<PAGE>
As filed with the Securities and Exchange Commission on December 23,
1996
1933 Act Registration No. 33-66240
1940 Act Registration No. 811-7892
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _____
Pre-Effective Amendment No. ______ _____
Post-Effective Amendment No. 7 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _____
Amendment No. 8 X
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(Check appropriate box or boxes.)
SHORT-TERM INVESTMENTS CO.
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(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 1919, Houston, TX 77046-1173
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
------------------
Charles T. Bauer
11 Greenway Plaza, Suite 1919, Houston, TX 77046-1173
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(Name and Address of Agent for Service)
Copy to:
P. Michelle Grace, Esquire Martha J. Hayes, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll
11 Greenway Plaza, Suite 1919 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b)
X on December 30, 1996 pursuant to paragraph (b)
-----
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of rule 485
(continued on next page)
<PAGE>
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant continues its election to register an indefinite number of its shares
of Common Stock pursuant to Rule 24f-2 under the Investment Company Act of 1940
and accordingly, filed its Rule 24f-2 Notice for the fiscal year ended August
31, 1996, on October 28, 1996.
<PAGE>
SHORT-TERM INVESTMENTS CO.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
(as required by Rule 495)
Note: The Registrant currently offers two portfolios of investments, the
Prime Portfolio and the Liquid Assets Portfolio. The Prime Portfolio is
comprised of five classes of shares - the Cash Management Class, the
Institutional Class, the Personal Investment Class, the Private Investment Class
and the Resource Class. Each class of shares of the Prime Portfolio is offered
to customers of certain institutions pursuant to separate Prospectuses and a
combined Statement of Additional Information. The Liquid Assets Portfolio is
comprised of four classes of shares - the Cash Management Class, the
Institutional Class, the MSTC Cash Reserves Class and the Private Investment
Class. Each class of shares of the Liquid Assets Portfolio is offered to
customers of certain institutions pursuant to separate Prospectuses and a
combined Statement of Additional Information.
I. PRIME PORTFOLIO - CASH MANAGEMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
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<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8 Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
<PAGE>
II. PRIME PORTFOLIO - INSTITUTIONAL CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
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<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset
Value
8 Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
III. PRIME PORTFOLIO - PERSONAL INVESTMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
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<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8. Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
IV. PRIME PORTFOLIO - PRIVATE INVESTMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8 Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
V. PRIME PORTFOLIO - RESOURCE CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8. Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
PRIME PORTFOLIO - CASH MANAGEMENT CLASS, INSTITUTIONAL CLASS, PERSONAL
INVESTMENT CLASS, PRIVATE INVESTMENT CLASS AND RESOURCE CLASS
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Statement of Additional Information Location
- -------- --------------------------------------------
<S> <C> <C>
10. Cover Page......................... Cover Page
11. Table of Contents.................. Table of Contents
12. General Information and History.... General Information About the Fund
13. Investment Objectives and Policies. Investment Program and Restrictions
14. Management of the Fund............. General Information About the
Fund - Directors and Officers
15. Control Persons and Principal
Holders of Securities............... General Information About the Fund
- Principal Holders of Securities
16. Investment Advisory and Other
Services............................ General Information About the Fund
- Investment Advisor
17. Brokerage Allocation................ Portfolio Transactions
18. Capital Stock and Other Securities.. General Information About the Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered............. Purchases and Redemptions
20. Tax Status........................... Tax Matters; See Part A - Taxes
21. Underwriters......................... Purchases and Redemptions;
Distribution Agreement
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
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22. Calculation of Performance Data...... Performance Information
23. Financial Statements................. Financial Statements
</TABLE>
VI. LIQUID ASSETS PORTFOLIO - CASH MANAGEMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8 Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
VII. LIQUID ASSETS PORTFOLIO - INSTITUTIONAL CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8. Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
VIII. LIQUID ASSETS PORTFOLIO - PRIVATE INVESTMENT CLASS
Part A - Prospectus
<TABLE>
<CAPTION>
Item No. Prospectus Location
- -------- -------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Financial Highlights
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends;
Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8. Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
6
<PAGE>
LIQUID ASSETS PORTFOLIO - CASH MANAGEMENT CLASS, INSTITUTIONAL CLASS AND PRIVATE
INVESTMENT CLASS
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Statement of Additional Information Location
- -------- --------------------------------------------
<S> <C> <C>
10. Cover Page........................... Cover Page
11. Table of Contents.................... Table of Contents
12. General Information and History...... General Information About the Fund
13. Investment Objectives and Policies... Investment Program and Restrictions
14. Management of the Fund............... General Information About the Fund -
Directors and Officers
15. Control Persons and Principal Holders
of Securities........................ General Information About the Fund -
Principal Holders of Securities
16. Investment Advisory and Other
Services............................. General Information About the Fund -
Investment Advisor
17. Brokerage Allocation................. Portfolio Transactions
18. Capital Stock and Other Securities... General Information About the Fund
19. Purchase, Redemption and Pricing of
Securities Being Offered............. Purchases and Redemptions
20. Tax Status........................... Tax Matters
21. Underwriters......................... Purchases and Redemptions; Distribution
Agreement
22. Calculation of Performance Data...... Performance Information
23. Financial Statements................. Financial Statements
</TABLE>
7
<PAGE>
IX. LIQUID ASSETS PORTFOLIO - MSTC CASH RESERVES CLASS
<TABLE>
<CAPTION>
Part A - Prospectus
Item No. Prospectus Location
- -------- -------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary; Table of Fees and Expenses
3. Condensed Financial Information...... Not Applicable
4. General Description of Registrant.... Cover Page; General Information;
Investment Program
5. Management of the Fund............... Management of the Fund; General
Information
5A. Management's Discussion of Fund
Performance.......................... Not Applicable
6. Capital Stock and Other Securities... General Information; Dividends; Taxes
7. Purchase of Securities Being Offered. Purchase of Shares; Net Asset Value
8. Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not Applicable
</TABLE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Item No. Statement of Additional Information Location
- -------- --------------------------------------------
<S> <C> <C>
10. Cover Page........................... Cover Page
11. Table of Contents.................... Table of Contents
12. General Information and History...... General Information About the Fund
13. Investment Objectives and Policies... Investment Program and Restrictions
14. Management of the Fund............... General Information About the Fund -
Directors and Officers, - Remuneration of
Directors, - AIM Funds Retirement Plan for
Eligible Directors/Trustees, - Deferred
Compensation Agreements
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
15. Control Persons and Principal
Holders of Securities................ General Information About the Fund -
Principal Holders of Securities
16. Investment Advisory and Other
Services............................. General Information About the Fund -
Investment Advisor, - Administrator, -
Expenses, - Transfer Agent and Custodian
17. Brokerage Allocation................. Portfolio Transactions
18. Capital Stock and Other Securities... General Information About the Fund -The
Fund and Its Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered............. Purchases and Redemptions
20. Tax Status........................... Tax Matters
21. Underwriters......................... Purchases and Redemptions - The
Distribution Agreement
22. Calculation of Performance Data...... Purchases and Redemptions - Performance
Information
23. Financial Statements.................. Financial Statements
</TABLE>
X. All Classes of Registrant
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- -----------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment
objective is the maximization of current income to the extent consistent with
CASH the preservation of capital and the maintenance of liquidity. The Portfolio
MANAGEMENT seeks to achieve its objective by investing in high grade money market
CLASS instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
DECEMBER 30, 1996 Portfolio will have maturities of sixty days or less.
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end, diversified, series management investment company. This
Prospectus relates solely to the Cash Management Class of the Portfolio, a
class of shares designed to be a convenient vehicle in which institutional
customers of banks, certain broker-dealers and other financial institutions can
invest in a diversified, money market fund.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class, the Private Investment Class,
the Personal Investment Class and the Resource Class, as well as shares of
classes of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE CASH MANAGEMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION, DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-7745.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7745
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Cash Management Class (the "Class") of the
Portfolio. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less. The investment objective
of the Portfolio is the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which institutional
customers of banks, certain broker-dealers and other financial institutions can
invest in a diversified open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $1,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in funds immediately available to the Portfolio. See "Purchase of
Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing the securities of the
Portfolio and rounds the per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
2
<PAGE>
On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on
February 7, 1997 (the "Annual Meeting"). The Board of Directors has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on
February 28, 1997. Provided that the Portfolio's shareholders approve the new
advisory agreement at the Annual Meeting and the merger is consummated, the new
advisory agreement with respect to the Portfolio, as well as the new
administrative services and distribution agreements, will automatically become
effective as of the closing of the merger.
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
0.10% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions as compensation for distribution-related services. See "Purchase
of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- CASH MANAGEMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................ None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)....................................................... None
Deferred Sales Load (as a percentage of original purchase price or re-
demption proceeds, as applicable)..................................... None
Redemption Fees (as a percentage of amount redeemed,if applicable)..... None
Exchange Fee........................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- CASH MANAGEMENT CLASS (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................................ 0.06%
12b-1 Fees (after fee waivers)**....................................... 0.08%
Other Expenses......................................................... 0.03%
----
Total Operating Expenses --Cash Management Class**..................... 0.17%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services..
** Had there been no fee waivers, 12b-1 Fees and Total Operating Expenses would
have been 0.10% and 0.19%, respectively.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.
1 year.................................................. $ 2
3 years................................................. $ 5
5 years................................................. $10
10 years................................................. $22
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The Other Expenses
figure is based upon actual costs and fees charged to the Class for the fiscal
year ended August 31, 1996. There can be no assurance that future waivers of
fees (if any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume expenses of the Class,
such assumption will have the effect of lowering the Class' overall expense
ratio and increasing its yield to investors. Beneficial owners of shares of the
Class should also consider the effect of any charges imposed by the institution
maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Cash Management Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively "data") for the two-year period ended August 31, 1996 and for the
period June 30, 1994 (date operations commenced) through August 31, 1994. The
data has been audited by KPMG Peat Marwick LLP, independent auditors, whose
report on the financial statements and the related notes appears in the
Statement of Additional Information.
<TABLE>
<CAPTION>
JUNE 30, 1994
(COMMENCEMENT
OF
OPERATIONS)
TO AUGUST 31,
1996 1995 1994
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<S> <C> <C> <C>
Net asset value, beginning of period...... $ 1.00 $ 1.00 $1.00
Income from investment operations:
Net investment income................... 0.05 0.06 0.01
-------- -------- -----
Total from investment operations...... 0.05 0.06 0.01
-------- -------- -----
Less distributions:
Dividends from net investment income.... (0.05) (0.06) (0.01)
-------- -------- -----
Net asset value, end of period............ $1.00 $1.00 $1.00
======== ======== =====
Total return.............................. 5.55% 5.71% 4.34%(a)
======== ======== =====
Ratios/Supplemental Data:
Net assets, end of period (000s omitted).. $507,247 $194,479 $372
======== ======== =====
Ratio of expenses to average net
assets(c)................................ 0.17%(b) 0.17% 0.14%(a)
======== ======== =====
Ratio of net investment income to average
net assets(d)............................ 5.38%(b) 5.69% 4.26%(a)
======== ======== =====
</TABLE>
- ------
(a) Annualized
(b) Ratios are based on average net assets of $303,094,444.
(c) Ratios of expenses to average net assets prior to waiver of distribution
fees and/or expense reimbursements were 0.19%, 0.32%, and 0.67% for the
periods 1996-1994, respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
distribution fees and/or expense reimbursements were 5.36%, 5.54%, and
3.73% for the periods 1996-1994, respectively.
SUITABILITY FOR INVESTORS
The shares of the Class are intended for use primarily by institutional
customers of banks, certain broker-dealers and other financial institutions who
seek a convenient vehicle in which to invest in an open-end diversified money
market fund. It is expected that the shares of the Class may be particularly
suitable investments for corporate cash managers, municipalities or other
public entities. The minimum initial investment is $1,000,000.
Investors in the shares of the Class have the opportunity to receive a
somewhat higher yield than might be obtainable through direct investment in
money market instruments, and enjoy the benefits of diversification, economies
of scale and same-day liquidity. Generally, higher interest rates can be
obtained on the purchase of very large blocks of money market instruments. Of
course, any such relative increase in interest rates may be offset to some
extent by the operating expenses of the shares of the Class.
5
<PAGE>
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations and taxable municipal securities that may be available in the money
markets. Such obligations are collectively referred to as "Money Market
Obligations" and include U.S. Treasury obligations, which include Treasury
bills, notes and bonds, and repurchase agreements relating to such securities.
The Portfolio may also engage in certain investment practices described below.
The market values of the money market instruments held by the Portfolio will be
affected by changes in the yields available on similar securities. If yields
have increased since a security was purchased, the market value of such
security will generally have decreased. Conversely, if yields have decreased,
the market value of such security will generally have increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposit, over 5% of the Portfolio's total
assets would be invested in time and savings deposits.
6
<PAGE>
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time. Generally, "First
Tier" securities are securities that are rated in the highest rating category
by two nationally recognized statistical rating organizations ("NRSROs") or, if
only rated by one NRSRO, are rated in the highest rating category by that NRSRO
or, if unrated, are determined by AIM (under the supervision of and pursuant to
guidelines established by the Board of Directors) to be of comparable quality
to a rated security that meets the foregoing quality standards. Commercial
paper consists of short-term promissory notes issued by corporations.
Commercial paper may be traded in the secondary market after its issuance.
Master notes are unsecured demand notes that permit the investment of
fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may fluctuate based upon changes in specified
interest rates or be reset periodically according to a prescribed formula or
may be a set rate. Although there is no secondary market in master demand
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note upon relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. Repurchase
transactions are limited to a term not to exceed 365 days. The Portfolio may
enter into repurchase agreements only with institutions believed by the Fund's
Board of Directors to present minimal credit risk. With regard to repurchase
transactions, in the event of a bankruptcy or other default of a seller of a
repurchase agreement (such as the seller's failure to repurchase the obligation
in accordance with the terms of the agreement), the Portfolio could experience
both delays in liquidating the underlying securities and losses, including: (a)
a possible decline in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible subnormal
levels of income and lack of access to income during this period, and (c)
expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Portfolio under the 1940 Act. Repurchase agreements will be
secured by U.S. Treasury securities. For additional information, see the
Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. Reverse
repurchase transactions are limited to a term not to exceed 92 days. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33-1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES.The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
7
<PAGE>
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered on a "when-issued" basis; that is, the
date for delivery of and payment for the securities is not fixed at the date of
purchase, but is set after the securities are issued (normally within forty-
five days after the date of the transaction). The payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreements or when-issued commitments. If
the market value of such securities declines, additional cash or securities
will be segregated on a daily basis so that the market value of the account
will equal the amount of the Portfolio's delayed delivery agreements and when-
issued commitments. To the extent that funds are segregated, they will not be
available for new investment or to meet redemptions. Investment in securities
on a when-issued basis and use of delayed delivery agreements may increase the
Portfolio's exposure to market fluctuation, or may increase the possibility
that the Portfolio will incur a short-term loss, if the Portfolio must engage
in portfolio transactions in order to honor a when-issued commitment or accept
delivery of a security under a delayed delivery agreement. The Portfolio will
employ techniques designed to minimize these risks. No additional delayed
delivery agreements or when-issued commitments will be made by the Portfolio
if, as a result, more than 25% of the Portfolio's net assets would become so
committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
8
<PAGE>
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The SEC
has proposed certain changes to Rule 2a-7. While such proposed changes may have
a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
9
<PAGE>
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 Fund's custodian bank,
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.
Shares of the Class are sold to institutional customers of banks, certain
broker-dealers and other financial institutions (individually an "Institution"
and collectively, "Institutions"). Individuals, corporations, partnerships and
other businesses that maintain qualified accounts at an Institution may invest
in the shares of the Class. Each Institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Class. Such services may include, among other things, establishment and
maintenance of shareholder accounts and records; assistance in processing
purchase and redemption transactions in shares of the Class; providing periodic
statements showing a customer's account balance in shares of the Class;
distribution of Fund proxy statements, annual reports and other communications
to shareholders whose accounts are serviced by the Institution; and such other
services as the Fund may reasonably request. Institutions will be required to
certify to the Fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS, at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
shares of the Class through an Institution in accordance with the procedures
established by such Institution. Each Institution separately determines the
rules applicable to accounts in the shares of the Class opened with it,
including minimum initial and subsequent investment requirements and the
procedures to be followed by investors to effect purchases of shares of the
Class. The minimum initial investment is $1,000,000, and there is no minimum
amount for subsequent purchases of shares of the Class by an Institution on
behalf of its customers. An investor who proposes to open a Portfolio account
with an Institution should consult with a representative of such Institution to
obtain a description of the rules governing such an account. The Institution
holds shares of the Class registered in its name, as agent for the customer, on
the books of the Institution. A statement with regard to the customer's shares
of the Class is supplied to the customer periodically, and confirmations of all
transactions for the account of the customer are provided by the Institution to
the customer promptly upon request. In addition, the Institution sends to each
customer proxies, periodic reports and other information with regard to the
customer's shares of the Class. The customer's shares of the Class are fully
assignable and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his relationship with an
Institution at any time, in which case an account in the investor's name will
be established directly with the Portfolio and the investor will become a
shareholder of record. In such case, however, the investor will not be able to
purchase additional shares of the Class directly, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Cash Management Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.
10
<PAGE>
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request. Certificates (in
full shares only) will be issued without charge and may be redeposited at any
time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also be
made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the net asset value per share of the Portfolio will
remain constant at $1.00. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made through a customer's Institution.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
Shares of the Class are not redeemable at the option of the Fund unless the
Board of Directors of the Fund determines in its sole discretion that failure
to so redeem may have materially adverse consequences to the shareholders of
the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in its net asset value, they are not expected to be of an amount
which would affect its $1.00 per share net asset value for purposes of
purchases and redemptions. See "Net Asset Value." Distributions from net
realized short-term gains may be declared and paid yearly or more frequently.
See "Taxes." The Portfolio does not expect to realize any long-term capital
gains or losses.
11
<PAGE>
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the Institution to AIFS, at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain its net asset value per share
at $1.00 for purposes of sales and redemptions. See "Net Asset Value." Should
the Fund incur or anticipate any unusual expense, loss or depreciation which
could adversely affect the income or net asset value of the Portfolio, the
Fund's Board of Directors would at that time consider whether to adhere to the
present dividend policy described above or to revise it in light of the then
prevailing circumstances. For example, under such unusual circumstances the
Board of Directors might reduce or suspend the daily dividend in order to
prevent, to the extent possible, the net asset value per share of the Portfolio
from being reduced below $1.00. Thus, such expenses, losses or depreciation may
result in a shareholder receiving no dividends for the period during which it
held its shares and cause such a shareholder to receive upon redemption a price
per share lower than the shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions , please contact your tax advisor or AIFS.
12
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NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods, the daily yield on shares of the Portfolio, computed as
described in "Purchases and Redemptions--Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
877-7745. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by an investor before
making an investment in the Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.25% and 5.39%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation by its
Institution for each transaction unless otherwise specified by the shareholder.
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 periodic 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.
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MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and AIM Management, a holding company engaged in the financial services
business. Information concerning the Board of Directors may be found in the
Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 41 investment company portfolios. As of December 9, 1996,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $63.6 billion. AIM is a wholly-owned
subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees pursuant to the
Advisory Agreement from the Fund with respect to the Portfolio which
represented 0.06% of the Portfolio's average daily net assets. During such
fiscal year, the expenses of the Class, including AIM's fees, amounted to 0.17%
of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "AIM Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. As compensation to AIM for its services under the Administrative
Services Agreement, the Portfolio may reimburse AIM for expenses incurred by
AIM in connection with such services.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expenses prior to the end of each fiscal year. FMC may in its discretion
from time to time agree to waive voluntarily its 12b-1 fee but will retain its
ability to be reimbursed prior to the end of the fiscal year.
DISTRIBUTOR
The Fund has entered into a Distribution Agreement dated as of October 18,
1993 (the "Distribution Agreement") with FMC, a registered broker-dealer and a
wholly-owned subsidiary of AIM, to act as the exclusive distributor of the
shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Fund either directly or through
other broker-dealers. FMC is the distributor of several of the mutual funds
managed or advised by AIM.
14
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FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or financial institutions who sell a
minimum dollar amount of the shares of the Class during a specific period of
time. In some instances, these incentives may be offered only to certain
dealers or financial institutions who have sold or may sell significant amounts
of shares. The total amount of such additional bonus payments or other
consideration shall not exceed 0.05% of the net asset value of the shares of
the Class sold. Any such bonus or incentive programs will not change the price
paid by investors for the purchase of shares of the Class or the amount
received as proceeds from such sales. Sales of the shares of the Class may not
be used to qualify for any incentives to the extent that such incentives may be
prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of shares of the Class in an amount equal to
0.10% on an annualized basis of the average daily net assets of the Portfolio
attributable to the Class. Such amounts may be expended when and if authorized
by the Board of Directors and may be used to finance such distribution-related
services as expenses of organizing and conducting sales seminars, printing of
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature and costs of administering the
Plan.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to FMC would be characterized as an asset-based sales charge
pursuant to the Plan. The Plan also imposes a cap on the total amount of sales
charges, including asset-based sales charges, that may be paid by the Portfolio
with respect to the Class. The Plan does not obligate the Fund to reimburse FMC
for the actual expenses FMC may incur in fulfilling its obligations under the
Plan on behalf of the Class. Thus, under the Plan, even if FMC's actual
expenses exceed the fee payable to FMC thereunder at any given time, the Fund
will not be obligated to pay more than that fee. If FMC's expenses are less
than the fee it receives, FMC will retain the full amount of the fee.
As required by Rule 12b-1 under the 1940 Act, the Plan was initially approved
by the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 19, 1993. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the shareholders of the outstanding
voting securities of the Class. Any change in the Plan that would increase
materially the distribution expenses paid by the Class requires shareholder
approval; otherwise the Plan may be amended by the Board of Directors,
including a majority of the Qualified Directors, by votes cast in person at a
meeting called for the purpose of voting upon such amendment. As long as the
Plan is in effect, the selection or nomination of the Qualified Directors is
committed to the discretion of the Qualified Directors.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund except those listed in the next sentence are prorated among all
classes of such portfolio. Distribution and service fees, transfer agency fees
and shareholder recordkeeping fees which are directly attributable to a
specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
15
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio is that of the Predecessor Portfolio. Shares of
common stock of the Fund are divided into nine classes. Five classes, including
the Class, represent interests in the Portfolio, and four classes represent
interests in the Liquid Assets Portfolio. Each class of shares has a par value
of $.001 per share. The other classes of the Fund may have different sales
charges and other expenses which may affect performance. An investor may obtain
information concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
16
<PAGE>
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7745.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
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SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 877-7745
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 CASH MANAGEMENT CLASS
Houston, Texas 77046-1173
(800) 877-7745 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
SUMMARY........................... 2
CUSTODIAN
THE BANK OF NEW YORK TABLE OF FEES AND EXPENSES........ 4
90 Washington Street
11th Floor FINANCIAL HIGHLIGHTS.............. 5
New York, New York 10286
SUITABILITY FOR INVESTORS......... 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. INVESTMENT PROGRAM................ 6
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 PURCHASE OF SHARES................ 9
REDEMPTION OF SHARES.............. 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE DIVIDENDS......................... 11
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS TAXES............................. 12
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND NET ASSET VALUE................... 13
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED YIELD INFORMATION................. 13
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THIS REPORTS TO SHAREHOLDERS........... 13
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY MANAGEMENT OF THE FUND............ 14
PERSON TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE. GENERAL INFORMATION............... 16
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO. Prospectus
- ------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment
objective is the maximization of current income to the extent consistent with
INSTITUTIONAL the preservation of capital and the maintenance of liquidity. The Portfolio
CLASS seeks to achieve its objective by investing in high grade money market
instruments, such as U.S. Government obligations, bank obligations, commercial
DECEMBER 30, 1996 instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less.
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end diversified series management investment company. This
Prospectus relates solely to the Institutional Class of the Portfolio, a class
of shares designed to be a convenient vehicle in which institutions,
particularly banks, acting for themselves or in a fiduciary, advisory, agency,
custodial or other similar capacity can invest in a diversified money market
fund.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Cash Management Class, the Private Investment Class,
the Personal Investment Class and the Resource Class, as well as shares of
classes of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE INSTITUTIONAL CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION, DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 659-1005.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 659-1005
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Institutional Class
(the "Class") of the Portfolio at net asset value. The Portfolio is a money
market fund which invests in money market instruments, such as U.S. Government
obligations, bank obligations, commercial instruments and repurchase
agreements. The instruments purchased by the Portfolio will have maturities of
sixty days or less. The investment objective of the Portfolio is the
maximization of current income to the extent consistent with the preservation
of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which institutions,
particularly banks, acting for themselves or in a fiduciary, advisory, agency,
custodial or other similar capacity can invest short-term cash reserves in a
diversified, open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value
without a sales charge. The minimum initial investment in the Class is
$1,000,000. There is no minimum amount for subsequent investments. Payment for
shares of the Class purchased must be in funds immediately available to the
Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Fund uses the amortized cost method of valuing the securities held by the
Portfolio and rounds the per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
2
<PAGE>
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund -- Investment
Advisor" and "-- Administrator."
On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on February
7, 1997 (the "Annual Meeting"). The Board of Directors has also approved a new
administrative services agreement with AIM and a new distribution agreement
with Fund Management Company. There are no material changes to the terms of the
new agreements, including the fees payable by the Portfolio. No change is
anticipated in the investment advisory or other personnel responsible for the
Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on February
28, 1997. Provided that the Portfolio's shareholders approve the new advisory
agreement at the Annual Meeting and the merger is consummated, the new advisory
agreement with respect to the Portfolio, as well as the new administrative
services and distribution agreements, will automatically become effective as of
the closing of the merger.
DISTRIBUTOR
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. FMC does not receive any fee for distribution services
from the Fund with respect to the shares of the Class. See "Management of the
Fund--Distributor."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- INSTITUTIONAL CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES -- INSTITUTIONAL CLASS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees......................................................... 0.06%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... 0.03%
----
Total Operating Expenses -- Institutional Class......................... 0.09%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year........................................................... $1
3 years.......................................................... $3
5 years.......................................................... $5
10 years......................................................... $12
</TABLE>
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The fees and expense
figures are based upon actual costs and fees charged to the Class for the
fiscal year ended August 31, 1996. To the extent any service providers assume
expenses of the Class, such assumption will have the effect of lowering the
Class' overall expense ratio and increasing its yield to investors. Beneficial
owners of shares of the Class should also consider the effect of any charges
imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses -- Institutional Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for each of the years in the ten-year period ended
August 31, 1996. 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>
1996 1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income......... 0.05 0.06 0.04 0.03 0.04 0.07 0.08 0.09
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations..... 0.05 0.06 0.04 0.03 0.04 0.07 0.08 0.09
Less
distributions:
Dividends from
net investment
income.......... (0.05) (0.06) (0.04) (0.03) (0.04) (0.07) (0.08) (0.09)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ========== ==========
Total return..... 5.64% 5.80% 3.64% 3.20% 4.44% 7.11% 8.72% 9.42%
========== ========== ========== ========== ========== ========== ========== ==========
Ratios/supplemental
data
Net assets, end
of period (000s
omitted)........ $5,264,601 $3,752,693 $4,080,753 $4,349,945 $3,993,340 $6,108,991 $6,475,123 $7,003,546
========== ========== ========== ========== ========== ========== ========== ==========
Ratio of expenses
to average net
assets.......... 0.09%(a) 0.09% 0.08% 0.07% 0.08% 0.07% 0.07% 0.08%
========== ========== ========== ========== ========== ========== ========== ==========
Ratio of net
investment
income to
average net
assets.......... 5.48%(a) 5.64% 3.58% 3.15% 4.43% 6.89% 8.39% 9.07%
========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
1988 1987
----------- -----------
<S> <C> <C>
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income......... 0.07 0.06
----------- -----------
Total from
investment
operations..... 0.07 0.06
Less
distributions:
Dividends from
net investment
income.......... (0.07) (0.06)
----------- -----------
Net asset value,
end of period .. $ 1.00 $ 1.00
=========== ===========
Total return..... 7.34% 6.39%
=========== ===========
Ratios/supplemental
data
Net assets, end
of period (000s
omitted)........ $5,841,901 $4,822,758
=========== ===========
Ratio of expenses
to average net
assets.......... 0.09% 0.08%
=========== ===========
Ratio of net
investment
income to
average net
assets.......... 7.11% 6.22%
=========== ===========
</TABLE>
- ------
(a) Ratios are based on average daily net assets of $4,508,079,574.
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
as a convenient and economical vehicle in which to invest short-term cash
reserves in an open-end diversified money market fund. Shares of the Class may
not be purchased directly by individuals, although institutions may purchase
shares of the Class for accounts maintained by individuals. Prospective
investors should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day.
Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class. However, these expenses are expected to be
relatively small due primarily to the following factors: the Class will have a
small number of shareholders who do not need many of the services provided by
other money market investment companies, thereby resulting in lower transfer
agent fees and cost for printing reports and proxy statements; sales of the
shares of the Class to institutions acting for themselves or in a fiduciary
capacity are exempt from the registration requirements of most state securities
laws, thereby resulting in reduced state registration fees; and the relatively
low investment advisory fee paid to AIM.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
5
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations and taxable municipal securities that may be available in the money
markets. Such obligations are collectively referred to as "Money Market
Obligations" and include U.S. Treasury obligations, which include Treasury
bills, notes and bonds, and repurchase agreements relating to such securities.
The Portfolio may also engage in certain investment practices described below.
The market values of the money market instruments held by the Portfolio will be
affected by changes in the yields available on similar securities. If yields
have increased since a security was purchased, the market value of such
security will generally have decreased. Conversely, if yields have decreased,
the market value of such security will generally have increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future, and it is not obligated to do so by law.
BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposit, over 5% of the Portfolio's total
assets would be invested in time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
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,
6
<PAGE>
are determined by AIM (under the supervision of and pursuant to guidelines
established by the Board of Directors) to be of comparable quality to a rated
security that meets the foregoing quality standards. Commercial paper consists
of short-term promissory notes issued by corporations. Commercial paper may be
traded in the secondary market after its issuance. Master notes are unsecured
demand notes that permit the investment of fluctuating amounts of money at
varying rates of interest pursuant to arrangements with issuers who meet the
quality criteria of the Portfolio. The interest rate on a master note may
fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master notes, if such notes have a demand
feature, the payee may demand payment of the principal amount of the note upon
relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. Repurchase
transactions are limited to a term not to exceed 365 days. The Portfolio may
enter into repurchase agreements only with institutions believed by the Fund's
Board of Directors to present minimal credit risk. With regard to repurchase
transactions, in the event of a bankruptcy or other default of a seller of a
repurchase agreement (such as the seller's failure to repurchase the obligation
in accordance with the terms of the agreement), the Portfolio could experience
both delays in liquidating the underlying securities and losses, including: (a)
a possible decline in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible subnormal
levels of income and lack of access to income during this period, and (c)
expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Portfolio under the 1940 Act. Repurchase agreements will be
secured by U.S. Treasury securities. For additional information, see the
Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. Reverse
repurchase transactions are limited to a term not to exceed 92 days. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33-1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
7
<PAGE>
Debt securities are sometimes offered on a "when-issued" basis; that is, the
date for delivery of and payment for the securities is not fixed at the date of
purchase, but is set after the securities are issued (normally within forty-
five days after the date of the transaction). The payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreement obligations or when-issued
commitments. If the market value of such securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the account will equal the amount of the Portfolio's delayed delivery agreement
obligations and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investment in securities on a when-issued basis and use of delayed
delivery agreements may increase the Portfolio's exposure to market
fluctuation, or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in
order to honor a when-issued commitment or accept delivery of a security under
a delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks. No additional delayed delivery agreements or when-issued
commitments will be made by the Portfolio if, as a result, more than 25% of the
Portfolio's net assets would become so committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the credit
worthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests),
the Portfolio may borrow money from banks or obtain funds by entering into
reverse repurchase agreements, and (b) to the extent
8
<PAGE>
that entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio. The investment policies described above
under the heading "Investment Policies" may be changed without the affirmative
vote of a majority of the outstanding shares of the Portfolio.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The SEC
has proposed certain changes to Rule 2a-7. While such proposed changes may have
a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
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.
