respect to the Class may also be made via AIM LINK(TM), a
personal computer application software product. 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
3:00 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 Information
and Authorization Form, which can be obtained from FMC, must be completed and
sent to FMC at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173. Any
changes made to the information provided in the Account Information and
Authorization Form must be made in writing or by completing a new form and
providing it to FMC. An investor must open an account in the Class through an
Institution in accordance with 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 of subsequent purchases of shares of the Class by an
Institution on behalf of its customers. An Institution may have a "sweep"
program under which a portion of a customer's account with such Institution may
be automatically invested in shares of the Class. 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
the Fund.
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 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(TM), 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
Information and Authorization Form, but may be remitted by check upon request
by a shareholder. If a redemption request is received by the Portfolio prior to
3:00 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 the
Fund after 3:00 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 3:00 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, State Street
Bank and Trust Company, or A I M Institutional Fund Services, Inc. ("AIFS"),
the Class' transfer agents (the "Transfer Agents").
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 as of immediately after 3:00 p.m. Eastern
Time on the day of declaration. Net income for dividend purposes is determined
daily as of 3:00 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 accrued for the applicable
dividend period attributable to the Portfolio, such as custodian fees,
directors' fees,
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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
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 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 be paid by check or wire transfer.
(Wire transfers may only be made in amounts of $1,000 or more.) 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
3:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made either in writing by the Institution to
FMC at 11 Greenway Plaza, Suite 1919, Houston, TX 77046-1173, or transmitted
via the version of AIM LINK(TM) containing the subaccounting feature, and will
become effective with dividends paid after its receipt by FMC or, if such
election is transmitted via AIM LINK(TM), FMC's affiliates. 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
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 the date of this 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 3:00
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 Securities and Exchange Commission
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, 1994, 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 4.13% and 4.22%, 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 4:00 p.m.
Eastern Time.
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.
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 November 30, 1994,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $26.9 billion. AIM is a wholly-owned
subsidiary of A I M Management Group Inc. ("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, 1994, AIM received fees with respect to
the Portfolio, which represented 0.06% of the Portfolio's average daily net
assets. Such fees were paid pursuant to an advisory agreement that was
previously in effect, which agreement provided for the same level of
compensation to AIM as the Advisory Agreement. During such fiscal year, the
expenses of the Class, including AIM's fees, amounted to 0.58% 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 have entered into an Administrative Services
Agreement pursuant to which AIFS is reimbursed by AIM for its costs in
providing shareholder services for the Fund. AIFS or its affiliates received
reimbursement of shareholder services costs of $14,651 with respect to the
Portfolio for the period June 1, 1994 through August 31, 1994 which represented
0.0003% of the Portfolio's average daily net assets.
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.
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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 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, payment of a service fee may
be made to dealers and other financial institutions that provide continuing
personal shareholder services to their customers who purchase and own shares of
the Class, in amounts of up to 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. Payments to dealers and other financial
institutions in excess of such amount 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 10, 1994. 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.
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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 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.
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 five classes. Four classes, including the Class,
represent interests in the Portfolio and one represents an interest in the
Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. 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, if a portfolio is
divided into various classes, holders of shares of a particular class will have
the exclusive right to vote on any matter, such as distribution arrangements,
which relates solely to such class. The holders of shares of 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.
There will not normally be 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.
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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 AGENTS 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. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, and A I M Institutional Fund Services, Inc., 11 Greenway
Plaza, Suite 1919 Houston, Texas 77046-1173, act as transfer agents 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
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
======================================== =====================================
INVESTMENT ADVISOR PROSPECTUS
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 December 30, 1994
Houston, Texas 77046-1173
(713) 626-1919
SHORT-TERM
INVESTMENTS CO.
DISTRIBUTOR
FUND MANAGEMENT COMPANY ---------------
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 PRIME PORTFOLIO
(800) 877-4744
---------------
AUDITORS PERSONAL INVESTMENT CLASS
KPMG PEAT MARWICK LLP
NationsBank Building TABLE OF CONTENTS
700 Louisiana
Houston, Texas 77002 <TABLE>
<CAPTION>
PAGE
CUSTODIAN ----
THE BANK OF NEW YORK <S> <C>
110 Washington Street, 8th Floor SUMMARY.......................... 2
New York, New York 10286
TABLE OF FEES AND EXPENSES....... 4
TRANSFER AGENTS FINANCIAL HIGHLIGHTS............. 5
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street SUITABILITY FOR INVESTORS........ 6
Boston, Massachusetts 02110
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 FUND REPORTS TO SHAREHOLDERS.......... 13
OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY MANAGEMENT OF THE FUND........... 14
JURISDICTION TO ANY PERSON TO WHOM SUCH
OFFERING MAY NOT LAWFULLY BE MADE. GENERAL INFORMATION.............. 16
</TABLE>
======================================= =====================================
<PAGE>
PERSONAL INVESTMENT CLASS
OF THE
PRIME PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
Supplement dated June 29, 1995
to the Statement of Additional Information
dated December 30, 1994
Effective July 1, 1995, A I M Institutional Fund Services, Inc. ("AIFS"), a
wholly-owned subsidiary of A I M Advisors, Inc. and a registered transfer agent,
will become the exclusive transfer agent and dividend disbursing agent for the
Personal Investment Class (the "Class") of the Prime Portfolio of Short-Term
Investments Co. (the "Fund"). Since September 16, 1994, AIFS has been acting as
a transfer agent for the Class providing certain limited transfer agency
services for shares of the Class. The phone number of AIFS is (800) 877-4744.
