SHORT TERM INVESTMENTS CO /TX/, 497, 1995-06-29

SHORT TERM INVESTMENTS CO /TX/
497, 1995-06-29

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SHORT-TERM INVESTMENTS CO.

LIQUID ASSETS PORTFOLIO

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
Liquid Assets Portfolio (the "Portfolio") of Short-Term Investments Co. (the
"Fund"). Since September 16, 1994, AIFS has been acting as a transfer agent for
the Portfolio providing certain limited transfer agency services for shares of
the Portfolio. The phone number of AIFS is (800) 659-1005.

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>

SHORT-TERM
INVESTMENTS CO.

Prospectus
- --------------------------------------------------------------------------------
LIQUID ASSETS
PORTFOLIO The Liquid Assets Portfolio (the "Portfolio") is a money
market fund whose investment objective is to provide as
DECEMBER 30, 1994 high a level of current income as is consistent with the
preservation of capital and liquidity. The Portfolio seeks
to achieve its objective by investing in high quality money
market instruments such as U.S. Government obligations,
bank obligations, commercial instruments and repurchase
agreements.

The Portfolio is a series portfolio of Short-Term
Investments Co. (the "Fund"), an open-end diversified
series management investment company designed to be a
convenient and economical vehicle in which institutions can
invest short-term cash reserves.

Shares of the Portfolio are sold at net asset value
without a sales charge.

In addition, the Fund offers the following classes of
another portfolio, the Prime Portfolio, pursuant to
separate prospectuses: the Institutional Class, the Private
Investment Class, the Personal Investment Class and the
Cash Management Class. Copies of such other prospectuses
may be obtained from Fund Management Company.

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 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. A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST TO FUND MANAGEMENT COMPANY AT 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046.

THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE
PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.

(AIM LOGO APPEARS HERE)

Fund Management Company

11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 659-1005
<PAGE>

SUMMARY

THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE

The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Portfolio at net
asset value. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government Agencies obligations, bank obligations,
commercial instruments and repurchase agreements. The investment objective of
the Portfolio is to provide as high a level of current income as is consistent
with the preservation of capital and liquidity.

This Prospectus relates to the Portfolio. Pursuant to separate prospectuses,
the Fund also offers shares of another portfolio, the Prime Portfolio. The
Prime Portfolio offers separate classes of shares with different distribution
arrangements designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as "Portfolios."

INVESTORS IN THE PORTFOLIO

The Portfolio is designed to be a convenient and economical vehicle in which
institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Portfolio may not be purchased by
individuals directly, institutions may purchase shares for accounts maintained
for individuals. See "Suitability for Investors."

PURCHASE OF SHARES

Shares of the Portfolio are sold at net asset value without a sales charge.
The minimum initial investment in the Portfolio is $10,000,000. There is no
minimum amount for subsequent investments. Payment for shares of the Portfolio
purchased must be in federal funds or other funds immediately available to the
Portfolio. See "Purchase of Shares."

REDEMPTION OF SHARES

Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Portfolio for which redemption orders have been received
pursuant to this Prospectus (see "Redemption of Shares") shall be made in
federal funds on the same day.

DIVIDENDS

The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Portfolio. Information concerning the amount of the dividends declared on
any particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."

CONSTANT NET ASSET VALUE

The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "Net Asset
Value."

INVESTMENT ADVISOR

A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" "--Administrator."

DISTRIBUTOR

Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Portfolio. FMC does not receive any fee from the Portfolio. See
"Management of the Fund--Distributor."

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SPECIAL CONSIDERATIONS

The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of
foreign branches of major domestic banks and in repurchase agreements. The
Portfolio may purchase delayed delivery or when-issued securities. Accordingly,
an investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices. See
"Investment Program."

TABLE OF FEES AND EXPENSES

The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
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
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees............................................................................................. 0.15%
12b-1 Fees.................................................................................................. None
Other Expenses (estimated).................................................................................. 0.03%
----
Total Portfolio Operating Expenses.......................................................................... 0.18%
====
</TABLE>

EXAMPLE

An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.

<TABLE>
<S> <C>
1 year........................................................... $ 2
3 years.......................................................... $ 6
</TABLE>

The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) The Other Expenses figure is based upon
estimated costs and the estimated size of the Portfolio and estimated fees to
be charged for the current fiscal year. Thus, actual expenses may be greater or
less than such estimates. To the extent any service providers assume expenses
of the Portfolio, such assumption of expenses will have the effect of lowering
the Portfolio's overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Portfolio 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" remain the same in the years shown. THE EXAMPLE
SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST OR FUTURE
PERFORMANCE AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

3
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FINANCIAL HIGHLIGHTS

Shown below are the per share data, ratios and supplemental data
(collectively, "data") for the period November 4, 1993 (date operations
commenced) through August 31, 1994. The data has been audited by KPMG Peat
Marwick LLP, independent auditors, whose report on the financial statements and
the related notes appears in the Statement of Additional Information.

<TABLE>
<CAPTION>
NOVEMBER 4,1993
(COMMENCEMENT
OF OPERATIONS) TO
AUGUST 31, 1994
-----------------
<S> <C>
Net asset value, beginning of period........................ $ 1.00
Income from investment operations:
Net investment income..................................... 0.03
----------
Less distributions:
Dividends from net investment income...................... (0.03)
----------
Net asset value, end of period.............................. $ 1.00
==========
Total return(a)............................................. 3.83%
==========
Ratios/supplemental data:
Net assets, end of period (000s omitted).................... $1,028,350
==========
Ratio of expenses to average net assets(b).................. 0.05%
==========
Ratio of net investment income to average net assets(b)..... 3.85%
==========
</TABLE>
- ---------------
(a) Annualized.
(b) After waiver of advisory fees. Ratios are annualized and based on average
net assets of $1,393,106,329. Annualized ratios of expenses and net
investment income prior to waiver of advisory fees are 0.18% and 3.72%,
respectively.

4
<PAGE>

SUITABILITY FOR INVESTORS

The Portfolio is intended for use primarily by institutions, particularly
banks, acting for themselves or in a fiduciary, advisory, agency, custodial or
other similar capacity. It is designed to be a convenient and economical
vehicle in which such institutions can invest short-term cash reserves. Shares
of the Portfolio may not be purchased directly by individuals, although
institutions may purchase shares for accounts maintained by individuals.
Prospective investors should determine if an investment in the Portfolio is
consistent with the objectives of an account and with applicable state and
federal laws and regulations.

An investment in the Portfolio may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day. Sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.

INVESTMENT PROGRAM

The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.

INVESTMENT OBJECTIVE

The investment objective of the Portfolio is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Portfolio seeks to achieve its objective by investing in a diversified
portfolio of high quality U.S. dollar-denominated money market instruments and
other similar instruments with maturities of 397 days or less from the date of
purchase. The Portfolio will maintain a weighted average maturity of 90 days or
less.

INVESTMENT POLICIES

The Portfolio may invest in a broad range of U.S. Government and foreign
government obligations, and bank and commercial instruments that may be
available in the money markets. Such obligations include U.S. Treasury
obligations and repurchase agreements. The Portfolio intends to invest in
bankers' acceptances, certificates of deposit, time deposits and commercial
paper, and U.S. Government direct obligations and U.S. Government agencies
securities. Certain U.S. Government obligations with floating or variable
interest rates may have longer maturities. Commercial obligations may include
both domestic and foreign issuers that are U.S. dollar-denominated. Bankers'
acceptances, certificates of deposit and time deposits may be purchased from
U.S. or foreign banks. These instruments, which are collectively referred to as
"Money Market Obligations," are briefly described below.

The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 (the "1940 Act"), as such Rule may be amended from time to time.
Generally, "First Tier" securities are securities that are rated in the highest
rating category by two nationally recognized statistical rating organizations
("NRSROs"), or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Fund's Board of
Directors) to be of comparable quality to a rated security that meets the
foregoing quality standards.

The Portfolio will not invest more than 10% of its net assets in illiquid
securities.