9
<PAGE>
Banks will be required to certify to the Fund that they comply with
applicable state laws regarding registration as broker-dealers, or that they
are exempt from such registration.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Fund's custodian
bank, in the form described below and notice of such order is provided to the
Fund's transfer agent or (b) at the time the order is placed, if the Portfolio
is assured of payment.
Payment for shares of the Class purchased must be in federal funds or other
funds immediately available to the Portfolio. Federal Reserve wires should be
sent as early as possible in order to facilitate crediting to the shareholder's
account. Any funds received with respect to an order which is not accepted by
the Portfolio and any funds received for which an order has not been received
will be returned to the sending institution. An order must specify that it is
for the purchase of "Shares of the Institutional Class of the Prime Portfolio,"
otherwise any funds received will be returned to the sending institution.
The minimum initial investment in the Class is $1,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
held by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary,
and (b) for accounts for which the institution acts in some other capacity. An
institution's master account(s) and sub-accounts with the Portfolio may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS"), 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the net asset value per share of the Portfolio will
remain constant at $1.00. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made by calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
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Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class's pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in its net asset value, they are not expected to be of an amount
which would affect its $1.00 per-share net asset value for purposes of
purchases and redemptions. See "Net Asset Value." Distributions from net
realized short-term gains may be declared and paid yearly or more frequently.
See "Taxes." The Portfolio does not expect to realize any long-term capital
gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the institution to AIFS at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's Board of Directors would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent, to the extent possible, the net asset value per share of
the Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code
11
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in order to avoid the imposition of a 4% excise tax. The Portfolio intends to
distribute at least 98% of its net investment income for the calendar year and
at least 98% of its net realized capital gains, if any, for the period ending
on October 31. The Portfolio also intends to meet the other requirements of
Subchapter M, including the requirements with respect to diversification of
assets and sources of income, so that the Portfolio will pay no taxes on net
investment income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods, the daily yield on shares of the Portfolio, computed as
described in "Purchases and Redemptions -- Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
659-1005. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
12
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For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.33% and 5.47%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and AIM Management, a holding company engaged in the financial services
business. Information concerning the Board of Directors may be found in the
Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 41 investment company portfolios. As of December 9, 1996,
the total assets of the investment company portfolios managed, advised or
administered by AIM and its affiliates were approximately $63.6 billion. AIM is
a wholly-owned subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
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For the fiscal year ended August 31, 1996, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.06% of the
Portfolio's average daily net assets. During such fiscal year, the expenses of
the Class, including AIM's fees, amounted to 0.09% of the Class's average daily
net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. As compensation to AIM for its services under the Administrative
Services Agreement, the Portfolio may reimburse AIM for expenses incurred by
AIM in connection with such services.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expenses prior to the end of each fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. FMC does not receive any fee for distribution services
from the Fund with respect to the shares of the Class. The address of FMC is 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173. Certain directors and
officers of the Fund are affiliated with FMC. The Distribution Agreement
provides that FMC has the exclusive right to distribute shares of the Fund
either directly or through other broker-dealers. FMC is the distributor of
several of the mutual funds managed or advised by AIM.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund except those listed in the next sentence are
prorated among all classes of such Portfolios. Distribution and service fees,
transfer agency fees and shareholder recordkeeping fees which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
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<PAGE>
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or a class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into nine classes. Five classes, including the Class,
represent interests in the Portfolio, and four classes represent interests in
the Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. The other classes of the Fund may have different sales charges and other
expenses which may affect performance. An investor may obtain information
concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 659-1005.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
15
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- -------------------------------------- ---------------------------------------
- -------------------------------------- ---------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
Houston, Texas 77046-1173
(800) 659-1005 December 30, 1996
INVESTMENT ADVISOR SHORT-TERM
A I M ADVISORS, INC. INVESTMENTS CO.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 ------------
(713) 626-1919
PRIME PORTFOLIO
DISTRIBUTOR
FUND MANAGEMENT COMPANY ------------
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 INSTITUTIONAL CLASS
(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
90 Washington Street Table of Fees and Expenses....... 4
11th Floor
New York, New York 10286 Financial Highlights............. 5
TRANSFER AGENT Suitability For Investors........ 5
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 Investment Program............... 5
Houston, Texas 77046-1173
Purchase of Shares............... 9
Redemption of Shares............. 10
NO PERSON HAS BEEN AUTHORIZED TO GIVE Dividends........................ 11
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS Taxes............................ 11
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND Net Asset Value.................. 12
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED Yield Information................ 12
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THIS Reports to Shareholders.......... 13
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY Management of the Fund........... 13
PERSON TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE. General Information.............. 15
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment
objective is the maximization of current income to the extent consistent with
PERSONAL the preservation of capital and the maintenance of liquidity. The Portfolio
INVESTMENT seeks to achieve its objective by investing in high grade money market
CLASS instruments such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
DECEMBER 30, 1996 Portfolio will have maturities of sixty days or less.
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end, diversified, series, management investment company. This
Prospectus relates solely to the Personal Investment Class of the Portfolio, a
class of shares designed to be a convenient vehicle in which customers of
banks, certain broker-dealers and other financial institutions can invest in a
diversified money market fund.
The Fund also offers shares of the following classes of the Portfolio
pursuant to separate prospectuses: the Institutional Class, the Private
Investment Class, the Cash Management Class and the Resource Class, as well as
shares of classes of another portfolio of the Fund, the Liquid Assets
Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE PERSONAL INVESTMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION, DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-4744.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-4744
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Personal Investment Class (the "Class") of the
Portfolio. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less. The investment objective
of the Portfolio is the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which customers of banks,
certain broker-dealers and other financial institutions can invest in a
diversified open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $1,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in funds immediately available to the Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
2
<PAGE>
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "Administrator."
On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on
February 7, 1997 (the "Annual Meeting"). The Board of Directors has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on
February 28, 1997. Provided that the Portfolio's shareholders approve the new
advisory agreement at the Annual Meeting and the merger is consummated, the new
advisory agreement with respect to the Portfolio, as well as the new
administrative services and distribution agreements, will automatically become
effective as of the closing of the merger.
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay to FMC
as well as certain broker-dealers or other financial institutions up to 0.75%
of the average daily net assets of the Portfolio attributable to the shares of
the Class. Of this amount, up to 0.25% may be for continuing personal services
to shareholders provided by broker-dealers, banks or other financial
institutions and the balance would be deemed an asset-based sales charge. See
"Purchase of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- PERSONAL INVESTMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).............................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage
of offering price).................................................. None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable).. None
Exchange Fee......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- PERSONAL INVESTMENT CLASS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees...................................................... 0.06%
12b-1 Fees (after fee waivers)**..................................... 0.50%***
Other Expenses (after expense reimbursements)**...................... 0.03%
----
Total Operating Expenses -- Personal Investment Class**.............. 0.59%
====
</TABLE>
- -------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** Had there been no fee waivers and no expense reimbursements, 12b-1 Fees,
Other Expenses and Total Operating Expenses would have been 0.75%, 0.08%
and 0.89% respectively.
*** It is possible that as a result of Rule 12b-1 fees, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted under rules of the National Association of Securities
Dealers, Inc. Given the Rule 12b-1 fee of the Class, however, it is
estimated that it would take a substantial number of years for a
shareholder to exceed such maximum front-end sales charges.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period.
<TABLE>
<S> <C>
1 year............................................................. $ 6
3 years............................................................ $19
5 years............................................................ $33
10 years........................................................... $74
</TABLE>
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The expense figures
are based upon actual costs and fees charged to the Class for the fiscal year
ended August 31, 1996. There can be no assurance that future waivers of fees
(if any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume additional expenses of the
Class, such assumption of additional expenses will have the effect of lowering
the Class' overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Class should also consider the effect of any
charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses -- Personal Investment Class" remain the same in
the years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively "data") for each of the years in the five year period ended
August 31, 1996 and the period August 8, 1991 (date operations commenced)
through August 31, 1991. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
-------- ------- ------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
-------- ------- ------ ----- ----- -------
Income from investment
operations:
Net investment income.. 0.05 0.05 0.03 0.03 0.04 0.002
-------- ------- ------ ----- ----- -------
Total from investment
operations............ 0.05 0.05 0.03 0.03 0.04 0.002
Less distributions:
Dividends from net
investment income...... (0.05) (0.05) (0.03) (0.03) (0.04) (0.002)
-------- ------- ------ ----- ----- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
======== ======= ====== ===== ===== =======
Total return............ 5.11% 5.27% 3.12% 2.74% 3.94% 5.02%(a)
======== ======= ====== ===== ===== =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted).. $112,645 $99,630 $3,065 $ 904 $ 727 $ 270
======== ======= ====== ===== ===== =======
Ratio of expenses to
average net assets(b). 0.59%(d) 0.59% 0.58% 0.52% 0.54% 0.80%(a)
======== ======= ====== ===== ===== =======
Ratio of net investment
income to average net
assets(c)............. 4.99%(d) 5.23% 3.34% 2.71% 3.75% 5.03%(a)
======== ======= ====== ===== ===== =======
</TABLE>
- -------
(a) Annualized.
(b) Ratios of expenses to average net assets prior to waiver of distribution
fees and/or expense reimbursements were 0.89%, 0.86%, 2.39%, 2.33%, 7.21%
and 15.40% for the periods 1996-1991, respectively.
(c) Ratios of net investment income to average net assets prior to waiver of
distribution fees and/or expense reimbursements were 4.69%, 4.96%, 1.53%,
0.90%, (2.93%) and (9.57%) for the periods 1996-1991, respectively.
(d) Ratios are based on average net assets of $111,204,901.
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by customers of banks, certain
broker-dealers and other financial institutions who seek a convenient vehicle
in which to invest in an open-end diversified money market fund. The minimum
initial investment is $1,000.
Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments, and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
5
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations and taxable municipal securities that may be available in the money
markets. Such obligations are collectively referred to as "Money Market
Obligations" and include U.S. Treasury obligations, which include Treasury
bills, notes and bonds, and repurchase agreements relating to such securities.
The Portfolio may also engage in certain investment practices described below.
The market values of the money market instruments held by the Portfolio will be
affected by changes in the yields available on similar securities. If yields
have increased since a security was purchased, the market value of such
security will generally have decreased. Conversely, if yields have decreased,
the market value of such security will generally have increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposits, over 5% of the Portfolio's total
assets would be invested in the time and savings deposits.
6
<PAGE>
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time. Generally, "First
Tier" securities are securities that are rated in the highest rating category
by two nationally recognized statistical rating organizations ("NRSROs") or, if
only rated by one NRSRO, are rated in the highest rating category by that NRSRO
or, if unrated, are determined by A I M Advisors, Inc. ("AIM") (under the
supervision of and pursuant to guidelines established by the Board of
Directors) to be of comparable quality to a rated security that meets the
foregoing quality standards. Commercial paper consists of short-term promissory
notes issued by corporations. Commercial paper may be traded in the secondary
market after its issuance. Master notes are unsecured demand notes that permit
the investment of fluctuating amounts of money at varying rates of interest
pursuant to arrangements with issuers who meet the quality criteria of the
Portfolio. The interest rate on a master note may fluctuate based upon changes
in specified interest rates or be reset periodically according to a prescribed
formula or may be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note upon relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. Repurchase
transactions are limited to a term not to exceed 365 days. The Portfolio may
enter into repurchase agreements only with institutions believed by the Fund's
Board of Directors to present minimal credit risk. With regard to repurchase
transactions, in the event of a bankruptcy or other default of a seller of a
repurchase agreement (such as the seller's failure to repurchase the obligation
in accordance with the terms of the agreement), the Portfolio could experience
both delays in liquidating the underlying securities and losses, including: (a)
a possible decline in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible subnormal
levels of income and lack of access to income during this period and (c) the
expense of enforcing its rights. Repurchase agreements are considered to be
loans by the Portfolio under the 1940 Act. Repurchase agreements will be
secured by U.S. Treasury securities. For additional information, see the
Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. Reverse
repurchase transactions are limited to a term not to exceed 92 days. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
7
<PAGE>
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered on a "when-issued" basis; that is, the
date for delivery of and payment for the securities is not fixed at the date of
purchase, but is set after the securities are issued (normally within forty-
five days after the date of the transaction). The payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreement obligations or when-issued
commitments. If the market value of such securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the account will equal the amount of the Portfolio's delayed delivery agreement
obligations and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investments in securities on a when-issued basis and use of
delayed delivery agreements may increase the Portfolio's exposure to market
fluctuation, or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in
order to honor a when-issued commitment or accept delivery of a security under
a delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks. No additional delayed delivery agreements or when-issued
commitments will be made by the Portfolio if, as a result, more than 25% of the
Portfolio's net assets would become so committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investors in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
8
<PAGE>
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase securities while borrowings in
excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The SEC
has proposed certain changes to Rule 2a-7. While such proposed changes may have
a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, President's Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
9
<PAGE>
Shares of the Class are sold to customers of banks, certain broker-dealers
and other financial institutions (each, an "Institution" and, collectively,
"Institutions"). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an Institution may invest in the shares of
the Class. Each Institution will render administrative support services to its
customers who are the beneficial owners of the shares of the Class. Such
services may include, among other things, establishment and maintenance of
shareholder accounts and records; assistance in processing purchase and
redemption transactions in shares of the Class; providing periodic statements
to customers showing a client's account balance in shares of the Class;
distribution of Fund proxy statements, annual reports and other communications
to shareholders whose accounts are serviced by the Institution; and such other
services as the Fund may reasonably request. Institutions will be required to
certify to the Fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
Class through an Institution in accordance with the procedures established by
such Institution. Each Institution separately determines the rules applicable
to accounts in the Class opened with it, including minimum initial and
subsequent investment requirements and the procedures to be followed by
investors to effect purchases of shares of the Class. The minimum initial
investment is $1,000, and there is no minimum amount for subsequent purchases
of shares of the Class by an Institution on behalf of its customers. An
investor who proposes to open a Portfolio account with an Institution should
consult with a representative of such Institution to obtain a description of
the rules governing such an account. The Institution holds shares of the Class
registered in its name, as agent for the customer, on the books of the
Institution. A statement with regard to the customer's shares of the Class is
supplied to the customer periodically, and confirmations of all transactions
for the account of the customer are provided by the Institution to the customer
promptly upon request. In addition, the Institution sends each customer
proxies, periodic reports and other information with regard to the customer's
shares of the Class. The customer's shares of the Class are fully assignable
and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his relationship with an
Institution at any time, in which case an account in the investor's name will
be established directly with the Portfolio and the investor will become a
shareholder of record. In such case, however, the investor will not be able to
purchase additional shares of the Class directly, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Personal Investment Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
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<PAGE>
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the net asset value per share of the Portfolio will
remain constant at $1.00. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made through a customer's Institution.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
such Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in its net asset value, they are not expected to be of an amount
which would affect its $1.00 per share net asset value for purposes of purchases
and redemptions. See "Net Asset Value." Distributions from net realized short-
term gains may be declared and paid yearly or more frequently. See "Taxes." The
Portfolio does not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full
11
<PAGE>
and fractional shares of the Class at the net asset value as of 4:00 p.m.
Eastern Time on the last business day of the month. Such election, or any
revocation thereof, must be made in writing by the Institution to AIFS at 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become effective
with dividends paid after its receipt by AIFS. If a shareholder redeems all the
shares of the Class in its account at any time during the month, all dividends
declared through the date of redemption are paid to the shareholder along with
the proceeds of the redemption.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's Board of Directors would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances, the Board of Directors might reduce or suspend the daily
dividend in order to prevent, to the extent possible, the net asset value per
share of the Portfolio from being reduced below $1.00. Thus, such expenses,
losses or depreciation may result in a shareholder receiving no dividends for
the period during which it held its shares of the Class and cause such a
shareholder to receive upon redemption a price per share lower than the
shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31 and intends
to meet the other requirements of Subchapter M, including the requirements with
respect to diversification of assets and sources of income, so that the
Portfolio will pay no taxes on net investment income and net realized capital
gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each Portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
12
<PAGE>
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all its
liabilities (including accrued expenses and dividends payable) by the number of
shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods, the daily yield on shares of the Portfolio, computed as
described in "Purchases and Redemptions--Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
877-4744. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY OTHER
INSTITUTION. These factors should be carefully considered by the investor
before investing in the Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 4.83% and 4.95%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided a written confirmation by its Institution
for each transaction unless otherwise specified by the shareholder.
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 periodic 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 account.
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<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and AIM Management, a holding company engaged in the financial services
business. Information concerning the Board of Directors may be found in the
Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 41 investment company portfolios. As of December 9, 1996,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $63.6 billion. AIM is a wholly-owned
subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.06% of the
Portfolio's average daily net assets. During such fiscal year, the expenses of
the Class, including AIM's fees, amounted to 0.59% of the Class' average daily
net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. Under the Administrative Services Agreement, the Portfolio reimburses
AIM for expenses incurred by AIM in connection with such services.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expenses prior to the end of each fiscal year. FMC may in its discretion
from time to time voluntarily agree to waive its 12b-1 fee, but will retain its
ability to be reimbursed prior to the end of the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Class either directly or
through other broker-dealers. FMC is the distributor of several of the mutual
funds managed or advised by AIM.
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<PAGE>
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or Institutions who
have sold or may sell significant amounts of shares. The total amount of such
additional bonus payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.75% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund and may be used to finance
such distribution-related services as expenses of organizing and conducting
sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Plan.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments retained by FMC would be characterized as an asset-
based sales charge pursuant to the Plan. The Plan also imposes a cap on the
total amount of sales charges, including asset-based sales charges, that may be
paid by the Portfolio with respect to the Class. The Plan does not obligate the
Fund to reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund will not be obligated to pay more than that fee. If FMC's
expenses are less than the fee it receives, FMC will retain the full amount of
the fee.
As required by Rule 12b-1 under the 1940 Act, the Plan was initially approved
by the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 19, 1993. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes cast in person at a meeting
called for the purpose of voting upon such amendment. As long as the Plan is in
effect, the selection or nomination of the Qualified Directors is committed to
the discretion of the Qualified Directors.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund except those listed in the next sentence are prorated among all
classes of such Portfolios. Distribution and service fees, transfer agency fees
and shareholder recordkeeping fees which are directly attributable to a
specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
15
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment programs. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into nine classes. Five classes, including the Class,
represent interests in the Portfolio and four classes represent interests in
the Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. The other classes of the Fund may have different sales charges and other
expenses which may affect performance. An investor may obtain information
concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemptions which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares. As of December
1, 1996, the Bank of New York was the owner of record of 60.84% of the
outstanding shares of the Class. As long as the Bank of New York owns over 25%
of such shares, it may be presumed to be in "control" of the Personal
Investment Class of the Prime Portfolio, as defined in the 1940 Act.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
16
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TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919 Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-4744.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
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- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 877-4744
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 PERSONAL INVESTMENT CLASS
Houston, Texas 77046-1173
(800) 877-4744 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
SUMMARY......................... 2
CUSTODIAN
THE BANK OF NEW YORK TABLE OF FEES AND EXPENSES...... 4
90 Washington Street, 11th Floor
New York, New York 10286 FINANCIAL HIGHLIGHTS............ 5
TRANSFER AGENT SUITABILITY FOR INVESTORS....... 5
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 INVESTMENT PROGRAM.............. 5
Houston, Texas 77046-1173
PURCHASE OF SHARES.............. 9
REDEMPTION OF SHARES............ 11
DIVIDENDS....................... 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY TAXES........................... 12
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE NET ASSET VALUE................. 13
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR YIELD INFORMATION............... 13
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE REPORTS TO SHAREHOLDERS......... 13
FUND OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY MANAGEMENT OF THE FUND.......... 14
JURISDICTION TO ANY PERSON TO WHOM SUCH
OFFERING MAY NOT LAWFULLY BE MADE. GENERAL INFORMATION............. 16
</TABLE>
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- -------------------------------------- -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment
objective is the maximization of current income to the extent consistent with
PRIVATE the preservation of capital and the maintenance of liquidity. The Portfolio
INVESTMENT seeks to achieve its objective by investing in high grade money market
CLASS instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
DECEMBER 30, 1996 Portfolio will have maturities of sixty days or less.
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end, diversified, series, management investment company. This
Prospectus relates solely to the Private Investment Class of the Portfolio, a
class of shares designed to be a convenient vehicle in which customers of
banks, certain broker-dealers and other financial institutions can invest in a
diversified, money market fund.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class, the Cash Management Class, the
Personal Investment Class and the Resource Class, as well as shares of classes
of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE PRIVATE INVESTMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION, DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-7748.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7748
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Private Investment Class (the "Class") of the
Portfolio. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less. The investment objective
of the Portfolio is the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of the Fund representing interests in the Portfolio. Such classes have
different distribution arrangements and are designed for institutional and
other categories of investors. The Fund also offers shares of classes of
another portfolio, the Liquid Assets Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which customers of banks,
certain broker-dealers and other financial institutions can invest in a
diversified, open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $10,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in funds immediately available to the Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing the securities held
by the Portfolio and rounds the per share net asset value to the nearest whole
cent. Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "Administrator."
2
<PAGE>
On November 4, 1996, A I M Management Group Inc. (" AIM Management")
announced that it had entered into an Agreement and Plan of Merger among
INVESCO plc, Invesco Group Services Inc. and AIM Management, pursuant to which
AIM Management will be merged with INVESCO Group Services Inc. Subject to a
number of conditions being met, it is currently anticipated that the
transaction will occur in the early part of 1997. The Fund's investment
advisor, AIM, is a wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on
February 7, 1997 (the "Annual Meeting"). The Board of Directors has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on
February 28, 1997. Provided that the Portfolio's shareholders approve the new
advisory agreement at the Annual Meeting and the merger is consummated, the new
advisory agreement with respect to the Portfolio, as well as the new
administrative services and distribution agreements, will automatically become
effective as of the closing of the merger.
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
0.50% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions. Of this amount, up to 0.25% may be for continuing personal
services to shareholders provided by broker-dealers or institutions and the
balance would be deemed an asset-based sales charge. See "Purchase of Shares"
and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- PRIVATE INVESTMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).............................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage
of offering price).................................................. None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable).. None
Exchange Fee......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- PRIVATE INVESTMENT CLASS (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees...................................................... 0.06%
12b-1 Fees (after fee waivers)**..................................... 0.30%***
Other Expenses....................................................... 0.03%
----
Total Operating Expenses --Private Investment Class**................ 0.39%
====
</TABLE>
- -------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** Had there been no fee waivers, 12b-1 Fees and Total Operating Expenses
would have been 0.50% and 0.59%, respectively.
*** It is possible that as a result of Rule 12b-1 fees, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted under rules of the National Association of Securities
Dealers, Inc. Given the Rule 12b-1 fee of the Class, however, it is
estimated that it would take a substantial number of years for a
shareholder to exceed such maximum front-end sales charges.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period.
<TABLE>
<S> <C>
1 year............................................................ $ 4
3 years........................................................... $13
5 years........................................................... $22
10 years.......................................................... $49
</TABLE>
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The expense figures
are based upon actual costs and fees charged to the Class for the fiscal year
ended August 31, 1996. There can be no assurance that future waivers of fees
(if any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume additional expenses of the
Class, such assumption of additional expenses will have the effect of lowering
the Class' overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Class should also consider the effect of any
charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses -- Private Investment Class" remain the same in
the years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively "data") for each of the years in the three year period ended
August 31, 1996 and the period July 8, 1993 (date operations commenced) through
August 31, 1993. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
JULY 8, 1993
(COMMENCEMENT
OF OPERATIONS)
TO AUGUST 31,
1996 1995 1994 1993
-------- -------- ------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income.......... 0.05 0.05 0.03 0.03
-------- -------- ------- -------
Total from investment
operations.................... 0.05 0.05 0.03 0.03
Less distributions:
Dividends from net investment
income........................ (0.05) (0.05) (0.03) (0.03)
-------- -------- ------- -------
Net asset value, end of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= =======
Total return.................... 5.32% 5.48% 3.33% 3.24%(a)
======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)...................... $209,443 $154,278 $30,834 $17,857
======== ======== ======= =======
Ratio of expenses to average
net assets(c)................. 0.39%(b) 0.39% 0.38% 0.37%(a)
======== ======== ======= =======
Ratio of net investment income
to average net assets(d)...... 5.20%(b) 5.50% 3.32% 2.85%(a)
======== ======== ======= =======
</TABLE>
- -------
(a) Annualized.
(b) Ratios are based on average net assets of $191,862,808.
(c) Ratios of expenses to average net assets prior to waiver of distribution
fees and/or expense reimbursements were 0.59%, 0.60%, 1.38% and 0.57% for
the periods 1996-1993, respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
distribution fees and/or expense reimbursements were 5.00%, 5.29%, 2.32%
and 2.65% for the periods 1996-1993, respectively.
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by customers of banks, certain
broker-dealers and other financial institutions who seek a convenient vehicle
in which to invest in an open-end diversified money market fund. The minimum
initial investment is $10,000.
Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments, and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
5
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations and taxable municipal securities that may be available in the money
markets. Such obligations are collectively referred to as "Money Market
Obligations" and include U.S. Treasury obligations, which include Treasury
bills, notes and bonds, and repurchase agreements relating to such securities.
The Portfolio may also engage in certain investment practices described below.
The market values of the money market instruments held by the Portfolio will be
affected by changes in the yields available on similar securities. If yields
have increased since a security was purchased, the market value of such
security will generally have decreased. Conversely, if yields have decreased,
the market value of such security will generally have increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposits, over 5% of the Portfolio's total
assets would be invested in illiquid time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
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
6
<PAGE>
organizations ("NRSROs") or, if only rated by one NRSRO, are rated in the
highest rating category by that NRSRO or, if unrated, are determined by A I M
Advisors, Inc. ("AIM") (under the supervision of and pursuant to guidelines
established by the Board of Directors) to be of comparable quality to a rated
security that meets the foregoing quality standards. Commercial paper consists
of short-term promissory notes issued by corporations. Commercial paper may be
traded in the secondary market after its issuance. Master notes are unsecured
demand notes that permit the investment of fluctuating amounts of money at
varying rates of interest pursuant to arrangements with issuers who meet the
quality criteria of the Portfolio. The interest rate on a master note may
fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master notes, if such notes have a demand
feature, the payee may demand payment of the principal amount of the note upon
relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. Repurchase
transactions are limited to a term not to exceed 365 days. The Portfolio may
enter into repurchase agreements only with institutions believed by the Fund's
Board of Directors to present minimal credit risk. With regard to repurchase
transactions, in the event of a bankruptcy or other default of a seller of a
repurchase agreement (such as the seller's failure to repurchase the obligation
in accordance with the terms of the agreement), the Portfolio could experience
both delays in liquidating the underlying securities and losses, including: (a)
a possible decline in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible subnormal
levels of income and lack of access to income during this period and (c) the
expense of enforcing its rights. Repurchase agreements are considered to be
loans by the Portfolio under the 1940 Act. Repurchase agreements will be
secured by U.S. Treasury securities. For additional information, see the
Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. Reverse
repurchase transactions are limited to a term not to exceed 92 days. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
7
<PAGE>
Debt securities are sometimes offered on a "when-issued" basis; that is, the
date for delivery of and payment for the securities is not fixed at the date of
purchase, but is set after the securities are issued (normally within forty-
five days after the date of the transaction). The payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Fund will direct its custodian bank to segregate cash
or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreement obligations or when-issued
commitments. If the market value of such securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the account will equal the amount of the Portfolio's delayed delivery agreement
obligations and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investment in securities on a when-issued basis and use of delayed
delivery agreements may increase the Portfolio's exposure to market
fluctuation, or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in
order to honor a when-issued commitment or accept delivery of a security under
a delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks. No additional delayed delivery agreements or when-issued
commitments will be made by the Portfolio if, as a result, more than 25% of the
Portfolio's net assets would become so committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
8
<PAGE>
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The SEC
has proposed certain changes to Rule 2a-7. While such proposed changes may have
a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund"s custodian bank,
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.
Shares of the Class are sold to customers of banks, certain broker-dealers
and other financial institutions (each, an "Institution" and, collectively,
"Institutions"). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an Institution may invest in the shares of
the Class. Each Institution will render administrative support services to its
customers who are the beneficial owners of the shares of the Class. Such
services may include, among other
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things, establishment and maintenance of shareholder accounts and records;
assistance in processing purchase and redemption transactions in shares of the
Class; providing periodic statements showing a customer's account balance in
shares of the Class; distribution of Fund proxy statements, annual reports and
other communications to shareholders whose accounts are serviced by the
Institution; and such other services as the Fund may reasonably request.
Institutions will be required to certify to the Fund that they comply with
applicable state law regarding registration as broker-dealers, or that they are
exempt from such registration.
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
shares of the Class through an Institution in accordance with the procedures
established by such Institution. Each Institution separately determines the
rules applicable to accounts in the shares of the Class opened with it,
including minimum initial and subsequent investment requirements and the
procedures to be followed by investors to effect purchases of shares of the
Class. The minimum initial investment is $10,000, and there is no minimum
amount for subsequent purchases of shares of the Class by an Institution on
behalf of its customers. An investor who proposes to open a Portfolio account
with an Institution should consult with a representative of such Institution to
obtain a description of the rules governing such an account. The Institution
holds shares of the Class registered in its name, as agent for the customer, on
the books of the Institution. A statement with regard to the customer's shares
of the Class is supplied to the customer periodically, and confirmations of all
transactions for the account of the customer are provided by the Institution to
the customer promptly upon request. In addition, each Institution sends its
customers proxies, periodic reports and other information from the Institution
with regard to the customer's shares of the Class. The customer's shares of the
Class are fully assignable and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his relationship with an
Institution at any time, in which case an account in the investor's name will
be established directly with the Portfolio and the investor will become a
shareholder of record. In such case, however, the investor will not be able to
directly purchase additional shares of the Class, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Private Investment Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
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<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the net asset value per share of the Portfolio will
remain constant at $1.00. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made through a customer's Institution.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in its net asset value, they are not expected to be of an amount
which would affect its $1.00 per share net asset value for purposes of
purchases and redemptions. See "Net Asset Value." Distributions from net
realized short-term gains may be declared and paid yearly or more frequently.
See "Taxes." The Portfolio does not expect to realize any long-term capital
gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such
11
<PAGE>
election, or any revocation thereof, must be made in writing by the Institution
to AIFS at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will
become effective with dividends paid after its receipt by AIFS. If a
shareholder redeems all the shares of the Class in its account at any time
during the month, all dividends declared through the date of redemption are
paid to the shareholder along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's Board of Directors would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances, the Board of Directors might reduce or suspend the daily
dividend in order to prevent, to the extent possible, the net asset value per
share of the Portfolio from being reduced below $1.00. Thus, such expenses,
losses or depreciation may result in a shareholder receiving no dividends for
the period during which it held its shares of the Class and cause such a
shareholder to receive upon redemption a price per share lower than the
shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income, so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each Portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
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<PAGE>
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if the security were sold.
During such periods, the daily yield on shares of the Portfolio, computed as
described in "Purchases and Redemptions -- Performance Information" in the
Statement of Additional Information, may differ somewhat from an identical
computation made by an investment company with identical investments utilizing
available indications as to market value to value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
877-7748. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.03% and 5.16%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation by its
Institution for each transaction unless otherwise specified by the shareholder.
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 periodic 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.
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<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and AIM Management, a holding company engaged in the financial services
business. Information concerning the Board of Directors may be found in the
Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 41 investment company portfolios. As of December 9, 1996,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $63.6 billion. AIM is a wholly-owned
subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.06% of the
Portfolio's average daily net assets. During such fiscal year, the expenses of
the Class, including AIM's fees, amounted to 0.39% of the Class' average daily
net assets.