AIFS will provide such transfer agency services pursuant to a Transfer
Agency and Service Agreement, dated September 16, 1994, as amended July 1, 1995,
and the Administrative Services Agreement, dated September 16, 1994, between
A I M Advisors, Inc. and AIFS will terminate.
<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
DATED DECEMBER 30, 1994, 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 30, 1994
RELATING TO THE PROSPECTUS DATED: DECEMBER 30, 1994
<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
Investment Advisor.......................................... 6
Administrator............................................... 7
Expenses.................................................... 8
Transfer Agents and Custodian............................... 9
Reports..................................................... 9
Principal Holders of Securities............................. 9
PURCHASES AND REDEMPTIONS.................................... 12
Net Asset Value Determination............................... 12
Distribution Agreement...................................... 12
Distribution Plan........................................... 13
Banking Regulations......................................... 13
Performance Information..................................... 14
Suspension of Redemption Rights............................. 15
INVESTMENT PROGRAM AND RESTRICTIONS.......................... 15
Investment Program.......................................... 15
Eligible Securities......................................... 16
Commercial Paper Ratings.................................... 17
Bond Ratings................................................ 18
Investment Restrictions..................................... 19
PORTFOLIO TRANSACTIONS....................................... 20
TAX MATTERS.................................................. 21
Qualification as a Regulated Investment Company............. 22
Excise Tax on Regulated Investment Companies................ 23
Portfolio Distributions..................................... 23
Effect of Future Legislation; Local Tax Considerations...... 23
FINANCIAL STATEMENTS......................................... FS
</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 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 30, 1994 (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 Portfolio. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectus; and, 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 four classes of
shares: Cash Management Class, Private Investment Class, Personal Investment
Class and the Institutional Class. The Liquid Assets Portfolio consists of a
single class 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 single class 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 Articles of Incorporation of the Fund authorize the issuance of 10
billion shares, par value $.001 per share, each representing an interest in the
Liquid Assets Portfolio (or class thereof) and 19 billion shares, par value
$.001 per share, representing 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 Articles of Incorporation provide 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
Director and Chairman and Chief Executive Officer, A I M Management Group
Inc.; and Chairman of the Board of Directors, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc.,
A I M Institutional Fund Services, Inc. and Fund Management Company.
BRUCE L. CROCKETT, Director
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
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
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 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.
3
<PAGE>
*ROBERT H. GRAHAM, Director and President
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
Institutional Fund Services, Inc. and Fund Management Company; and Director and
Vice President, A I M Capital Management, Inc. and A I M Fund Services, Inc.
JOHN F. KROEGER, Director
Box 464
24875 Swan Road - Martingham
St. Michaels, MD 21663
Trustee, Flag Investors International Trust; and Director, Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Quality Growth Fund, Inc., Flag Investors 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., 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
8955 Katy Freeway, Suite 204
Houston, TX 77024
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director
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
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
Senior Vice President and Treasurer, A I M Advisors, Inc.; and Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company.
- ----------------
* A director who is an "interested person" of A I M Advisors, Inc. and the
Fund as defined in the 1940 Act.
4
<PAGE>
GARY T. CRUM, Senior Vice President
Director and President, A I M Capital Management, Inc.; Director and Senior
Vice President, A I M Management Group Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc.
WILLIAM H. KLEH, Senior Vice President
Director and Senior Vice President, A I M Advisors, Inc.; Director and Vice
President, A I M Capital Management, Inc. and Fund Management Company; Senior
Vice President, A I M Management Group Inc.; and Vice President, A I M
Distributors, Inc. and A I M Fund Services, Inc.
CAROL F. RELIHAN, Secretary and Vice President
Vice President, General Counsel and Secretary, A I M Advisors, Inc., A I M
Distributors, Inc.; A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc., A I M Management Group Inc. and Fund Management Company; and
General Counsel and Secretary, A I M Capital Management, Inc.
POLLY A. AHRENDTS, Vice President
Vice President, A I M Capital Management, Inc.
MELVILLE B. COX, Vice President
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc. and A
I M 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 KELLY, Vice President
Senior Vice President, A I M Capital Management, Inc.; and Vice President,
A I M Advisors, Inc.
J. ABBOTT SPRAGUE, Vice President
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. and A I M Fund Services,
Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
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,
5
<PAGE>
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. All of the Fund's executive
officers hold similar offices with some or all of such investment companies.