5
<PAGE>

In managing the Portfolio's investments, AIM may indicate to dealers or
issuers its interest in acquiring certain securities for the Portfolio for
settlement beyond a customary settlement date thereafter. In some cases, the
Portfolio may agree to purchase such securities at stated prices and yields.
(In such cases, these securities are considered "delayed delivery" securities
when traded in the secondary market or "when-issued" securities if they are an
initial issuance of securities.) Since this is done to facilitate the
acquisition of portfolio securities and is not for the purpose of investment
leverage, the amount of delayed delivery or when-issued securities involved may
not exceed the estimated amount of funds available for investment on the
settlement date. Until the settlement date, assets of the Portfolio with a
dollar value sufficient at all times to make payment for the delayed delivery
or when-issued securities will be set aside in a segregated account. (The total
amount of assets in the segregated account may not exceed 25% of the
Portfolio's total assets.) The delayed delivery securities, which will not
begin to accrue interest until the settlement date, and the when-issued
securities will be recorded as an asset of the Portfolio and will be subject to
the risks of market value fluctuations. The purchase price of the delayed
delivery or when-issued securities will be recorded as a liability of the
Portfolio until settlement. AIM may also transact sales of securities on a
"forward commitment" basis. In such a transaction, AIM agrees to sell portfolio
securities at a future date at specified prices and yields. Securities subject
to sale on a forward commitment basis will continue to accrue interest until
sold and will be subject to the risks of market value fluctuations. Absent
extraordinary circumstances, the Portfolio's right to acquire delayed delivery
and when-issued securities or its obligation to sell securities on a forward-
commitment basis will not be divested prior to the settlement date.

The Portfolio may invest up to 100% of its total assets in obligations issued
by banks. While the Portfolio will limit its investments in bank instruments to
U.S.dollar-denominated obligations, it may invest in Eurodollar obligations
(i.e., U.S. dollar-denominated obligations issued by a foreign branch of a
domestic bank), Yankee dollar obligations (i.e., U.S. dollar-denominated
obligations issued by a domestic branch of a foreign bank) and obligations of
foreign branches of foreign banks, including time deposits. The Portfolio will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total
assets at the time of purchase, provided that there is no limitation upon the
Portfolio's investments in (a) Eurodollar obligations, if the domestic parent
of the foreign branch issuing the obligation is unconditionally liable in the
event that the foreign branch for any reason fails to pay on the Eurodollar
obligation; and (b) Yankee dollar obligations, if the U.S. branch of the
foreign bank is subject to the same regulation as U.S. banks.

The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets of $5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of foreign country withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.

The Portfolio may also lend its portfolio securities in amounts up to 33 1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.

DESCRIPTION OF MONEY MARKET OBLIGATIONS

The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Portfolio reserves the right to invest in Money
Market Obligations other than those listed below:

U.S. GOVERNMENT DIRECT OBLIGATIONS--These are bills, notes, and bonds issued
by the U.S. Treasury.

U.S. GOVERNMENT AGENCIES SECURITIES--Certain federal agencies (such as the
Federal National Mortgage Association, the Small Business Administration and
the Resolution Trust Corporation) have been established as instrumentalities of
the U.S. Government to supervise and finance certain types of activities.
Issues of these agencies, while not direct obligations of the U.S.

6
<PAGE>

Government, are (a) backed by the full faith and credit of the United States,
(b) guaranteed by the U.S. Treasury or (c) supported by the issuing agencies'
right to borrow from the U.S. Treasury.

FOREIGN GOVERNMENT OBLIGATIONS--These are U.S. dollar-denominated obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by
AIM to be of comparable quality to the other obligations in which the Portfolio
may invest. These obligations are often, but not always, supported by the full
faith and credit of the foreign governments, or their subdivisions, agencies or
instrumentalities, that issue them. Such securities also include debt
obligations of supranational entities. Such debt obligations are ordinarily
backed by the full faith and credit of the entities that issue them.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples of supranational entities include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of the Portfolio's assets invested in securities issued by
foreign governments will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.

BANKERS' ACCEPTANCES--A bankers' acceptance is a bill of exchange or time
draft drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods and to furnish
dollar exchange. These instruments generally mature in six months or less.

CERTIFICATES OF DEPOSIT--A certificate of deposit is a negotiable interest-
bearing instrument with a specific maturity. Certificates of deposit are issued
by banks and savings and loan institutions in exchange for the deposit of
funds, and normally can be traded in the secondary market prior to maturity.

TIME DEPOSITS--A time deposit is a non-negotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market.

EURODOLLAR OBLIGATIONS--A Eurodollar obligation is a U.S. dollar-denominated
obligation issued by a foreign branch of a domestic bank.

YANKEE DOLLAR OBLIGATIONS--A Yankee dollar obligation is a U.S. dollar-
denominated obligation issued by a domestic branch of a foreign bank.

SHORT AND MEDIUM TERM NOTES--Short and medium term notes are obligations that
have fixed coupons and maturities that can be targeted to meet investor
requirements. They are issued in the capital markets either publicly under a
shelf registration pursuant to Rule 415 promulgated by the Securities and
Exchange Commission, or privately without such a registration.

COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.

MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note on relatively short notice.

REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. The Portfolio may enter into repurchase agreements only with
institutions believed by the Fund's Board of Directors to present minimal
credit risk. With regard to repurchase transactions, in the event of a
bankruptcy or other default of a seller of a repurchase agreement (such as the
seller's failure to

7
<PAGE>

repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying securities
and losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities, U.S.
Government agency securities (including, but not limited to, those which have
been stripped of their interest payments and mortgage-backed securities) and
commercial paper. For additional information on the use of repurchase
agreements, see the Statement of Additional Information.

BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS--Reverse repurchase agreements
involve the sale by the Portfolio of a portfolio security at an agreed-upon
price, date and interest payment. The Portfolio will borrow money or enter into
reverse repurchase agreements solely for temporary or defensive purposes to
facilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests should they occur. The Portfolio will use reverse
repurchase agreements when the interest income to be earned from the securities
that would otherwise have to be liquidated to meet redemption requests is
greater than the interest expense of the reverse repurchase transaction. The
Portfolio may enter into reverse repurchase agreements in amounts not exceeding
10% of the value of its total assets. Reverse repurchase agreements involve the
risk that the market value of securities retained by the Portfolio in lieu of
liquidation may decline below the repurchase price of the securities sold by
the Portfolio which it is obligated to repurchase. The risk, if encountered,
could cause a reduction in the net asset value of the Portfolio's shares.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act.

INVESTMENT RESTRICTIONS

The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:

1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;

2) purchase securities of any one issuer (other than obligations of the U.S.
Government, its agencies or instrumentalities) if, immediately after such
purchase, more than 5% of the value of the Portfolio's total assets would be
invested in such issuer, except as permitted by Rule 2a-7 under the 1940 Act,
as amended from time to time; or

3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of portfolio
securities or to accommodate abnormally heavy redemption requests), the
Portfolio may borrow money from banks or obtain funds by entering into reverse
repurchase agreements, and (b) to the extent that entering into commitments to
purchase securities in accordance with the Portfolio's investment program may
be considered the issuance of senior securities. The Portfolio will not
purchase portfolio securities while borrowings in an amount in excess of 5% of
its total assets are outstanding.

The Portfolio's investment objective and the three investment restrictions set
forth above (as well as certain others set forth in the Statement of Additional
Information) are matters of fundamental policy which may not be changed without
the affirmative vote of a majority of the outstanding shares of the Portfolio.

For industry classification purposes, bank broker-dealers are considered to
be part of the banking industry.

In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein.

8
<PAGE>

The 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 Portfolio 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 Portfolio, banks and other
institutions may charge a recordkeeping, account maintenance or other fee to
their customers. Beneficial holders of shares of the Portfolio should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Portfolio will earn the dividend declared on the effective
date of purchase.

A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Portfolio's custodian,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.

Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Portfolio purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below or (b) at the time the order is
placed, if the Portfolio is assured of payment.

Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which is
not accepted by the Portfolio and any funds received for which an order has not
been received will be returned to the sending institution. An order to purchase
shares of the Portfolio must specify that the "Liquid Assets Portfolio" is
being purchased; otherwise, any funds received will be returned to the sending
institution.