ADMINISTRATOR
The Fund has also entered into a Master Administrative Services Agreement
dated as of October 18, 1993 with AIM (the "Administrative Services
Agreement"), as permitted by the Advisory Agreement pursuant to which AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Portfolio, including the services of a principal
financial officer of the Fund and related staff. Under the Administrative
Services Agreement, the Portfolio reimburses AIM for expenses incurred by AIM
in connection with such services.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expense prior to the end of each fiscal year. FMC may in its discretion
from time to time voluntarily agree to waive its 12b-1 fee, but will retain its
ability to be reimbursed prior to the end of the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Class either directly or
through other broker-dealers. FMC is the distributor of several of the mutual
funds managed or advised by AIM.
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<PAGE>
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of the shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or institutions who
have sold or may sell significant amounts of shares. The total amount of such
additional bonus payments or other consideration shall not exceed 0.05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of the
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.50% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors and may be used to finance such
distribution-related services as expenses of organizing and conducting sales
seminars, printing of prospectuses and statements of additional information
(and supplements thereto) and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature and
costs of administering the Plan.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments to FMC would be characterized as an asset-based sales
charge pursuant to the Plan. The Plan also imposes a cap on the total amount of
sales charges, including asset-based sales charges, that may be paid by the
Portfolio with respect to the Class. The Plan does not obligate the Fund to
reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund will not be obligated to pay more than that fee. If FMC's
expenses are less than the fee it receives, FMC will retain the full amount of
the fee.
As required by Rule 12b-1 under the 1940 Act, the Plan was initially approved
by the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 19, 1993. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes cast in person at a meeting
called for the purpose of voting upon such amendment. As long as the Plan is in
effect, the selection or nomination of the Qualified Directors is committed to
the discretion of the Qualified Directors.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund except those listed in the next sentence are prorated among all
classes of such Portfolios. Distribution and service fees, transfer agency fees
and shareholder recordkeeping fees 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.
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<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or a class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into nine classes. Five classes, including the Class,
represent interests in the Portfolio, and four classes represent interests in
the Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. The other classes of the Fund may have different sales charges and other
expenses which may affect performance. An investor may obtain information
concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares. As of December
1, 1996, Huntington Capital Corporation was the owner of record of 62.76% of
the outstanding shares of the Class. As long as Huntington Capital Corporation
owns over 25% of such shares, it may be presumed to be in "control" of the
Private Investment Class of the Prime Portfolio, as defined in the 1940 Act.
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.
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TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th floor New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7748.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
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SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 877-7748
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 PRIVATE INVESTMENT CLASS
Houston, Texas 77046-1173
(800) 877-7748 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
SUMMARY........................... 2
CUSTODIAN
THE BANK OF NEW YORK TABLE OF FEES AND EXPENSES....... 4
90 Washington Street
11th Floor FINANCIAL HIGHLIGHTS............. 5
New York, New York 10286
SUITABILITY FOR INVESTORS........ 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. INVESTMENT PROGRAM............... 5
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 PURCHASE OF SHARES............... 9
REDEMPTION OF SHARES............. 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE DIVIDENDS........................ 11
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS TAXES............................ 12
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND NET ASSET VALUE.................. 13
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED YIELD INFORMATION................ 13
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THIS REPORTS TO SHAREHOLDERS.......... 13
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY MANAGEMENT OF THE FUND........... 14
PERSON TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE. GENERAL INFORMATION.............. 16
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------
PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment
objective is the maximization of current income to the extent consistent with
RESOURCE the preservation of capital and the maintenance of liquidity. The Portfolio
CLASS seeks to achieve its objective by investing in high grade money market
instruments, such as U.S. Government obligations, bank obligations, commercial
DECEMBER 30, 1996 instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less.
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end, diversified, series management investment company. This
Prospectus relates solely to the Resource Class of the Portfolio, a class of
shares designed to be a convenient vehicle in which institutional customers of
banks, certain broker-dealers and other financial institutions can invest in a
diversified, money market fund.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class, the Private Investment Class,
the Personal Investment Class and the Cash Management Class, as well as shares
of classes of another portfolio of the Fund, the Liquid Assets Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE RESOURCE CLASS OF THE PORTFOLIO
AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF ADDITIONAL
INFORMATION, DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY INCORPORATED
BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION WITHOUT
CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 825-6858. THE SEC MAINTAINS A
WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT OF ADDITIONAL
INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER INFORMATION
REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 825-6858
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Resource Class (the "Class") of the Portfolio.
The Portfolio is a money market fund which invests in money market instruments,
such as U.S. Government obligations, bank obligations, commercial instruments
and repurchase agreements. The instruments purchased by the Portfolio will have
maturities of sixty days or less. The investment objective of the Portfolio is
the maximization of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."
All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.
INVESTORS IN THE CLASS
The Class is designed to be a convenient vehicle in which institutional
customers of banks, certain broker-dealers and other financial institutions can
invest in a diversified open-end money market fund.
PURCHASE OF SHARES
Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $10,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in funds immediately available to the Portfolio. See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing the securities of the
Portfolio and rounds the per share net asset value to the nearest whole cent.
Accordingly, the net asset value per share of the Portfolio will normally
remain constant at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. See "Net Asset Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under a separate Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
2
<PAGE>
On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on February
7, 1997 (the "Annual Meeting"). The Board of Directors has also approved a new
administrative services agreement with AIM and a new distribution agreement
with Fund Management Company. There are no material changes to the terms of the
new agreements, including the fees payable by the Portfolio. No change is
anticipated in the investment advisory or other personnel responsible for the
Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on February
28, 1997. Provided that the Portfolio's shareholders approve the new advisory
agreement at the Annual Meeting and the merger is consummated, the new advisory
agreement with respect to the Portfolio, as well as the new administrative
services and distribution agreements, will automatically become effective as of
the closing of the merger.
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
0.20% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions as compensation for distribution-related services. See "Purchase
of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES -- RESOURCE CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................ None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)....................................................... None
Deferred Sales Load (as a percentage of original purchase price or re-
demption proceeds, as applicable)..................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable).... None
Exchange Fee........................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- RESOURCE CLASS (AS A PERCENTAGE OF
AVERAGE NET ASSETS)**
Management Fees........................................................ 0.06%
12b-1 Fees (after fee waivers)***...................................... 0.16%
Other Expenses......................................................... 0.03%
----
Total Operating Expenses --Resource Class***........................... 0.25%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** The fees and expenses set forth in the table are based on estimated average
net assets of the Class.
*** Had there been no fee waivers, 12b-1 fees and Total Operating Expenses
would have been 0.20% and 0.29%, respectively.
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.
1 year.......................................................... $ 3
3 years......................................................... $ 8
The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The other expenses and
12b-1 fees figure is based upon estimated costs and the estimated size of the
Class and estimated fees to be charged for the current fiscal year. Thus,
actual expenses may be greater or less than such estimates. To the extent any
service providers assume expenses of the Class, such assumption will have the
effect of lowering the Class' overall expense ratio and increasing its yield to
investors. Beneficial owners of shares of the Class should also consider the
effect of any charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Resource Class" remain the same in the years
shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for the period January 16, 1996 (date operations
commenced) through August 31, 1996. 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>
JANUARY 16,
1996
(COMMENCEMENT
OF
OPERATIONS)
TO AUGUST 31,
1996
-------------
<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..................................................... 5.23%(a)
=======
Ratios/supplemental data:
Net assets, end of period (000s omitted)......................... $58,012
=======
Ratio of expenses to average net assets.......................... 0.25%(b)
=======
Ratio of net investment income to average net assets............. 5.18%(b)
=======
</TABLE>
(a) Annualized.
(b) After waiver of distribution fees. Ratios are annualized and based on
average net assets of $96,885,122. Annualized ratios of expenses and net
investment income to average net assets prior to waiver of distribution
fees were 0.29% and 5.14%, respectively.
SUITABILITY FOR INVESTORS
The shares of the Class are intended for use primarily by institutional
customers of banks, certain broker-dealers and other financial institutions who
seek a convenient vehicle in which to invest in an open-end diversified money
market fund. It is expected that the shares of the Class may be particularly
suitable investments for corporate cash managers, municipalities or other
public entities. The minimum initial investment is $10,000.
Investors in the shares of the Class have the opportunity to receive a
somewhat higher yield than might be obtainable through direct investment in
money market instruments, and enjoy the benefits of diversification, economies
of scale and same-day liquidity. Generally, higher interest rates can be
obtained on the purchase of very large blocks of money market instruments. Of
course, any such relative increase in interest rates may be offset to some
extent by the operating expenses of the shares of the Class.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in high grade money market instruments. The money market instruments
in which the Portfolio invests are considered to carry very little risk and
accordingly may not have as high a yield as that available on money market
instruments of lesser quality. The Portfolio consists exclusively of money
market instruments which have maturities of 60 days or less from the date of
purchase (except for securities subject to repurchase agreements which may have
longer maturities), and normally does not maintain a dollar-weighted average
maturity of its portfolio securities in excess of 40 days.
5
<PAGE>
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations and taxable municipal securities that may be available in the money
markets. Such obligations are collectively referred to as "Money Market
Obligations" and include U.S. Treasury obligations, which include Treasury
bills, notes and bonds, and repurchase agreements relating to such securities.
The Portfolio may also engage in certain investment practices described below.
The market values of the money market instruments held by the Portfolio will be
affected by changes in the yields available on similar securities. If yields
have increased since a security was purchased, the market value of such
security will generally have decreased. Conversely, if yields have decreased,
the market value of such security will generally have increased.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not purport
to be an exhaustive list of all Money Market Obligations, and the Portfolio
reserves the right to invest in Money Market Obligations other than those
listed below.
GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.
BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.
The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposit, over 5% of the Portfolio's total
assets would be invested in time and savings deposits.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time. Generally, "First
Tier" securities are securities that are rated in the highest rating category
by two nationally recognized statistical rating organizations ("NRSROs") or, if
only rated by one NRSRO, are rated in the highest rating category by that NRSRO
or, if unrated, are determined by AIM (under the supervision of and pursuant to
guidelines established by the Board of Directors) to be of comparable quality
to a rated security that meets the foregoing quality standards. Commercial
paper consists of short-term promissory notes issued by corporations.
Commercial paper may be traded in the secondary market after its issuance.
Master notes are unsecured demand notes that permit the investment of
fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may fluctuate based upon changes in specified
interest rates or be reset periodically according to a prescribed formula or
may be a set rate. Although there is no secondary market in master demand
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note upon relatively short notice.
6
<PAGE>
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. Repurchase
transactions are limited to a term not to exceed 365 days. The Portfolio may
enter into repurchase agreements only with institutions believed by the Fund's
Board of Directors to present minimal credit risk. With regard to repurchase
transactions, in the event of a bankruptcy or other default of a seller of a
repurchase agreement (such as the seller's failure to repurchase the obligation
in accordance with the terms of the agreement), the Portfolio could experience
both delays in liquidating the underlying securities and losses, including: (a)
a possible decline in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible subnormal
levels of income and lack of access to income during this period, and (c)
expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Portfolio under the 1940 Act. Repurchase agreements will be
secured by U.S. Treasury securities. For additional information, see the
Statement of Additional Information.
Investment Practices
BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. Reverse
repurchase transactions are limited to a term not to exceed 92 days. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may also lend its portfolio
securities in amounts up to 33 1/3% of its total assets to financial
institutions in accordance with the investment restrictions of the Portfolio.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by AIM to be
of good standing and only when, in AIM's judgment, the income to be earned from
the loans justifies the attendant risks.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES.The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales
of shares of the Portfolio and may enter into delayed delivery agreements to
assure that the Portfolio will be as fully invested as possible in instruments
meeting its investment objective.
Debt securities are sometimes offered on a "when-issued" basis; that is, the
date for delivery of and payment for the securities is not fixed at the date of
purchase, but is set after the securities are issued (normally within forty-
five days after the date of the transaction). The payment obligation and the
interest rate that will be received on the securities are fixed at the time the
buyer enters into the commitment. The Portfolio will only make commitments to
purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable.
7
<PAGE>
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to segregate
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreements or when-issued commitments. If
the market value of such securities declines, additional cash or securities
will be segregated on a daily basis so that the market value of the account
will equal the amount of the Portfolio's delayed delivery agreements and when-
issued commitments. To the extent that funds are segregated, they will not be
available for new investment or to meet redemptions. Investment in securities
on a when-issued basis and use of delayed delivery agreements may increase the
Portfolio's exposure to market fluctuation, or may increase the possibility
that the Portfolio will incur a short-term loss, if the Portfolio must engage
in portfolio transactions in order to honor a when-issued commitment or accept
delivery of a security under a delayed delivery agreement. The Portfolio will
employ techniques designed to minimize these risks. No additional delayed
delivery agreements or when-issued commitments will be made by the Portfolio
if, as a result, more than 25% of the Portfolio's net assets would become so
committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
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The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The SEC
has proposed certain changes to Rule 2a-7. While such proposed changes may have
a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
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.
Shares of the Class are sold to institutional customers of banks, certain
broker-dealers and other financial institutions (individually an "Institution"
and collectively, "Institutions"). Individuals, corporations, partnerships and
other businesses that maintain qualified accounts at an Institution may invest
in the shares of the Class. Each Institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Class. Such services may include, among other things, establishment and
maintenance of shareholder accounts and records; assistance in processing
purchase and redemption transactions in shares of the Class; providing periodic
statements showing a customer's account balance in shares of the Class;
distribution of Fund proxy statements, annual reports and other communications
to shareholders whose accounts are serviced by the Institution; and such other
services as the Fund may reasonably request. Institutions will be required to
certify to the Fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.
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Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
shares of the Class through an Institution in accordance with the procedures
established by such Institution. Each Institution separately determines the
rules applicable to accounts in the shares of the Class opened with it,
including minimum initial and subsequent investment requirements and the
procedures to be followed by investors to effect purchases of shares of the
Class. The minimum initial investment is $10,000, and there is no minimum
amount for subsequent purchases of shares of the Class by an Institution on
behalf of its customers. An investor who proposes to open a Portfolio account
with an Institution should consult with a representative of such Institution to
obtain a description of the rules governing such an account. The Institution
holds shares of the Class registered in its name, as agent for the customer, on
the books of the Institution. A statement with regard to the customer's shares
of the Class is supplied to the customer periodically, and confirmations of all
transactions for the account of the customer are provided by the Institution to
the customer promptly upon request. In addition, the Institution sends to each
customer proxies, periodic reports and other information with regard to the
customer's shares of the Class. The customer's shares of the Class are fully
assignable and subject to encumbrance by the customer.
All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his relationship with an
Institution at any time, in which case an account in the investor's name will
be established directly with the Portfolio and the investor will become a
shareholder of record. In such case, however, the investor will not be able to
purchase additional shares of the Class directly, except through reinvestment
of dividends and distributions.
Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.
Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Resource Class of the Prime Portfolio," otherwise any funds
received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request. Certificates (in
full shares only) will be issued without charge and may be redeposited at any
time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the net asset value per share of the Portfolio will
remain constant at $1.00. See "Net Asset Value." Redemption requests with
respect to shares of the Class for which certificates have not been issued are
normally made through a customer's Institution.
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Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the Institution's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Class to be redeemed
will not receive the dividend declared on the effective date of the redemption.
If a redemption request is received by AIFS after 4:00 p.m. Eastern Time or on
other than a business day of the Portfolio, the redemption will be effected at
the net asset value of the Portfolio determined as of 4:00 p.m. Eastern Time on
the next business day of the Portfolio, and the proceeds of such redemption
will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 will be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
Shares of the Class are not redeemable at the option of the Fund unless the
Board of Directors of the Fund determines in its sole discretion that failure
to so redeem may have materially adverse consequences to the shareholders of
the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in its net asset value, they are not expected to be of an amount
which would affect its $1.00 per share net asset value for purposes of
purchases and redemptions. See "Net Asset Value." Distributions from net
realized short-term gains may be declared and paid yearly or more frequently.
See "Taxes." The Portfolio does not expect to realize any long-term capital
gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Class at the net asset value as of
4:00 p.m. Eastern Time on the last business day of the month. Such election, or
any revocation thereof, must be made in writing by the Institution to AIFS at
11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares of the Class in its account at any time during the
month, all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
The 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
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<PAGE>
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent, to the extent possible, the net asset value per share of
the Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares and cause such a shareholder to receive upon
redemption a price per share lower than the shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on November 1, 1995 Prospectus which are subject
to change by legislation or administrative action.
NET ASSET VALUE
The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all of its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.
The securities of the Portfolio are valued on the basis of amortized cost
pursuant to rules promulgated by the SEC applicable to money market funds. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined
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by amortized cost, is higher or lower than the price the Portfolio would
receive if the security were sold. During such periods, the daily yield on
shares of the Portfolio, computed as described in "Purchases and Redemptions--
Performance Information" in the Statement of Additional Information, may differ
somewhat from an identical computation made by an investment company with
identical investments utilizing available indications as to market value to
value its portfolio securities.
YIELD INFORMATION
Yield information for the Class can be obtained by calling the Fund at (800)
825-6858. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by an investor before
making an investment in the Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.17% and 5.31%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Portfolio to
eight decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.
Each shareholder will be provided with a written confirmation by its
Institution for each transaction unless otherwise specified by the shareholder.
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 periodic statement setting forth, for each sub-
account, the share balance, income earned for the month, income earned for the
year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and AIM Management, a holding company engaged in the financial services
business. Information concerning the Board of Directors may be found in the
Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM
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was organized in 1976 and, together with its affiliates, manages or advises 41
investment company portfolios. As of December 9, 1996, the total assets of the
investment company portfolios managed or advised by AIM and its affiliates were
approximately $63.6 billion. AIM is a wholly-owned subsidiary of AIM
Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees pursuant to the
Advisory Agreement from the Fund with respect to the Portfolio which
represented 0.06% of the Portfolio's average daily net assets. During such
fiscal year, the expenses of the Class, including AIM's fees, amounted to 0.25%
of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "AIM Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. As compensation to AIM for its services under the Administrative
Services Agreement, the Portfolio may reimburse AIM for expenses incurred by
AIM in connection with such services.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expenses prior to the end of each fiscal year. FMC may in its discretion
from time to time agree to waive voluntarily its 12b-1 fee but will retain its
ability to be reimbursed prior to the end of the fiscal year.
DISTRIBUTOR
The Fund has entered into a Distribution Agreement dated as of October 18,
1993 (the "Distribution Agreement") with FMC, a registered broker-dealer and a
wholly-owned subsidiary of AIM, to act as the exclusive distributor of the
shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Fund either directly or through
other broker-dealers. FMC is the distributor of several of the mutual funds
managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or financial institutions who sell a
minimum dollar amount of the shares of the Class during a specific period of
time. In some instances, these incentives may be offered only to certain
dealers or financial institutions who have sold or may sell significant amounts
of shares. The total amount of such additional bonus payments or other
consideration shall not exceed 0.05% of the net asset value of the shares of
the Class sold. Any such bonus or incentive programs will not change the price
paid by investors for the purchase of shares of the Class or the amount
received as proceeds from such sales. Sales of the shares of the Class may not
be used to qualify for any incentives to the extent that such incentives may be
prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of shares of the Class in an amount equal to
0.20% on an annualized basis of the average daily net assets of the Portfolio
attributable to the Class. Such amounts may be
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<PAGE>
expended when and if authorized by the Board of Directors and may be used to
finance such distribution-related services as expenses of organizing and
conducting sales seminars, printing of prospectuses and statements of
additional information (and supplements thereto) and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature and costs of administering the Plan.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to FMC would be characterized as an asset-based sales charge
pursuant to the Plan. The Plan also imposes a cap on the total amount of sales
charges, including asset-based sales charges, that may be paid by the Portfolio
with respect to the Class. The Plan does not obligate the Fund to reimburse FMC
for the actual expenses FMC may incur in fulfilling its obligations under the
Plan on behalf of the Class. Thus, under the Plan, even if FMC's actual
expenses exceed the fee payable to FMC thereunder at any given time, the Fund
will not be obligated to pay more than that fee. If FMC's expenses are less
than the fee it receives, FMC will retain the full amount of the fee.
As required by Rule 12b-1 under the 1940 Act, the Plan was initially approved
by the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 19, 1993. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the shareholders of the outstanding
voting securities of the Class. Any change in the Plan that would increase
materially the distribution expenses paid by the Class requires shareholder
approval; otherwise the Plan may be amended by the Board of Directors,
including a majority of the Qualified Directors, by votes cast in person at a
meeting called for the purpose of voting upon such amendment. As long as the
Plan is in effect, the selection or nomination of the Qualified Directors is
committed to the discretion of the Qualified Directors.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund except those listed in the next sentence are prorated among all
classes of such portfolio. Distribution and service fees, transfer agency fees
and shareholder recordkeeping fees which are directly attributable to a
specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
15
<PAGE>
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio is that of the Predecessor Portfolio. Shares of
common stock of the Fund are divided into nine classes. Five classes, including
the Class, represent interests in the Portfolio, and four classes represent
interests in the Liquid Assets Portfolio. Each class of shares has a par value
of $.001 per share. The other classes of the Fund may have different sales
charges and other expenses which may affect performance. An investor may obtain
information concerning the Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 825-6858.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
16
<PAGE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 825-6858
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 RESOURCE CLASS
Houston, Texas 77046-1173
(800) 825-6858 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
SUMMARY........................... 2
CUSTODIAN
THE BANK OF NEW YORK TABLE OF FEES AND EXPENSES........ 4
90 Washington Street
11th Floor FINANCIAL HIGHLIGHTS.............. 5
New York, New York 10286
SUITABILITY FOR INVESTORS......... 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. INVESTMENT PROGRAM................ 5
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 PURCHASE OF SHARES................ 9
REDEMPTION OF SHARES.............. 10
DIVIDENDS......................... 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY TAXES............................. 12
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE NET ASSET VALUE................... 12
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR YIELD INFORMATION................. 13
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE REPORTS TO SHAREHOLDERS........... 13
FUND OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY MANAGEMENT OF THE FUND............ 13
JURISDICTION TO ANY PERSON TO WHOM SUCH
OFFERING MAY NOT LAWFULLY BE MADE. GENERAL INFORMATION............... 16
</TABLE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
SHORT-TERM INVESTMENTS CO.
PRIME PORTFOLIO
(CASH MANAGEMENT CLASS)
(INSTITUTIONAL CLASS)
(PERSONAL INVESTMENT CLASS)
(PRIVATE INVESTMENT CLASS)
(RESOURCE CLASS)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF EACH
OF THE ABOVE-NAMED FUNDS, 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, 1996
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE PRIME
PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED DECEMBER 30, 1996,
INSTITUTIONAL CLASS PROSPECTUS DATED DECEMBER 30, 1996, PERSONAL INVESTMENT
CLASS PROSPECTUS DATED DECEMBER 30, 1996, PRIVATE INVESTMENT CLASS PROSPECTUS
DATED DECEMBER 30, 1996 AND RESOURCE CLASS PROSPECTUS DATED DECEMBER 30, 1996
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.................................................... 3
General Information about the Fund.............................. 3
The Fund and Its Shares....................................... 3
Directors and Officers........................................ 4
Remuneration of Directors..................................... 7
AIM Funds Retirement Plan for Eligible Directors/Trustees..... 8
Deferred Compensation Agreements.............................. 8
Investment Advisor............................................ 8
Administrator................................................. 10
Expenses...................................................... 10
Transfer Agent and Custodian.................................. 11
Reports....................................................... 11
Principal Holders of Securities............................... 12
Purchases and Redemptions....................................... 16
Net Asset Value Determination................................. 16
Distribution Agreement........................................ 16
Distribution Plan............................................. 16
Banking Regulations........................................... 17
Performance Information....................................... 17
Suspension of Redemption Rights............................... 18
Investment Program and Restrictions............................. 18
Investment Program............................................ 18
Eligible Securities........................................... 19
Commercial Paper Ratings...................................... 20
Bond Ratings.................................................. 20
Investment Restrictions....................................... 22
Portfolio Transactions.......................................... 23
Tax Matters..................................................... 24
Qualification as a Regulated Investment Company............... 24
Excise Tax On Regulated Investment Companies.................. 25
Portfolio Distributions....................................... 25
Sale or Redemption of Shares.................................. 26
Foreign Shareholders.......................................... 26
Effect of Future Legislation; Local Tax Considerations........ 27
Financial Statements............................................ FS
</TABLE>
2
<PAGE>
INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of Short-
Term Investments Co. (the "Fund"), a mutual fund. The rules and regulations of
the United States Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning
the activities of the fund being considered for investment. This information is
included in the Cash Management Class Prospectus dated December 30, 1996, the
Institutional Class Prospectus dated December 30, 1996, the Personal Investment
Class Prospectus dated December 30, 1996, the Private Investment Class
Prospectus dated December 30, 1996 and the Resource Class Prospectus dated
December 30, 1996 (each a "Prospectus"). Additional copies of each Prospectus
and 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 each class of the Portfolio.
Some of the information required to be in this Statement of Additional
Information is also included in each Prospectus; thus, in order to avoid
repetition, reference will be made to sections of the Prospectus. Additionally,
each Prospectus and this Statement of Additional Information omit certain
information contained in the registration statement filed with the SEC. Copies
of the registration statement, including items omitted from each Prospectus and
this Statement of Additional Information, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUND
THE FUND AND ITS SHARES
The Fund is an open-end, diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993. On October 15, 1993, the Portfolio succeeded to the assets and
assumed the liabilities of the Prime Portfolio (the "Predecessor Portfolio") of
Short-Term Investments Co., a Massachusetts business trust ("STIC"), pursuant
to an Agreement and Plan of Reorganization between the Fund and STIC. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to October 15, 1993 relating to the
Portfolio (or a class thereof) is that of the Predecessor Portfolio (or the
corresponding class thereof). Shares of common stock of the Fund are redeemable
at their net asset value at the option of the shareholder or at the option of
the Fund in certain circumstances. For information concerning the methods of
redemption and the rights of share ownership, investors should consult each
Prospectus under the captions "General Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in one
of two portfolios: the Portfolio and the Liquid Assets Portfolio (together, the
"Portfolios"). The Portfolio consists of the following five classes of shares:
Cash Management Class, Institutional Class, Personal Investment Class, Private
Investment Class and the Resource Class. The Liquid Assets Portfolio consists
of four classes of shares. Each class of shares has different shareholder
qualifications and bears expenses differently. This Statement of Additional
Information relates to each Class of the Portfolio. The classes of the Liquid
Assets Portfolio are offered pursuant to separate prospectuses and separate
statements of additional information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders
of more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
Shareholders of the Fund do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of the Fund voting
together for election of directors can elect all of the members of the Board of
Directors of the Fund. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.
The Board of Directors may classify or reclassify any unissued shares of any
class or classes in addition to those already authorized by setting or changing
in any one or more respects, from time to time, prior to the issuance of such
shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act").
3
<PAGE>
The Charter of the Fund authorizes the issuance of 50 billion shares with a
par value of $.001 each, of which 19 billion shares represent an interest in
the Liquid Assets Portfolio (or class thereof) and 22 billion shares represent
an interest in the Portfolio (or class thereof). A share of a Portfolio (or
class) represents an equal proportionate interest in such Portfolio (or class)
with each other share of that Portfolio (or class) and is entitled to a
proportionate interest in the dividends and distributions from that Portfolio
(or class). Additional information concerning the rights of share ownership is
set forth in the Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated to that
Portfolio, and constitute the underlying assets of that Portfolio. The
underlying assets of each of the Portfolios are segregated and are charged with
the expenses with respect to that Portfolio and with a share of the general
expenses of the Fund. While the expenses of the Fund are allocated to the
separate books of account of each of the Portfolios, certain expenses may be
legally chargeable against the assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be liable
to the Fund or its shareholders for money damages, except (i) to the extent
that it is proved that such director or officer actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received, or (ii) to the
extent that a judgment or other final adjudication adverse to such director or
officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. The foregoing shall not be construed to protect
or purport to protect any director or officer of the Fund against any liability
to the Fund or its shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
office. The Fund shall indemnify and advance expenses to its currently acting
and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Fund shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents of the Fund to the
fullest extent permitted by the Maryland General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. At such time as less than a majority of the directors
have been elected by the shareholders, the directors then in office will call a
shareholders' meeting for the election of directors. Upon written request by
ten or more shareholders who have been such for at least six months and who
hold shares constituting 1% of the outstanding shares, stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
director, the Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations during
the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
*CHARLES T. BAUER, Director and Chairman (77)
Director, 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.
- ------
* A director who is an "interested person" of A I M Advisors, Inc. and the Fund
as defined in the 1940 Act.
4
<PAGE>
BRUCE L. CROCKETT, Director (52)
906 Frome Lane
McLean, VA 22102
Formerly, Director, President and Chief Executive Officer, COMSAT
Corporation (includes COMSAT World Systems, COMSAT Mobile Communications,
COMSAT Video Enterprises, COMSAT RSI and COMSAT International Ventures),
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 (72)
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 (59)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis & 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 (50)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; and Director and Senior
Vice President, 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.
JOHN F. KROEGER, Director (72)
37 Pippins Way
Morristown, NJ 07960
Director, Flag Investors International Fund, Inc.; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Total Return U.S. Treasury
Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag
Investors Maryland Intermediate Tax-Free Income Fund, Inc., Flag Investors
Real Estate Securities Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and
North American Government Bond Fund, Inc. (investment companies). Formerly,
Consultant, Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (54)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (73)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management
services to telephone companies); Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone companies); and Vice President and
Chief Financial Officer, Bell Telephone Company of Pennsylvania and Diamond
State Telephone Company.
- ------
* A director who is an "interested person" of A I M Advisors, Inc. and the Fund
as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the 1940
Act.
5
<PAGE>
LOUIS S. SKLAR, Director (57)
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 (52)
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 (49)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc.;
and Director, A I M Distributors, Inc.
***CAROL F. RELIHAN, Senior Vice President and Secretary (42)
Senior Vice President, General Counsel and Secretary, A I M Advisors,
Inc.; Vice President, General Counsel and Secretary, A I M Management Group
Inc.; Vice President and General Counsel, Fund Management Company; and Vice
President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (37)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (53)
Vice President and Chief Compliance Officer, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services,
Inc., A I M Institutional Fund Services, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance
Officer, Charles Schwab Investment Management, Inc.; and Vice President,
Integrated Resources Life Insurance Co. and Capital Life Insurance Co.
KAREN DUNN KELLY, Vice President (36)
Senior Vice President, A I M Capital Management, Inc.; and Vice President,
A I M Advisors, Inc.
J. ABBOTT SPRAGUE, Vice President (41)
Director and President, A I M Institutional Fund Services, Inc. and Fund
Management Company; Director and Senior Vice President, A I M Advisors,
Inc.; and Senior Vice President, A I M Management Group Inc.
- ------
*** Mr. Arthur and Ms. Relihan are married to each other.
6
<PAGE>
The Board of Directors has an Audit Committee, an Investments Committee, and
a Nomination Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the directors
as a whole with respect to the Portfolio's fund accounting or its internal
accounting controls, or for considering such matters as may from time to time
be set forth in a charter adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating
individuals to stand for election as directors who are not interested persons
as long as the Fund maintains a distribution plan pursuant to Rule 12b-1 under
the 1940 Act, reviewing from time to time the compensation payable to the
disinterested directors, or considering such matters as may from time to time
be set forth in a charter adopted by the Board of Directors and such Committee.
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors,
Inc. ("AIM") or distributed and administered by FMC. Most of the Fund's
executive officers hold similar offices with some or all of such investment
companies.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board of Directors or any Committee attended. The directors of
the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM
Funds"). Each such director receives a fee, allocated among the AIM Funds for
which he serves as a director or trustee, which consists of an annual retainer
component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued during
the fiscal year ended August 31, 1996 for each director of the Fund:
<TABLE>
<CAPTION>
RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED BY ALL FROM ALL
DIRECTOR FROM FUND(1) AIM FUNDS(2) AIM FUNDS(3)
-------- -------------- -------------- --------------
<S> <C> <C> <C>
Charles T. Bauer................. -0- -0- -0-
Bruce L. Crockett................ $6,957 $ 3,655 $57,750
Owen Daly II..................... 8,110 18,662 58,125
Carl Frischling.................. 7,891 11,323 57,250(4)
Robert H. Graham................. -0- -0- -0-
John F. Kroeger.................. 7,600 22,313 58,125
Lewis F. Pennock................. 6,799 5,067 58,125
Ian W. Robinson.................. 6,986 15,381 56,750
Louis S. Sklar................... 7,971 6,632 57,250
</TABLE>
- ------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1996, including interest earned
thereon, was $28,784.