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 investment companies advised or
managed by AIM. Each such director receives a fee, allocated among the
investment companies for which he serves as a director or trustee, which
consists of two components: (i) an annual retainer, based on the number of
series portfolios of the investment companies for which such director serves as
director/trustee ("Series"), which annual retainer shall equal the sum of $7,500
for the first Series, $5,000 for the second Series, $2,500 for the third Series,
$1,000 for each of the fourth through tenth Series, and $750 for each additional
Series, with 50% of such annual retainer being allocated equally among the
Series for which the director serves as director/trustee, and 50% of such annual
retainer being allocated among the Series based upon their relative net assets;
and (ii) a meeting fee of $250 per Series, up to a maximum of $1,000 per
meeting, for each board meeting attended in person by such director with 50% of
such meeting fee being allocated equally among the Series for which the director
serves as director/trustee, and 50% allocated among the Series based upon their
relative net assets.
During the fiscal year ended August 31, 1994, $37,943 in directors' fees
and expenses were allocated to the Portfolio.
The Fund paid Reid & Priest $28,323 in legal fees for services provided to
the Portfolio during the fiscal year ended August 31, 1994. Mr. Carl
Frischling, a director of the Fund, was a partner in such firm during the term
services were provided to the Portfolio.
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 November 30, 1994, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $26.9 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. All of the directors and certain of the
officers of AIM are also executive officers of the Fund and their affiliations
are shown under "Directors and Officers."
6
<PAGE>
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 million 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,
has entered 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, 1994, 1993 and 1992, AIM received fees
with respect to the Portfolio (and the Predecessor Portfolio) in the amounts of
$2,599,662, $2,647,096 and $3,060,139, respectively.
The Advisory Agreement will continue in effect until June 30, 1995, 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") have 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
7
<PAGE>
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, provides that AIFS may
perform certain shareholder services for the Portfolio. For such services, AIFS
is entitled to receive from AIM such reimbursement of its costs associated with
the Class.
Under the terms of the Prior Advisory Agreement, AIM was reimbursed for the
fiscal years ended August 31, 1993 and 1992 in the amounts of $94,922 and
$111,576, respectively, for fund accounting services for the Portfolio. Pursuant
to the Administrative Services Agreement, A I M was reimbursed for the fiscal
year ended August 31, 1994 in the amount of $106,109 for fund accounting
services for the Portfolio. 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 amount of $14,651.
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). 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
8
<PAGE>
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 AGENTS 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.
State Street Bank and Trust Company serves as a transfer agent for the Class
and receives such compensation from the Fund for its services in such capacity
as is agreed to from time to time by State Street Bank and Trust Company and the
Fund. The address of State Street Bank and Trust Company is 225 Franklin Street,
Boston, Massachusetts 02110. A I M Institutional Fund Services, Inc., 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, also acts as a transfer
agent for the shares of the Class and currently receives no compensation from
the Fund for its services.
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.
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 November 22, 1994, 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, N.A............ 16.46%
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
US Bank of Oregon.................... 13.29%
321 Southwest Sixth
Portland, OR 97208
</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.
9
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
Frost National Bank............................ 7.33%
P.O. Box 1600
San Antonio, TX 78296
Wachovia Bank & Trust Co....................... 6.97%
P.O. Box 3075
Winston Salem, NC 27150
Texas Commerce Bank............................ 6.87%
601 Travis
Houston, TX 77700
Trust Company of Georgia....................... 6.40%
P.O. Box 105213
Atlanta, GA 30348
Boatmen's Trust Company........................ 6.28%
P. O. Box 14737
St. Louis, MO 63178
Liberty Bank and Trust Company of Tulsa, N.A... 5.04%
P. O. Box 705
Tulsa, OK 74101
PRIVATE INVESTMENT CLASS
- ------------------------
Liberty Bank and Trust Company of Tulsa, N.A... 9.70%
P. O. Box 705
Tulsa, OK 74101
Huntington Capital Corp........................ 6.46%
41 S. High Street, 9th Floor
Columbus, OH 43287
</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.
10
<PAGE>
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
<S> <C>
PERSONAL INVESTMENT CLASS
- -------------------------
The Bank of New York................... 31.35%**
440 Mamaroneck Ave.
Harrison, NY 10528
CASH MANAGEMENT CLASS
- ---------------------
Citibank as Agent for Customer......... 100.00%**
120 Wall Street
New York, NY 10043
</TABLE>
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 the Liquid Assets Portfolio
as of November 22, 1994, and the percentage of the Liquid Assets Portfolio's
outstanding shares owned by such shareholders as of such date are as follows:
<TABLE>
<S> <C>
NationsBank of Texas, N.A.............. 19.70%
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
Trust Company of Georgia............... 14.67%
P.O. Box 105213
Atlanta, GA 30348
Boatmen's Trust Company................ 12.46%
P.O. Box 14737
St. Louis, MO 63178
Mellon Bank, N.A....................... 9.84%
Two Mellon Bank Center, Room 15206
Pittsburgh, PA 15259-0001
</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 25% or more of the outstanding shares of a class may
be presumed to be in "control" of such class of shares, as defined in the
1940 Act.
11
<PAGE>
To the best of the knowledge of the Fund, as of November 22, 1994, 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. 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.