The minimum initial investment in the Portfolio is $10,000,000. Institutions
may be requested to maintain separate master accounts in the Portfolio for
shares of the Portfolio held by the institution (a) for its own account, for
the account of other institutions and for accounts for which the institution
acts as a fiduciary, and (b) for accounts for which the institution acts in
some other capacity. An institution's master account(s) and sub-accounts with
the Portfolio may be aggregated for the purpose of the minimum investment
requirement. No minimum amount is required for subsequent investments in the
Portfolio nor are minimum balances required. Prior to the initial purchase of
shares of the Portfolio, an Account Information and Authorization Form must be
completed and sent to FMC at 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Account Information and Authorization Forms may be obtained from
FMC. 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.

Banks will be required to certify to the Fund that they comply with
applicable state law regarding registration as broker-dealers, or that they are
exempt from such registration.

In the interest of economy and convenience, certificates representing shares
of the Portfolio will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.

The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.

9
<PAGE>

REDEMPTION OF SHARES

A shareholder may redeem any or all of its shares of the Portfolio 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 Fund intends to maintain the net asset value per share of the
Portfolio at $1.00 per share. See "Net Asset Value." Redemption requests with
respect to Shares for which certificates have not been issued are normally made
by calling the Fund.

Payment for redeemed shares of the Portfolio is normally made by Federal
Reserve wire to the commercial bank account designated in the shareholder's
Account 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 4:00 p.m. Eastern Time on a business day of the Portfolio, the
redemption will be effected at the net asset value next determined on such day
and the shares of the Portfolio to be redeemed will not receive the dividend
declared on the effective date of the redemption. If a redemption request is
received by the Fund after 4:00 p.m. Eastern Time or on other than a business
day of the Portfolio, the redemption will be effected at the net asset value of
the Portfolio determined as of 4:00 p.m. Eastern Time on the next business day
of the Portfolio, and the proceeds of such redemption will normally be wired on
the effective day of the redemption.

A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Portfolio, State
Street Bank and Trust Company or A I M Institutional Fund Services, Inc.
("AIFS"), the Portfolio's transfer agents (the "Transfer Agents.")

Payment for shares of the Portfolio redeemed by mail and payment for
telephone redemptions in amounts under $1,000 will be made by check mailed
within seven days after receipt of the redemption request in proper form. The
Portfolio may make payment for telephone redemptions in excess of $1,000 by
check when it is considered to be in the Portfolio's best interest to do so.

The shares of the Portfolio are not redeemable at the option of the Portfolio
unless the Board of Directors of the Fund determines in its sole discretion
that failure to so redeem may have materially adverse consequences to the
shareholders of the Portfolio.

DIVIDENDS

Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Portfolio as of immediately after 4:00 p.m.
Eastern Time on the day of declaration. Net income for dividend purposes is
determined daily as of 4:00 p.m. Eastern Time. Net income of the Portfolio
consists of interest accrued and discount earned (including both original issue
and market discount) on securities held by the Portfolio, less amortization of
market premium and the accrued expenses of the Portfolio applicable to that
dividend period and attributable to the Portfolio. Although realized gains and
losses on the assets of the Portfolio are reflected in the net asset value of
the Portfolio, they are not expected to be of an amount which would affect the
Portfolio's net asset value of $1.00 per share for purposes of purchases and
redemptions. See "Net Asset Value." Distributions from net realized short-term
gains may be declared and paid yearly or more frequently. See "Taxes." The
Portfolio does not expect to realize any long-term capital gains or losses.

All dividends declared during a month will 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 Portfolio at the net asset value
of such shares as of 4:00 p.m. Eastern Time on the last business day of the
month. Such election, or any revocation thereof, must be made either in writing
by the shareholder to Fund Management Company, P.O. Box 4333, Houston, Texas
77210-4333 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 in its account at any time
during the month, all dividends declared through the date of redemption are
paid to the shareholder along with the proceeds of the redemption.

10
<PAGE>

The Portfolio uses its best efforts to maintain its net asset value per share
at $1.00 for purposes of sales and redemptions. See "Net Asset Value." Should
the Fund incur or anticipate any unusual expense, loss or depreciation which
could adversely affect the income or net asset value of the Portfolio, the
Fund's Board of Directors would at that time consider whether to adhere to the
present dividend policy described above or to revise it in light of the then
prevailing circumstances. For example, under such unusual circumstances the
Board of Directors might reduce or suspend the daily dividend in order to
prevent to the extent possible the net asset value per share of the Portfolio
from being reduced below $1.00. Thus, such expenses, losses or depreciation may
result in a shareholder receiving no dividends for the period during which it
held its shares and cause such a shareholder to receive upon redemption a price
per share lower than the shareholder's original cost.

TAXES

The Portfolio's policy is to distribute to its shareholders at least 90% of
its investment company taxable income for each year and consistent therewith to
meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.

Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Portfolio. The Code provides an exception to this general rule; if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend before February 1 of the next
year, a shareholder will be treated for tax purposes as having received the
dividend in the year in which it is declared rather than in January when it is
paid. It is anticipated that no portion of distributions will be eligible for
the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.

For purposes of determining taxable income, distribution requirements and
other requirements of Subchapter M, the Portfolio will be treated as a separate
corporation. Therefore, one portfolio of the Fund may not offset its gains
against the other portfolio's losses and each portfolio must specifically
comply with all the provisions of the Code.

Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisers concerning the application of
state, local or foreign taxes.

The foregoing discussion of federal income tax consequences is only a summary
based on tax laws and regulations in effect on 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 4:00
p.m. Eastern Time on each business day of the Portfolio. Net asset value per
share is determined by dividing the value of the Portfolio's securities, cash
and other assets (including interest accrued but not collected), less all its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.

The securities of the Portfolio are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if the security were
sold. During such periods, the daily yield on shares of the Portfolio computed
as described in "Purchases and Redemptions--Performance Information" in the
Statement of Additional Information may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.

11
<PAGE>

YIELD INFORMATION

Yield information for the Portfolio can be obtained by calling FMC at (800)
659-1005. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Portfolio. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.

For the seven-day period ended August 31, 1994, the current yield and the
effective yield of the Portfolio (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 4.65% and 4.75%, respectively. These yields
are quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.

To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.

REPORTS TO SHAREHOLDERS

The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.

Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors.

INVESTMENT ADVISOR

A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages, advises or administers 37 investment company portfolios. As of
November 30, 1994, the total assets of such investment company portfolios 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.

12
<PAGE>

For the fiscal year ended August 31, 1994, AIM received fees with respect to
the Portfolio which represented 0.15% of the Portfolio's average daily net
assets. Such fees were paid pursuant to an advisory agreement that was
previously in effect, which provided for the same level of compensation to AIM
as the Advisory Agreement. During such fiscal year, the expenses of the
Portfolio, including AIM's fees, amounted to 0.18% of the Portfolio's average
daily net assets.

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.

ADMINISTRATOR

The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Fund's Board of
Directors for providing specified administrative services. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services, as well as the services of
staff responding to various shareholder inquiries.

In addition, AIM and AIFS have entered into an Administrative Services
Agreement pursuant to which AIFS 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 $5,110 with respect to the
Portfolio for the period June 1, 1994 through August 31, 1994 which represented
0.0004% 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.

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,
to act as the exclusive distributor of the Shares. The address of FMC is 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173. Certain directors and
officers of the Fund are affiliated with FMC and AIM Management. The
Distribution Agreement provides that FMC has the exclusive right to distribute
shares of the Portfolio either directly or through other broker-dealers, and
receives no fees for its services with respect to the Portfolio pursuant to the
Distribution Agreement. FMC is the distributor of several other mutual funds
managed or advised by AIM. FMC is a wholly owned subsidiary of AIM.

EXPENSES

Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund 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. Expenses of the Fund which are directly attributable to a specific class
of shares are charged against the income available for distribution as
dividends to the holders of such shares.

PORTFOLIO TRANSACTIONS AND BROKERAGE

AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.