(2) During the fiscal year ended August 31, 1996, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $45,550.
Data reflects compensation earned for the calendar year ended December 31,
1995.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects total compensation for the calendar year ended
December 31, 1995.
(4) See also page 8 regarding fees earned by Mr. Frischling's law firm.
7
<PAGE>
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any
of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may
be entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the
first day of the calendar quarter coincident with or following his date of
retirement equal to 75% of the retainer paid or accrued by the AIM Funds for
such director during the twelve-month period immediately preceding the
trustee's retirement (including amounts deferred under a separate agreement
between the AIM Funds and the director for the number of such Director's years
of service (not in excess of 10 years of service) completed with respect to any
of the AIM Funds. Such benefit is payable to each eligible director in
quarterly installments. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences,
the director's surviving spouse (if any) shall receive a quarterly survivor's
benefit equal to 50% of the amount payable to the deceased director, for no
more than ten years beginning the first day of the calendar quarter following
the date of the director's death. Payments under the Plan are not secured or
funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service for Messrs.
Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar are 8, 9, 18,
18, 14, 8 and 6 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
ANNUAL COMPENSATION PAID BY
ALL AIM FUNDS
NUMBER OF YEARS OF SERVICE ---------------------------
WITH THE AIM FUNDS $55,000 $60,000 $65,000
-------------------------- ------- ------- -------
<S> <C> <C> <C>
10................. $41,250 $45,000 $48,750
9................. $37,125 $40,500 $43,875
8................. $33,000 $36,000 $39,000
7................. $28,875 $31,500 $34,125
6................. $24,750 $27,000 $29,250
5................. $20,625 $22,500 $24,375
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, and such amounts are placed into a deferral
account. Currently, the deferring directors may select various AIM Funds in
which all or part of their deferral account shall be deemed to be invested.
Distributions from the deferring directors' deferral accounts will be paid in
cash, in generally in equal quarterly installments over a period of five years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's Board of Directors, in its sole discretion, may
accelerate or extend the distribution of such deferral accounts after the
deferring director's termination of service as a director of the Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable
after such deferring director's death. The Agreements are not funded and, with
respect to the payments of amounts held in the deferral accounts, the deferring
directors have the status of unsecured creditors of the Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1996, $44,043 in directors' fees and
expenses were allocated to the Portfolio.
The Portfolio paid legal fees of $15,883 for the year ended August 31, 1996
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Directors. Carl Frischling, a director of the Fund, is a member of
that firm.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). A prior
8
<PAGE>
investment advisory agreement (the "Prior Advisory Agreement") with
substantially identical terms (including the fee schedules) to the Advisory
Agreement was previously in effect with respect to the Predecessor Portfolio.
AIM was organized in 1976 and, together with its affiliates, advises or
manages 41 investment company portfolios. As of December 9, 1996, the total
assets of the investment company portfolios managed or advised by AIM and its
affiliates were approximately $63.6 billion. AIM is a wholly-owned subsidiary
of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173. Certain of the directors and officers of AIM
are also executive officers of the Fund and their affiliations are shown under
"Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and(iii) transactions involving securities being considered for
investment by an AIM Fund. The Code also prohibits investment personnel from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Directors reviews annually
such reports (including information on any substantial violations of the Code).
Violations of the Code may result in censure, monetary penalties, suspension or
termination of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be
subject to the policies and control of the Fund's Board of Directors. AIM shall
not be liable to the Fund or its shareholders for any act or omission by AIM or
for any loss sustained by the Fund or its shareholders except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services, AIM receives a monthly fee which is
calculated by applying the following annual rates to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
NET ASSETS RATE
---------- ----
<S> <C>
First $100 million.............................................. .20%
Over $100 million to $200 million............................... .15%
Over $200 million to $300 million............................... .10%
Over $300 million to $1.5 billion............................... .06%
Over $1.5 billion............................................... .05%
</TABLE>
The Advisory Agreement requires AIM to reduce its fee to the extent required
to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered into a master administrative services agreement under
which AIM will provide the additional services described below under the
caption "Administrator."
For the fiscal years ended August 31, 1996, 1995 and 1994, AIM received fees
pursuant to the Advisory Agreement with respect to the Portfolio (and the
Predecessor Portfolio) in the amounts of $3,007,431, $2,567,762 and $2,599,662,
respectively.
The Advisory Agreement will continue in effect until June 30, 1997, and from
year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of a
majority of the directors who are not parties to the Advisory Agreement or
"interested persons" of any such party by votes cast in person at a meeting
called for such purpose. The Fund or AIM may terminate the Advisory Agreement
on 60 days' notice without penalty. The Advisory Agreement terminates
automatically in the event of its "assignment," as defined in the 1940 Act.
9
<PAGE>
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement, dated as of October 18, 1993 between AIM and
the Fund (the "Administrative Services Agreement").
Under the Administrative Services Agreement, AIM performs accounting and
other administrative services for the Portfolio. As full compensation for the
performance of such services, AIM is reimbursed for any personnel and other
costs (including applicable office space, facilities and equipment) of
furnishing the services of a principal financial officer of the Fund and of
persons working under his supervision for maintaining the financial accounts
and books and records of the Fund, including calculation of the Portfolio's
daily net asset value, and preparing tax returns and financial statements for
the Portfolio. The method of calculating such reimbursements must be annually
approved, and the amounts paid will be periodically reviewed, by the Fund's
Board of Directors.
A I M Institutional Fund Services, Inc. ("AIFS") receives fees with respect
to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the fiscal year ended
August 31, 1996 AIFS received transfer agency fees from AIM with respect to the
Portfolio in the amount $424,496.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for the
fiscal years ended August 31, 1996, 1995 and 1994 in the amounts of $126,321,
$154,963 and $106,109, respectively, for fund accounting services for the
Portfolio. For the period from August 31, 1994 through June 30, 1995 and for
the period from June 1, 1994 through August 31, 1994. AIFS or its affiliates
received shareholder services fees from AIM with respect to the Portfolio in
the amounts of $95,254 and $14,651, respectively.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM under
the Advisory Agreement the charges and expenses of any registrar, any custodian
or depositary appointed by the Fund for the safekeeping of cash, portfolio
securities and other property, and any transfer, dividend or accounting agent
or agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable
by the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and shares with the SEC and various
states and other jurisdictions (including filing and legal fees and
disbursements of counsel); the costs and expenses of printing, including
typesetting, and distributing prospectuses and statements of additional
information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and directors' meetings and of preparing, printing
and mailing of prospectuses, proxy statements and reports to shareholders; fees
and travel expenses of directors and director members of any advisory board or
committee; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's shares; charges and expenses
of legal counsel, including counsel to the directors of the Fund who are not
"interested persons" (as defined in the 1940 Act) of the Fund or AIM, and of
independent accountants in connection with any matter relating to the Fund,
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; and extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto). FMC bears the expenses of
printing and distributing prospectuses and statements of additional information
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund) and any other promotional or
sales literature used by FMC or furnished by FMC to purchasers or dealers in
connection with the public offering of the Fund's shares.
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund based upon
the relative net assets of each class. Expenses of the Fund except those listed
in the next sentence are prorated among all classes of such Portfolios based
upon the relative net assets of each such class. The expenses of
10
<PAGE>
the Portfolio are deducted from its total income before dividends are paid.
Distribution and service fees, transfer agency fees and shareholder
recordkeeping fees which are directly attributable to a specific class of
shares are charged against the income available for distribution as dividends
to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York ("BONY") acts as custodian for the portfolio securities
and cash of the Portfolio. BONY receives such compensation from the Fund for
its services in such capacity as is agreed to from time to time by BONY and the
Fund. The address of BONY is 90 Washington Street, 11th Floor, New York, New
York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of each class of the Portfolio and receives an annual fee
from the Fund for its services in such capacity in the amount of .009% of
average daily net assets of the Fund, payable monthly. Such compensation may be
changed from time to time as is agreed to by A I M Institutional Fund Services,
Inc. and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of December 1, 1996, and the percentage of the Portfolio's outstanding
shares owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(A)
---------------- --------------
CASH MANAGEMENT CLASS
---------------------
<S> <C>
MELLON BANK.................................................. 24.45%
Three Mellon Center Rm 3840
Pittsburgh, PA 15259-0001
OPPENHEIMER & CO., INC ...................................... 16.64%
Oppenheimer Tower
World Financial Center
New York, NY 10281
SOUTHWEST BANK OF TEXAS, N.A. ............................... 16.38%
4295 San Felipe
Houston, TX 77027
FUND SERVICES ASSOCIATES..................................... 15.68%
11835 West Olympic Blvd
Suite 205
Los Angeles, CA 90064
<CAPTION>
INSTITUTIONAL CLASS
-------------------
<S> <C>
U.S. BANK OF OREGON.......................................... 12.47%
Trust Operations
321 Southwest Sixth
Portland, OR 97208
COMERICA BANK................................................ 12.25%
PO Box 75000
Detroit, MI 48275-3455
NATIONSBANK TEXAS............................................ 8.29%
1401 Elm Street 11th Floor
PO Box 831000
Dallas, TX 75283-1000
BOATMAN'S TRUST COMPANY...................................... 7.03%
100 North Broadway
Attn: Fund Accounting LBT0785
St. Louis, MO 63101
FROST NATIONAL BANK.......................................... 5.77%
PO Box 1600
Attn: Trust Securities (T - 8)
San Antonio, TX 78296
LIBERTY REGISTRATION CO. OF OKLAHOMA CITY.................... 5.66%
Trust Security Processing Dept.
P.O. Box 25848
Oklahoma City, OK 73125
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(A)
---------------- --------------
INSTITUTIONAL CLASS
-------------------
<S> <C>
TEXAS COMMERCE BANK........................................ 5.40%
PO Box 2558
16 HCB-98
Houston, TX 77252-8098
CITICORP, N.A. ............................................ 5.23%
400 Royal Palm Way
3rd Floor
Palm Beach, FL 33480
<CAPTION>
PERSONAL INVESTMENT CLASS
-------------------------
<S> <C>
BANK OF NEW YORK........................................... 60.84%(b)
440 Mamaroneck Avenue
Harrison, NY 10528
CULLEN/FROST DISCOUNT BROKERS.............................. 23.18%
P.O. Box 2358
San Antonio, TX 78299
MARK TWAIN CAPITAL MARKETS GROUP........................... 12.30%
1630 S. Lindbergh Blvd
St. Louis, MO 63131
</TABLE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(A)
---------------- --------------
PRIVATE INVESTMENT CLASS
------------------------
<S> <C>
HUNTINGTON CAPITAL CORP .................................. 62.76%(b)
41 S High St.
9th Floor
Columbus, OH 43287
FIRST TRUST/VAR & CO ..................................... 10.97%
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
FROST NATIONAL BANK....................................... 9.10%
PO Box 1600
Attn: Trust Securities (T - 8)
San Antonio, TX 78296
CULLEN/FROST DISCOUNT BROKERS............................. 6.06%
100 W. Houston St
San Antonio, TX 78205
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(A)
---------------- --------------
RESOURCE CLASS
--------------
<S> <C>
MELLON BANK................................................ 18.06%
Three Mellon Center Rm 3840
Pittsburgh, PA 15259-0001
CORESTATES CAPITAL MARKETS................................. 16.66%
1345 Chestnut St
FC 1-1-9-49
Philadelphia, PA 19101
HUNTINGTON CAPITAL CORP ................................... 16.53%
41 S High St
Ninth Floor
Columbus, OH 43287
TULSA & CO. ............................................... 5.09%
P.O. Box 3688
Tulsa, OK 74101-3688
</TABLE>
- ------
(a) 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.
(b) A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of December 1, 1996, and the percentage of the Liquid
Assets Portfolio's outstanding shares owned by such shareholders as of such
date are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(A)
---------------- --------------
CASH MANAGEMENT CLASS
---------------------
<S> <C>
OPPENHEIMER & CO. ......................................... 31.63%(b)
Oppenheimer Tower
World Financial Center
New York, NY 10281
INTELLON CORPORATION....................................... 7.79%
5100 West Silver Springs Blvd.
Ocala, FL 34482
HIGHLINE FINANCIAL SERVICES................................ 6.45%
Canyon Center Rd.
Suite 300
1881 9th St.
Boulder, CO 80302
FUND SERVICES ASSOCIATES................................... 49.49%(b)
11835 West Olympic Blvd.
Suite 205
Los Angeles, CA 90064
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(A)
---------------- --------------
INSTITUTIONAL CLASS
-------------------
<S> <C>
WACHOVIA BANK AND TRUST.................................... 16.54%
P.O. Box 3075
Winston-Salem, NC 27150
TRUST COMPANY BANK......................................... 14.80%
P.O. Box 105504
Atlanta, GA 30348
BZW BARCLAYS GLOBAL INVESTORS.............................. 6.08%
980 9th St. Suite 600
Sacramento, CA 95814
TEACHER'S RETIREMENT C/O BOSTON GLOBAL..................... 5.73%
50 Rowos Whart
Boston, MA 20110
NATIONSBANK................................................ 5.55%
1401 Elm St. 11th Floor
P.O. Box 831000
Dallas, TX 75283-1000
NORWEST BANK............................................... 5.01%
733 Marquette Avenue
Minneapolis, MN 55479-0052
<CAPTION>
PRIVATE INVESTMENT CLASS
------------------------
<S> <C>
MELLON BANK................................................ 98.14%(b)
P.O. Box 710
Pittsburgh, PA 15230-0710
<CAPTION>
MSTC CASH RESERVES CLASS
------------------------
<S> <C>
AIM ADVISORS............................................... 100%(b)
11 Greenway Plaza
Suite 1919
Houston, TX 77046
</TABLE>
- ------
(a) 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.
(b) A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
To the best of the knowledge of the Fund, as of December 1, 1996, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
15
<PAGE>
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Portfolio are sold at net asset value. Shareholders may at any
time redeem all or a portion of their shares at net asset value. The investor's
price for purchases and redemptions will be the net asset value next determined
following the receipt of an order to purchase or a request to redeem shares.
The valuation of the portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Portfolio is permitted in accordance with applicable rules and regulations
of the SEC, including Rule 2a-7 under the 1940 Act, which require the Portfolio
to adhere to certain conditions. These rules require that the Portfolio
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 397 calendar days or
less and invest only in securities determined by the Board of Directors to be
"Eligible Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Portfolio's price per
share at $1.00 as computed for the purpose of sales and redemptions. Such
procedures include review of the Portfolio's holdings by the Board of
Directors, at such intervals as they may deem appropriate, to determine whether
the net asset value calculated by using available market quotations or other
reputable sources for the Portfolio deviates from $1.00 per share and, if so,
whether such deviation may result in material dilution or is otherwise unfair
to existing holders of the Portfolio's shares. In the event the Board of
Directors determines that such a deviation exists, it will take such corrective
action as the Board of Directors deems necessary and appropriate, including the
sales of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity; the withholding of
dividends; redemption of shares in kind; or the establishment of a net asset
value per share by using available market quotations.
DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of each class of the Portfolio. The address of FMC is 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046-1173. See "General Information about
the Fund--Directors and Officers" and "General Information about the Fund --
Investment Advisor" for information as to the affiliation of certain directors
and officers of the Fund with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right to
distribute the shares of each class of the Portfolio either directly or through
other broker-dealers. The Distribution Agreement also provides that FMC will
pay promotional expenses, including the incremental costs of printing
prospectuses and statements of additional information, annual reports and other
periodic reports for distribution to persons who are not shareholders of the
Portfolio and the costs of preparing and distributing any other supplemental
sales literature. FMC has not undertaken to sell any specified number of shares
of the Portfolio.
The Distribution Agreement will continue in effect until June 30, 1997, and
from year to year thereafter, provided that it is specifically approved at
least annually by the Fund's Board of Directors and the affirmative vote of the
directors who are not parties to the Distribution Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or FMC may terminate the Distribution Agreement on 60 days'
written notice without penalty. The Distribution Agreement will terminate
automatically in the event of its "assignment," as defined in the 1940 Act.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. Pursuant to the Plan, the Fund may enter into
Shareholder Service Agreements ("Service Agreements") with selected broker-
dealers, banks, other financial institutions or their affiliates. Such firms
may receive compensation from the Portfolio for servicing investors as
beneficial owners of the shares of the Private Investment Class, Personal
Investment Class, Resource Class and Cash Management Class of the Portfolio.
These services may include among other things: (i) answering customer inquiries
regarding the shares of the Class and the Portfolio; (ii) assisting customers
in changing dividend options, account designations and addresses;
16
<PAGE>
(iii) performing sub-accounting; (iv) establishing and maintaining shareholder
accounts and records; (v) processing purchase and redemption transactions; (vi)
automatic investment in shares of the Class of customer cash accounting
balances; (vii) providing periodic statements showing a customer's account
balance and integrating such statements with those of other transactions and
balances in the customer's other accounts serviced by such firm; (viii)
arranging for bank wires; and (ix) such other services as the Fund may request
on behalf of the shares of the Class, to the extent such firms are permitted to
engage in such services by applicable statute, rule or regulation. The Plan may
only be used for the purposes specified above and as stated in the Plan.
Expenses may not be carried over from year to year.
For the fiscal year ended August 31, 1996, FMC received compensation pursuant
to the Plan in the amount of $575,588, or an amount equal to 0.30% of the
average net daily assets of the Private Investment Class, $556,024 or an amount
equal to 0.50% of the average net daily assets of the Personal Investment
Class, $96,991, or an amount equal to 0.16% of the average net daily assets of
the Resource Class, and $242,476, or an amount equal to 0.08% of the average
net daily assets of the Cash Management Class. With respect to the Private
Investment Class, $493,954 of such amount (or an amount equal to 0.26% of the
average daily net assets of the class) was paid to dealers and financial
institutions and $81,634 (or an amount equal to 0.04% of the average daily net
assets of the class) was retained by FMC. With respect to the Personal
Investment Class, $435,689 of such amount (or an amount equal to 0.39% of the
average daily net assets of the class) was paid to dealers and financial
institutions and $120,335 (or an amount equal to 0.11% of the average daily net
assets) was retained by FMC. With respect to the Resource Class, $96,991 of
such amount (or an amount equal to 0.16% of the average daily net assets of the
class) was paid to dealers and financial institutions and $0 (or an amount
equal to 0% of the average daily net assets of the class) was retained by FMC.
With respect to the Cash Management Class, $235,519 of such amount (or an
amount equal to 0.08% of the average daily net assets of the class) was paid to
dealers and financial institutions and $6,957 (or an amount equal to 0.00% of
the average daily net assets of the class) was retained by FMC.
FMC is a wholly-owned subsidiary of AIM which is a wholly-owned subsidiary of
AIM Management. Charles T. Bauer, a Director and Chairman of the Fund and
Robert H. Graham, a Director and President of the Fund, own shares of AIM
Management.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations, among other
things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers
and to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well
as changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, shareholder clients of
such bank would be permitted to remain shareholders of the Fund and alternate
means for continuing the servicing of such shareholders would be sought. In
such event, changes in the operation of the Fund might occur and shareholders
serviced by such bank might no longer be able to avail themselves of any
automatic investment or other services then being provided by such bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and certain banks and financial institutions may be required to register as
dealers pursuant to state law.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus, yield
information for the shares of the Class may be obtained by calling the Fund at
(800) 659-1005. The current yield quoted will be the net average annualized
yield for an identified period, such as seven days or a month. Current yield
will be computed by assuming that an account was established with a single
share (the "Single Share Account") on the first day of the period. To arrive at
the quoted yield, the net change in the value of that Single Share Account for
the period (which would include dividends accrued with respect to the share,
and dividends declared on shares purchased with dividends accrued and paid, if
any, but would not include realized gains and losses or unrealized appreciation
or depreciation) will be multiplied by 365 and then divided by the number of
days in the period, with the resulting figure carried to the nearest hundredth
of one percent. The Fund may also furnish a quotation of effective yield for
the Class that assumes the reinvestment of dividends for a 365-day year and a
return for the entire year equal
17
<PAGE>
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, 1996, 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) were 5.33% and 5.47%, for the Institutional Class, were 5.25% and
5.39%, for the Cash Management Class, were 4.83% and 4.95%, for the Personal
Investment Class, were 5.03% and 5.16%, for the Private Investment Class and
were 5.17% and 5.31%, for the Resource Class, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
The Fund may compare the performance of a class or the performance of
securities in which the Portfolio may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of various
types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money Fund
Report--Registered Trademark--of Holliston, Massachusetts or by Lipper
Analytical Services, Inc., a widely recognized independent service located in
Summit, New Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate,
a financial information network, or by Bloomberg, a financial information
firm; and
. other fixed-income investments such as Certificates of Deposit ("CDs").
The principal value and interest rate of CDs and money market securities are
fixed at the time of purchase whereas a class's yield will fluctuate. Unlike
some CDs and certain other money market securities, money market mutual funds
are not insured by the FDIC. Investors should give consideration to the quality
and maturity of the portfolio securities of the respective investment companies
when comparing investment alternatives.
The Fund may reference the growth and variety of money market mutual funds
and AIM's innovation and participation in the industry.
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of London branches of domestic banks
having total assets of $1.5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of United Kingdom withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than 5% of its total assets in securities issued by a single
issuer, provided that such a fund may invest more than 5% of its total assets
in the First Tier securities of a
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single issuer for a period of up to 3 business days after the purchase thereof
if the money market fund is a diversified investment company, provided further,
that the fund may not make more than one investment in accordance with the
foregoing proviso at any time. Under Rule 2a-7, for purposes of determining the
percentage of a fund's total assets that are invested in securities of an
issuer, a repurchase agreement shall be deemed to be an acquisition of the
underlying securities, provided that the obligation of the seller to repurchase
the securities from the money market fund is fully collateralized. To be fully
collateralized, the collateral must, among other things, consist entirely of
U.S. Government securities or securities that, at the time the repurchase
agreement is entered into, are rated in the highest rating category by
Requisite NRSROs.(1)
The Portfolio may also lend its portfolio securities in amounts up to 33-1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to borrowers deemed by AIM to be of good standing and only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
Rule 2a-7 under the 1940 Act, which governs the operations of money market
funds, defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 calendar days or less that
has received a short-term rating (or that has been issued by an issuer that
is rated with respect to a class of short-term debt obligations, or any debt
obligation within that class, that is comparable in priority and security with
the security) by the Requisite NRSROs in one of the two highest rating
categories for short-term debt obligations (within which there may be
subcategories or gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance had a remaining maturity of more than
397 calendar days 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 debt obligations (or any debt obligation within
that class) that is now comparable in priority and security with the
security, in one of the two highest rating categories (within which there
may be sub-categories or gradations indicating relative standing); or
(iii) an Unrated Security that is of comparable quality to a security
meeting the requirements of paragraphs (a)(9)(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 that is not a Demand Feature 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 had a remaining maturity of
more than 397 calendar days 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 received a long-term rating from any NRSRO
that is not within the NRSRO's three highest long-term rating categories
(within which there may be sub-categories or gradations indicating
relative standing).
- ------
(1) "Requisite/NRSRO" means (a) any two nationally recognized statistical rating
organizations that have issued a rating with respect to a security or class
of debt obligations of an issuer, or (b) if only one NRSRO has issued a
rating with respect to such security or class of debt obligations of an
issuer at the time the fund purchases or rolls over the 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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COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the commercial paper
ratings of Moody's, S&P and Fitch Investors Service, Inc. ("Fitch").
MOODY'S--The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is rated
P-1, P-2 or P-3.
S&P--Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality
of management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or A-
3.
FITCH--Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. The short-term rating places greater emphasis than a long-
term rating on the existence of liquidity necessary to meet the issuer's
obligations in a timely manner. Fitch short-term ratings are as follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are regarded
as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings of
Moody's, S&P and Fitch.
MOODY'S--The following are the two highest bond ratings of Moody's.
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Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P--The following are the two highest bond ratings of S&P.
AAA
Bonds rated AAA are the highest grade obligations. They possess the ultimate
degree of protection as to principal and interest. Market values of bonds rated
AAA move with interest rates, and hence provide the maximum safety on all
counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
FITCH--Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guarantees unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
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AA
Bonds rated AA are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of the holders of a majority of the outstanding shares of the
Portfolio (as that term is defined under "General Information about the Fund--
The Fund and its Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as amended from time to time;
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests),
the Portfolio may borrow money from banks or obtain funds by entering into
reverse repurchase agreements, and (b) to the extent that entering into
commitments to purchase securities in accordance with the Portfolio's
investment program may be considered the issuance of senior securities,
provided that the Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure permitted
borrowings and except for reverse repurchase agreements and then only in an
amount up to 33-1/3% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement;
(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.
On December 11, 1996, the Board of Directors of the Fund approved, subject to
shareholder approval, the elimination of and changes to certain fundamental
investment policies of the Portfolio. Shareholders of the Portfolio will be
asked to approve these changes at an annual meeting of shareholders to be held
on February 7, 1997. If approved, these changes will become effective as of
March 1, 1997.
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Reference is made to Investment Restriction Nos.(2) and (10) of the
Portfolio, set forth above. The Board of Directors has approved the elimination
of Investment Restriction No. (10) and a change to Investment Restriction No.
(2) of the Portfolio. In the event shareholders approve the proposed changes,
Investment Restriction No. (10) will no longer apply and Investment Restriction
No. (2) will read in full as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
The following investment policy is not fundamental 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.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
The Portfolio does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The investment policy of the Portfolio requires that investments
mature within 60 days or less. Thus, there is likely to be relatively high
portfolio turnover, but since brokerage commissions are not normally paid on
money market instruments, the high rate of portfolio turnover is not expected
to have a material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the execution and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with clients other than the
Portfolio. Similarly, any research services received by AIM through placement
of portfolio transactions of other clients may be of value to AIM in fulfilling
its obligations to the Portfolio. AIM is of the opinion that the material
received is beneficial in supplementing AIM's research and analysis; and
therefore, it may benefit the Portfolio by improving the quality of AIM's
investment advice. The advisory fees paid by the Portfolio are not reduced
because AIM receives such services.
From time to time, the Fund may sell a security to, or purchase a security
from, an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital"), when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by AIM or AIM
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have
been adopted by the Board of Directors/Trustees of the various AIM Funds,
including the Fund. Although such transactions may result in custodian, tax or
other related expenses, no brokerage commissions or other direct transaction
costs are generated by transactions among the investment accounts advised by
AIM or AIM Capital.
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<PAGE>
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such
investment accounts. However, the position of each account in the securities of
the same issue may vary and the length of time that each account may choose to
hold its investment in the securities of the same issue may likewise vary. The
timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts and is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchases
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolios as a principal in any purchase or sale of
securities unless an exemptive order allowing such transactions is obtained
from the SEC. Furthermore, the 1940 Act prohibits the Fund from purchasing a
security being publicly underwritten by a syndicate of which persons affiliated
with the Fund are members except in accordance with certain conditions. These
conditions may restrict the ability of the Portfolio to purchase money market
obligations being publicly underwritten by such a syndicate, and the Portfolio
may be required to wait until the syndicate has been terminated before buying
such securities. At such time, the market price of the securities may be higher
or lower than the original offering price. A person affiliated with the Fund
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligations and be paid a fee by such issuer. The
Portfolio may purchase such money market obligations directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and such purchase is reviewed at least quarterly by
the Fund's Board of Directors and a determination is made that all such
purchases were effected in compliance with such procedures, including a
determination that the placement fee or other remuneration paid by the issuer
to the person affiliated with the Fund was fair and reasonable in relation to
the fees charged by other persons, performing similar services. During the
fiscal year ended August 31, 1996, no securities or instruments were purchased
by the Portfolio from issuers who paid placement fees or other compensation to
a broker affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolio or its shareholders, and the discussion here and
in the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As
a regulated investment company, the Portfolio is not subject to federal income
tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess
of net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Portfolio made
during the taxable year or, under specified circumstances, within twelve months
after the close of the taxable year, will be considered distributions of income
and gains for the taxable year and can therefore satisfy the Distribution
Requirement.
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In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities)
and other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts,
will not be characterized as Short-Short Gains if they are directly related to
the regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition
of a loss before the expiration of the three-month holding period is
disregarded. Interest (including original issue discount) received by a fund at
maturity or upon the disposition of a security held for less than three months
will not be treated as gross income derived from the sale or other disposition
of a security within the meaning of the Short-Short Gain Test. However, income
that is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
In addition to satisfying the requirements described above, a regulated
investment company must satisfy an asset diversification test in order to
qualify for tax purposes as a regulated investment company. Under this test, at
the close of each quarter of a fund's taxable year, at least 50% of the value
of a fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a fund has not invested more than 5% of the value
of a fund's total assets in securities of such issuer and as to which a fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any other issuer (other than U.S. Government securities
and securities of other regulated investment companies), or in two or more
issuers which a fund controls and which are engaged in the same or similar
trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year). The balance of such income
must be distributed during the next calendar year. For the foregoing purposes,
a regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
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.
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Distributions by the Portfolio will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the Portfolio
into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Portfolio) on December
31 of such calendar year if such dividends are actually paid in January of the
following year.
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."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of shares
of a class in an amount equal to the difference between the proceeds of the
sale or redemption and the shareholder's adjusted tax basis in the shares. All
or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the class within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a class will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on
by such shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and
distributions (other than capital gains dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the dividend or distribution. Such a foreign shareholder would generally be
exempt from U.S. federal income tax on gains realized on the sale of shares of
a class, capital gain dividends and amounts retained by the Portfolio that are
designated as undistributed capital gains.
If the income from the Portfolio is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends and any gains realized upon the sale of
shares of the Portfolio will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Portfolio may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax unless such shareholders furnish
the Portfolio with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Portfolio,
including the applicability of foreign taxes.
26
<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
December 30, 1996. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting investment in the Fund.
27
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
PRIME PORTFOLIO
CASH MANAGEMENT CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 83.45%(a)
BASIC INDUSTRY - 0.32%
PAPER & FOREST PRODUCTS - 0.32%
Weyerhaeuser Co.
5.29% 10/01/96 $ 20,000 $ 19,911,833
- ------------------------------------------------------------------------
Total Basic Industry 19,911,833
- ------------------------------------------------------------------------
BUSINESS SERVICES - 5.14%
POLLUTION CONTROL SERVICES - 2.42%
Browning-Ferris Industries, Inc.
5.30% 09/16/96 20,000 19,955,834
- ------------------------------------------------------------------------
5.31% 10/11/96 35,000 34,793,500
- ------------------------------------------------------------------------
5.31% 10/15/96 35,000 34,772,850
- ------------------------------------------------------------------------
5.30% 10/16/96 60,000 59,602,500
- ------------------------------------------------------------------------
149,124,684
- ------------------------------------------------------------------------
MISCELLANEOUS - 2.72%
Donnelley (R.R.) & Sons Co.
5.30% 09/17/96 17,850 17,807,954
- ------------------------------------------------------------------------
PHH Corp.
5.28% 09/04/96 20,000 19,991,200
- ------------------------------------------------------------------------
5.28% 09/25/96 50,000 49,824,000
- ------------------------------------------------------------------------
5.28% 10/04/96 30,000 29,854,800
- ------------------------------------------------------------------------
5.26% 10/22/96 50,000 49,627,417
- ------------------------------------------------------------------------
167,105,371
- ------------------------------------------------------------------------
Total Business Services 316,230,055
- ------------------------------------------------------------------------
CAPITAL GOODS - 2.21%
AEROSPACE/DEFENSE - 0.32%
Raytheon Co.
5.32% 09/18/96 20,000 19,949,756
- ------------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT - 1.89%
Electronic Data Systems Corp.
5.29% 10/15/96 20,000 19,870,689
- ------------------------------------------------------------------------
International Business Machines Corp.