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, 1995, 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
12
<PAGE>
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, 1994, FMC received compensation pursuant
to the Plan in the amount of $7,190, or an amount equal to 0.50% of the average
daily net assets of the Class. Of such amount, $5,983 (or an amount equal to
0.42% of the average daily net assets of the Class) was paid to dealers and
financial institutions and $1,207 (or an amount equal to 0.08% 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 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
13
<PAGE>
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, 1994, 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 4.13% and 4.22%, 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.
14
<PAGE>
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 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.(1)
The Portfolio may also lend its portfolio securities in amounts up to 331/3%
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.
15
<PAGE>
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
(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(2) is not an Eligible Security if
the security has a long-term rating from any NRSRO that is not within
- ----------------
(1) "Requisite NRSRO" means (a) any two nationally recognized statistical
rating organization 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.
(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.
16
<PAGE>
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:
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.
17
<PAGE>
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 by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as 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.
18
<PAGE>
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;
(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;
19
<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.
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,
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 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
20
<PAGE>
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.
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 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 principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
The Board of Directors has adopted procedures pursuant to Rule 17a-7 under the
1940 Act relating to portfolio transactions among the Portfolio and the AIM
Funds and the Portfolio may from time to time enter into transactions in
accordance with such Rule and procedures.
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.
21
<PAGE>
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Portfolio is not subject to federal income tax
on the portion of its net investment income (i.e., taxable interest, dividends
and other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 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 Gain 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.
22
<PAGE>
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."
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 the date
of this Statement of Additional Information. 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
23
<PAGE>
above. Shareholders are urged to consult their tax advisers as to the
consequences of these and other state and local tax rules affecting investment
in the Portfolio.
24
<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, 1994, 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, 1994 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, 1994, 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.
KPMG Peat Marwick LLP
Houston, Texas
October 7, 1994
FS-1
<PAGE>
SCHEDULE OF
INVESTMENTS
August 31, 1994
<TABLE>
<S> <C> <C> <C>
MATURITY PAR (000) VALUE
---------------------------------------------
COMMERCIAL PAPER, MASTER AND
PROMISSORY NOTE AGREEMENTS - 81.70%(a)
BASIC INDUSTRIES - 2.83%
CHEMICALS - 0.74%
Hoechst Corp.
4.40%........................... 09/02/94 $ 30,500 $ 30,496,272
--------------
MISCELLANEOUS - 2.09%
PHH Corp.
4.50%........................... 09/07/94 to 09/13/94 85,878 85,775,467
--------------
Total Basic Industries......... 116,271,739
--------------
CAPITAL GOODS - 3.35%
MACHINE TOOLS & RELATED PRODUCTS - 0.24%
Vermont American Corp.
4.55%........................... 09/09/94 10,000 9,989,889
--------------
MACHINERY - 3.11%
Dover Corp.
4.50%........................... 09/07/94 17,000 16,987,250
4.59%........................... 09/08/94 20,000 19,982,150
4.80%........................... 09/09/94 to 09/13/94 51,000 50,926,400
4.75%........................... 09/20/94 to 09/21/94 40,000 39,897,083
--------------
127,792,883
--------------
Total Capital Goods............ 137,782,772
--------------
CONSUMER DURABLES - 5.89%
AUTOMOBILE - 4.99%
Ford Motor Credit Co.
4.50%........................... 09/12/94 to 09/15/94 62,840 62,737,530
4.45%........................... 09/22/94 43,000 42,888,379
Toyota Motor Credit Corp.
4.55%........................... 09/13/94 to 09/15/94 100,000 99,835,694
--------------
205,461,603
--------------
RESIDENTIAL CONSTRUCTION - 0.90%
Weyerhaeuser Real Estate Co.
4.50%........................... 09/13/94 37,000 36,944,500
--------------
Total Consumer Durables........ 242,406,103
--------------
CONSUMER NONDURABLES - 4.68%
BEVERAGES - 4.44%
Seagram (Joseph E.) & Sons, Inc.
4.45%........................... 09/19/94 to 09/21/94 52,786 52,660,029
4.55%........................... 09/19/94 to 09/20/94 100,345 100,110,396
Coca-Cola Co. (The)(b)
4.70%........................... 12/20/94 30,000 30,000,000
--------------
182,770,425
--------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<S> <C> <C> <C>
MATURITY PAR (000) VALUE
-------------------------------------------
FOOD PROCESSING - 0.24%
General Mills, Inc.
4.55%............................ 09/26/94 $ 10,000 $ 9,968,403
------------
Total Consumer Nondurables...... 192,738,828
------------
CONSUMER SERVICES - 1.69%
MISCELLANEOUS - 1.69%
USL Capital Corp.