13
<PAGE>

AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.

GENERAL INFORMATION

ORGANIZATION AND DESCRIPTION OF SHARES

The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into five classes, of which one represents an interest
in the Portfolio and the remaining four represent interests in the Prime
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 redemption which are more
fully described in this Prospectus. In the event of liquidation or termination
of the Fund, holders of shares of each portfolio will receive pro rata, subject
to the rights of creditors, (a) the proceeds of the sale of the assets held in
the respective portfolio to which such shares relate, less (b) the liabilities
of the Fund attributable to or allocated to the respective portfolio based on
the respective liquidation value of each portfolio. Fractional shares of each
portfolio have the same rights as full shares to the extent of their
proportionate interest.

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.

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 acts as custodian for the portfolio securities and cash
of the Portfolio. State Street Bank and Trust Company and A I M Institutional
Fund Services, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173,
act as transfer agents for shares of the Portfolio.

LEGAL COUNSEL

The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.

SHAREHOLDER INQUIRIES

Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 659-1005.

OTHER INFORMATION

This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the Securities and Exchange Commission. 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
Securities and Exchange Commission. Copies of the registration statement,
including items omitted herein, may be obtained from the Securities and
Exchange Commission by paying the charges prescribed under its rules and
regulations.

14
<PAGE>

====================================== =======================================

SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 659-1005 December 30, 1994

INVESTMENT ADVISOR
A I M ADVISORS, INC. SHORT-TERM
11 Greenway Plaza, Suite 1919 INVESTMENTS CO.
Houston, Texas 77046-1173
(713) 626-1919

DISTRIBUTOR LIQUID ASSETS PORTFOLIO
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 659-1005
TABLE OF CONTENTS
AUDITORS
KPMG PEAT MARWICK LLP <TABLE>
NationsBank Building <CAPTION>
700 Louisiana PAGE
Houston, Texas 77002 ----
<S> <C>
CUSTODIAN Summary......................... 2
THE BANK OF NEW YORK
110 Washington Street Table of Fees and Expenses...... 3
8th Floor
New York, New York 10286 Financial Highlights............ 4

TRANSFER AGENTS Suitability For Investors....... 5
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street Investment Program.............. 5
Boston, Massachusetts 02110
Purchase of Shares.............. 9
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 Redemption of Shares............ 10
Houston, Texas 77046-1173
Dividends....................... 10
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY Taxes........................... 11
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE Net Asset Value................. 11
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR Yield Information............... 12
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE Reports to Shareholders......... 12
FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN Management of the Fund.......... 12
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY General Information............. 14
NOT LAWFULLY BE MADE. </TABLE>

====================================== =======================================
<PAGE>

SHORT-TERM INVESTMENTS CO.

LIQUID ASSETS PORTFOLIO

Supplement dated June 29, 1995
to the Statement of Additional Information
dated December 30, 1994

STATEMENT OF
ADDITIONAL INFORMATION

SHORT-TERM INVESTMENTS CO.
LIQUID ASSETS PORTFOLIO

11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005

--------------------

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 659-1005

--------------------

STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 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............................... 8
Reports..................................................... 9
Fee Waivers................................................. 9
Principal Holders of Securities............................. 9

PURCHASES AND REDEMPTIONS.................................... 11
Net Asset Value Determination............................... 11
The Distribution Agreement.................................. 12
Performance Information..................................... 12
Redemptions in Kind......................................... 13
Suspension of Redemption Rights............................. 13

INVESTMENT PROGRAM AND RESTRICTIONS.......................... 14
Eligible Securities......................................... 14
Commercial Paper Ratings.................................... 15
Bond Ratings................................................ 16
Repurchase Agreements....................................... 18
Investment Restrictions..................................... 18

PORTFOLIO TRANSACTIONS....................................... 19

TAX MATTERS.................................................. 21
Qualification as a Regulated Investment Company............. 21
Excise Tax On Regulated Investment Companies................ 22
Portfolio Distributions..................................... 22
Effect of Future Legislation; Local Tax Considerations...... 23

FINANCIAL STATEMENTS......................................... FS
</TABLE>

i
<PAGE>

INTRODUCTION

The Liquid Assets Portfolio (the "Portfolio") is an investment portfolio of
Short-Term Investments Co. (the "Fund"), a mutual fund. The rules and
regulations of the United States Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information is included in a Prospectus dated December 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) 659-
1005. Investors must receive a Prospectus before they invest.

This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the 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, and had no operations prior to November 4, 1993. Shares of common
stock of the Fund are redeemable at their net asset value at the option of the
shareholder or at the option of the Fund in certain circumstances. For
information concerning the methods of redemption and the rights of share
ownership, investors should consult the Prospectus under the captions "General
Information" and "Redemption of Shares."

The Fund offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Prime Portfolio (together, the
"Portfolios"). The Prime Portfolio consists of four classes of shares, each
having different shareholder qualifications and bearing expenses differently.
The Portfolio consists of one class of shares. This Statement of Additional
Information and the associated Prospectus relate solely to the Portfolio.

As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.

Shareholders of the Fund do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of the Fund voting
together for election of directors can elect all of the members of the Board of
Directors of the Fund. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.

The Board of Directors may classify or reclassify any unissued shares of any
class or classes in addition to those already authorized by setting or changing
in any one or more respects, from time to time, prior to the issuance of such
shares, the preferences, conversion or other rights, voting powers,
restrictions,

1
<PAGE>

limitations as to dividends, qualifications, or terms or conditions of
redemption, of such shares. Any such classification or reclassification will
comply with the provisions of the Investment Company Act of 1940 (the "1940
Act").

The Articles of Incorporation of the Fund authorize the issuance of 10 billion
shares, par value $.001 per share, representing an interest in the Portfolio (or
class thereof) and 19 billion shares, par value $.001 per share, representing an
interest in the Prime Portfolio (or class thereof). A share of a portfolio (or
class) represents an equal proportionate interest in such Portfolio (or class)
with each other share of that Portfolio (or class) and is entitled to a
proportionate interest in the dividends and distributions from that Portfolio
(or class). Additional information concerning the rights of share ownership is
set forth in the Prospectus.

The assets received by the Fund for the issue or sale of shares of each of the
Portfolios and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Portfolio, and
constitute the underlying assets of that Portfolio. The underlying assets of the
Portfolios are segregated and each Portfolio is charged with the expenses with
respect to that portfolio and with a share of the general expenses of the Fund.
While the expenses of the Fund are allocated to the separate books of account of
each of the Portfolios, certain expenses may be legally chargeable against the
assets of the entire Fund.

The 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 currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.

As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. At such time as less than a majority of the directors
have been elected by the shareholders, the directors then in office will call a
shareholders' meeting for the election of directors. Upon written request by ten
or more shareholders, who have been such for at least six months and who hold
shares constituting 1% of the outstanding shares, stating that such shareholders
wish to communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a director, the
Fund has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).

Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.

2
<PAGE>

DIRECTORS AND OFFICERS

The directors and officers of the Fund and their principal occupations during
the last five years are set forth below. Unless otherwise indicated, the address
of each director and officer is 11 Greenway Plaza, Suite 1919, Houston, Texas
77046.

*CHARLES T. BAUER, Director and Chairman

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).

*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.

- ----------------
* 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>

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.

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.

4
<PAGE>

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 Board of Directors has an Audit Committee, an Investments Committee, and a
Nominating and Compensation Committee.

The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the directors as
a whole with respect to the Portfolio's fund accounting or its internal
accounting controls, or for considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such Committee.

The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.

The members of the Nominating and Compensation Committee are Messrs. Crockett,
Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and Compensation
Committee is responsible for considering and nominating individuals to stand for
election as directors who are not interested persons as long as the Fund
maintains a distribution plan pursuant to rule 12b-1 under the 1940 Act,
reviewing from

5
<PAGE>

time to time the compensation payable to the disinterested directors, or
considering such matters as may from time to time be set forth in a charter
adopted by the board and such Committee.