5.30% 09/10/96 30,000 29,960,250
- ------------------------------------------------------------------------
Xerox Corp.
5.29% 09/19/96 30,000 29,920,650
- ------------------------------------------------------------------------
5.30% 10/02/96 36,537 36,370,249
- ------------------------------------------------------------------------
116,121,838
- ------------------------------------------------------------------------
Total Capital Goods 136,071,594
- ------------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 4.45%
AUTOMOBILE - 4.29%
Ford Motor Credit Co.
5.37% 09/17/96 $ 50,000 $ 49,880,667
- -------------------------------------------------------------------
5.28% 10/25/96 40,000 39,683,200
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.40% 09/05/96 40,000 39,976,000
- -------------------------------------------------------------------
5.40% 09/11/96 40,000 39,940,000
- -------------------------------------------------------------------
5.30% 09/25/96 20,000 19,929,333
- -------------------------------------------------------------------
5.29% 10/07/96 25,000 24,867,750
- -------------------------------------------------------------------
5.24% 10/08/96 25,000 24,865,361
- -------------------------------------------------------------------
5.295% 10/18/96 25,000 24,827,177
- -------------------------------------------------------------------
263,969,488
- -------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION - 0.16%
Weyerhaeuser Real Estate Co.
5.28% 10/04/96 9,800 9,752,568
- -------------------------------------------------------------------
Total Consumer Durables 273,722,056
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 6.44%
BEVERAGES - 0.40%
Coca-Cola Co. (The)
5.23% 10/16/96 25,000 24,836,562
- -------------------------------------------------------------------
DRUGS - 1.70%
Pfizer Inc.
5.27% 09/23/96 10,056 10,023,614
- -------------------------------------------------------------------
5.25% 09/24/96 50,000 49,832,292
- -------------------------------------------------------------------
5.25% 10/03/96 45,000 44,790,000
- -------------------------------------------------------------------
104,645,906
- -------------------------------------------------------------------
FOOD PROCESSING - 2.45%
Heinz (H.J.) Co.
5.29% 09/05/96 10,200 10,194,005
- -------------------------------------------------------------------
5.28% 09/09/96 11,000 10,987,093
- -------------------------------------------------------------------
5.28% 09/24/96 9,278 9,246,702
- -------------------------------------------------------------------
5.28% 10/02/96 29,000 28,868,147
- -------------------------------------------------------------------
5.25% 10/07/96 20,000 19,895,000
- -------------------------------------------------------------------
5.25% 10/08/96 25,000 24,865,104
- -------------------------------------------------------------------
5.27% 10/11/96 12,000 11,929,733
- -------------------------------------------------------------------
5.28% 10/15/96 15,000 14,903,200
- -------------------------------------------------------------------
Nestle Capital Co.
5.24% 09/24/96 20,000 19,933,044
- -------------------------------------------------------------------
150,822,028
- -------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER NONDURABLES - (continued)
HOUSEHOLD PRODUCTS - 1.32%
Colgate-Palmolive Co.
5.37% 09/04/96 $ 41,000 $ 40,981,652
- -------------------------------------------------------------------------
5.27% 09/27/96 40,000 39,847,756
- -------------------------------------------------------------------------
80,829,408
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.57%
Unilever Capital Co.
5.22% 09/17/96 35,000 34,918,800
- -------------------------------------------------------------------------
Total Consumer Nondurables 396,052,704
- -------------------------------------------------------------------------
ENERGY - 3.93%
OIL & GAS - 3.93%
Koch Industries Inc.
5.36% 09/17/96 13,587 13,554,633
- -------------------------------------------------------------------------
Mobil Australia Finance Co., Inc.
5.41% 09/13/96 78,818 78,675,865
- -------------------------------------------------------------------------
Petrofina Delaware, Inc.
5.29% 09/03/96 25,000 24,992,653
- -------------------------------------------------------------------------
5.38% 09/12/96 25,000 24,958,903
- -------------------------------------------------------------------------
Shell Oil Co.
5.35% 09/03/96 50,000 49,985,139
- -------------------------------------------------------------------------
5.25% 10/16/96 50,000 49,671,875
- -------------------------------------------------------------------------
Total Energy 241,839,068
- -------------------------------------------------------------------------
FINANCIAL - 56.00%
ASSET-BACKED SECURITIES - 25.28%
Asset Securitization Cooperative Corp.
5.45% 09/03/96 70,000 69,978,805
- -------------------------------------------------------------------------
5.40% 09/12/96 50,000 49,917,500
- -------------------------------------------------------------------------
5.38% 09/18/96 40,000 39,898,378
- -------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -------------------------------------------------------------------------
5.28% 10/03/96 30,000 29,859,200
- -------------------------------------------------------------------------
5.29% 10/03/96 26,000 25,877,742
- -------------------------------------------------------------------------
5.26% 10/17/96 25,000 24,831,972
- -------------------------------------------------------------------------
5.26% 10/18/96 50,000 49,656,639
- -------------------------------------------------------------------------
Ciesco, L.P.
5.44% 09/04/96 47,300 47,278,558
- -------------------------------------------------------------------------
5.42% 09/05/96 60,000 59,963,867
- -------------------------------------------------------------------------
5.30% 09/09/96 40,000 39,952,889
- -------------------------------------------------------------------------
5.33% 09/10/96 10,000 9,986,675
- -------------------------------------------------------------------------
5.35% 09/18/96 25,000 24,936,840
- -------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Clipper Receivables Corp.
5.30% 09/11/96 $ 50,000 $ 49,926,389
- ------------------------------------------------------------------------
5.31% 09/16/96 15,075 15,041,647
- ------------------------------------------------------------------------
5.32% 09/19/96 50,000 49,867,000
- ------------------------------------------------------------------------
5.30% 09/24/96 50,000 49,830,694
- ------------------------------------------------------------------------
5.30% 09/25/96 55,000 54,805,667
- ------------------------------------------------------------------------
5.28% 09/26/96 83,414 83,108,149
- ------------------------------------------------------------------------
5.27% 10/01/96 30,000 29,868,250
- ------------------------------------------------------------------------
5.28% 10/01/96 20,000 19,912,000
- ------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.29% 10/07/96 50,000 49,735,500
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.28% 09/10/96 30,355 30,314,931
- ------------------------------------------------------------------------
5.31% 09/18/96 68,000 67,829,490
- ------------------------------------------------------------------------
5.28% 09/20/96 30,000 29,916,400
- ------------------------------------------------------------------------
5.30% 10/04/96 50,269 50,024,776
- ------------------------------------------------------------------------
5.30% 10/08/96 40,000 39,782,111
- ------------------------------------------------------------------------
5.30% 10/11/96 16,704 16,605,632
- ------------------------------------------------------------------------
5.31% 10/17/96 35,000 34,762,525
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.30% 09/10/96 41,151 41,096,475
- ------------------------------------------------------------------------
5.28% 09/11/96 13,745 13,724,841
- ------------------------------------------------------------------------
5.35% 09/20/96 35,000 34,901,174
- ------------------------------------------------------------------------
5.28% 10/08/96 20,000 19,891,467
- ------------------------------------------------------------------------
5.28% 10/21/96 50,000 49,633,333
- ------------------------------------------------------------------------
5.28% 10/22/96 45,000 44,663,400
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.30% 09/27/96 67,325 67,067,295
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.34% 09/20/96 10,654 10,623,973
- ------------------------------------------------------------------------
5.36% 09/20/96 50,000 49,858,555
- ------------------------------------------------------------------------
5.35% 09/23/96 15,256 15,206,121
- ------------------------------------------------------------------------
5.28% 10/03/96 17,529 17,446,731
- ------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.45% 09/05/96 22,500 22,486,375
- ------------------------------------------------------------------------
1,554,959,549
- ------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
BROKERAGE/INVESTMENTS - 11.10%
Bear, Stearns & Co. Inc.
5.45% 09/06/96 $ 50,000 $ 49,962,153
- -------------------------------------------------------------------------------
5.31% 10/09/96 50,000 49,719,750
- -------------------------------------------------------------------------------
First Boston Corp. (The)
5.32% 10/07/96 50,000 49,734,000
- -------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.30% 09/03/96 75,000 74,977,917
- -------------------------------------------------------------------------------
Merrill Lynch & Co. Inc.
5.45% 09/06/96 100,000 99,924,305
- -------------------------------------------------------------------------------
5.46% 09/06/96 50,000 49,962,083
- -------------------------------------------------------------------------------
5.30% 10/11/96 30,000 29,823,333
- -------------------------------------------------------------------------------
5.30% 10/15/96 25,000 24,838,056
- -------------------------------------------------------------------------------
5.30% 10/17/96 40,000 39,729,111
- -------------------------------------------------------------------------------
5.28% 10/18/96 50,000 49,655,333
- -------------------------------------------------------------------------------
Morgan Stanley Group, Inc.
5.30% 10/18/96 40,000 39,723,222
- -------------------------------------------------------------------------------
Smith Barney Inc.
5.33% 09/09/96 50,000 49,940,778
- -------------------------------------------------------------------------------
5.38% 09/19/96 50,000 49,865,500
- -------------------------------------------------------------------------------
5.31% 10/08/96 25,000 24,863,563
- -------------------------------------------------------------------------------
682,719,104
- -------------------------------------------------------------------------------
BUSINESS CREDIT - 2.88%
CIT Group Holdings, Inc.
5.40% 09/13/96 50,000 49,910,000
- -------------------------------------------------------------------------------
5.30% 10/03/96 30,000 29,858,667
- -------------------------------------------------------------------------------
5.29% 10/11/96 30,000 29,823,667
- -------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.30% 10/03/96 20,000 19,905,778
- -------------------------------------------------------------------------------
5.30% 10/04/96 18,300 18,211,093
- -------------------------------------------------------------------------------
5.29% 10/18/96 10,000 9,930,936
- -------------------------------------------------------------------------------
5.28% 10/25/96 20,000 19,841,600
- -------------------------------------------------------------------------------
177,481,741
- -------------------------------------------------------------------------------
INSURANCE - 2.27%
A.I. Credit Corp.
5.23% 09/26/96 30,000 29,891,042
- -------------------------------------------------------------------------------
5.30% 10/07/96 15,000 14,920,500
- -------------------------------------------------------------------------------
Prudential Funding Corp.
5.38% 09/17/96 50,000 49,880,444
- -------------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -------------------------------------------------------------------------------
5.33% 10/29/96 20,000 19,828,256
- -------------------------------------------------------------------------------
139,388,242
- -------------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - 7.49%
Associates Corp. of North America
5.40% 09/23/96 $ 50,000 $ 49,835,000
- --------------------------------------------------------------------
AVCO Financial Services, Inc.
5.30% 10/11/96 35,000 34,793,889
- --------------------------------------------------------------------
Student Loan Corp.
5.30% 10/23/96 25,000 24,808,611
- --------------------------------------------------------------------
5.29% 10/25/96 50,000 49,603,250
- --------------------------------------------------------------------
Transamerica Finance Corp.
5.37% 09/09/96 33,200 33,160,381
- --------------------------------------------------------------------
5.36% 09/19/96 20,000 19,946,400
- --------------------------------------------------------------------
5.35% 09/20/96 10,000 9,971,764
- --------------------------------------------------------------------
5.29% 09/23/96 29,000 28,906,249
- --------------------------------------------------------------------
5.30% 10/02/96 24,000 23,890,467
- --------------------------------------------------------------------
5.30% 10/09/96 10,000 9,944,056
- --------------------------------------------------------------------
5.29% 10/17/96 24,000 23,837,773
- --------------------------------------------------------------------
5.27% 10/18/96 30,000 29,793,592
- --------------------------------------------------------------------
5.26% 10/21/96 75,000 74,452,083
- --------------------------------------------------------------------
5.27% 10/21/96 23,500 23,327,993
- --------------------------------------------------------------------
5.26% 10/22/96 25,000 24,813,708
- --------------------------------------------------------------------
461,085,216
- --------------------------------------------------------------------
MISCELLANEOUS - 4.22%
Hertz Corp. (The)
5.45% 09/06/96 100,000 99,924,305
- --------------------------------------------------------------------
5.30% 10/25/96 25,000 24,801,250
- --------------------------------------------------------------------
International Lease Finance Corp.
5.40% 09/13/96 15,700 15,671,740
- --------------------------------------------------------------------
5.39% 09/18/96 29,000 28,926,187
- --------------------------------------------------------------------
5.35% 09/20/96 50,000 49,858,820
- --------------------------------------------------------------------
5.35% 09/23/96 20,500 20,432,976
- --------------------------------------------------------------------
USAA Capital Corp.
5.30% 09/05/96 20,000 19,988,222
- --------------------------------------------------------------------
259,603,500
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.76%
American Express Credit Co.
5.31% 10/04/96 50,000 49,756,625
- --------------------------------------------------------------------
General Electric Capital Corp.
5.30% 09/04/96 25,000 24,988,959
- --------------------------------------------------------------------
5.35% 09/06/96 95,000 94,929,409
- --------------------------------------------------------------------
169,674,993
- --------------------------------------------------------------------
Total Financial 3,444,912,345
- --------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
RETAIL - 1.64%
DEPARTMENT STORES - 1.30%
Penney (J.C.) Funding Corp.
5.29% 09/16/96 $ 50,000 $ 49,889,792
- -----------------------------------------------------------------------------
5.28% 09/24/96 30,000 29,898,800
- -----------------------------------------------------------------------------
79,788,592
- -----------------------------------------------------------------------------
SPECIALTY STORES - 0.34%
Toys "R" Us, Inc.
5.30% 09/16/96 21,300 21,252,962
- -----------------------------------------------------------------------------
Total Retail 101,041,554
- -----------------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.40% 09/13/96 30,000 29,946,000
- -----------------------------------------------------------------------------
5.38% 09/23/96 50,000 49,835,611
- -----------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -----------------------------------------------------------------------------
5.26% 10/21/96 40,000 39,707,778
- -----------------------------------------------------------------------------
Cargill Financial Services Corp.
5.27% 10/21/96 10,000 9,926,806
- -----------------------------------------------------------------------------
Cargill Inc.
5.28% 10/04/96 25,000 24,879,000
- -----------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -----------------------------------------------------------------------------
Total Other 204,052,778
- -----------------------------------------------------------------------------
Total Commercial Paper 5,133,833,987
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENT - 0.44%
Goldman Sachs Group (The), L.P.(b)
5.423% 10/25/96 27,000 27,000,000
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 5,160,833,987
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 16.59%(c)
Daiwa Securities America, Inc.(d)
5.24% 09/03/96 44,115 44,114,604
- -----------------------------------------------------------------------------
Goldman, Sachs & Co.(e)
5.28% 09/03/96 300,000 300,000,000
- -----------------------------------------------------------------------------
HSBC Securities, Inc.
5.27%(f) 09/03/96 36,000 36,000,000
- -----------------------------------------------------------------------------
5.28%(g) 09/03/96 139,336 139,336,009
- -----------------------------------------------------------------------------
Morgan Stanley & Co. Inc.(h)
5.28% 09/03/96 65,000 65,000,000
- -----------------------------------------------------------------------------
Nikko Securities Co., International,
Inc.(i)
5.30% 09/03/96 100,000 100,000,000
- -----------------------------------------------------------------------------
Nomura Securities International, Inc.(j)
5.27% -- 156,000 156,000,000
- -----------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Smith Barney, Inc.(k)
5.28% 09/03/96 $ 84,000 $ 84,000,000
- --------------------------------------------------------------------------
UBS Securities LLC(l)
5.26% 09/03/96 96,000 96,000,000
- --------------------------------------------------------------------------
Total Repurchase Agreements 1,020,450,613
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.48% 6,181,284,600 (m)
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -
(0.48%) (29,336,245)
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $6,151,948,355
- --------------------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1996.
(c) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds,
private accounts and certain non-registered investment companies managed by
the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
(e) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$834,779,144. Collateralized by $823,484,000 U.S. Treasury obligations, 0%
to 10.75% due 10/10/96 to 08/15/05.
(f) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$100,058,556. Collateralized by $42,013,000 U.S. Government Agency
obligations, 0% due 10/10/96 to 10/21/96 and $58,016,000 U.S. Treasury
obligations, 6.00% to 8.00% due 07/31/99 to 12/31/99.
(g) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(h) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(i) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,668. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(j) Open joint repurchase agreement entered into 07/16/96; however, either
party may terminate the agreement upon demand. Interest rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(k) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and $18,291,000 U.S.
Treasury obligations, 0% due 11/15/04.
(l) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(m) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $5,160,833,987
- ------------------------------------------------------------------------
Repurchase agreements 1,020,450,613
- ------------------------------------------------------------------------
Interest receivable 431,498
- ------------------------------------------------------------------------
Investment for deferred compensation plan 56,031
- ------------------------------------------------------------------------
Other assets 1,079,694
- ------------------------------------------------------------------------
Total assets 6,182,851,823
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 30,043,232
- ------------------------------------------------------------------------
Deferred compensation 56,031
- ------------------------------------------------------------------------
Accrued advisory fees 319,722
- ------------------------------------------------------------------------
Accrued distribution fees 138,772
- ------------------------------------------------------------------------
Accrued transfer agent fees 85,716
- ------------------------------------------------------------------------
Accrued operating expenses 259,995
- ------------------------------------------------------------------------
Total liabilities 30,903,468
- ------------------------------------------------------------------------
NET ASSETS $6,151,948,355
========================================================================
NET ASSETS:
Institutional Class $5,264,600,762
========================================================================
Private Investment Class $ 209,443,494
========================================================================
Personal Investment Class $ 112,644,595
========================================================================
Cash Management Class $ 507,247,366
========================================================================
Resource Class $ 58,012,138
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class 5,264,608,015
========================================================================
Private Investment Class 209,445,352
========================================================================
Personal Investment Class 112,644,015
========================================================================
Cash Management Class 507,247,359
========================================================================
Resource Class 58,012,107
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-9
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $287,932,532
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 3,007,431
- -------------------------------------------------------------------
Custodian fees 305,946
- -------------------------------------------------------------------
Administrative services fees 126,321
- -------------------------------------------------------------------
Directors' fees and expenses 44,043
- -------------------------------------------------------------------
Transfer agent fees 426,413
- -------------------------------------------------------------------
Distribution fees (Note 2) 1,471,079
- -------------------------------------------------------------------
Other 782,028
- -------------------------------------------------------------------
Total expenses 6,163,261
- -------------------------------------------------------------------
Less expenses assumed by advisor (61,100)
===================================================================
Net expenses 6,102,161
===================================================================
Net investment income 281,830,371
===================================================================
Net realized gain on sales of investments 3,560
===================================================================
Net increase in net assets resulting from operations $281,833,931
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 281,830,371 $ 241,891,385
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 3,560 --
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 281,833,931 241,891,385
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (281,830,371) (241,891,385)
- ----------------------------------------------------------------------------
Capital stock transactions-net 1,950,864,683 86,066,761
- ----------------------------------------------------------------------------
Net increase in net assets 1,950,868,243 86,066,761
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,201,080,112 4,115,013,351
- ----------------------------------------------------------------------------
End of period $6,151,948,355 $4,201,080,112
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $6,151,956,848 $4,201,092,165
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (8,493) (12,053)
- ----------------------------------------------------------------------------
$6,151,948,355 $4,201,080,112
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
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 Prime Portfolio and the Liquid Assets Portfolio. Information presented in
these financial statements pertains only to the Prime Portfolio (the
"Portfolio"). The assets, liabilities and operations of each portfolio are
accounted for separately. The Portfolio consists of five different classes of
shares: the Institutional Class, the Private Investment Class, the Personal
Investment Class, the Cash Management Class and the Resource Class. Matters
affecting each class are voted on exclusively by the shareholders of each
class. The Portfolio's objective is the maximization of current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
- ----------------------------------------
<S> <C>
First $100 million 0.20%
- ----------------------------------------
Over $100 million to $200 million 0.15%
- ----------------------------------------
Over $200 million to $300 million 0.10%
- ----------------------------------------
Over $300 million to $1.5 billion 0.06%
- ----------------------------------------
Over $1.5 billion 0.05%
- ----------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $61,100 during the year ended August 31, 1996.
FS-12
<PAGE>
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1996,
the Portfolio reimbursed AIM $126,321 for such services. During the year ended
August 31, 1996, the Fund paid A I M Institutional Fund Services, Inc. ("AIFS")
$424,496 pursuant to a shareholder and transfer agency services agreement.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class of the Portfolio. The Plan provides that the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class may pay FMC up to a maximum annual rate of 0.50%, 0.75%,
0.10% and 0.20%, respectively, of the average daily net assets attributable to
such class. Of this amount, the Fund may pay a service fee of (a) 0.25% of the
average daily net assets of each of the Private Investment Class and the
Personal Investment Class, (b) 0.10% of the average daily net assets of the
Cash Management Class and (c) 0.20% of the average daily net assets of the
Resource Class, to selected banks, broker-dealers and other financial
institutions who offer continuing personal shareholder services to their
customers who purchase and own shares of the Private Investment Class, the
Personal Investment Class, the Cash Management Class or the Resource Class. Any
amounts not paid as a service fee under such Plan would constitute an asset-
based sales charge. During the year ended August 31, 1996, the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class accrued $575,588, $556,024, $242,476 and $96,991,
respectively, as compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of
$15,883 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Fund's directors. A member of that firm is a director of the Fund.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 47,809,368,885 $47,809,368,885 30,516,627,315 $30,516,627,315
- ------------------------------------------------------------------------------------------
Private Investment
Class 1,712,695,255 1,712,695,255 1,403,913,359 1,403,913,359
- ------------------------------------------------------------------------------------------
Personal Investment
Class 976,763,335 976,763,335 881,857,651 881,857,651
- ------------------------------------------------------------------------------------------
Cash Management Class 2,572,268,560 2,572,268,560 307,521,987 307,521,987
- ------------------------------------------------------------------------------------------
Resource Class* 1,501,999,293 1,501,999,293 -- --
- ------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 8,231,944 8,231,944 3,106,371 3,106,371
- ------------------------------------------------------------------------------------------
Private Investment
Class 6,300,025 6,300,025 4,691,704 4,691,704
- ------------------------------------------------------------------------------------------
Personal Investment
Class 5,517,924 5,517,924 4,299,720 4,299,720
- ------------------------------------------------------------------------------------------
Cash Management Class 12,713,851 12,713,851 896,094 896,094
- ------------------------------------------------------------------------------------------
Resource Class* 892,705 892,705 -- --
- ------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (46,305,697,661) (46,305,697,661) (30,847,783,300) (30,847,783,300)
- ------------------------------------------------------------------------------------------
Private Investment
Class (1,663,828,112) (1,663,828,112) (1,285,160,664) (1,285,160,664)
- ------------------------------------------------------------------------------------------
Personal Investment
Class (969,266,851) (969,266,851) (789,592,898) (789,592,898)
- ------------------------------------------------------------------------------------------
Cash Management Class (2,272,214,579) (2,272,214,579) (114,310,578) (114,310,578)
- ------------------------------------------------------------------------------------------
Resource Class* (1,444,879,891) (1,444,879,891) -- --
- ------------------------------------------------------------------------------------------
Net increase 1,950,864,683 $ 1,950,864,683 86,066,761 $ 86,066,761
==========================================================================================
</TABLE>
* The Resource Class commenced operations on January 16, 1996.
FS-13
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Cash Management Class during the two-year period ended August 31, 1996 and
the period June 30, 1994 (date operations commenced) through August 31, 1994.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -----
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $1.00
- --------------------------------------------- -------- -------- -----
Income from investment operations:
Net investment income 0.05 0.06 0.01
- --------------------------------------------- -------- -------- -----
Total from investment operations 0.05 0.06 0.01
- --------------------------------------------- -------- -------- -----
Less distributions:
Dividends from net investment income (0.05) (0.06) (0.01)
- --------------------------------------------- -------- -------- -----
Net asset value, end of period $ 1.00 $ 1.00 $1.00
============================================= ======== ======== =====
Total return 5.55% 5.71% 4.34%(a)
============================================= ======== ======== =====
Ratios/supplemental data:
Net assets, end of period (000s omitted) $507,247 $194,479 $372
============================================= ======== ======== =====
Ratio of expenses to average net assets(c) 0.17%(b) 0.17% 0.14%
============================================= ======== ======== =====
Ratio of net investment income to average net
assets(d) 5.38%(b) 5.69% 4.26%
============================================= ======== ======== =====
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $303,094,444.
(c) Ratios of expenses to average net assets prior to waiver of distribution
fees and/or expense reimbursements were 0.19%, 0.32%, and 0.67% for the
periods 1996-1994, respectively. Ratios are annualized for periods less
than one year.
(d) Ratios of net investment income to average net assets prior to waiver of
distribution fees and/or expense reimbursements were 5.36%, 5.54%, and
3.73% for the periods 1996-1994, respectively. Ratios are annualized for
periods less than one year.
FS-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the two-year period then ended and the
period June 30, 1994 (date operations commenced) through August 31, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Portfolio as of August 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the two-year period then ended and the period June 30, 1994 (date operations
commenced) through August 31, 1994, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-15
<PAGE>
PRIME PORTFOLIO
INSTITUTIONAL CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 83.45%(a)
BASIC INDUSTRY - 0.32%
PAPER & FOREST PRODUCTS - 0.32%
Weyerhaeuser Co.
5.29% 10/01/96 $ 20,000 $ 19,911,833
- ------------------------------------------------------------------------
Total Basic Industry 19,911,833
- ------------------------------------------------------------------------
BUSINESS SERVICES - 5.14%
POLLUTION CONTROL SERVICES - 2.42%
Browning-Ferris Industries, Inc.
5.30% 09/16/96 20,000 19,955,834
- ------------------------------------------------------------------------
5.31% 10/11/96 35,000 34,793,500
- ------------------------------------------------------------------------
5.31% 10/15/96 35,000 34,772,850
- ------------------------------------------------------------------------
5.30% 10/16/96 60,000 59,602,500
- ------------------------------------------------------------------------
149,124,684
- ------------------------------------------------------------------------
MISCELLANEOUS - 2.72%
Donnelley (R.R.) & Sons Co.
5.30% 09/17/96 17,850 17,807,954
- ------------------------------------------------------------------------
PHH Corp.
5.28% 09/04/96 20,000 19,991,200
- ------------------------------------------------------------------------
5.28% 09/25/96 50,000 49,824,000
- ------------------------------------------------------------------------
5.28% 10/04/96 30,000 29,854,800
- ------------------------------------------------------------------------
5.26% 10/22/96 50,000 49,627,417
- ------------------------------------------------------------------------
167,105,371
- ------------------------------------------------------------------------
Total Business Services 316,230,055
- ------------------------------------------------------------------------
CAPITAL GOODS - 2.21%
AEROSPACE/DEFENSE - 0.32%
Raytheon Co.
5.32% 09/18/96 20,000 19,949,756
- ------------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT - 1.89%
Electronic Data Systems Corp.
5.29% 10/15/96 20,000 19,870,689
- ------------------------------------------------------------------------
International Business Machines Corp.
5.30% 09/10/96 30,000 29,960,250
- ------------------------------------------------------------------------
Xerox Corp.
5.29% 09/19/96 30,000 29,920,650
- ------------------------------------------------------------------------
5.30% 10/02/96 36,537 36,370,249
- ------------------------------------------------------------------------
116,121,838
- ------------------------------------------------------------------------
Total Capital Goods 136,071,594
- ------------------------------------------------------------------------
</TABLE>
FS-16
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 4.45%
AUTOMOBILE - 4.29%
Ford Motor Credit Co.
5.37% 09/17/96 $ 50,000 $ 49,880,667
- -------------------------------------------------------------------
5.28% 10/25/96 40,000 39,683,200
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.40% 09/05/96 40,000 39,976,000
- -------------------------------------------------------------------
5.40% 09/11/96 40,000 39,940,000
- -------------------------------------------------------------------
5.30% 09/25/96 20,000 19,929,333
- -------------------------------------------------------------------
5.29% 10/07/96 25,000 24,867,750
- -------------------------------------------------------------------
5.24% 10/08/96 25,000 24,865,361
- -------------------------------------------------------------------
5.295% 10/18/96 25,000 24,827,177
- -------------------------------------------------------------------
263,969,488
- -------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION - 0.16%
Weyerhaeuser Real Estate Co.
5.28% 10/04/96 9,800 9,752,568
- -------------------------------------------------------------------
Total Consumer Durables 273,722,056
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 6.44%
BEVERAGES - 0.40%
Coca-Cola Co. (The)
5.23% 10/16/96 25,000 24,836,562
- -------------------------------------------------------------------
DRUGS - 1.70%
Pfizer Inc.
5.27% 09/23/96 10,056 10,023,614
- -------------------------------------------------------------------
5.25% 09/24/96 50,000 49,832,292
- -------------------------------------------------------------------
5.25% 10/03/96 45,000 44,790,000
- -------------------------------------------------------------------
104,645,906
- -------------------------------------------------------------------
FOOD PROCESSING - 2.45%
Heinz (H.J.) Co.
5.29% 09/05/96 10,200 10,194,005
- -------------------------------------------------------------------
5.28% 09/09/96 11,000 10,987,093
- -------------------------------------------------------------------
5.28% 09/24/96 9,278 9,246,702
- -------------------------------------------------------------------
5.28% 10/02/96 29,000 28,868,147
- -------------------------------------------------------------------
5.25% 10/07/96 20,000 19,895,000
- -------------------------------------------------------------------
5.25% 10/08/96 25,000 24,865,104
- -------------------------------------------------------------------
5.27% 10/11/96 12,000 11,929,733
- -------------------------------------------------------------------
5.28% 10/15/96 15,000 14,903,200
- -------------------------------------------------------------------
Nestle Capital Co.
5.24% 09/24/96 20,000 19,933,044
- -------------------------------------------------------------------
150,822,028
- -------------------------------------------------------------------
</TABLE>
FS-17
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER NONDURABLES - (continued)
HOUSEHOLD PRODUCTS - 1.32%
Colgate-Palmolive Co.
5.37% 09/04/96 $ 41,000 $ 40,981,652
- -------------------------------------------------------------------------
5.27% 09/27/96 40,000 39,847,756
- -------------------------------------------------------------------------
80,829,408
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.57%
Unilever Capital Co.
5.22% 09/17/96 35,000 34,918,800
- -------------------------------------------------------------------------
Total Consumer Nondurables 396,052,704
- -------------------------------------------------------------------------
ENERGY - 3.93%
OIL & GAS - 3.93%
Koch Industries Inc.
5.36% 09/17/96 13,587 13,554,633
- -------------------------------------------------------------------------
Mobil Australia Finance Co., Inc.
5.41% 09/13/96 78,818 78,675,865
- -------------------------------------------------------------------------
Petrofina Delaware, Inc.
5.29% 09/03/96 25,000 24,992,653
- -------------------------------------------------------------------------
5.38% 09/12/96 25,000 24,958,903
- -------------------------------------------------------------------------
Shell Oil Co.
5.35% 09/03/96 50,000 49,985,139
- -------------------------------------------------------------------------
5.25% 10/16/96 50,000 49,671,875
- -------------------------------------------------------------------------
Total Energy 241,839,068
- -------------------------------------------------------------------------
FINANCIAL - 56.00%
ASSET-BACKED SECURITIES - 25.28%
Asset Securitization Cooperative Corp.
5.45% 09/03/96 70,000 69,978,805
- -------------------------------------------------------------------------
5.40% 09/12/96 50,000 49,917,500
- -------------------------------------------------------------------------
5.38% 09/18/96 40,000 39,898,378
- -------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -------------------------------------------------------------------------
5.28% 10/03/96 30,000 29,859,200
- -------------------------------------------------------------------------
5.29% 10/03/96 26,000 25,877,742
- -------------------------------------------------------------------------
5.26% 10/17/96 25,000 24,831,972
- -------------------------------------------------------------------------
5.26% 10/18/96 50,000 49,656,639
- -------------------------------------------------------------------------
Ciesco, L.P.