4.80%............................ 10/14/94 70,000 69,598,667
------------
Total Consumer Services......... 69,598,667
------------
ENERGY - 3.90%
OIL & GAS - 3.63%
ARCO Coal Australia Inc.
4.63%............................ 10/06/94 to 10/07/94 29,140 29,007,157
4.64%............................ 10/06/94 to 10/07/94 51,391 51,154,545
4.65%............................ 10/06/94 24,578 24,466,887
4.80%............................ 10/13/94 to 10/26/94 44,943 44,657,084
------------
149,285,673
------------
NATURAL GAS - 0.27%
Colonial Pipeline Co.
4.50%............................ 09/08/94 11,000 10,990,375
------------
Total Energy.................... 160,276,048
------------
FINANCIAL - 56.59%
ASSET-BACKED SECURITIES - 19.13%
Asset Securitization Cooperative
Corp.
4.55%............................ 09/14/94 50,000 49,917,847
4.65%............................ 09/08/94 to 09/09/94 103,000 102,900,671
Ciesco, L.P.
4.52%............................ 09/19/94 9,200 9,179,208
4.75%............................ 09/21/94 20,000 19,947,222
4.63%............................ 10/06/94 15,000 14,932,479
4.80%............................ 10/14/94 25,000 24,856,816
Clipper Receivables Corp.
4.50%............................ 09/07/94 to 09/09/94 75,094 75,022,680
4.60%............................ 09/15/94 36,368 36,302,942
4.75%............................ 09/21/94 9,988 9,961,643
Corporate Asset Funding Co. Inc.
4.45%............................ 09/20/94 20,000 19,953,028
4.75%............................ 09/29/94 30,000 29,889,167
Delaware Funding Corp.
4.55%............................ 09/12/94 11,973 11,956,354
4.75%............................ 09/19/94 32,279 32,202,337
4.81%............................ 10/17/94 16,619 16,516,858
</TABLE>
FS-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
MATURITY PAR (000) VALUE
---------------------------------------------
Preferred Receivables Funding Corp.
4.65%.......................... 09/12/94 $ 19,475 $ 19,447,329
4.50%.......................... 09/14/94 to 09/16/94 85,775 85,623,360
4.55%.......................... 09/14/94 21,500 21,464,674
4.60%.......................... 09/15/94 21,250 21,211,986
4.53%.......................... 09/16/94 16,375 16,344,092
4.52%.......................... 09/20/94 15,675 15,637,606
Sheffield Receivables Corp.
4.80%.......................... 10/21/94 to 10/28/94 155,000 153,892,000
--------------
787,160,299
--------------
BANKING - 5.47%
Citicorp Securities Inc.(b)
5.13%.......................... 09/19/94 17,400 17,400,000
Morgan (J.P.) Securities, Inc.(c)
5.08%.......................... 01/19/95 90,350 90,350,000
5.13%.......................... 09/27/94 117,400 117,400,000
--------------
225,150,000
--------------
BROKERAGE/INVESTMENT - 12.07%
Goldman, Sachs & Co.(d)
3.69%.......................... 10/31/94 150,000 150,000,000
Merrill Lynch & Co. Inc.
4.50%.......................... 10/03/94 100,000 99,600,000
Morgan Stanley Group Inc.(e)
5.08%.......................... 11/04/94 167,400 167,400,000
Smith Barney Inc.
4.80%.......................... 10/05/94 30,000 29,864,000
4.84%.......................... 10/14/94 50,000 49,710,943
--------------
496,574,943
--------------
BUSINESS CREDIT - 3.33%
CIT Group Holdings, Inc.
4.64%.......................... 09/09/94 50,000 49,948,444
4.65%.......................... 09/12/94 45,000 44,936,063
National Rural Utilities Cooperative
Finance Corp.
4.62%.......................... 10/04/94 to 10/07/94 42,300 42,117,010
--------------
137,001,517
--------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
MATURITY PAR (000) VALUE
---------------------------------------------
INSURANCE (LIFE) - 3.92%
Lincoln National Corp.
4.65%........................... 10/04/94 $ 16,300 $ 16,230,521
MetLife Funding, Inc.
4.50%........................... 09/23/94 40,300 40,189,175
4.62%........................... 10/07/94 30,000 29,861,400
The Prudential Home Mortgage Co.
4.40%........................... 09/01/94 25,000 25,000,000
4.55%........................... 09/23/94 50,000 49,860,972
--------------
161,142,068
--------------
INSURANCE (OTHER) - 2.29%
Marsh & McLennan Companies, Inc.
4.40%........................... 09/01/94 to 09/02/94 32,000 31,997,983
4.60%........................... 09/07/94 to 09/16/94 62,500 62,417,392
--------------
94,415,375
--------------
PERSONAL CREDIT - 5.32%
Associates Corp. of North America
4.50%........................... 10/03/94 50,000 49,800,000
4.65%........................... 10/04/94 50,000 49,786,875
AVCO Financial Services, Inc.