All of the Fund's directors also serve as directors or trustees of some or all
of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. 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. Each director who
is not also an executive officer of the Fund is compensated according to a fee
schedule which recognizes the fact that such director also serves as a director
or trustee of certain other investment companies advised or managed by AIM. Each
such director receives a fee, allocated among the investment companies advised
by AIM (the "AIM Funds"), which consists of two components: (i) an annual
retainer, based on the number of portfolios of the investment companies advised
by AIM or its affiliates for which such director serves as director or trustee
(each, an "AIM Portfolio"), which annual retainer shall equal the sum of: $7,500
for the first AIM Portfolio, $5,000 for the second AIM Portfolio, $2,500 for the
third AIM Portfolio, $1,000 for each of the fourth through tenth AIM Portfolios,
and $750 for each additional AIM Portfolio, with 50% of such annual retainer
being allocated equally among the AIM Portfolios for which the director serves
as director, and 50% of such annual retainer being allocated among the AIM
Portfolios based upon their relative net assets; and (ii) a meeting fee of $250
per AIM Portfolio, up to a maximum fee of $1,000 per meeting, to be paid for
each board meeting and each committee meeting not held in conjunction with a
board meeting attended in person by such director, with 50% of such meeting fee
being allocated equally among the AIM Portfolios for which the director serves
as director or trustee, and 50% allocated among the AIM Portfolios based upon
their relative net assets.

During the fiscal year ended August 31, 1994, $11,140 in directors' fees and
expenses were allocated to the Portfolio.

The Fund paid Reid & Priest $7,204 in legal fees for services provided to the
Portfolio during the fiscal year ended August 31, 1994. Carl Frischling,
Esquire, director of the Fund, was a partner in such firm during the term
services were provided to the Portfolio.

Officers of the Fund receive no such direct remuneration from the Fund for
serving in such capacity.

INVESTMENT ADVISOR

AIM, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated October 18, 1993 (the "Advisory Agreement"). A prior investment
advisory agreement (the "Prior Advisory Agreement") with substantially identical
terms (including the fee schedules) to the Advisory Agreement was previously in
effect with respect to the Predecessor Portfolio.

AIM was organized in 1976 and, together with its affiliates, advises,
manages or administers 37 investment company portfolios. As of 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."

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

6
<PAGE>

be subject to the policies and control of the Fund's Board of Directors. AIM
shall not be liable to the Fund or its shareholders for any act or omission by
AIM or for any loss sustained by the Fund or its shareholders except in the case
of willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.

As compensation for its services with respect to the Portfolio, AIM receives a
fee at the annual rate of 0.15% of the average daily net assets of the
Portfolio. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.

During the period November 4, 1993 (date operations commenced) through August
31, 1994, AIM voluntarily waived fees of $1,500,977, which it was entitled to
receive pursuant to the Advisory Agreement.

The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation for
such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
has entered into the Master Administrative Services Agreement under which AIM
will provide the additional services described below under the caption
"Administrator."

The Advisory Agreement will continue in effect until June 30, 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 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, shareholder servicing and
other administrative services for the Portfolio which are not required to be
performed by AIM under the Advisory Agreement. For such services, AIM would be
entitled to receive from the Fund reimbursement of AIM's costs or such
reasonable compensation as may be approved by the Fund's Board of Directors. The
Administrative Services Agreement provides that such agreement will continue in
effect until June 30, 1995, and shall continue in effect from year to year
thereafter only if such continuance is specifically approved at least annually
by the Fund's Board of Directors, including the Non-Interested Directors, by
votes cast in person at a meeting called for such purpose. The Administrative
Services Agreement was last approved by the Fund's Board of Directors (including
the Non-Interested Directors) on May 10, 1994.

Pursuant to the Administrative Services Agreement, AIM was reimbursed for the
fiscal year ended August 31, 1994 in the amount of $39,492.

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

7
<PAGE>

associated with 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 $5,110.

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 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 shares
of the Portfolio 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 Portfolio and currently receives
no compensation from the Fund for its services.

8
<PAGE>

REPORTS

The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.

FEE WAIVERS

AIM may, from time to time, agree to waive voluntarily all or any portion of
its fees or reimburse the Portfolio for certain of its expenses. Such waivers or
reimbursements may be discontinued at any time. Shareholders of the Portfolio
will receive notice 30 days prior to the effective date of any substantial
change in such waivers or reimbursements.

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 Prime
Portfolio as of November 22, 1994, and the percentage of the Prime Portfolio's
outstanding shares owned by such shareholders as of such date are as follows:

<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------

INSTITUTIONAL CLASS
- -------------------
<S> <C>

NationsBank of Texas, 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

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
</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>

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

PERSONAL INVESTMENT CLASS
- -------------------------

The Bank of New York................. 31.35%**
440 Mamaroneck Ave.
Harrison, NY 10528
</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 ot the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.

10
<PAGE>

<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------

CASH MANAGEMENT CLASS

<S> <C>

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 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>
<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>

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 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 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 ot 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>

The valuation of the portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Portfolio is permitted in accordance with applicable rules and regulations
of the SEC, including Rule 2a-7 under the 1940 Act, which require the Portfolio
to adhere to certain conditions. These rules require that the Portfolio maintain
a dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 calendar days or less and invest
only in securities determined by the Board of Directors to be "Eligible
Securities" and to present minimal credit risk to the Portfolio.

The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Portfolio's price per share
at $1.00 as computed for the purpose of sales and redemptions. Such procedures
include review of the Portfolio's holdings by the Board of Directors, at such
intervals as they may deem appropriate, to determine whether the net asset value
calculated by using available market quotations or other reputable sources for
the Portfolio deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing holders of
the shares. In the event the Board of Directors determines that such a deviation
exists, it will take such corrective action as the Board of Directors deems
necessary and appropriate, including the sales of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity; the withholding of dividends; redemption of shares in kind; or the
establishment of a net asset value per share by using available market
quotations.

THE DISTRIBUTION AGREEMENT

The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly owned subsidiary of AIM, to act as the exclusive distributor
of the shares. The address of FMC is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173. See "General Information about the Fund -- Directors and
Officers" and "General Information about the Fund -- Investment Advisor" for
information as to the affiliation of certain directors and officers of the Fund
with FMC, AIM and AIM Management.

The Distribution Agreement provides that FMC has the exclusive right to
distribute shares either directly or through other broker-dealers. The
Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Portfolio and the costs
of preparing and distributing any other supplemental sales literature. FMC has
not undertaken to sell any specified number of shares. FMC does not receive any
fees from the Portfolio pursuant to the Distribution Agreement.

The Distribution Agreement will continue in effect until June 30, 1995 and
from year to year thereafter, provided that it specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of the
directors who are not parties to the Distribution Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or FMC may terminate the Distribution Agreement on 60 days'
written notice, without penalty. The Distribution Agreement will terminate
automatically in the event of its "assignment," as defined in the 1940 Act.

PERFORMANCE INFORMATION

As stated under the caption "Yield Information" in the Prospectus, yield
information for the Portfolio may be obtained by calling the Fund at (800) 659-
1005. The current yield quoted will be the net average annualized yield for an
identified period. Current yield will be computed by assuming that an account
was established with a single share (the "Single Share Account") on the first
day of the period. To arrive at the quoted yield, the net change in the value of
that Single Share Account for the period (which would include dividends accrued
with respect to the share, and dividends declared on shares purchased with
dividends accrued and paid, if any, but would not include realized gains and
losses or unrealized appreciation or

12
<PAGE>

depreciation) will be multiplied by 365 and then divided by the number of days
in the period, with the resulting figure carried to the nearest hundredth of one
percent. The Portfolio may also furnish a quotation of effective yield that
assumes the reinvestment of dividends for a 365-day year and a return for the
entire year equal to the average annualized yield for the period, which will be
computed by compounding the unannualized current yield for the period by adding
1 to the unannualized current yield, raising the sum to a power equal to 365
divided by the number of days in the period, and then subtracting 1 from the
result.

For the seven-day period ended August 31, 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 Portfolio were 4.65% and 4.75%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.