5.44% 09/04/96 47,300 47,278,558
- -------------------------------------------------------------------------
5.42% 09/05/96 60,000 59,963,867
- -------------------------------------------------------------------------
5.30% 09/09/96 40,000 39,952,889
- -------------------------------------------------------------------------
5.33% 09/10/96 10,000 9,986,675
- -------------------------------------------------------------------------
5.35% 09/18/96 25,000 24,936,840
- -------------------------------------------------------------------------
</TABLE>
FS-18
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Clipper Receivables Corp.
5.30% 09/11/96 $ 50,000 $ 49,926,389
- ------------------------------------------------------------------------
5.31% 09/16/96 15,075 15,041,647
- ------------------------------------------------------------------------
5.32% 09/19/96 50,000 49,867,000
- ------------------------------------------------------------------------
5.30% 09/24/96 50,000 49,830,694
- ------------------------------------------------------------------------
5.30% 09/25/96 55,000 54,805,667
- ------------------------------------------------------------------------
5.28% 09/26/96 83,414 83,108,149
- ------------------------------------------------------------------------
5.27% 10/01/96 30,000 29,868,250
- ------------------------------------------------------------------------
5.28% 10/01/96 20,000 19,912,000
- ------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.29% 10/07/96 50,000 49,735,500
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.28% 09/10/96 30,355 30,314,931
- ------------------------------------------------------------------------
5.31% 09/18/96 68,000 67,829,490
- ------------------------------------------------------------------------
5.28% 09/20/96 30,000 29,916,400
- ------------------------------------------------------------------------
5.30% 10/04/96 50,269 50,024,776
- ------------------------------------------------------------------------
5.30% 10/08/96 40,000 39,782,111
- ------------------------------------------------------------------------
5.30% 10/11/96 16,704 16,605,632
- ------------------------------------------------------------------------
5.31% 10/17/96 35,000 34,762,525
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.30% 09/10/96 41,151 41,096,475
- ------------------------------------------------------------------------
5.28% 09/11/96 13,745 13,724,841
- ------------------------------------------------------------------------
5.35% 09/20/96 35,000 34,901,174
- ------------------------------------------------------------------------
5.28% 10/08/96 20,000 19,891,467
- ------------------------------------------------------------------------
5.28% 10/21/96 50,000 49,633,333
- ------------------------------------------------------------------------
5.28% 10/22/96 45,000 44,663,400
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.30% 09/27/96 67,325 67,067,295
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.34% 09/20/96 10,654 10,623,973
- ------------------------------------------------------------------------
5.36% 09/20/96 50,000 49,858,555
- ------------------------------------------------------------------------
5.35% 09/23/96 15,256 15,206,121
- ------------------------------------------------------------------------
5.28% 10/03/96 17,529 17,446,731
- ------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.45% 09/05/96 22,500 22,486,375
- ------------------------------------------------------------------------
1,554,959,549
- ------------------------------------------------------------------------
</TABLE>
FS-19
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
BROKERAGE/INVESTMENTS - 11.10%
Bear, Stearns & Co. Inc.
5.45% 09/06/96 $ 50,000 $ 49,962,153
- -------------------------------------------------------------------------------
5.31% 10/09/96 50,000 49,719,750
- -------------------------------------------------------------------------------
First Boston Corp. (The)
5.32% 10/07/96 50,000 49,734,000
- -------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.30% 09/03/96 75,000 74,977,917
- -------------------------------------------------------------------------------
Merrill Lynch & Co. Inc.
5.45% 09/06/96 100,000 99,924,305
- -------------------------------------------------------------------------------
5.46% 09/06/96 50,000 49,962,083
- -------------------------------------------------------------------------------
5.30% 10/11/96 30,000 29,823,333
- -------------------------------------------------------------------------------
5.30% 10/15/96 25,000 24,838,056
- -------------------------------------------------------------------------------
5.30% 10/17/96 40,000 39,729,111
- -------------------------------------------------------------------------------
5.28% 10/18/96 50,000 49,655,333
- -------------------------------------------------------------------------------
Morgan Stanley Group, Inc.
5.30% 10/18/96 40,000 39,723,222
- -------------------------------------------------------------------------------
Smith Barney Inc.
5.33% 09/09/96 50,000 49,940,778
- -------------------------------------------------------------------------------
5.38% 09/19/96 50,000 49,865,500
- -------------------------------------------------------------------------------
5.31% 10/08/96 25,000 24,863,563
- -------------------------------------------------------------------------------
682,719,104
- -------------------------------------------------------------------------------
BUSINESS CREDIT - 2.88%
CIT Group Holdings, Inc.
5.40% 09/13/96 50,000 49,910,000
- -------------------------------------------------------------------------------
5.30% 10/03/96 30,000 29,858,667
- -------------------------------------------------------------------------------
5.29% 10/11/96 30,000 29,823,667
- -------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.30% 10/03/96 20,000 19,905,778
- -------------------------------------------------------------------------------
5.30% 10/04/96 18,300 18,211,093
- -------------------------------------------------------------------------------
5.29% 10/18/96 10,000 9,930,936
- -------------------------------------------------------------------------------
5.28% 10/25/96 20,000 19,841,600
- -------------------------------------------------------------------------------
177,481,741
- -------------------------------------------------------------------------------
INSURANCE - 2.27%
A.I. Credit Corp.
5.23% 09/26/96 30,000 29,891,042
- -------------------------------------------------------------------------------
5.30% 10/07/96 15,000 14,920,500
- -------------------------------------------------------------------------------
Prudential Funding Corp.
5.38% 09/17/96 50,000 49,880,444
- -------------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -------------------------------------------------------------------------------
5.33% 10/29/96 20,000 19,828,256
- -------------------------------------------------------------------------------
139,388,242
- -------------------------------------------------------------------------------
</TABLE>
FS-20
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - 7.49%
Associates Corp. of North America
5.40% 09/23/96 $ 50,000 $ 49,835,000
- --------------------------------------------------------------------
AVCO Financial Services, Inc.
5.30% 10/11/96 35,000 34,793,889
- --------------------------------------------------------------------
Student Loan Corp.
5.30% 10/23/96 25,000 24,808,611
- --------------------------------------------------------------------
5.29% 10/25/96 50,000 49,603,250
- --------------------------------------------------------------------
Transamerica Finance Corp.
5.37% 09/09/96 33,200 33,160,381
- --------------------------------------------------------------------
5.36% 09/19/96 20,000 19,946,400
- --------------------------------------------------------------------
5.35% 09/20/96 10,000 9,971,764
- --------------------------------------------------------------------
5.29% 09/23/96 29,000 28,906,249
- --------------------------------------------------------------------
5.30% 10/02/96 24,000 23,890,467
- --------------------------------------------------------------------
5.30% 10/09/96 10,000 9,944,056
- --------------------------------------------------------------------
5.29% 10/17/96 24,000 23,837,773
- --------------------------------------------------------------------
5.27% 10/18/96 30,000 29,793,592
- --------------------------------------------------------------------
5.26% 10/21/96 75,000 74,452,083
- --------------------------------------------------------------------
5.27% 10/21/96 23,500 23,327,993
- --------------------------------------------------------------------
5.26% 10/22/96 25,000 24,813,708
- --------------------------------------------------------------------
461,085,216
- --------------------------------------------------------------------
MISCELLANEOUS - 4.22%
Hertz Corp. (The)
5.45% 09/06/96 100,000 99,924,305
- --------------------------------------------------------------------
5.30% 10/25/96 25,000 24,801,250
- --------------------------------------------------------------------
International Lease Finance Corp.
5.40% 09/13/96 15,700 15,671,740
- --------------------------------------------------------------------
5.39% 09/18/96 29,000 28,926,187
- --------------------------------------------------------------------
5.35% 09/20/96 50,000 49,858,820
- --------------------------------------------------------------------
5.35% 09/23/96 20,500 20,432,976
- --------------------------------------------------------------------
USAA Capital Corp.
5.30% 09/05/96 20,000 19,988,222
- --------------------------------------------------------------------
259,603,500
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.76%
American Express Credit Co.
5.31% 10/04/96 50,000 49,756,625
- --------------------------------------------------------------------
General Electric Capital Corp.
5.30% 09/04/96 25,000 24,988,959
- --------------------------------------------------------------------
5.35% 09/06/96 95,000 94,929,409
- --------------------------------------------------------------------
169,674,993
- --------------------------------------------------------------------
Total Financial 3,444,912,345
- --------------------------------------------------------------------
</TABLE>
FS-21
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
RETAIL - 1.64%
DEPARTMENT STORES - 1.30%
Penney (J.C.) Funding Corp.
5.29% 09/16/96 $ 50,000 $ 49,889,792
- -----------------------------------------------------------------------------
5.28% 09/24/96 30,000 29,898,800
- -----------------------------------------------------------------------------
79,788,592
- -----------------------------------------------------------------------------
SPECIALTY STORES - 0.34%
Toys "R" Us, Inc.
5.30% 09/16/96 21,300 21,252,962
- -----------------------------------------------------------------------------
Total Retail 101,041,554
- -----------------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.40% 09/13/96 30,000 29,946,000
- -----------------------------------------------------------------------------
5.38% 09/23/96 50,000 49,835,611
- -----------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -----------------------------------------------------------------------------
5.26% 10/21/96 40,000 39,707,778
- -----------------------------------------------------------------------------
Cargill Financial Services Corp.
5.27% 10/21/96 10,000 9,926,806
- -----------------------------------------------------------------------------
Cargill Inc.
5.28% 10/04/96 25,000 24,879,000
- -----------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -----------------------------------------------------------------------------
Total Other 204,052,778
- -----------------------------------------------------------------------------
Total Commercial Paper 5,133,833,987
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENT - 0.44%
Goldman Sachs Group (The), L.P.(b)
5.423% 10/25/96 27,000 27,000,000
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 5,160,833,987
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 16.59%(c)
Daiwa Securities America, Inc.(d)
5.24% 09/03/96 44,115 44,114,604
- -----------------------------------------------------------------------------
Goldman, Sachs & Co.(e)
5.28% 09/03/96 300,000 300,000,000
- -----------------------------------------------------------------------------
HSBC Securities, Inc.
5.27%(f) 09/03/96 36,000 36,000,000
- -----------------------------------------------------------------------------
5.28%(g) 09/03/96 139,336 139,336,009
- -----------------------------------------------------------------------------
Morgan Stanley & Co. Inc.(h)
5.28% 09/03/96 65,000 65,000,000
- -----------------------------------------------------------------------------
Nikko Securities Co., International,
Inc.(i)
5.30% 09/03/96 100,000 100,000,000
- -----------------------------------------------------------------------------
Nomura Securities International, Inc.(j)
5.27% -- 156,000 156,000,000
- -----------------------------------------------------------------------------
</TABLE>
FS-22
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Smith Barney, Inc.(k)
5.28% 09/03/96 $ 84,000 $ 84,000,000
- --------------------------------------------------------------------------
UBS Securities LLC(l)
5.26% 09/03/96 96,000 96,000,000
- --------------------------------------------------------------------------
Total Repurchase Agreements 1,020,450,613
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.48% 6,181,284,600 (m)
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -
(0.48%) (29,336,245)
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $6,151,948,355
- --------------------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1996.
(c) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds,
private accounts and certain non-registered investment companies managed by
the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
(e) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$834,779,144. Collateralized by $823,484,000 U.S. Treasury obligations, 0%
to 10.75% due 10/10/96 to 08/15/05.
(f) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$100,058,556. Collateralized by $42,013,000 U.S. Government Agency
obligations, 0% due 10/10/96 to 10/21/96 and $58,016,000 U.S. Treasury
obligations, 6.00% to 8.00% due 07/31/99 to 12/31/99.
(g) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(h) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(i) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,668. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(j) Open joint repurchase agreement entered into 07/16/96; however, either
party may terminate the agreement upon demand. Interest rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(k) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and $18,291,000 U.S.
Treasury obligations, 0% due 11/15/04.
(l) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(m) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-23
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $5,160,833,987
- ------------------------------------------------------------------------
Repurchase agreements 1,020,450,613
- ------------------------------------------------------------------------
Interest receivable 431,498
- ------------------------------------------------------------------------
Investment for deferred compensation plan 56,031
- ------------------------------------------------------------------------
Other assets 1,079,694
- ------------------------------------------------------------------------
Total assets 6,182,851,823
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 30,043,232
- ------------------------------------------------------------------------
Deferred compensation 56,031
- ------------------------------------------------------------------------
Accrued advisory fees 319,722
- ------------------------------------------------------------------------
Accrued distribution fees 138,772
- ------------------------------------------------------------------------
Accrued transfer agent fees 85,716
- ------------------------------------------------------------------------
Accrued operating expenses 259,995
- ------------------------------------------------------------------------
Total liabilities 30,903,468
- ------------------------------------------------------------------------
NET ASSETS $6,151,948,355
========================================================================
NET ASSETS:
Institutional Class $5,264,600,762
========================================================================
Private Investment Class $ 209,443,494
========================================================================
Personal Investment Class $ 112,644,595
========================================================================
Cash Management Class $ 507,247,366
========================================================================
Resource Class $ 58,012,138
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class 5,264,608,015
========================================================================
Private Investment Class 209,445,352
========================================================================
Personal Investment Class 112,644,015
========================================================================
Cash Management Class 507,247,359
========================================================================
Resource Class 58,012,107
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-24
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $287,932,532
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 3,007,431
- -------------------------------------------------------------------
Custodian fees 305,946
- -------------------------------------------------------------------
Administrative services fees 126,321
- -------------------------------------------------------------------
Directors' fees and expenses 44,043
- -------------------------------------------------------------------
Transfer agent fees 426,413
- -------------------------------------------------------------------
Distribution fees (Note 2) 1,471,079
- -------------------------------------------------------------------
Other 782,028
- -------------------------------------------------------------------
Total expenses 6,163,261
- -------------------------------------------------------------------
Less expenses assumed by advisor (61,100)
===================================================================
Net expenses 6,102,161
===================================================================
Net investment income 281,830,371
===================================================================
Net realized gain on sales of investments 3,560
===================================================================
Net increase in net assets resulting from operations $281,833,931
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-25
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 281,830,371 $ 241,891,385
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 3,560 --
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 281,833,931 241,891,385
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (281,830,371) (241,891,385)
- ----------------------------------------------------------------------------
Capital stock transactions-net 1,950,864,683 86,066,761
- ----------------------------------------------------------------------------
Net increase in net assets 1,950,868,243 86,066,761
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,201,080,112 4,115,013,351
- ----------------------------------------------------------------------------
End of period $6,151,948,355 $4,201,080,112
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $6,151,956,848 $4,201,092,165
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (8,493) (12,053)
- ----------------------------------------------------------------------------
$6,151,948,355 $4,201,080,112
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
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 Prime Portfolio and the Liquid Assets Portfolio. Information presented in
these financial statements pertains only to the Prime Portfolio (the
"Portfolio"). The assets, liabilities and operations of each portfolio are
accounted for separately. The Portfolio consists of five different classes of
shares: the Institutional Class, the Private Investment Class, the Personal
Investment Class, the Cash Management Class and the Resource Class. Matters
affecting each class are voted on exclusively by the shareholders of each
class. The Portfolio's objective is the maximization of current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
----------------------------------------
<S> <C>
First $100 million 0.20%
----------------------------------------
Over $100 million to $200 million 0.15%
----------------------------------------
Over $200 million to $300 million 0.10%
----------------------------------------
Over $300 million to $1.5 billion 0.06%
----------------------------------------
Over $1.5 billion 0.05%
----------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $61,100 during the year ended August 31, 1996.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the
FS-27
<PAGE>
year ended August 31, 1996, the Portfolio reimbursed AIM $126,321 for such
services. During the year ended August 31, 1996, the Fund paid A I M
Institutional Fund Services, Inc. ("AIFS") $424,496 pursuant to a shareholder
and transfer agency services agreement.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class of the Portfolio. The Plan provides that the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class may pay FMC up to a maximum annual rate of 0.50%, 0.75%,
0.10% and 0.20%, respectively, of the average daily net assets attributable to
such class. Of this amount, the Fund may pay a service fee of (a) 0.25% of the
average daily net assets of each of the Private Investment Class and the
Personal Investment Class, (b) 0.10% of the average daily net assets of the
Cash Management Class and (c) 0.20% of the average daily net assets of the
Resource Class, to selected banks, broker-dealers and other financial
institutions who offer continuing personal shareholder services to their
customers who purchase and own shares of the Private Investment Class, the
Personal Investment Class, the Cash Management Class or the Resource Class. Any
amounts not paid as a service fee under such Plan would constitute an asset-
based sales charge. During the year ended August 31, 1996, the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class accrued $575,588, $556,024, $242,476 and $96,991,
respectively, as compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of
$15,883 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Fund's directors. A member of that firm is a director of the Fund.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 47,809,368,885 $47,809,368,885 30,516,627,315 $30,516,627,315
- -------------------------------------------------------------------------------------------
Private Investment
Class 1,712,695,255 1,712,695,255 1,403,913,359 1,403,913,359
- -------------------------------------------------------------------------------------------
Personal Investment
Class 976,763,335 976,763,335 881,857,651 881,857,651
- -------------------------------------------------------------------------------------------
Cash Management Class 2,572,268,560 2,572,268,560 307,521,987 307,521,987
- -------------------------------------------------------------------------------------------
Resource Class* 1,501,999,293 1,501,999,293 -- --
- -------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 8,231,944 8,231,944 3,106,371 3,106,371
- -------------------------------------------------------------------------------------------
Private Investment
Class 6,300,025 6,300,025 4,691,704 4,691,704
- -------------------------------------------------------------------------------------------
Personal Investment
Class 5,517,924 5,517,924 4,299,720 4,299,720
- -------------------------------------------------------------------------------------------
Cash Management Class 12,713,851 12,713,851 896,094 896,094
- -------------------------------------------------------------------------------------------
Resource Class* 892,705 892,705 -- --
- -------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (46,305,697,661) (46,305,697,661) (30,847,783,300) (30,847,783,300)
- -------------------------------------------------------------------------------------------
Private Investment
Class (1,663,828,112) (1,663,828,112) (1,285,160,664) (1,285,160,664)
- -------------------------------------------------------------------------------------------
Personal Investment
Class (969,266,851) (969,266,851) (789,592,898) (789,592,898)
- -------------------------------------------------------------------------------------------
Cash Management Class (2,272,214,579) (2,272,214,579) (114,310,578) (114,310,578)
- -------------------------------------------------------------------------------------------
Resource Class* (1,444,879,891) (1,444,879,891) -- --
- -------------------------------------------------------------------------------------------
Net increase 1,950,864,683 $ 1,950,864,683 86,066,761 $ 86,066,761
===========================================================================================
</TABLE>
* The Resource Class commenced operations on January 16, 1996.
FS-28
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of capital stock
outstanding of the Institutional Class during each of the years in the ten-year
period ended August 31, 1996.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
investment
operations:
Net investment
income 0.05 0.06 0.04 0.03 0.04 0.07 0.08 0.09
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less
distributions:
Dividends from
net
investment
income (0.05) (0.06) (0.04) (0.03) (0.04) (0.07) (0.08) (0.09)
- ---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================ ========== ========== ========== ========== ========== ========== ========== ==========
Total return 5.64% 5.80% 3.64% 3.20% 4.44% 7.11% 8.72% 9.42%
================ ========== ========== ========== ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end
of period (000s
omitted) $5,264,601 $3,752,693 $4,080,753 $4,349,945 $3,993,340 $6,108,991 $6,475,123 $7,003,546
================ ========== ========== ========== ========== ========== ========== ========== ==========
Ratio of
expenses to
average net
assets 0.09%(a) 0.09% 0.08% 0.07% 0.08% 0.07% 0.07% 0.08%
================ ========== ========== ========== ========== ========== ========== ========== ==========
Ratio of net
investment
income to
average net
assets 5.48%(a) 5.64% 3.58% 3.15% 4.43% 6.89% 8.39% 9.07%
================ ========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
1988 1987
----------- -----------
<S> <C> <C>
Net asset value,
beginning of
period $ 1.00 $ 1.00
- -------------------- ----------- -----------
Income from
investment
operations:
Net investment
income 0.07 0.06
- -------------------- ----------- -----------
Less
distributions:
Dividends from
net
investment
income (0.07) (0.06)
- -------------------- ----------- -----------
Net asset value,
end of period $ 1.00 $ 1.00
==================== =========== ===========
Total return 7.34% 6.39%
==================== =========== ===========
Ratios/supplemental
data:
Net assets, end
of period (000s
omitted) $5,841,901 $4,822,758
==================== =========== ===========
Ratio of
expenses to
average net
assets 0.09% 0.08%
==================== =========== ===========
Ratio of net
investment
income to
average net
assets 7.11% 6.22%
==================== =========== ===========
</TABLE>
(a) Ratios are based on average net assets of $4,508,079,574.
FS-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Portfolio as of August 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the ten-year period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-30
<PAGE>
PRIME PORTFOLIO
PERSONAL INVESTMENT CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 83.45%(a)
BASIC INDUSTRY - 0.32%
PAPER & FOREST PRODUCTS - 0.32%
Weyerhaeuser Co.
5.29% 10/01/96 $ 20,000 $ 19,911,833
- ------------------------------------------------------------------------
Total Basic Industry 19,911,833
- ------------------------------------------------------------------------
BUSINESS SERVICES - 5.14%
POLLUTION CONTROL SERVICES - 2.42%
Browning-Ferris Industries, Inc.
5.30% 09/16/96 20,000 19,955,834
- ------------------------------------------------------------------------
5.31% 10/11/96 35,000 34,793,500
- ------------------------------------------------------------------------
5.31% 10/15/96 35,000 34,772,850
- ------------------------------------------------------------------------
5.30% 10/16/96 60,000 59,602,500
- ------------------------------------------------------------------------
149,124,684
- ------------------------------------------------------------------------
MISCELLANEOUS - 2.72%
Donnelley (R.R.) & Sons Co.
5.30% 09/17/96 17,850 17,807,954
- ------------------------------------------------------------------------
PHH Corp.
5.28% 09/04/96 20,000 19,991,200
- ------------------------------------------------------------------------
5.28% 09/25/96 50,000 49,824,000
- ------------------------------------------------------------------------
5.28% 10/04/96 30,000 29,854,800
- ------------------------------------------------------------------------
5.26% 10/22/96 50,000 49,627,417
- ------------------------------------------------------------------------
167,105,371
- ------------------------------------------------------------------------
Total Business Services 316,230,055
- ------------------------------------------------------------------------
CAPITAL GOODS - 2.21%
AEROSPACE/DEFENSE - 0.32%
Raytheon Co.
5.32% 09/18/96 20,000 19,949,756
- ------------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT - 1.89%
Electronic Data Systems Corp.
5.29% 10/15/96 20,000 19,870,689
- ------------------------------------------------------------------------
International Business Machines Corp.
5.30% 09/10/96 30,000 29,960,250
- ------------------------------------------------------------------------
Xerox Corp.
5.29% 09/19/96 30,000 29,920,650
- ------------------------------------------------------------------------
5.30% 10/02/96 36,537 36,370,249
- ------------------------------------------------------------------------
116,121,838
- ------------------------------------------------------------------------
Total Capital Goods 136,071,594
- ------------------------------------------------------------------------
</TABLE>
FS-31
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 4.45%
AUTOMOBILE - 4.29%
Ford Motor Credit Co.
5.37% 09/17/96 $ 50,000 $ 49,880,667
- -------------------------------------------------------------------
5.28% 10/25/96 40,000 39,683,200
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.40% 09/05/96 40,000 39,976,000
- -------------------------------------------------------------------
5.40% 09/11/96 40,000 39,940,000
- -------------------------------------------------------------------
5.30% 09/25/96 20,000 19,929,333
- -------------------------------------------------------------------
5.29% 10/07/96 25,000 24,867,750
- -------------------------------------------------------------------
5.24% 10/08/96 25,000 24,865,361
- -------------------------------------------------------------------
5.295% 10/18/96 25,000 24,827,177
- -------------------------------------------------------------------
263,969,488
- -------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION - 0.16%
Weyerhaeuser Real Estate Co.
5.28% 10/04/96 9,800 9,752,568
- -------------------------------------------------------------------
Total Consumer Durables 273,722,056
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 6.44%
BEVERAGES - 0.40%
Coca-Cola Co. (The)
5.23% 10/16/96 25,000 24,836,562
- -------------------------------------------------------------------
DRUGS - 1.70%
Pfizer Inc.
5.27% 09/23/96 10,056 10,023,614
- -------------------------------------------------------------------
5.25% 09/24/96 50,000 49,832,292
- -------------------------------------------------------------------
5.25% 10/03/96 45,000 44,790,000
- -------------------------------------------------------------------
104,645,906
- -------------------------------------------------------------------
FOOD PROCESSING - 2.45%
Heinz (H.J.) Co.
5.29% 09/05/96 10,200 10,194,005
- -------------------------------------------------------------------
5.28% 09/09/96 11,000 10,987,093
- -------------------------------------------------------------------
5.28% 09/24/96 9,278 9,246,702
- -------------------------------------------------------------------
5.28% 10/02/96 29,000 28,868,147
- -------------------------------------------------------------------
5.25% 10/07/96 20,000 19,895,000
- -------------------------------------------------------------------
5.25% 10/08/96 25,000 24,865,104
- -------------------------------------------------------------------
5.27% 10/11/96 12,000 11,929,733
- -------------------------------------------------------------------
5.28% 10/15/96 15,000 14,903,200
- -------------------------------------------------------------------
Nestle Capital Co.
5.24% 09/24/96 20,000 19,933,044
- -------------------------------------------------------------------
150,822,028
- -------------------------------------------------------------------
</TABLE>
FS-32
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER NONDURABLES - (continued)
HOUSEHOLD PRODUCTS - 1.32%
Colgate-Palmolive Co.
5.37% 09/04/96 $ 41,000 $ 40,981,652
- -------------------------------------------------------------------------
5.27% 09/27/96 40,000 39,847,756
- -------------------------------------------------------------------------
80,829,408
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.57%
Unilever Capital Co.
5.22% 09/17/96 35,000 34,918,800
- -------------------------------------------------------------------------
Total Consumer Nondurables 396,052,704
- -------------------------------------------------------------------------
ENERGY - 3.93%
OIL & GAS - 3.93%
Koch Industries Inc.
5.36% 09/17/96 13,587 13,554,633
- -------------------------------------------------------------------------
Mobil Australia Finance Co., Inc.
5.41% 09/13/96 78,818 78,675,865
- -------------------------------------------------------------------------
Petrofina Delaware, Inc.
5.29% 09/03/96 25,000 24,992,653
- -------------------------------------------------------------------------
5.38% 09/12/96 25,000 24,958,903
- -------------------------------------------------------------------------
Shell Oil Co.
5.35% 09/03/96 50,000 49,985,139
- -------------------------------------------------------------------------
5.25% 10/16/96 50,000 49,671,875
- -------------------------------------------------------------------------
Total Energy 241,839,068
- -------------------------------------------------------------------------
FINANCIAL - 56.00%
ASSET-BACKED SECURITIES - 25.28%
Asset Securitization Cooperative Corp.
5.45% 09/03/96 70,000 69,978,805
- -------------------------------------------------------------------------
5.40% 09/12/96 50,000 49,917,500
- -------------------------------------------------------------------------
5.38% 09/18/96 40,000 39,898,378
- -------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -------------------------------------------------------------------------
5.28% 10/03/96 30,000 29,859,200
- -------------------------------------------------------------------------
5.29% 10/03/96 26,000 25,877,742
- -------------------------------------------------------------------------
5.26% 10/17/96 25,000 24,831,972
- -------------------------------------------------------------------------
5.26% 10/18/96 50,000 49,656,639
- -------------------------------------------------------------------------
Ciesco, L.P.
5.44% 09/04/96 47,300 47,278,558
- -------------------------------------------------------------------------
5.42% 09/05/96 60,000 59,963,867
- -------------------------------------------------------------------------
5.30% 09/09/96 40,000 39,952,889
- -------------------------------------------------------------------------
5.33% 09/10/96 10,000 9,986,675
- -------------------------------------------------------------------------
5.35% 09/18/96 25,000 24,936,840
- -------------------------------------------------------------------------
</TABLE>
FS-33
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Clipper Receivables Corp.
5.30% 09/11/96 $ 50,000 $ 49,926,389
- ------------------------------------------------------------------------
5.31% 09/16/96 15,075 15,041,647
- ------------------------------------------------------------------------
5.32% 09/19/96 50,000 49,867,000
- ------------------------------------------------------------------------
5.30% 09/24/96 50,000 49,830,694
- ------------------------------------------------------------------------
5.30% 09/25/96 55,000 54,805,667
- ------------------------------------------------------------------------
5.28% 09/26/96 83,414 83,108,149
- ------------------------------------------------------------------------
5.27% 10/01/96 30,000 29,868,250
- ------------------------------------------------------------------------
5.28% 10/01/96 20,000 19,912,000
- ------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.29% 10/07/96 50,000 49,735,500
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.28% 09/10/96 30,355 30,314,931
- ------------------------------------------------------------------------
5.31% 09/18/96 68,000 67,829,490
- ------------------------------------------------------------------------
5.28% 09/20/96 30,000 29,916,400
- ------------------------------------------------------------------------
5.30% 10/04/96 50,269 50,024,776
- ------------------------------------------------------------------------
5.30% 10/08/96 40,000 39,782,111
- ------------------------------------------------------------------------
5.30% 10/11/96 16,704 16,605,632
- ------------------------------------------------------------------------
5.31% 10/17/96 35,000 34,762,525
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.30% 09/10/96 41,151 41,096,475
- ------------------------------------------------------------------------
5.28% 09/11/96 13,745 13,724,841
- ------------------------------------------------------------------------
5.35% 09/20/96 35,000 34,901,174
- ------------------------------------------------------------------------
5.28% 10/08/96 20,000 19,891,467
- ------------------------------------------------------------------------
5.28% 10/21/96 50,000 49,633,333
- ------------------------------------------------------------------------
5.28% 10/22/96 45,000 44,663,400
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.30% 09/27/96 67,325 67,067,295
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.34% 09/20/96 10,654 10,623,973
- ------------------------------------------------------------------------
5.36% 09/20/96 50,000 49,858,555
- ------------------------------------------------------------------------
5.35% 09/23/96 15,256 15,206,121
- ------------------------------------------------------------------------
5.28% 10/03/96 17,529 17,446,731
- ------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.45% 09/05/96 22,500 22,486,375
- ------------------------------------------------------------------------
1,554,959,549
- ------------------------------------------------------------------------
</TABLE>
FS-34
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
BROKERAGE/INVESTMENTS - 11.10%
Bear, Stearns & Co. Inc.
5.45% 09/06/96 $ 50,000 $ 49,962,153
- -------------------------------------------------------------------------------
5.31% 10/09/96 50,000 49,719,750
- -------------------------------------------------------------------------------
First Boston Corp. (The)
5.32% 10/07/96 50,000 49,734,000
- -------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.30% 09/03/96 75,000 74,977,917
- -------------------------------------------------------------------------------
Merrill Lynch & Co. Inc.
5.45% 09/06/96 100,000 99,924,305
- -------------------------------------------------------------------------------
5.46% 09/06/96 50,000 49,962,083
- -------------------------------------------------------------------------------
5.30% 10/11/96 30,000 29,823,333
- -------------------------------------------------------------------------------
5.30% 10/15/96 25,000 24,838,056
- -------------------------------------------------------------------------------
5.30% 10/17/96 40,000 39,729,111
- -------------------------------------------------------------------------------
5.28% 10/18/96 50,000 49,655,333
- -------------------------------------------------------------------------------
Morgan Stanley Group, Inc.
5.30% 10/18/96 40,000 39,723,222
- -------------------------------------------------------------------------------
Smith Barney Inc.
5.33% 09/09/96 50,000 49,940,778
- -------------------------------------------------------------------------------
5.38% 09/19/96 50,000 49,865,500
- -------------------------------------------------------------------------------
5.31% 10/08/96 25,000 24,863,563
- -------------------------------------------------------------------------------
682,719,104
- -------------------------------------------------------------------------------
BUSINESS CREDIT - 2.88%
CIT Group Holdings, Inc.