4.52%........................... 09/30/94 35,000 34,872,561
4.63%........................... 10/06/94 50,000 49,774,931
Transamerica Finance Corp.
4.55%........................... 09/19/94 10,000 9,977,250
4.62%........................... 10/07/94 25,000 24,884,500
--------------
219,096,117
--------------
MISCELLANEOUS - 2.52%
International Lease Finance Corp.
4.52%........................... 09/19/94 10,000 9,977,400
4.50%........................... 09/23/94 9,050 9,025,113
4.48%........................... 09/28/94 25,000 24,916,000
4.79%........................... 10/14/94 50,000 49,713,931
USAA Capital Corp.
4.68%........................... 09/08/94 10,000 9,990,900
--------------
103,623,344
--------------
MULTIPLE INDUSTRY - 2.54%
American Express Co.
4.75%........................... 09/22/94 20,000 19,944,583
American Express Credit Corp.
4.52%........................... 09/16/94 to 09/30/94 85,000 84,708,084
--------------
104,652,667
--------------
Total Financial................ 2,328,816,330
--------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<S> <C> <C> <C>
MATURITY PAR (000) VALUE
------------------------------------
OTHER - 2.77%
BTR DUNLOP FINANCE INC. - 2.77%
4.55%.................................... 09/26/94 $ 25,000 $ 24,921,007
4.64%.................................... 10/05/94 50,000 49,780,889
4.80%.................................... 10/28/94 39,486 39,185,906
--------------
Total Other............................. 113,887,802
--------------
Total Commercial Paper.................. 3,361,778,289
--------------
Total Investments (excluding repurchase
agreements) - 81.70%(f)................ $3,361,778,289(g)
==============
REPURCHASE AGREEMENTS(h) - 18.59%
BT Securities Corp.(i)
4.83%.................................... -- 50,000 $ 50,000,000
Fuji Securities Inc.(j)
4.90%.................................... -- 250,000 250,000,000
Goldman, Sachs & Co.(k)
4.83%.................................... 09/01/94 249,031 249,031,299
Kidder, Peabody & Co. Inc.(l)
4.95%.................................... 09/01/94 30,000 30,000,000
Nikko Securities Co., Ltd.(m).............
4.85%.................................... 59,000 59,000,000
Prudential Securities Inc.(n)
4.89%.................................... -- 27,000 27,000,000
Sanwa - BGK Securities Co., L.P.(o)
4.91%.................................... -- 100,000 100,000,000
--------------
Total Repurchase Agreements - 18.59%(f). $ 765,031,299(g)
==============
</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. Master and Promissory Note Agreement
terms are described below.
(b) Master Note Purchase Agreement may be terminated by the Portfolio upon
three business days' written or telephonic notice. Interest rates on master
notes are redetermined periodically. Rates shown are the rates in effect on
August 31, 1994.
(c) Master Note Purchase Agreements may be terminated by either party upon
thirty business days written notice. Interest rates on master notes are
redetermined periodically. Rates shown are the rates in effect on August
31, 1994.
(d) Promissory Note Agreement may be terminated by the Portfolio upon seven
calendar days oral notice. Interest rates on promissory notes are
redetermined periodically. Rates shown are the rates in effect on August
31, 1994.
(e) Master Note Purchase Agreement may be terminated by either party upon three
business days' written or telephonic notice. Interest rates on master notes
are redetermined periodically. Rates shown are the rates in effect on
August 31, 1994.
(f) Percentage of Net Assets.
(g) Also represents cost for federal income tax purposes.
FS-6
<PAGE>
(h) 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.
(i) Open repurchase agreement entered into 07/11/94; however, either party may
terminate the agreement as of any business day not less than one business
day after receipt of written notice from the terminating party. Interest
rates are redetermined daily. Collateralized by $111,190,000 U.S. Treasury
Obligations 0% to 7.625, due 11/30/95 to 08/15/15.
(j) Open repurchase agreement entered into 04/11/94; however, either party may
terminate the agreement as of any business day not less than one business
day after receipt of written notice from the terminating party. Interest
rates are redetermined daily. Collateralized by $7,850,000 Federal Farm
Credit Obligations, 0% to 8.95% due 09/01/94 to 11/21/03, $16,980,000
Federal Home Loan Bank Board Obligations, 0% to 9.80% due 09/12/94 to
05/18/99, $900,000 Federal Home Loan Mortgage Corp. Obligations, 5.19% to
5.34% due 03/11/98 to 01/25/99, $19,555,000 Federal National Mortgage
Association Obligations, 5.05% to 8.00% due 12/19/94 to 01/13/04,
$65,865,000 Resolution Funding Corp. Obligations, 0% due 10/15/97 to
10/15/23, $300,000 Student Loan Marketing Association Obligations, 0% due
09/08/94, $8,565,000 Tennessee Valley Authority Obligations, 4.19% to 8.05%
due 09/09/96 to 07/15/24 and $534,127,000 U.S. Treasury Obligations, 0% to
11.75% due 11/17/94 to 02/15/23.