The Portfolio may compare its performance or the performance of securities
in which it may invest to:

. IBC/Donoghue's Money Fund Averages, which are average yields of various
types of money market funds that include the effect of compounding
distributions;

. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money Fund
Report(R) of Holliston, Massachusetts 01746 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 Portfolio's yields will fluctuate.
Unlike some CDs and certain other money market securities, money market mutual
funds are not insured by the FDIC. Investors should give consideration to the
quality and maturity of the portfolio securities of the respective investment
companies when comparing investment alternatives.

The Portfolio may reference the growth and variety of money market mutual
funds and AIM's innovation and participation in the industry.

REDEMPTIONS IN KIND

The Fund will not redeem shares representing an interest in the Portfolio in
kind (i.e., by distributing its portfolio securities).

SUSPENSION OF REDEMPTION RIGHTS

The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.

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<PAGE>

INVESTMENT PROGRAM AND RESTRICTIONS

The Portfolio may lend its portfolio securities in amounts up to 33 1/3% of
its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by AIM to be of good standing and only when, in AIM's judgment,
the income to be earned from the loans justifies the attendant risks.

ELIGIBLE SECURITIES

Rule 2a-7 under the 1940 Act, which governs the operations of money market
funds, defines an "Eligible Security" as follows:

(i) a security with a remaining maturity of 397 days or less that is rated
(or that has been issued by an issuer that is rated with respect to a class of
short-term debt obligations, or any security within that class, that is
comparable in priority and security with the security) by the Requisite
NRSROs(1) in one of the two highest rating categories for short-term debt
obligations (within which there may be sub-categories or gradations indicating
relative standing); or

(ii) a security:

(A) that at the time of issuance was a long-term security but that has a
remaining maturity of 397 calendar days or less, and

(B) whose issuer has received from the Requisite NRSROs a rating, with
respect to a class of short-term debt obligations (or any security within that
class) that is now comparable in priority and security with the security, in
one of the two highest rating categories for short-term debt obligations
(within which there may be sub-categories or gradations indicating relative
standing); or

- --------
(1) "Requisite NRSRO" means (a) any two nationally recognized statistical
rating organizations that have issued a rating with respect to a security
or class of debt obligations of an issuer, or (b) if only one NRSRO has
issued a rating with respect to such security or issuer of such security,
that NRSRO. At present the NRSROs are: Standard & Poor's Corp., Moody's
Investors Service, Inc., Duff and Phelps, Inc., Fitch Investors Services,
Inc. and, with respect to certain types of securities, IBCA Limited and its
affiliate, IBCA Inc. Subcategories or gradations in ratings (such as a "+"
or "-") do not count as rating categories.

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<PAGE>

(iii) an unrated security(2) that is of comparable quality to a security
meeting the requirements of paragraphs (a)(5)(i) or (ii) of this section, as
determined by the money market fund's board of directors; provided, however,
that:

(A) the board of directors may base its determination that a standby
commitment is an Eligible Security upon a finding that the issuer of the
commitment presents a minimal risk of default; and

(B) a security that at the time of issuance was a long-term security but
that has a remaining maturity of 397 calendar days or less and that is an
unrated security is not an Eligible Security if the security has a long-term
rating from any NRSRO that is not within the NRSRO's two highest categories
(within which there may be sub-categories or gradations indicating relative
standing).

COMMERCIAL PAPER RATINGS

The following is a description of the factors underlying the commercial paper
ratings of Moody's, S&P and Fitch Investors Service, Inc. ("Fitch").

MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.

S&P -- Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2
or A-3.

FITCH -- Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. The short-term rating places greater emphasis

- --------
(2) An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of comparable
priority and security; (ii) that was a long-term security at the time of
issuance and whose issuer has not received from any NRSRO a rating with
respect to a class of short-term debt obligations now comparable in
priority and security; or (iii) a security that is rated but which is the
subject of an external credit support agreement not in effect when the
security was assigned its rating, provided that a security is not an
unrated security if any short-term debt obligation issued by the issuer and
comparable in priority and security is rated by any NRSRO.

15
<PAGE>

than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch short-term ratings are as
follows:

F-1

Exceptionally Strong Credit Quality. Issues assigned this rating are regarded
as having the strongest degree of assurance for timely payment.

F-2

Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F-1."

PLUS(+) AND MINUS (-)

Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.

LOC
The symbol LOC indicates that the rating is based on a letter of credit issued
by a commercial bank.

BOND RATINGS

The following is a description of the factors underlying the bond ratings of
Moody's, S&P and Fitch.

MOODY'S -- The following are the two highest bond ratings of Moody's.

Aaa

Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or 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.

Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.

S&P -- The following are the four highest bond ratings of S&P; the lower two
of which are referred to in the foregoing description of its commercial paper
ratings.

AAA

Bonds rated AAA are the highest grade obligations. They possess the ultimate
degree of protection as to principal and interest. Market values of bonds rated
AAA move with interest rates, and hence provide the maximum safety on all
counts.

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<PAGE>

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.

Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior, but to some extent,
also economic conditions.

BBB

The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate. These
bonds have adequate asset coverage and normally are protected by satisfactory
earnings. Their susceptibility to changing conditions, particularly to
depressions, necessitates constant watching. Market values of these bonds are
more responsive to business and trade conditions than to interest rates. This
group is the lowest which qualifies for commercial bank investment.

FITCH - Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.

Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.

Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.

Fitch ratings are not recommendations to buy, sell or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.

Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.

AAA

Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.

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<PAGE>

Bonds rated AA are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1."

REPURCHASE AGREEMENTS

Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than five percent of its total assets in securities issued by the
issuer of the security, provided that such a fund may invest more than five
percent of its total assets in the First Tier securities of a single issuer for
a period of up to three business days after the purchase thereof if the money
market fund is a diversified investment company, provided further, that the fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of a
fund's total assets that are invested in securities of an issuer, a repurchase
agreement shall be deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the securities from the
money market fund is fully collateralized. To be fully collateralized, the
collateral must, among other things, consist entirely of U.S. Government
securities or securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by Requisite NRSROs.

INVESTMENT RESTRICTIONS

As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:

(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;

(2) purchase securities of any one issuer (other than obligations of the U.S.
Government, its agencies or instrumentalities) if, immediately after such
purchase, more than 5% of the value of the Portfolio's total assets would be
invested in such issuer, except as permitted by Rule 2a-7 under the 1940 Act,
as amended from time to time;

(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of portfolio
securities or to accommodate abnormally heavy redemption requests), the
Portfolio may borrow money from banks or obtain funds by entering into reverse
repurchase agreements, and (b) to the extent that entering into commitments to
purchase securities in accordance with the Portfolio's investment program may
be considered the issuance of senior securities, provided that the Portfolio
will not purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding;

(4) mortgage, pledge or hypothecate any assets except to secure permitted
borrowings and except for reverse repurchase agreements and then only in an
amount up to 33-1/3% of the value of its total assets at the time of borrowing
or entering into a reverse repurchase agreement;

18
<PAGE>

(5) make loans of money or securities other than (a) through the purchase of
debt securities in accordance with the Portfolio's investment program, (b) by
entering into repurchase agreements and (c) by lending portfolio securities to
the extent permitted by law or regulation;

(6) underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities in
accordance with the Portfolio's investment program may be deemed an
underwriting;

(7) invest in real estate, except that the Portfolio may purchase and sell
securities secured by real estate or interests therein or issued by issuers
which invest in real estate or interests therein;

(8) purchase or sell commodities or commodity futures contracts, purchase
securities on margin, make short sales or invest in puts or calls;

(9) invest in any obligation not payable as to principal and interest in
United States currency; or

(10) Acquire for value the securities of any other investment company, except
in connection with a merger, consolidation, reorganization or acquisition of
assets and except for the investment in such securities of funds representing
compensation otherwise payable to its directors pursuant to any deferred
compensation plan existing at any time between the Fund and its directors.

The following investment policies and restrictions are not fundamental
policies and may be changed by the Board of Directors of the Fund without
shareholder approval. The Portfolio does not intend to invest in companies for
the purpose of exercising control or management.