5.40% 09/13/96 50,000 49,910,000
- -------------------------------------------------------------------------------
5.30% 10/03/96 30,000 29,858,667
- -------------------------------------------------------------------------------
5.29% 10/11/96 30,000 29,823,667
- -------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.30% 10/03/96 20,000 19,905,778
- -------------------------------------------------------------------------------
5.30% 10/04/96 18,300 18,211,093
- -------------------------------------------------------------------------------
5.29% 10/18/96 10,000 9,930,936
- -------------------------------------------------------------------------------
5.28% 10/25/96 20,000 19,841,600
- -------------------------------------------------------------------------------
177,481,741
- -------------------------------------------------------------------------------
INSURANCE - 2.27%
A.I. Credit Corp.
5.23% 09/26/96 30,000 29,891,042
- -------------------------------------------------------------------------------
5.30% 10/07/96 15,000 14,920,500
- -------------------------------------------------------------------------------
Prudential Funding Corp.
5.38% 09/17/96 50,000 49,880,444
- -------------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -------------------------------------------------------------------------------
5.33% 10/29/96 20,000 19,828,256
- -------------------------------------------------------------------------------
139,388,242
- -------------------------------------------------------------------------------
</TABLE>
FS-35
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - 7.49%
Associates Corp. of North America
5.40% 09/23/96 $ 50,000 $ 49,835,000
- --------------------------------------------------------------------
AVCO Financial Services, Inc.
5.30% 10/11/96 35,000 34,793,889
- --------------------------------------------------------------------
Student Loan Corp.
5.30% 10/23/96 25,000 24,808,611
- --------------------------------------------------------------------
5.29% 10/25/96 50,000 49,603,250
- --------------------------------------------------------------------
Transamerica Finance Corp.
5.37% 09/09/96 33,200 33,160,381
- --------------------------------------------------------------------
5.36% 09/19/96 20,000 19,946,400
- --------------------------------------------------------------------
5.35% 09/20/96 10,000 9,971,764
- --------------------------------------------------------------------
5.29% 09/23/96 29,000 28,906,249
- --------------------------------------------------------------------
5.30% 10/02/96 24,000 23,890,467
- --------------------------------------------------------------------
5.30% 10/09/96 10,000 9,944,056
- --------------------------------------------------------------------
5.29% 10/17/96 24,000 23,837,773
- --------------------------------------------------------------------
5.27% 10/18/96 30,000 29,793,592
- --------------------------------------------------------------------
5.26% 10/21/96 75,000 74,452,083
- --------------------------------------------------------------------
5.27% 10/21/96 23,500 23,327,993
- --------------------------------------------------------------------
5.26% 10/22/96 25,000 24,813,708
- --------------------------------------------------------------------
461,085,216
- --------------------------------------------------------------------
MISCELLANEOUS - 4.22%
Hertz Corp. (The)
5.45% 09/06/96 100,000 99,924,305
- --------------------------------------------------------------------
5.30% 10/25/96 25,000 24,801,250
- --------------------------------------------------------------------
International Lease Finance Corp.
5.40% 09/13/96 15,700 15,671,740
- --------------------------------------------------------------------
5.39% 09/18/96 29,000 28,926,187
- --------------------------------------------------------------------
5.35% 09/20/96 50,000 49,858,820
- --------------------------------------------------------------------
5.35% 09/23/96 20,500 20,432,976
- --------------------------------------------------------------------
USAA Capital Corp.
5.30% 09/05/96 20,000 19,988,222
- --------------------------------------------------------------------
259,603,500
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.76%
American Express Credit Co.
5.31% 10/04/96 50,000 49,756,625
- --------------------------------------------------------------------
General Electric Capital Corp.
5.30% 09/04/96 25,000 24,988,959
- --------------------------------------------------------------------
5.35% 09/06/96 95,000 94,929,409
- --------------------------------------------------------------------
169,674,993
- --------------------------------------------------------------------
Total Financial 3,444,912,345
- --------------------------------------------------------------------
</TABLE>
FS-36
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
RETAIL - 1.64%
DEPARTMENT STORES - 1.30%
Penney (J.C.) Funding Corp.
5.29% 09/16/96 $ 50,000 $ 49,889,792
- -----------------------------------------------------------------------------
5.28% 09/24/96 30,000 29,898,800
- -----------------------------------------------------------------------------
79,788,592
- -----------------------------------------------------------------------------
SPECIALTY STORES - 0.34%
Toys "R" Us, Inc.
5.30% 09/16/96 21,300 21,252,962
- -----------------------------------------------------------------------------
Total Retail 101,041,554
- -----------------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.40% 09/13/96 30,000 29,946,000
- -----------------------------------------------------------------------------
5.38% 09/23/96 50,000 49,835,611
- -----------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -----------------------------------------------------------------------------
5.26% 10/21/96 40,000 39,707,778
- -----------------------------------------------------------------------------
Cargill Financial Services Corp.
5.27% 10/21/96 10,000 9,926,806
- -----------------------------------------------------------------------------
Cargill Inc.
5.28% 10/04/96 25,000 24,879,000
- -----------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -----------------------------------------------------------------------------
Total Other 204,052,778
- -----------------------------------------------------------------------------
Total Commercial Paper 5,133,833,987
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENT - 0.44%
Goldman Sachs Group (The), L.P.(b)
5.423% 10/25/96 27,000 27,000,000
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 5,160,833,987
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 16.59%(c)
Daiwa Securities America, Inc.(d)
5.24% 09/03/96 44,115 44,114,604
- -----------------------------------------------------------------------------
Goldman, Sachs & Co.(e)
5.28% 09/03/96 300,000 300,000,000
- -----------------------------------------------------------------------------
HSBC Securities, Inc.
5.27%(f) 09/03/96 36,000 36,000,000
- -----------------------------------------------------------------------------
5.28%(g) 09/03/96 139,336 139,336,009
- -----------------------------------------------------------------------------
Morgan Stanley & Co. Inc.(h)
5.28% 09/03/96 65,000 65,000,000
- -----------------------------------------------------------------------------
Nikko Securities Co., International,
Inc.(i)
5.30% 09/03/96 100,000 100,000,000
- -----------------------------------------------------------------------------
Nomura Securities International, Inc.(j)
5.27% -- 156,000 156,000,000
- -----------------------------------------------------------------------------
</TABLE>
FS-37
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Smith Barney, Inc.(k)
5.28% 09/03/96 $ 84,000 $ 84,000,000
- --------------------------------------------------------------------------
UBS Securities LLC(l)
5.26% 09/03/96 96,000 96,000,000
- --------------------------------------------------------------------------
Total Repurchase Agreements 1,020,450,613
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.48% 6,181,284,600 (m)
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -
(0.48%) (29,336,245)
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $6,151,948,355
==========================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1996.
(c) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds,
private accounts and certain non-registered investment companies managed by
the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
(e) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$834,779,144. Collateralized by $823,484,000 U.S. Treasury obligations, 0%
to 10.75% due 10/10/96 to 08/15/05.
(f) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$100,058,556. Collateralized by $42,013,000 U.S. Government Agency
obligations, 0% due 10/10/96 to 10/21/96 and $58,016,000 U.S. Treasury
obligations, 6.00% to 8.00% due 07/31/99 to 12/31/99.
(g) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(h) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(i) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,668. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(j) Open joint repurchase agreement entered into 07/16/96; however, either
party may terminate the agreement upon demand. Interest rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(k) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and $18,291,000 U.S.
Treasury obligations, 0% due 11/15/04.
(l) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(m) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-38
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $5,160,833,987
- ------------------------------------------------------------------------
Repurchase agreements 1,020,450,613
- ------------------------------------------------------------------------
Interest receivable 431,498
- ------------------------------------------------------------------------
Investment for deferred compensation plan 56,031
- ------------------------------------------------------------------------
Other assets 1,079,694
- ------------------------------------------------------------------------
Total assets 6,182,851,823
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 30,043,232
- ------------------------------------------------------------------------
Deferred compensation 56,031
- ------------------------------------------------------------------------
Accrued advisory fees 319,722
- ------------------------------------------------------------------------
Accrued distribution fees 138,772
- ------------------------------------------------------------------------
Accrued transfer agent fees 85,716
- ------------------------------------------------------------------------
Accrued operating expenses 259,995
- ------------------------------------------------------------------------
Total liabilities 30,903,468
- ------------------------------------------------------------------------
NET ASSETS $6,151,948,355
========================================================================
NET ASSETS:
Institutional Class $5,264,600,762
========================================================================
Private Investment Class $ 209,443,494
========================================================================
Personal Investment Class $ 112,644,595
========================================================================
Cash Management Class $ 507,247,366
========================================================================
Resource Class $ 58,012,138
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class 5,264,608,015
========================================================================
Private Investment Class 209,445,352
========================================================================
Personal Investment Class 112,644,015
========================================================================
Cash Management Class 507,247,359
========================================================================
Resource Class 58,012,107
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-39
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $287,932,532
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 3,007,431
- -------------------------------------------------------------------
Custodian fees 305,946
- -------------------------------------------------------------------
Administrative services fees 126,321
- -------------------------------------------------------------------
Directors' fees and expenses 44,043
- -------------------------------------------------------------------
Transfer agent fees 426,413
- -------------------------------------------------------------------
Distribution fees (Note 2) 1,471,079
- -------------------------------------------------------------------
Other 782,028
- -------------------------------------------------------------------
Total expenses 6,163,261
- -------------------------------------------------------------------
Less expenses assumed by advisor (61,100)
===================================================================
Net expenses 6,102,161
===================================================================
Net investment income 281,830,371
===================================================================
Net realized gain on sales of investments 3,560
===================================================================
Net increase in net assets resulting from operations $281,833,931
===================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 281,830,371 $ 241,891,385
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 3,560 --
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 281,833,931 241,891,385
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (281,830,371) (241,891,385)
- ----------------------------------------------------------------------------
Capital stock transactions-net 1,950,864,683 86,066,761
- ----------------------------------------------------------------------------
Net increase in net assets 1,950,868,243 86,066,761
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,201,080,112 4,115,013,351
- ----------------------------------------------------------------------------
End of period $6,151,948,355 $4,201,080,112
- ----------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $6,151,956,848 $4,201,092,165
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (8,493) (12,053)
- ----------------------------------------------------------------------------
$6,151,948,355 $4,201,080,112
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-40
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
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 Prime Portfolio and the Liquid Assets Portfolio. Information presented in
these financial statements pertains only to the Prime Portfolio (the
"Portfolio"). The assets, liabilities and operations of each portfolio are
accounted for separately. The Portfolio consists of five different classes of
shares: the Institutional Class, the Private Investment Class, the Personal
Investment Class, the Cash Management Class and the Resource Class. Matters
affecting each class are voted on exclusively by the shareholders of each
class. The Portfolio's objective is the maximization of current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
----------------------------------------
<S> <C>
First $100 million 0.20%
----------------------------------------
Over $100 million to $200 million 0.15%
----------------------------------------
Over $200 million to $300 million 0.10%
----------------------------------------
Over $300 million to $1.5 billion 0.06%
----------------------------------------
Over $1.5 billion 0.05%
----------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $61,100 during the year ended August 31, 1996.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the
FS-41
<PAGE>
year ended August 31, 1996, the Portfolio reimbursed AIM $126,321 for such
services. During the year ended August 31, 1996, the Fund paid A I M
Institutional Fund Services, Inc. ("AIFS") $424,496 pursuant to a shareholder
and transfer agency services agreement.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class of the Portfolio. The Plan provides that the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class may pay FMC up to a maximum annual rate of 0.50%, 0.75%,
0.10% and 0.20%, respectively, of the average daily net assets attributable to
such class. Of this amount, the Fund may pay a service fee of (a) 0.25% of the
average daily net assets of each of the Private Investment Class and the
Personal Investment Class, (b) 0.10% of the average daily net assets of the
Cash Management Class and (c) 0.20% of the average daily net assets of the
Resource Class, to selected banks, broker-dealers and other financial
institutions who offer continuing personal shareholder services to their
customers who purchase and own shares of the Private Investment Class, the
Personal Investment Class, the Cash Management Class or the Resource Class. Any
amounts not paid as a service fee under such Plan would constitute an asset-
based sales charge. During the year ended August 31, 1996, the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class accrued $575,588, $556,024, $242,476 and $96,991,
respectively, as compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of
$15,883 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Fund's directors. A member of that firm is a director of the Fund.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 47,809,368,885 $47,809,368,885 30,516,627,315 $30,516,627,315
- -------------------------------------------------------------------------------------------
Private Investment
Class 1,712,695,255 1,712,695,255 1,403,913,359 1,403,913,359
- -------------------------------------------------------------------------------------------
Personal Investment
Class 976,763,335 976,763,335 881,857,651 881,857,651
- -------------------------------------------------------------------------------------------
Cash Management Class 2,572,268,560 2,572,268,560 307,521,987 307,521,987
- -------------------------------------------------------------------------------------------
Resource Class* 1,501,999,293 1,501,999,293 -- --
- -------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 8,231,944 8,231,944 3,106,371 3,106,371
- -------------------------------------------------------------------------------------------
Private Investment
Class 6,300,025 6,300,025 4,691,704 4,691,704
- -------------------------------------------------------------------------------------------
Personal Investment
Class 5,517,924 5,517,924 4,299,720 4,299,720
- -------------------------------------------------------------------------------------------
Cash Management Class 12,713,851 12,713,851 896,094 896,094
- -------------------------------------------------------------------------------------------
Resource Class* 892,705 892,705 -- --
- -------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (46,305,697,661) (46,305,697,661) (30,847,783,300) (30,847,783,300)
- -------------------------------------------------------------------------------------------
Private Investment
Class (1,663,828,112) (1,663,828,112) (1,285,160,664) (1,285,160,664)
- -------------------------------------------------------------------------------------------
Personal Investment
Class (969,266,851) (969,266,851) (789,592,898) (789,592,898)
- -------------------------------------------------------------------------------------------
Cash Management Class (2,272,214,579) (2,272,214,579) (114,310,578) (114,310,578)
- -------------------------------------------------------------------------------------------
Resource Class* (1,444,879,891) (1,444,879,891) -- --
- -------------------------------------------------------------------------------------------
Net increase 1,950,864,683 $ 1,950,864,683 86,066,761 $ 86,066,761
===========================================================================================
</TABLE>
* The Resource Class commenced operations on January 16, 1996.
FS-42
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Personal
Investment Class outstanding during each of the years in the five-year period
ended August 31, 1996 and the period August 8, 1991 (date operations commenced)
through August 31, 1991.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
--------- ------- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
- ----------------------- --------- ------- ------ ----- ----- ------
Income from investment
operations:
Net investment income 0.05 0.05 0.03 0.03 0.04 0.002
- ----------------------- --------- ------- ------ ----- ----- ------
Total from investment
operations 0.05 0.05 0.03 0.03 0.04 0.002
- ----------------------- --------- ------- ------ ----- ----- ------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.03) (0.03) (0.04) (0.002)
- ----------------------- --------- ------- ------ ----- ----- ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
======================= ========= ======= ====== ===== ===== ======
Total return 5.11% 5.27% 3.12% 2.74% 3.94% 5.02%(a)
======================= ========= ======= ====== ===== ===== ======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $112,645 $99,630 $3,065 $904 $727 $270
======================= ========= ======= ====== ===== ===== ======
Ratio of expenses to
average net assets(b) 0.59%(d) 0.59% 0.58% 0.52% 0.54% 0.80%(a)
======================= ========= ======= ====== ===== ===== ======
Ratio of net investment
income to average net
assets(c) 4.99%(d) 5.23% 3.34% 2.71% 3.75% 5.03%(a)
======================= ========= ======= ====== ===== ===== ======
</TABLE>
(a) Annualized.
(b) Ratios of expenses to average net assets prior to waiver of distribution
fees and/or expense reimbursements were 0.89%, 0.86%, 2.39%, 2.33%, 7.21%
and 15.40% for the periods 1996-1991, respectively. Ratios are annualized
for periods less than one year.
(c) Ratios of net investment income to average net assets prior to waiver of
distribution fees and/or expense reimbursements were 4.69%, 4.96%, 1.53%,
0.90%, (2.93%) and (9.57%) for the periods 1996-1991, respectively. Ratios
are annualized for periods less than one year.
(d) Ratios are based on average net assets of $111,204,901.
FS-43
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended and the
period August 8, 1991 (date operations commenced) through August 31, 1991.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Portfolio as of August 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended and the period August 8, 1991 (date
operations commenced) through August 31, 1991, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-44
<PAGE>
PRIME PORTFOLIO
PRIVATE INVESTMENT CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 83.45%(a)
BASIC INDUSTRY - 0.32%
PAPER & FOREST PRODUCTS - 0.32%
Weyerhaeuser Co.
5.29% 10/01/96 $ 20,000 $ 19,911,833
- ------------------------------------------------------------------------
Total Basic Industry 19,911,833
- ------------------------------------------------------------------------
BUSINESS SERVICES - 5.14%
POLLUTION CONTROL SERVICES - 2.42%
Browning-Ferris Industries, Inc.
5.30% 09/16/96 20,000 19,955,834
- ------------------------------------------------------------------------
5.31% 10/11/96 35,000 34,793,500
- ------------------------------------------------------------------------
5.31% 10/15/96 35,000 34,772,850
- ------------------------------------------------------------------------
5.30% 10/16/96 60,000 59,602,500
- ------------------------------------------------------------------------
149,124,684
- ------------------------------------------------------------------------
MISCELLANEOUS - 2.72%
Donnelley (R.R.) & Sons Co.
5.30% 09/17/96 17,850 17,807,954
- ------------------------------------------------------------------------
PHH Corp.
5.28% 09/04/96 20,000 19,991,200
- ------------------------------------------------------------------------
5.28% 09/25/96 50,000 49,824,000
- ------------------------------------------------------------------------
5.28% 10/04/96 30,000 29,854,800
- ------------------------------------------------------------------------
5.26% 10/22/96 50,000 49,627,417
- ------------------------------------------------------------------------
167,105,371
- ------------------------------------------------------------------------
Total Business Services 316,230,055
- ------------------------------------------------------------------------
CAPITAL GOODS - 2.21%
AEROSPACE/DEFENSE - 0.32%
Raytheon Co.
5.32% 09/18/96 20,000 19,949,756
- ------------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT - 1.89%
Electronic Data Systems Corp.
5.29% 10/15/96 20,000 19,870,689
- ------------------------------------------------------------------------
International Business Machines Corp.
5.30% 09/10/96 30,000 29,960,250
- ------------------------------------------------------------------------
Xerox Corp.
5.29% 09/19/96 30,000 29,920,650
- ------------------------------------------------------------------------
5.30% 10/02/96 36,537 36,370,249
- ------------------------------------------------------------------------
116,121,838
- ------------------------------------------------------------------------
Total Capital Goods 136,071,594
- ------------------------------------------------------------------------
</TABLE>
FS-45
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 4.45%
AUTOMOBILE - 4.29%
Ford Motor Credit Co.
5.37% 09/17/96 $ 50,000 $ 49,880,667
- -------------------------------------------------------------------
5.28% 10/25/96 40,000 39,683,200
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.40% 09/05/96 40,000 39,976,000
- -------------------------------------------------------------------
5.40% 09/11/96 40,000 39,940,000
- -------------------------------------------------------------------
5.30% 09/25/96 20,000 19,929,333
- -------------------------------------------------------------------
5.29% 10/07/96 25,000 24,867,750
- -------------------------------------------------------------------
5.24% 10/08/96 25,000 24,865,361
- -------------------------------------------------------------------
5.295% 10/18/96 25,000 24,827,177
- -------------------------------------------------------------------
263,969,488
- -------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION - 0.16%
Weyerhaeuser Real Estate Co.
5.28% 10/04/96 9,800 9,752,568
- -------------------------------------------------------------------
Total Consumer Durables 273,722,056
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 6.44%
BEVERAGES - 0.40%
Coca-Cola Co. (The)
5.23% 10/16/96 25,000 24,836,562
- -------------------------------------------------------------------
DRUGS - 1.70%
Pfizer Inc.
5.27% 09/23/96 10,056 10,023,614
- -------------------------------------------------------------------
5.25% 09/24/96 50,000 49,832,292
- -------------------------------------------------------------------
5.25% 10/03/96 45,000 44,790,000
- -------------------------------------------------------------------
104,645,906
- -------------------------------------------------------------------
FOOD PROCESSING - 2.45%
Heinz (H.J.) Co.
5.29% 09/05/96 10,200 10,194,005
- -------------------------------------------------------------------
5.28% 09/09/96 11,000 10,987,093
- -------------------------------------------------------------------
5.28% 09/24/96 9,278 9,246,702
- -------------------------------------------------------------------
5.28% 10/02/96 29,000 28,868,147
- -------------------------------------------------------------------
5.25% 10/07/96 20,000 19,895,000
- -------------------------------------------------------------------
5.25% 10/08/96 25,000 24,865,104
- -------------------------------------------------------------------
5.27% 10/11/96 12,000 11,929,733
- -------------------------------------------------------------------
5.28% 10/15/96 15,000 14,903,200
- -------------------------------------------------------------------
Nestle Capital Co.
5.24% 09/24/96 20,000 19,933,044
- -------------------------------------------------------------------
150,822,028
- -------------------------------------------------------------------
</TABLE>
FS-46
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER NONDURABLES - (continued)
HOUSEHOLD PRODUCTS - 1.32%
Colgate-Palmolive Co.
5.37% 09/04/96 $ 41,000 $ 40,981,652
- -------------------------------------------------------------------------
5.27% 09/27/96 40,000 39,847,756
- -------------------------------------------------------------------------
80,829,408
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.57%
Unilever Capital Co.
5.22% 09/17/96 35,000 34,918,800
- -------------------------------------------------------------------------
Total Consumer Nondurables 396,052,704
- -------------------------------------------------------------------------
ENERGY - 3.93%
OIL & GAS - 3.93%
Koch Industries Inc.
5.36% 09/17/96 13,587 13,554,633
- -------------------------------------------------------------------------
Mobil Australia Finance Co., Inc.
5.41% 09/13/96 78,818 78,675,865
- -------------------------------------------------------------------------
Petrofina Delaware, Inc.
5.29% 09/03/96 25,000 24,992,653
- -------------------------------------------------------------------------
5.38% 09/12/96 25,000 24,958,903
- -------------------------------------------------------------------------
Shell Oil Co.
5.35% 09/03/96 50,000 49,985,139
- -------------------------------------------------------------------------
5.25% 10/16/96 50,000 49,671,875
- -------------------------------------------------------------------------
Total Energy 241,839,068
- -------------------------------------------------------------------------
FINANCIAL - 56.00%
ASSET-BACKED SECURITIES - 25.28%
Asset Securitization Cooperative Corp.
5.45% 09/03/96 70,000 69,978,805
- -------------------------------------------------------------------------
5.40% 09/12/96 50,000 49,917,500
- -------------------------------------------------------------------------
5.38% 09/18/96 40,000 39,898,378
- -------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -------------------------------------------------------------------------
5.28% 10/03/96 30,000 29,859,200
- -------------------------------------------------------------------------
5.29% 10/03/96 26,000 25,877,742
- -------------------------------------------------------------------------
5.26% 10/17/96 25,000 24,831,972
- -------------------------------------------------------------------------
5.26% 10/18/96 50,000 49,656,639
- -------------------------------------------------------------------------
Ciesco, L.P.
5.44% 09/04/96 47,300 47,278,558
- -------------------------------------------------------------------------
5.42% 09/05/96 60,000 59,963,867
- -------------------------------------------------------------------------
5.30% 09/09/96 40,000 39,952,889
- -------------------------------------------------------------------------
5.33% 09/10/96 10,000 9,986,675
- -------------------------------------------------------------------------
5.35% 09/18/96 25,000 24,936,840
- -------------------------------------------------------------------------
</TABLE>
FS-47
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Clipper Receivables Corp.
5.30% 09/11/96 $ 50,000 $ 49,926,389
- ------------------------------------------------------------------------
5.31% 09/16/96 15,075 15,041,647
- ------------------------------------------------------------------------
5.32% 09/19/96 50,000 49,867,000
- ------------------------------------------------------------------------
5.30% 09/24/96 50,000 49,830,694
- ------------------------------------------------------------------------
5.30% 09/25/96 55,000 54,805,667
- ------------------------------------------------------------------------
5.28% 09/26/96 83,414 83,108,149
- ------------------------------------------------------------------------
5.27% 10/01/96 30,000 29,868,250
- ------------------------------------------------------------------------
5.28% 10/01/96 20,000 19,912,000
- ------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.29% 10/07/96 50,000 49,735,500
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.28% 09/10/96 30,355 30,314,931
- ------------------------------------------------------------------------
5.31% 09/18/96 68,000 67,829,490
- ------------------------------------------------------------------------
5.28% 09/20/96 30,000 29,916,400
- ------------------------------------------------------------------------
5.30% 10/04/96 50,269 50,024,776
- ------------------------------------------------------------------------
5.30% 10/08/96 40,000 39,782,111
- ------------------------------------------------------------------------
5.30% 10/11/96 16,704 16,605,632
- ------------------------------------------------------------------------
5.31% 10/17/96 35,000 34,762,525
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.30% 09/10/96 41,151 41,096,475
- ------------------------------------------------------------------------
5.28% 09/11/96 13,745 13,724,841
- ------------------------------------------------------------------------
5.35% 09/20/96 35,000 34,901,174
- ------------------------------------------------------------------------
5.28% 10/08/96 20,000 19,891,467
- ------------------------------------------------------------------------
5.28% 10/21/96 50,000 49,633,333
- ------------------------------------------------------------------------
5.28% 10/22/96 45,000 44,663,400
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.30% 09/27/96 67,325 67,067,295
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.34% 09/20/96 10,654 10,623,973
- ------------------------------------------------------------------------
5.36% 09/20/96 50,000 49,858,555
- ------------------------------------------------------------------------
5.35% 09/23/96 15,256 15,206,121
- ------------------------------------------------------------------------
5.28% 10/03/96 17,529 17,446,731
- ------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.45% 09/05/96 22,500 22,486,375
- ------------------------------------------------------------------------
1,554,959,549
- ------------------------------------------------------------------------
</TABLE>
FS-48
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
BROKERAGE/INVESTMENTS - 11.10%
Bear, Stearns & Co. Inc.
5.45% 09/06/96 $ 50,000 $ 49,962,153
- -------------------------------------------------------------------------------
5.31% 10/09/96 50,000 49,719,750
- -------------------------------------------------------------------------------
First Boston Corp. (The)
5.32% 10/07/96 50,000 49,734,000
- -------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.30% 09/03/96 75,000 74,977,917
- -------------------------------------------------------------------------------
Merrill Lynch & Co. Inc.
5.45% 09/06/96 100,000 99,924,305
- -------------------------------------------------------------------------------
5.46% 09/06/96 50,000 49,962,083
- -------------------------------------------------------------------------------
5.30% 10/11/96 30,000 29,823,333
- -------------------------------------------------------------------------------
5.30% 10/15/96 25,000 24,838,056
- -------------------------------------------------------------------------------
5.30% 10/17/96 40,000 39,729,111
- -------------------------------------------------------------------------------
5.28% 10/18/96 50,000 49,655,333
- -------------------------------------------------------------------------------
Morgan Stanley Group, Inc.
5.30% 10/18/96 40,000 39,723,222
- -------------------------------------------------------------------------------
Smith Barney Inc.
5.33% 09/09/96 50,000 49,940,778
- -------------------------------------------------------------------------------
5.38% 09/19/96 50,000 49,865,500
- -------------------------------------------------------------------------------
5.31% 10/08/96 25,000 24,863,563
- -------------------------------------------------------------------------------
682,719,104
- -------------------------------------------------------------------------------
BUSINESS CREDIT - 2.88%
CIT Group Holdings, Inc.
5.40% 09/13/96 50,000 49,910,000
- -------------------------------------------------------------------------------
5.30% 10/03/96 30,000 29,858,667
- -------------------------------------------------------------------------------
5.29% 10/11/96 30,000 29,823,667
- -------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.30% 10/03/96 20,000 19,905,778
- -------------------------------------------------------------------------------
5.30% 10/04/96 18,300 18,211,093
- -------------------------------------------------------------------------------
5.29% 10/18/96 10,000 9,930,936
- -------------------------------------------------------------------------------
5.28% 10/25/96 20,000 19,841,600
- -------------------------------------------------------------------------------
177,481,741
- -------------------------------------------------------------------------------
INSURANCE - 2.27%
A.I. Credit Corp.
5.23% 09/26/96 30,000 29,891,042
- -------------------------------------------------------------------------------
5.30% 10/07/96 15,000 14,920,500
- -------------------------------------------------------------------------------
Prudential Funding Corp.
5.38% 09/17/96 50,000 49,880,444
- -------------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -------------------------------------------------------------------------------
5.33% 10/29/96 20,000 19,828,256
- -------------------------------------------------------------------------------
139,388,242
- -------------------------------------------------------------------------------
</TABLE>
FS-49
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - 7.49%
Associates Corp. of North America
5.40% 09/23/96 $ 50,000 $ 49,835,000
- --------------------------------------------------------------------
AVCO Financial Services, Inc.
5.30% 10/11/96 35,000 34,793,889
- --------------------------------------------------------------------
Student Loan Corp.
5.30% 10/23/96 25,000 24,808,611
- --------------------------------------------------------------------
5.29% 10/25/96 50,000 49,603,250
- --------------------------------------------------------------------
Transamerica Finance Corp.
5.37% 09/09/96 33,200 33,160,381
- --------------------------------------------------------------------
5.36% 09/19/96 20,000 19,946,400
- --------------------------------------------------------------------
5.35% 09/20/96 10,000 9,971,764
- --------------------------------------------------------------------
5.29% 09/23/96 29,000 28,906,249
- --------------------------------------------------------------------
5.30% 10/02/96 24,000 23,890,467
- --------------------------------------------------------------------
5.30% 10/09/96 10,000 9,944,056
- --------------------------------------------------------------------
5.29% 10/17/96 24,000 23,837,773
- --------------------------------------------------------------------
5.27% 10/18/96 30,000 29,793,592
- --------------------------------------------------------------------
5.26% 10/21/96 75,000 74,452,083
- --------------------------------------------------------------------
5.27% 10/21/96 23,500 23,327,993
- --------------------------------------------------------------------
5.26% 10/22/96 25,000 24,813,708
- --------------------------------------------------------------------
461,085,216
- --------------------------------------------------------------------
MISCELLANEOUS - 4.22%
Hertz Corp. (The)
5.45% 09/06/96 100,000 99,924,305
- --------------------------------------------------------------------
5.30% 10/25/96 25,000 24,801,250
- --------------------------------------------------------------------
International Lease Finance Corp.
5.40% 09/13/96 15,700 15,671,740
- --------------------------------------------------------------------
5.39% 09/18/96 29,000 28,926,187
- --------------------------------------------------------------------
5.35% 09/20/96 50,000 49,858,820
- --------------------------------------------------------------------
5.35% 09/23/96 20,500 20,432,976
- --------------------------------------------------------------------
USAA Capital Corp.
5.30% 09/05/96 20,000 19,988,222
- --------------------------------------------------------------------
259,603,500
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.76%
American Express Credit Co.
5.31% 10/04/96 50,000 49,756,625
- --------------------------------------------------------------------
General Electric Capital Corp.
5.30% 09/04/96 25,000 24,988,959
- --------------------------------------------------------------------
5.35% 09/06/96 95,000 94,929,409
- --------------------------------------------------------------------
169,674,993
- --------------------------------------------------------------------
Total Financial 3,444,912,345
- --------------------------------------------------------------------
</TABLE>
FS-50
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
RETAIL - 1.64%
DEPARTMENT STORES - 1.30%
Penney (J.C.) Funding Corp.
5.29% 09/16/96 $ 50,000 $ 49,889,792
- -----------------------------------------------------------------------------
5.28% 09/24/96 30,000 29,898,800
- -----------------------------------------------------------------------------
79,788,592
- -----------------------------------------------------------------------------
SPECIALTY STORES - 0.34%
Toys "R" Us, Inc.