(k) Joint repurchase agreement entered into 08/31/94 with a maturing value of
$554,131,782 with the Fund's pro-rata interest being $249,064,711.
Collateralized by $562,755,000 U.S. Treasury Notes, 4.375% to 8.875% due
05/15/95 to 01/15/00.
(l) Joint repurchase agreement entered into 08/31/94 with a maturing value of
$100,013,750 with the Fund's pro-rata interest being $30,004,125.
Collateralized by $67,395,988 Federal Home Loan Mortgage Corp. Obligations,
0% to 4.676% due 03/15/24 to 09/01/24 and $44,414,254 Federal National
Mortgage Association Obligations, 8.00% due 09/25/21.
(m) Open repurchase agreement entered into 04/14/94; however, either party may
terminate the agreement as of any business day not less than one business
day after receipt of written notice from the terminating party. Interest
rates are redetermined daily. Collateralized by $143,760,000 U.S. Treasury
Obligations, 0% to 6.50% due 03/09/95 to 04/30/99.
(n) Open repurchase agreement entered into 07/14/94; however, either party may
terminate the agreement as of any business day not less than one business
day after receipt of written notice from the terminating party. Interest
rates are redetermined daily. Collateralized by $1,915,000 Federal Farm
Credit Obligations, 0% to 8.65% due 09/01/94 to 04/01/02, $3,415,000
Federal Home Loan Bank Board Obligations, 0% to 9.50% due 09/14/94 to
07/19/04, $2,363,000 Federal Home Loan Mortgage Association Obligations, 0%
to 8.125% due 11/30/94 to 11/29/19, $3,045,000 Federal National Mortgage
Association Obligations, 4.875% to 11.70% due 09/10/94 to 07/14/04,
$483,000 Financing Corp. Obligations, 0% to 10.70% due 11/30/94 to
08/03/18, $8,841,000 Resolution Funding Corp. Obligations, 0% to 9.375% due
10/15/95 to 04/15/30, $445,000 Student Loan Marketing Association
Obligations, 0% to 10.50% due 09/10/94 to 04/16/96, $1,171,000 Tennessee
Valley Authority Obligations, 4.375% to 8.625% due 10/01/94 to 06/15/44,
and $25,506,875 U.S. Treasury Obligations, 0% to 13.375% due 09/30/94 to
08/15/23.
(o) Open repurchase agreement entered into 05/19/94; however, either party may
terminate the agreement as of any business day not less than one business
day after receipt of written notice from the terminating party. Interest
rates are redetermined daily. Collateralized by $108,827,105 Government
National Mortgage Association Obligations, 5.00% to 7.00% due 11/20/22 to
08/20/24.
See Notes to Financial Statements.
FS-7
<PAGE>
STATEMENT
OF ASSETS
AND LIABILITIES
August 31, 1994
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost)............................................... $3,361,778,289
Repurchase agreements........................................... 765,031,299
Interest receivable............................................. 4,867,772
Investment for deferred compensation plan....................... 14,881
Other assets.................................................... 258,635
--------------
Total assets.................................................. 4,131,950,876
--------------
LIABILITIES:
Dividends payable............................................... 16,744,999
Deferred compensation payable................................... 14,881
Accrued advisory fees........................................... 165,682
Accrued distribution fees....................................... 4,807
Accrued printing expenses....................................... 5,536
Accrued operating expenses...................................... 1,620
--------------
Total liabilities............................................. 16,937,525
--------------
NET ASSETS...................................................... $4,115,013,351
==============
NET ASSET VALUE PER SHARE:
Capital shares, $0.001 par value per share...................... $4,115,025,404
==============
Net asset value, offering and redemption price per share........ $1.00
=====
</TABLE>
See Notes to Financial Statements.
FS-8
<PAGE>
STATEMENT OF
OPERATIONS
For the year ended
August 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income................................................... $159,273,989
------------
EXPENSES:
Advisory fees..................................................... 2,599,662
Custodian fees.................................................... 233,785
Administrative service fees....................................... 120,760
Directors' fees and expenses...................................... 37,943
Transfer agent fees............................................... 29,699
Professional fees................................................. 137,285
Printing expenses................................................. 56,163
Registration and filing fees...................................... 158,557
Distribution fees (Note 2)........................................ 36,698
Other............................................................. 135,578
------------
Total expenses.................................................. 3,546,130
Less expenses assumed by advisor.................................. (104,200)
------------
Net expenses.................................................... 3,441,930
------------
Net investment income............................................. 155,832,059
------------
Net increase in net assets resulting from operations.............. $155,832,059
============
</TABLE>
See Notes to Financial Statements.