State Law Restrictions The Fund may, from time to time in order to qualify
----------------------
shares of the Portfolio for sale in a particular state, agree to certain
investment restrictions in addition to or more stringent than those set forth
above. Such restrictions are not fundamental and may be changed without the
approval of shareholders. Pursuant to an undertaking made to the State
Securities Board of Texas, the Portfolio (i) will not invest in limited
partnership interests in real property, and (ii) will not issue any class of
senior security or borrow money unless immediately after such issuance or
borrowing there is asset coverage of at least 300%.

Pursuant to an undertaking made to the Ohio Division of Securities, the
Portfolio will not: (i) purchase the securities of an issuer if the officers or
directors of the Fund who own more than 0.5% of the securities of the issuer
together own beneficially more than 5% of the securities of such issuer; and
(ii) purchase the securities of any issuer if, as to 75% of the total assets of
the Portfolio, more than 10% of the voting securities of such issuer would be
held by the Portfolio at the time of purchase.

PORTFOLIO TRANSACTIONS

AIM is responsible for decisions to buy and sell securities for the Portfolio,
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.

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<PAGE>

The Portfolio does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money market. For example, market
conditions frequently result in similar securities trading at different prices.
AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio.

AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by AIM to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement of
portfolio transactions of other clients may be of value to AIM in fulfilling its
obligations to the Portfolio. AIM is of the opinion that the material received
is beneficial in supplementing AIM's research and analysis; and therefore, it
may benefit the Portfolio by improving the quality of AIM's investment advice.
The advisory fees paid by the Portfolio are not reduced because AIM receives
such services.

Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.

AIM and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing
and amount of purchase by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchases
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.

Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolio as 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.

20
<PAGE>

TAX MATTERS

The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful planning.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY

The Portfolio has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Portfolio is not subject to federal income tax
on the portion of its net investment income (i.e., taxable interest, dividends
and other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net short-
term capital gain over net long-term capital loss) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. Distributions by the Portfolio made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
for the taxable year and can therefore satisfy the Distribution Requirement.

In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts, will
not be characterized as Short-Short 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.

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<PAGE>

If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.

EXCISE TAX ON REGULATED INVESTMENT COMPANIES

A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.

The Portfolio intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Portfolio may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.

PORTFOLIO DISTRIBUTIONS

The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will not qualify for the 70% dividends received deduction
for corporations.

Distributions by the Portfolio will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio (or of another AIM Fund). Shareholders
receiving a distribution in the form of additional shares will be treated as
receiving a distribution in an amount equal to the fair market value of the
shares received, determined as of the reinvestment date.

Ordinarily, shareholders are required to take distributions by the Portfolio
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Portfolio) on December
31 of such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.

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."

22
<PAGE>

EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS

The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of its 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 above. Shareholders are urged to
consult their tax advisers as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolio.

23
<PAGE>

FINANCIAL STATEMENTS

FS
<PAGE>

INDEPENDENT
AUDITORS' REPORT

The Board of Directors and Shareholders of
Short-Term Investments Co.

We have audited the accompanying statements of assets and liabilities
of the Liquid Assets Portfolio (a series of Short-Term Investments
Co.), including the schedule of investments, as of August 31, 1994, and
the related statements of operations and changes in net assets for the
period November 4, 1993 (date operations commenced) through August 31,
1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of August 31, 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 audit provides a reasonable basis for
our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Liquid Assets Portfolio as of August 31,
1994, the results of its operations and changes in its net assets for
the period November 4, 1993 (date operations commenced) through August
31, 1994, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

October 7, 1994
Houston, Texas

FS-1
<PAGE>

SCHEDULE OF
INVESTMENTS
August 31, 1994

PRINCIPAL
AMOUNT MARKET
(000) VALUE
- -------- --------
<C> <S> <C>
COMMERCIAL PAPER -- 14.35%(a)
CONSUMER DURABLES -- 0.48%
AUTOMOBILE -- 0.48%
$ 5,000 Toyota Motor Credit Corp., 3.35%, 10/11/94............ $ 4,981,389
--------------
Total Consumer Durables........................... 4,981,389
--------------
FINANCIAL -- 13.87%
ASSET-BACKED SECURITIES -- 2.38%
15,000 Asset Securitization Cooperative Corp., 4.855%(b),
09/23/94............................................. 15,000,000
9,500 Ciesco L.P., 3.83%, 11/03/94.......................... 9,436,325
--------------
24,436,325
--------------
BROKERAGE/INVESTMENTS -- 0.96%
10,000 Goldman Sachs Group. L.P. (The), 3.42%, 10/17/94...... 9,956,300
--------------
INSURANCE -- 2.42%
25,000 Marsh & McLennan Cos. Inc., 3.33%, 10/12/94........... 24,905,188
--------------
PERSONAL CREDIT -- 1.46%
15,000 Student Loan Corp. (The), 4.855%(b), 09/19/94......... 15,000,000
--------------
MISCELLANEOUS -- 4.85%
25,000 Cargill Inc., 3.30%, 09/06/94......................... 24,988,543
25,000 International Lease Finance Corp., 3.30%, 10/24/94.... 24,878,542
--------------
49,867,085
--------------
MULTIPLE INDUSTRY -- 1.80%
General Electric Capital Corp.
11,500 3.31%, 09/06/94..................................... 11,494,713
7,000 3.32%, 10/03/94..................................... 6,979,343
--------------
18,474,056
--------------
Total Financial.................................. 142,638,954
--------------
Total Commercial Paper........................... 147,620,343
--------------
U.S. GOVERNMENT AGENCIES -- 27.28%
FEDERAL HOME LOAN BANK -- 0.77%
800 8.30%, 10/25/94....................................... 805,344
7,100 5.89%, 11/25/94....................................... 7,136,013
--------------
7,941,357
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 16.34%
32,415 10.10%, 10/11/94...................................... 32,640,836
4,315 9.25%, 11/10/94....................................... 4,360,434
131,000 5.13%(b), 06/02/99.................................... 131,000,000
--------------
168,001,270
--------------
</TABLE>

FS-2
<PAGE>

PRINCIPAL
AMOUNT MARKET
(000) VALUE
- -------- --------
<C> <S> <C>
STUDENT LOAN MARKETING ASSOCIATION -- 10.17%
$ 5,545 4.92%(b), 08/20/98.................................... $ 5,546,623
64,000 4.94%(b), 01/13/99.................................... 64,000,000
25,000 4.94%(b), 02/08/99.................................... 25,007,500
5,000 4.93%(b), 02/22/99.................................... 5,001,876
5,000 4.99%(b), 03/07/01.................................... 5,002,391
--------------
104,558,390
--------------
Total U.S. Government Agencies.................... 280,501,017
--------------
U.S. TREASURY SECURITIES -- 9.13%
U.S. TREASURY NOTES -- 8.45%
81,317 9.50%, 10/15/94....................................... 81,903,055
5,000 6.00%, 11/15/94....................................... 5,023,933
--------------
86,926,988
--------------
U.S. TREASURY STRIPS(c) -- 0.68%
7,000 3.52%, 11/15/94...................................... 6,950,736
--------------
Total U.S. Treasury Securities.................. 93,877,724
--------------
PROMISSORY AND MASTER NOTE AGREEMENTS -- 40.69%
82,600 Citicorp Mortgage Securities, Inc., 5.125%(d),
09/19/94............................................ 82,600,000
88,000 Goldman Sachs Group, L.P. (The) 5.08%(e), 01/20/95... 88,000,000
82,600 Lehman Brothers Holdings Inc., 5.125%(f), 11/22/94... 82,600,000
82,600 Morgan (J.P.) Securities Inc., 5.125%(g), 09/27/94... 82,600,000
82,600 Morgan Stanley Group, Inc., 5.075%(h), 11/04/94...... 82,600,000
--------------
Total Promissory and Master Note Agreements...... 418,400,000
--------------
REPURCHASE AGREEMENTS -- 8.24%(i)
14,718 Goldman Sachs Group, L.P. (The), 4.83%(j), 09/01/94... 14,718,009
70,000 Kidder, Peabody & Co. Inc., 4.95%(k), 09/01/94........ 70,000,000
--------------
Total Repurchase Agreements...................... 84,718,009
--------------
Total Investments -- 99.69%(l)........................ 1,025,117,093(m)
OTHER ASSETS LESS LIABILITIES -- 0.31%................ 3,232,714
--------------
NET ASSETS -- 100.00%................................. $1,028,349,807
==============
</TABLE>
- ------------
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.