FS-9
<PAGE>
STATEMENT OF
CHANGES IN
NET ASSETS
For the years ended
August 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income............................................... $ 155,832,059 $ 140,216,467
Net realized gain (loss) on sales of investments.................... -- (4,456)
-------------- --------------
Net increase in net assets resulting from operations................ 155,832,059 140,212,011
Distributions to shareholders from net investment income............. (155,832,059) (140,216,467)
Share transactions -- net............................................ (253,692,887) 374,643,259
-------------- --------------
Net increase (decrease) in net assets............................... (253,692,887) 374,638,803
NET ASSETS:
Beginning of period................................................. 4,368,706,238 3,994,067,435
-------------- --------------
End of period....................................................... $4,115,013,351 $4,368,706,238
============== ==============
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in).......................... $4,115,025,404 $4,368,718,291
Undistributed net realized gain (loss) on sales of investments...... (12,053) (12,053)
-------------- --------------
$4,115,013,351 $4,368,706,238
============== ==============
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
August 31, 1994
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 specific class of
shares are charged to that class' operations. Expenses which are applicable
to all classes, e.g. advisory fees, are allocated among them. Expenses of
the Fund which are not directly attributable to a specific class are
prorated among the classes to which the expense relates based on the
relative net assets of each class.
FS-11
<PAGE>
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......................................................... .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>
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 $76,000 on the Prime Portfolio-Private Investment Class, $22,400 on
the Prime Portfolio-Personal Investment Class and $5,800 on the Prime
Portfolio-Cash Management Class during the year ended August 31, 1994.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting and shareholder services to the Portfolio. During the year ended
August 31, 1994, the Portfolio reimbursed AIM $120,760 for such services.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, Personal Investment Class and the Cash Management Class of
the Portfolio. The Plan provides that the Portfolio's Private Investment Class,
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, 1994, the Prime Portfolio-Private Investment
Class, the Prime Portfolio-Personal Investment Class and Prime Portfolio-Cash
Management Class accrued for compensation to FMC of $28,599, $7,190 and $909,
respectively, under the Plan. Certain officers and directors of the Fund are
officers of AIM and FMC.
The Fund paid legal fees of $28,323 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. A
member of that firm is a director of the Fund.
FS-12
<PAGE>
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of the Fund. 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
As of August 31, 1994, shares outstanding of the Prime Portfolio are:
Institutional Class -4,080,754,461, Private Investment Class - 30,833,786,
Personal Investment Class - 3,065,133 and Cash Management Class - 372,024.
Changes in shares outstanding during the years ended August 31, 1994 and 1993
were as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------------------- -----------------------------------
Shares Amount Shares Amount
-------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
PRIME PORTFOLIO:
Sold:
Institutional Class...................... 33,826,759,958 $ 33,826,759,958 24,999,540,725 $ 24,999,540,725
Private Investment Class................. 120,927,192 120,927,192 27,239,367 27,239,367
Personal Investment Class................ 15,823,134 15,823,134 2,231,787 2,231,787
Cash Management Class*................... 25,113,434 25,113,434 -- --
Issued as reinvestment of dividends:
Institutional Class...................... 527,557 527,557 930,552 930,552
Private Investment Class................. 3,982 3,982 4 4
Personal Investment Class................ 39,701 39,701 18,538 18,538
Cash Management Class*................... 5,586 5,586 -- --
Reacquired:
Institutional Class...................... (34,096,489,905) (34,096,489,905) (24,643,862,582) (24,643,862,582)
Private Investment Class................. (107,954,443) (107,954,443) (9,382,421) (9,382,421)
Personal Investment Class................ (13,702,087) (13,702,087) (2,072,711) (2,072,711)
Cash Management Class*................... (24,746,996) (24,746,996) -- --
-------------- --------------- -------------- ---------------
Net increase (decrease)..................... (253,692,887) $ (253,692,887) 374,643,259 $ 374,643,259
============== =============== ============== ===============
</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-Personal Investment Class during each of the years in the
three year period ended August 31, 1994 and the period August 8, 1991 (date
operations commenced) through August 31, 1991.
<TABLE>
<CAPTION>
1994 1993 1992 1991
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............. $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income........................... 0.031 0.027 0.039 0.002
------ ------ ------ ------
Total from investment operations................ 0.031 0.027 0.039 0.002
------ ------ ------ ------
Less distributions:
Dividends from net investment income............ (0.031) (0.027) (0.039) (0.002)
------ ------ ------ ------
Net asset value, end of period................... $1.00 $1.00 $1.00 $1.00
====== ====== ====== ======
Total return..................................... 3.12% 2.74% 3.94% 5.02%(a)
====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of period
(000s omitted).................................. $3,065 $904 $727 $270
====== ====== ====== ======
Ratio of expenses to average net assets (b)...... 0.58%(c) 0.52% 0.54% 0.80%(a)
====== ====== ====== ======
Ratio of net investment income to average net
assets (b)...................................... 3.34%(c) 2.71% 3.75% 5.03%(a)
====== ====== ====== ======
</TABLE>
(a) Annualized.
(b) Had there been no expense reimbursements, the ratios of expenses and net
investment income to average net assets would have been 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 $1,437,993.
FS-14