(b) Interest rates are redetermined weekly. Rates shown are the rates in effect
on August 31, 1994.

(c) U.S. Treasury STRIPS are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.

(d) 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.

FS-3

<PAGE>

(e) Promissory Note Agreement may be terminated by the Portfolio upon thirty
calendar days' written or telephonic notice. Interest rates on promissory
notes are redetermined periodically. Rates shown are the rates in effect on
August 31, 1994.

(f) Master Note Purchase Agreement may be terminated by the Portfolio upon
three calendar days' telephonic notice. Interest rates on master notes are
redetermined periodically. Rates shown are the rates in effect on August 31,
1994.

(g) Master Note Purchase Agreement 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.

(h) Master Note Purchase Agreement may be terminated by either party upon three
business days' telephonic notice. Interest rates on master notes are
redetermined periodically. Rates shown are the rates in effect on August 31,
1994.

(i) 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.

(j) Joint repurchase agreement entered into on 08/31/94 with a maturing value of
$554,131,782. Collateralized by $562,755,000 U.S. Treasury obligations,
4.375% to 8.875% due 05/15/95 to 01/15/00 with the Portfolio's pro-rata
interest being $15,027,088.

(k) Joint repurchase agreement entered into on 08/31/94 with a maturing value of
$100,013,750. Collateralized by $101,447,958 U.S. Treasury obligations,
0.00% to 8.00% due 09/25/21 to 09/01/24 with the Portfolio's pro-rata
interest being $71,400,000.

(l) Percentage of Net Assets.

(m) Also represents cost for federal income tax purposes.

See Notes to Financial Statements.

FS-4
<PAGE>

STATEMENT
OF ASSETS
AND LIABILITIES
August 31, 1994

<TABLE>
<S> <C>
ASSETS:

Investments, at value (amortized cost)............. $1,025,117,093
Interest receivable................................ 8,684,991
Investment for deferred compensation plan.......... 3,578
Other assets....................................... 45,875
--------------
Total assets................................... 1,033,851,537
--------------
LIABILITIES:

Payables for:
Dividends........................................ 5,220,326
Deferred compensation............................ 3,578
Accrued advisory fees.............................. 29,143
Accrued directors' fees............................ 2,459
Accrued administrative service fees................ 10,448
Accrued filing fees................................ 161,193
Accrued operating expenses......................... 74,583
--------------
Total liabilities........................... 5,501,730
--------------
NET ASSETS......................................... $1,028,349,807
==============
NET ASSET VALUE PER SHARE:

Capital stock, $.01 par value per share............ 1,028,412,003
==============

Net asset value, offering and redemption price per
share............................................. $1.00
=====
</TABLE>

See Notes to Financial Statements.

FS-5

<PAGE>

STATEMENT OF
OPERATIONS
For the period ended
November 4, 1993 (date
operations commenced)
through August 31, 1994

<TABLE>
<S> <C>
INVESTMENT INCOME:

Interest income........................................... $44,819,625
-----------
EXPENSES:

Advisory fees............................................. 222,277
Custodian fees............................................ 75,525
Administrative service fees............................... 34,382
Directors' fees and expenses.............................. 11,140
Filing fees............................................... 182,159
Other..................................................... 78,909
-----------
Total expenses........................................ 604,392
-----------
Net investment income..................................... 44,215,233

Net realized gain (loss) on sales of investments.......... (62,196)
-----------
Net increase in net assets resulting from operations...... $44,153,037
===========
</TABLE>

See Notes to Financial Statements.

FS-6

<PAGE>

STATEMENT
OF CHANGES
IN NET ASSETS
For the period
November 4, 1993
(date operations
commenced) through
August 31, 1994

<TABLE>
<S> <C>
OPERATIONS:

Net investment income............................. $ 44,215,233
Net realized gain (loss) on sales of investments.. (62,196)
--------------
Net increase in net assets resulting from
operations..................................... 44,153,037
Distributions to shareholders from net investment
income............................................. (44,215,233)
Share transactions -- net........................... 1,028,412,003
--------------
Net increase in net assets........................ 1,028,349,807

NET ASSETS:

Beginning of period............................... --
--------------
End of period..................................... $1,028,349,807
==============
NET ASSETS CONSIST OF:

Capital (par value and additional paid-in)........ $1,028,412,003
Undistributed net realized gain (loss) on sales of
investment securities............................ (62,196)
--------------
$1,028,349,807
==============
</TABLE>

See Notes to Financial Statements.

FS-7

<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, each of which offers separate series of shares: the
Liquid Assets Portfolio and the Prime Portfolio, with the assets,liabilities and
operations of each portfolio accounted for separately. Information presented in
these financial statements pertains only to the Liquid Assets Portfolio (the
"Portfolio").
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of 397 days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a security
at its cost on the date of purchase and thereafter assumes a constant
amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the securities
sold. Interest income, adjusted for amortization of premiums and discounts on
investments, is accrued daily. Dividends to shareholders are declared daily
and are paid on the first business day of the following month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Expenses - Expenses of the Fund which are not directly attributable to a
specific portfolio or class are prorated among the portfolios to which the
expense relates based on the relative net assets of each portfolio.

NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a fee, paid monthly, with respect to the Portfolio at the annual rate
of 0.15% of the average daily net assets of the Portfolio.
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. During the period November
4, 1993 (date operations commenced) through August 31, 1994, AIM voluntarily
waived fees of $1,500,977.
The Portfolio, pursuant to a master administrative agreement with AIM, has
agreed to reimburse AIM for certain costs incurred in providing accounting and
shareholder services to the Portfolio. During the period November 4, 1993 (date
operations commenced) through August 31, 1994, the Portfolio reimbursed AIM
$34,382 for such services. Certain officers and directors of the Fund are
officers and directors of AIM and Fund Management Company, the Portfolio's
distributor.
During the period November 4, 1993 (date operations commenced) through August
31, 1994, the Portfolio paid legal fees of $7,204 for services rendered by Reid
& Priest as counsel to the Board of Directors. In September 1994, the firm
Kramer, Levin, Naftalis, Nesser, Kamin & Frankel was appointed as Counsel to the
Board of Directors. A member of that firm is a director of the Fund.

FS-8

<PAGE>

NOTE 3 - DIRECTORS' FEES

Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of 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 - CAPITAL STOCK

Changes in capital stock during the period November 4, 1993 (date operations
commenced) through August 31, 1994 were as follows:
1994
----------------------------------
Shares Value
--------------- ---------------
Sold....................................... 20,765,848,248 $20,765,848,248
Issued as reinvestment of dividends........ 587,397 587,397
Reacquired................................. (19,738,023,642) (19,738,023,642)
--------------- ---------------
Net increase............................... 1,028,412,003 $ 1,028,412,003
=============== ===============

NOTE 5 - FINANCIAL HIGHLIGHTS

Shown below are the condensed financial highlights for a share of capital
stock outstanding during the period November 4, 1993 (date operations commenced)
through August 31, 1994.
August 31,
1994
----------
Net asset value, beginning of period............................... $ 1.00
Income from investment operations:
Net investment income.......................................... 0.03
----------
Less distributions:
Dividends from net investment income........................... (0.03)
----------
Net asset value, end of period..................................... $ 1.00
==========
Total return(a).................................................... 3.83%
==========
Ratios/supplemental data:
Net assets, end of period (000s omitted)........................... $1,028,350
==========
Ratio of expenses to average net assets(b)......................... 0.05%
==========
Ratio of net investment income to average net assets(b)............ 3.85%
==========
(a) Annualized.
(b) After waiver of advisory fees. Ratios are annualized and based on average
net assets of $1,393,106,329. Annualized ratios of expenses and net
investment income prior to waiver of advisory fees are 0.18% and 3.72%,
respectively.

FS-9