5.30% 09/16/96 21,300 21,252,962
- -----------------------------------------------------------------------------
Total Retail 101,041,554
- -----------------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.40% 09/13/96 30,000 29,946,000
- -----------------------------------------------------------------------------
5.38% 09/23/96 50,000 49,835,611
- -----------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -----------------------------------------------------------------------------
5.26% 10/21/96 40,000 39,707,778
- -----------------------------------------------------------------------------
Cargill Financial Services Corp.
5.27% 10/21/96 10,000 9,926,806
- -----------------------------------------------------------------------------
Cargill Inc.
5.28% 10/04/96 25,000 24,879,000
- -----------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -----------------------------------------------------------------------------
Total Other 204,052,778
- -----------------------------------------------------------------------------
Total Commercial Paper 5,133,833,987
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENT - 0.44%
Goldman Sachs Group (The), L.P.(b)
5.423% 10/25/96 27,000 27,000,000
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 5,160,833,987
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 16.59%(c)
Daiwa Securities America, Inc.(d)
5.24% 09/03/96 44,115 44,114,604
- -----------------------------------------------------------------------------
Goldman, Sachs & Co.(e)
5.28% 09/03/96 300,000 300,000,000
- -----------------------------------------------------------------------------
HSBC Securities, Inc.
5.27%(f) 09/03/96 36,000 36,000,000
- -----------------------------------------------------------------------------
5.28%(g) 09/03/96 139,336 139,336,009
- -----------------------------------------------------------------------------
Morgan Stanley & Co. Inc.(h)
5.28% 09/03/96 65,000 65,000,000
- -----------------------------------------------------------------------------
Nikko Securities Co., International,
Inc.(i)
5.30% 09/03/96 100,000 100,000,000
- -----------------------------------------------------------------------------
Nomura Securities International, Inc.(j)
5.27% -- 156,000 156,000,000
- -----------------------------------------------------------------------------
</TABLE>
FS-51
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Smith Barney, Inc.(k)
5.28% 09/03/96 $ 84,000 $ 84,000,000
- --------------------------------------------------------------------------
UBS Securities LLC(l)
5.26% 09/03/96 96,000 96,000,000
- --------------------------------------------------------------------------
Total Repurchase Agreements 1,020,450,613
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.48% 6,181,284,600 (m)
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -
(0.48%) (29,336,245)
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $6,151,948,355
==========================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1996.
(c) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds,
private accounts and certain non-registered investment companies managed by
the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
(e) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$834,779,144. Collateralized by $823,484,000 U.S. Treasury obligations, 0%
to 10.75% due 10/10/96 to 08/15/05.
(f) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$100,058,556. Collateralized by $42,013,000 U.S. Government Agency
obligations, 0% due 10/10/96 to 10/21/96 and $58,016,000 U.S. Treasury
obligations, 6.00% to 8.00% due 07/31/99 to 12/31/99.
(g) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(h) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(i) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,668. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(j) Open joint repurchase agreement entered into 07/16/96; however, either
party may terminate the agreement upon demand. Interest rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(k) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and $18,291,000 U.S.
Treasury obligations, 0% due 11/15/04.
(l) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(m) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-52
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $5,160,833,987
- ------------------------------------------------------------------------
Repurchase agreements 1,020,450,613
- ------------------------------------------------------------------------
Interest receivable 431,498
- ------------------------------------------------------------------------
Investment for deferred compensation plan 56,031
- ------------------------------------------------------------------------
Other assets 1,079,694
- ------------------------------------------------------------------------
Total assets 6,182,851,823
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 30,043,232
- ------------------------------------------------------------------------
Deferred compensation 56,031
- ------------------------------------------------------------------------
Accrued advisory fees 319,722
- ------------------------------------------------------------------------
Accrued distribution fees 138,772
- ------------------------------------------------------------------------
Accrued transfer agent fees 85,716
- ------------------------------------------------------------------------
Accrued operating expenses 259,995
- ------------------------------------------------------------------------
Total liabilities 30,903,468
- ------------------------------------------------------------------------
NET ASSETS $6,151,948,355
- ------------------------------------------------------------------------
NET ASSETS:
Institutional Class $5,264,600,762
- ------------------------------------------------------------------------
Private Investment Class $ 209,443,494
- ------------------------------------------------------------------------
Personal Investment Class $ 112,644,595
- ------------------------------------------------------------------------
Cash Management Class $ 507,247,366
- ------------------------------------------------------------------------
Resource Class $ 58,012,138
- ------------------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class 5,264,608,015
- ------------------------------------------------------------------------
Private Investment Class 209,445,352
- ------------------------------------------------------------------------
Personal Investment Class 112,644,015
- ------------------------------------------------------------------------
Cash Management Class 507,247,359
- ------------------------------------------------------------------------
Resource Class 58,012,107
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
- ------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-53
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $287,932,532
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 3,007,431
- -------------------------------------------------------------------
Custodian fees 305,946
- -------------------------------------------------------------------
Administrative services fees 126,321
- -------------------------------------------------------------------
Directors' fees and expenses 44,043
- -------------------------------------------------------------------
Transfer agent fees 426,413
- -------------------------------------------------------------------
Distribution fees (Note 2) 1,471,079
- -------------------------------------------------------------------
Other 782,028
- -------------------------------------------------------------------
Total expenses 6,163,261
- -------------------------------------------------------------------
Less expenses assumed by advisor (61,100)
- -------------------------------------------------------------------
Net expenses 6,102,161
- -------------------------------------------------------------------
Net investment income 281,830,371
- -------------------------------------------------------------------
Net realized gain on sales of investments 3,560
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $281,833,931
- -------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 281,830,371 $ 241,891,385
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 3,560 --
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 281,833,931 241,891,385
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (281,830,371) (241,891,385)
- ----------------------------------------------------------------------------
Capital stock transactions-net 1,950,864,683 86,066,761
- ----------------------------------------------------------------------------
Net increase in net assets 1,950,868,243 86,066,761
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,201,080,112 4,115,013,351
- ----------------------------------------------------------------------------
End of period $6,151,948,355 $4,201,080,112
- ----------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $6,151,956,848 $4,201,092,165
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (8,493) (12,053)
- ----------------------------------------------------------------------------
$6,151,948,355 $4,201,080,112
- ----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-54
<PAGE>
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
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 Prime Portfolio and the Liquid Assets Portfolio. Information presented in
these financial statements pertains only to the Prime Portfolio (the
"Portfolio"). The assets, liabilities and operations of each portfolio are
accounted for separately. The Portfolio consists of five different classes of
shares: the Institutional Class, the Private Investment Class, the Personal
Investment Class, the Cash Management Class and the Resource Class. Matters
affecting each class are voted on exclusively by the shareholders of each
class. The Portfolio's objective is the maximization of current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
----------------------------------------
<S> <C>
First $100 million 0.20%
----------------------------------------
Over $100 million to $200 million 0.15%
----------------------------------------
Over $200 million to $300 million 0.10%
----------------------------------------
Over $300 million to $1.5 billion 0.06%
----------------------------------------
Over $1.5 billion 0.05%
----------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $61,100 during the year ended August 31, 1996.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the
FS-55
<PAGE>
year ended August 31, 1996, the Portfolio reimbursed AIM $126,321 for such
services. During the year ended August 31, 1996, the Fund paid A I M
Institutional Fund Services, Inc. ("AIFS") $424,496 pursuant to a shareholder
and transfer agency services agreement.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class of the Portfolio. The Plan provides that the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class may pay FMC up to a maximum annual rate of 0.50%, 0.75%,
0.10% and 0.20%, respectively, of the average daily net assets attributable to
such class. Of this amount, the Fund may pay a service fee of (a) 0.25% of the
average daily net assets of each of the Private Investment Class and the
Personal Investment Class, (b) 0.10% of the average daily net assets of the
Cash Management Class and (c) 0.20% of the average daily net assets of the
Resource Class, to selected banks, broker-dealers and other financial
institutions who offer continuing personal shareholder services to their
customers who purchase and own shares of the Private Investment Class, the
Personal Investment Class, the Cash Management Class or the Resource Class. Any
amounts not paid as a service fee under such Plan would constitute an asset-
based sales charge. During the year ended August 31, 1996, the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class accrued $575,588, $556,024, $242,476 and $96,991,
respectively, as compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of
$15,883 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Fund's directors. A member of that firm is a director of the Fund.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 47,809,368,885 $47,809,368,885 30,516,627,315 $30,516,627,315
- -------------------------------------------------------------------------------------------
Private Investment
Class 1,712,695,255 1,712,695,255 1,403,913,359 1,403,913,359
- -------------------------------------------------------------------------------------------
Personal Investment
Class 976,763,335 976,763,335 881,857,651 881,857,651
- -------------------------------------------------------------------------------------------
Cash Management Class 2,572,268,560 2,572,268,560 307,521,987 307,521,987
- -------------------------------------------------------------------------------------------
Resource Class* 1,501,999,293 1,501,999,293 -- --
- -------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 8,231,944 8,231,944 3,106,371 3,106,371
- -------------------------------------------------------------------------------------------
Private Investment
Class 6,300,025 6,300,025 4,691,704 4,691,704
- -------------------------------------------------------------------------------------------
Personal Investment
Class 5,517,924 5,517,924 4,299,720 4,299,720
- -------------------------------------------------------------------------------------------
Cash Management Class 12,713,851 12,713,851 896,094 896,094
- -------------------------------------------------------------------------------------------
Resource Class* 892,705 892,705 -- --
- -------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (46,305,697,661) (46,305,697,661) (30,847,783,300) (30,847,783,300)
- -------------------------------------------------------------------------------------------
Private Investment
Class (1,663,828,112) (1,663,828,112) (1,285,160,664) (1,285,160,664)
- -------------------------------------------------------------------------------------------
Personal Investment
Class (969,266,851) (969,266,851) (789,592,898) (789,592,898)
- -------------------------------------------------------------------------------------------
Cash Management Class (2,272,214,579) (2,272,214,579) (114,310,578) (114,310,578)
- -------------------------------------------------------------------------------------------
Resource Class* (1,444,879,891) (1,444,879,891) -- --
- -------------------------------------------------------------------------------------------
Net increase 1,950,864,683 $ 1,950,864,683 86,066,761 $ 86,066,761
===========================================================================================
</TABLE>
* The Resource Class commenced operations on January 16, 1996.
FS-56
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Private
Investment Class outstanding during each of the years in the three-year period
ended August 31, 1996 and the period July 8, 1993 (date operations commenced)
through August 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------- -------- -------- ------- -------
Income from investment operations:
Net investment income 0.05 0.05 0.03 0.03
- ---------------------------------- -------- -------- ------- -------
Total from investment operations 0.05 0.05 0.03 0.03
- ---------------------------------- -------- -------- ------- -------
Less distributions:
Dividends from net investment
income (0.05) (0.05) (0.03) (0.03)
- ---------------------------------- -------- -------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------- -------- -------- ------- -------
Total return 5.32% 5.48% 3.33% 3.24%(a)
- ---------------------------------- -------- -------- ------- -------
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $209,443 $154,278 $30,834 $17,857
================================== ======== ======== ======= =======
Ratio of expenses to average net
assets(c) 0.39%(b) 0.39% 0.38% 0.37%(a)
================================== ======== ======== ======= =======
Ratio of net investment income to
average net assets(d) 5.20%(b) 5.50% 3.32% 2.85%(a)
================================== ======== ======== ======= =======
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $191,862,808.
(c) Ratios of expenses to average net assets prior to waiver of distribution
fees and/or expense reimbursements were 0.59%, 0.60%, 1.38% and 0.57% for
the periods 1996-1993, respectively. Ratios are annualized for periods less
than one year.
(d) Ratios of net investment income to average net assets prior to waiver of
distribution fees and/or expense reimbursements were 5.00%, 5.29%, 2.32%
and 2.65% for the periods 1996-1993, respectively. Ratios are annualized
for periods less than one year.
FS-57
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the three-year period then ended and the
period July 8, 1993 (date operations commenced) through August 31, 1993. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Portfolio as of August 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the three-year period then ended and the period July 8, 1993 (date
operations commenced) through August 31, 1993, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-58
<PAGE>
PRIME PORTFOLIO
RESOURCE CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 83.45%(a)
BASIC INDUSTRY - 0.32%
PAPER & FOREST PRODUCTS - 0.32%
Weyerhaeuser Co.
5.29% 10/01/96 $ 20,000 $ 19,911,833
- ------------------------------------------------------------------------
Total Basic Industry 19,911,833
- ------------------------------------------------------------------------
BUSINESS SERVICES - 5.14%
POLLUTION CONTROL SERVICES - 2.42%
Browning-Ferris Industries, Inc.
5.30% 09/16/96 20,000 19,955,834
- ------------------------------------------------------------------------
5.31% 10/11/96 35,000 34,793,500
- ------------------------------------------------------------------------
5.31% 10/15/96 35,000 34,772,850
- ------------------------------------------------------------------------
5.30% 10/16/96 60,000 59,602,500
- ------------------------------------------------------------------------
149,124,684
- ------------------------------------------------------------------------
MISCELLANEOUS - 2.72%
Donnelley (R.R.) & Sons Co.
5.30% 09/17/96 17,850 17,807,954
- ------------------------------------------------------------------------
PHH Corp.
5.28% 09/04/96 20,000 19,991,200
- ------------------------------------------------------------------------
5.28% 09/25/96 50,000 49,824,000
- ------------------------------------------------------------------------
5.28% 10/04/96 30,000 29,854,800
- ------------------------------------------------------------------------
5.26% 10/22/96 50,000 49,627,417
- ------------------------------------------------------------------------
167,105,371
- ------------------------------------------------------------------------
Total Business Services 316,230,055
- ------------------------------------------------------------------------
CAPITAL GOODS - 2.21%
AEROSPACE/DEFENSE - 0.32%
Raytheon Co.
5.32% 09/18/96 20,000 19,949,756
- ------------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT - 1.89%
Electronic Data Systems Corp.
5.29% 10/15/96 20,000 19,870,689
- ------------------------------------------------------------------------
International Business Machines Corp.
5.30% 09/10/96 30,000 29,960,250
- ------------------------------------------------------------------------
Xerox Corp.
5.29% 09/19/96 30,000 29,920,650
- ------------------------------------------------------------------------
5.30% 10/02/96 36,537 36,370,249
- ------------------------------------------------------------------------
116,121,838
- ------------------------------------------------------------------------
Total Capital Goods 136,071,594
- ------------------------------------------------------------------------
</TABLE>
FS-59
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER DURABLES - 4.45%
AUTOMOBILE - 4.29%
Ford Motor Credit Co.
5.37% 09/17/96 $ 50,000 $ 49,880,667
- -------------------------------------------------------------------
5.28% 10/25/96 40,000 39,683,200
- -------------------------------------------------------------------
Toyota Motor Credit Corp.
5.40% 09/05/96 40,000 39,976,000
- -------------------------------------------------------------------
5.40% 09/11/96 40,000 39,940,000
- -------------------------------------------------------------------
5.30% 09/25/96 20,000 19,929,333
- -------------------------------------------------------------------
5.29% 10/07/96 25,000 24,867,750
- -------------------------------------------------------------------
5.24% 10/08/96 25,000 24,865,361
- -------------------------------------------------------------------
5.295% 10/18/96 25,000 24,827,177
- -------------------------------------------------------------------
263,969,488
- -------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION - 0.16%
Weyerhaeuser Real Estate Co.
5.28% 10/04/96 9,800 9,752,568
- -------------------------------------------------------------------
Total Consumer Durables 273,722,056
- -------------------------------------------------------------------
CONSUMER NONDURABLES - 6.44%
BEVERAGES - 0.40%
Coca-Cola Co. (The)
5.23% 10/16/96 25,000 24,836,562
- -------------------------------------------------------------------
DRUGS - 1.70%
Pfizer Inc.
5.27% 09/23/96 10,056 10,023,614
- -------------------------------------------------------------------
5.25% 09/24/96 50,000 49,832,292
- -------------------------------------------------------------------
5.25% 10/03/96 45,000 44,790,000
- -------------------------------------------------------------------
104,645,906
- -------------------------------------------------------------------
FOOD PROCESSING - 2.45%
Heinz (H.J.) Co.
5.29% 09/05/96 10,200 10,194,005
- -------------------------------------------------------------------
5.28% 09/09/96 11,000 10,987,093
- -------------------------------------------------------------------
5.28% 09/24/96 9,278 9,246,702
- -------------------------------------------------------------------
5.28% 10/02/96 29,000 28,868,147
- -------------------------------------------------------------------
5.25% 10/07/96 20,000 19,895,000
- -------------------------------------------------------------------
5.25% 10/08/96 25,000 24,865,104
- -------------------------------------------------------------------
5.27% 10/11/96 12,000 11,929,733
- -------------------------------------------------------------------
5.28% 10/15/96 15,000 14,903,200
- -------------------------------------------------------------------
Nestle Capital Co.
5.24% 09/24/96 20,000 19,933,044
- -------------------------------------------------------------------
150,822,028
- -------------------------------------------------------------------
</TABLE>
FS-60
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
CONSUMER NONDURABLES - (continued)
HOUSEHOLD PRODUCTS - 1.32%
Colgate-Palmolive Co.
5.37% 09/04/96 $ 41,000 $ 40,981,652
- -------------------------------------------------------------------------
5.27% 09/27/96 40,000 39,847,756
- -------------------------------------------------------------------------
80,829,408
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.57%
Unilever Capital Co.
5.22% 09/17/96 35,000 34,918,800
- -------------------------------------------------------------------------
Total Consumer Nondurables 396,052,704
- -------------------------------------------------------------------------
ENERGY - 3.93%
OIL & GAS - 3.93%
Koch Industries Inc.
5.36% 09/17/96 13,587 13,554,633
- -------------------------------------------------------------------------
Mobil Australia Finance Co., Inc.
5.41% 09/13/96 78,818 78,675,865
- -------------------------------------------------------------------------
Petrofina Delaware, Inc.
5.29% 09/03/96 25,000 24,992,653
- -------------------------------------------------------------------------
5.38% 09/12/96 25,000 24,958,903
- -------------------------------------------------------------------------
Shell Oil Co.
5.35% 09/03/96 50,000 49,985,139
- -------------------------------------------------------------------------
5.25% 10/16/96 50,000 49,671,875
- -------------------------------------------------------------------------
Total Energy 241,839,068
- -------------------------------------------------------------------------
FINANCIAL - 56.00%
ASSET-BACKED SECURITIES - 25.28%
Asset Securitization Cooperative Corp.
5.45% 09/03/96 70,000 69,978,805
- -------------------------------------------------------------------------
5.40% 09/12/96 50,000 49,917,500
- -------------------------------------------------------------------------
5.38% 09/18/96 40,000 39,898,378
- -------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -------------------------------------------------------------------------
5.28% 10/03/96 30,000 29,859,200
- -------------------------------------------------------------------------
5.29% 10/03/96 26,000 25,877,742
- -------------------------------------------------------------------------
5.26% 10/17/96 25,000 24,831,972
- -------------------------------------------------------------------------
5.26% 10/18/96 50,000 49,656,639
- -------------------------------------------------------------------------
Ciesco, L.P.
5.44% 09/04/96 47,300 47,278,558
- -------------------------------------------------------------------------
5.42% 09/05/96 60,000 59,963,867
- -------------------------------------------------------------------------
5.30% 09/09/96 40,000 39,952,889
- -------------------------------------------------------------------------
5.33% 09/10/96 10,000 9,986,675
- -------------------------------------------------------------------------
5.35% 09/18/96 25,000 24,936,840
- -------------------------------------------------------------------------
</TABLE>
FS-61
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Clipper Receivables Corp.
5.30% 09/11/96 $ 50,000 $ 49,926,389
- ------------------------------------------------------------------------
5.31% 09/16/96 15,075 15,041,647
- ------------------------------------------------------------------------
5.32% 09/19/96 50,000 49,867,000
- ------------------------------------------------------------------------
5.30% 09/24/96 50,000 49,830,694
- ------------------------------------------------------------------------
5.30% 09/25/96 55,000 54,805,667
- ------------------------------------------------------------------------
5.28% 09/26/96 83,414 83,108,149
- ------------------------------------------------------------------------
5.27% 10/01/96 30,000 29,868,250
- ------------------------------------------------------------------------
5.28% 10/01/96 20,000 19,912,000
- ------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.29% 10/07/96 50,000 49,735,500
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.28% 09/10/96 30,355 30,314,931
- ------------------------------------------------------------------------
5.31% 09/18/96 68,000 67,829,490
- ------------------------------------------------------------------------
5.28% 09/20/96 30,000 29,916,400
- ------------------------------------------------------------------------
5.30% 10/04/96 50,269 50,024,776
- ------------------------------------------------------------------------
5.30% 10/08/96 40,000 39,782,111
- ------------------------------------------------------------------------
5.30% 10/11/96 16,704 16,605,632
- ------------------------------------------------------------------------
5.31% 10/17/96 35,000 34,762,525
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.30% 09/10/96 41,151 41,096,475
- ------------------------------------------------------------------------
5.28% 09/11/96 13,745 13,724,841
- ------------------------------------------------------------------------
5.35% 09/20/96 35,000 34,901,174
- ------------------------------------------------------------------------
5.28% 10/08/96 20,000 19,891,467
- ------------------------------------------------------------------------
5.28% 10/21/96 50,000 49,633,333
- ------------------------------------------------------------------------
5.28% 10/22/96 45,000 44,663,400
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.30% 09/27/96 67,325 67,067,295
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.34% 09/20/96 10,654 10,623,973
- ------------------------------------------------------------------------
5.36% 09/20/96 50,000 49,858,555
- ------------------------------------------------------------------------
5.35% 09/23/96 15,256 15,206,121
- ------------------------------------------------------------------------
5.28% 10/03/96 17,529 17,446,731
- ------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.45% 09/05/96 22,500 22,486,375
- ------------------------------------------------------------------------
1,554,959,549
- ------------------------------------------------------------------------
</TABLE>
FS-62
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
BROKERAGE/INVESTMENTS - 11.10%
Bear, Stearns & Co. Inc.
5.45% 09/06/96 $ 50,000 $ 49,962,153
- -------------------------------------------------------------------------------
5.31% 10/09/96 50,000 49,719,750
- -------------------------------------------------------------------------------
First Boston Corp. (The)
5.32% 10/07/96 50,000 49,734,000
- -------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.30% 09/03/96 75,000 74,977,917
- -------------------------------------------------------------------------------
Merrill Lynch & Co. Inc.
5.45% 09/06/96 100,000 99,924,305
- -------------------------------------------------------------------------------
5.46% 09/06/96 50,000 49,962,083
- -------------------------------------------------------------------------------
5.30% 10/11/96 30,000 29,823,333
- -------------------------------------------------------------------------------
5.30% 10/15/96 25,000 24,838,056
- -------------------------------------------------------------------------------
5.30% 10/17/96 40,000 39,729,111
- -------------------------------------------------------------------------------
5.28% 10/18/96 50,000 49,655,333
- -------------------------------------------------------------------------------
Morgan Stanley Group, Inc.
5.30% 10/18/96 40,000 39,723,222
- -------------------------------------------------------------------------------
Smith Barney Inc.
5.33% 09/09/96 50,000 49,940,778
- -------------------------------------------------------------------------------
5.38% 09/19/96 50,000 49,865,500
- -------------------------------------------------------------------------------
5.31% 10/08/96 25,000 24,863,563
- -------------------------------------------------------------------------------
682,719,104
- -------------------------------------------------------------------------------
BUSINESS CREDIT - 2.88%
CIT Group Holdings, Inc.
5.40% 09/13/96 50,000 49,910,000
- -------------------------------------------------------------------------------
5.30% 10/03/96 30,000 29,858,667
- -------------------------------------------------------------------------------
5.29% 10/11/96 30,000 29,823,667
- -------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.30% 10/03/96 20,000 19,905,778
- -------------------------------------------------------------------------------
5.30% 10/04/96 18,300 18,211,093
- -------------------------------------------------------------------------------
5.29% 10/18/96 10,000 9,930,936
- -------------------------------------------------------------------------------
5.28% 10/25/96 20,000 19,841,600
- -------------------------------------------------------------------------------
177,481,741
- -------------------------------------------------------------------------------
INSURANCE - 2.27%
A.I. Credit Corp.
5.23% 09/26/96 30,000 29,891,042
- -------------------------------------------------------------------------------
5.30% 10/07/96 15,000 14,920,500
- -------------------------------------------------------------------------------
Prudential Funding Corp.
5.38% 09/17/96 50,000 49,880,444
- -------------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -------------------------------------------------------------------------------
5.33% 10/29/96 20,000 19,828,256
- -------------------------------------------------------------------------------
139,388,242
- -------------------------------------------------------------------------------
</TABLE>
FS-63
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - 7.49%
Associates Corp. of North America
5.40% 09/23/96 $ 50,000 $ 49,835,000
- --------------------------------------------------------------------
AVCO Financial Services, Inc.
5.30% 10/11/96 35,000 34,793,889
- --------------------------------------------------------------------
Student Loan Corp.
5.30% 10/23/96 25,000 24,808,611
- --------------------------------------------------------------------
5.29% 10/25/96 50,000 49,603,250
- --------------------------------------------------------------------
Transamerica Finance Corp.
5.37% 09/09/96 33,200 33,160,381
- --------------------------------------------------------------------
5.36% 09/19/96 20,000 19,946,400
- --------------------------------------------------------------------
5.35% 09/20/96 10,000 9,971,764
- --------------------------------------------------------------------
5.29% 09/23/96 29,000 28,906,249
- --------------------------------------------------------------------
5.30% 10/02/96 24,000 23,890,467
- --------------------------------------------------------------------
5.30% 10/09/96 10,000 9,944,056
- --------------------------------------------------------------------
5.29% 10/17/96 24,000 23,837,773
- --------------------------------------------------------------------
5.27% 10/18/96 30,000 29,793,592
- --------------------------------------------------------------------
5.26% 10/21/96 75,000 74,452,083
- --------------------------------------------------------------------
5.27% 10/21/96 23,500 23,327,993
- --------------------------------------------------------------------
5.26% 10/22/96 25,000 24,813,708
- --------------------------------------------------------------------
461,085,216
- --------------------------------------------------------------------
MISCELLANEOUS - 4.22%
Hertz Corp. (The)
5.45% 09/06/96 100,000 99,924,305
- --------------------------------------------------------------------
5.30% 10/25/96 25,000 24,801,250
- --------------------------------------------------------------------
International Lease Finance Corp.
5.40% 09/13/96 15,700 15,671,740
- --------------------------------------------------------------------
5.39% 09/18/96 29,000 28,926,187
- --------------------------------------------------------------------
5.35% 09/20/96 50,000 49,858,820
- --------------------------------------------------------------------
5.35% 09/23/96 20,500 20,432,976
- --------------------------------------------------------------------
USAA Capital Corp.
5.30% 09/05/96 20,000 19,988,222
- --------------------------------------------------------------------
259,603,500
- --------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.76%
American Express Credit Co.
5.31% 10/04/96 50,000 49,756,625
- --------------------------------------------------------------------
General Electric Capital Corp.
5.30% 09/04/96 25,000 24,988,959
- --------------------------------------------------------------------
5.35% 09/06/96 95,000 94,929,409
- --------------------------------------------------------------------
169,674,993
- --------------------------------------------------------------------
Total Financial 3,444,912,345
- --------------------------------------------------------------------
</TABLE>
FS-64
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
RETAIL - 1.64%
DEPARTMENT STORES - 1.30%
Penney (J.C.) Funding Corp.
5.29% 09/16/96 $ 50,000 $ 49,889,792
- -----------------------------------------------------------------------------
5.28% 09/24/96 30,000 29,898,800
- -----------------------------------------------------------------------------
79,788,592
- -----------------------------------------------------------------------------
SPECIALTY STORES - 0.34%
Toys "R" Us, Inc.
5.30% 09/16/96 21,300 21,252,962
- -----------------------------------------------------------------------------
Total Retail 101,041,554
- -----------------------------------------------------------------------------
OTHER - 3.32%
DIVERSIFIED - 3.32%
BTR Dunlop Finance Inc.
5.40% 09/13/96 30,000 29,946,000
- -----------------------------------------------------------------------------
5.38% 09/23/96 50,000 49,835,611
- -----------------------------------------------------------------------------
5.30% 10/01/96 25,000 24,889,583
- -----------------------------------------------------------------------------
5.26% 10/21/96 40,000 39,707,778
- -----------------------------------------------------------------------------
Cargill Financial Services Corp.
5.27% 10/21/96 10,000 9,926,806
- -----------------------------------------------------------------------------
Cargill Inc.
5.28% 10/04/96 25,000 24,879,000
- -----------------------------------------------------------------------------
5.28% 10/07/96 25,000 24,868,000
- -----------------------------------------------------------------------------
Total Other 204,052,778
- -----------------------------------------------------------------------------
Total Commercial Paper 5,133,833,987
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENT - 0.44%
Goldman Sachs Group (The), L.P.(b)
5.423% 10/25/96 27,000 27,000,000
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 5,160,833,987
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 16.59%(c)
Daiwa Securities America, Inc.(d)
5.24% 09/03/96 44,115 44,114,604
- -----------------------------------------------------------------------------
Goldman, Sachs & Co.(e)
5.28% 09/03/96 300,000 300,000,000
- -----------------------------------------------------------------------------
HSBC Securities, Inc.
5.27%(f) 09/03/96 36,000 36,000,000
- -----------------------------------------------------------------------------
5.28%(g) 09/03/96 139,336 139,336,009
- -----------------------------------------------------------------------------
Morgan Stanley & Co. Inc.(h)
5.28% 09/03/96 65,000 65,000,000
- -----------------------------------------------------------------------------
Nikko Securities Co., International,
Inc.(i)
5.30% 09/03/96 100,000 100,000,000
- -----------------------------------------------------------------------------
Nomura Securities International, Inc.(j)
5.27% -- 156,000 156,000,000
- -----------------------------------------------------------------------------
</TABLE>
FS-65
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Smith Barney, Inc.(k)
5.28% 09/03/96 $ 84,000 $ 84,000,000
- --------------------------------------------------------------------------
UBS Securities LLC(l)
5.26% 09/03/96 96,000 96,000,000
- --------------------------------------------------------------------------
Total Repurchase Agreements 1,020,450,613
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.48% 6,181,284,600 (m)
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -
(0.48%) (29,336,245)
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $6,151,948,355
==========================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rate shown is the rate in effect on August 31, 1996.
(c) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales price
of the repurchase agreement. The investments in some repurchase agreements
are through participation in joint accounts with other mutual funds,
private accounts and certain non-registered investment companies managed by
the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
(e) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$834,779,144. Collateralized by $823,484,000 U.S. Treasury obligations, 0%
to 10.75% due 10/10/96 to 08/15/05.
(f) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$100,058,556. Collateralized by $42,013,000 U.S. Government Agency
obligations, 0% due 10/10/96 to 10/21/96 and $58,016,000 U.S. Treasury
obligations, 6.00% to 8.00% due 07/31/99 to 12/31/99.
(g) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(h) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(i) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$300,176,668. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(j) Open joint repurchase agreement entered into 07/16/96; however, either
party may terminate the agreement upon demand. Interest rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(k) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and $18,291,000 U.S.
Treasury obligations, 0% due 11/15/04.
(l) Joint repurchase agreement entered into 08/30/96 with a maturing value of
$200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(m) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-66
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $5,160,833,987
- ------------------------------------------------------------------------
Repurchase agreements 1,020,450,613
- ------------------------------------------------------------------------
Interest receivable 431,498
- ------------------------------------------------------------------------
Investment for deferred compensation plan 56,031
- ------------------------------------------------------------------------
Other assets 1,079,694
- ------------------------------------------------------------------------
Total assets 6,182,851,823
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 30,043,232
- ------------------------------------------------------------------------
Deferred compensation 56,031
- ------------------------------------------------------------------------
Accrued advisory fees 319,722
- ------------------------------------------------------------------------
Accrued distribution fees 138,772
- ------------------------------------------------------------------------
Accrued transfer agent fees 85,716
- ------------------------------------------------------------------------
Accrued operating expenses 259,995
- ------------------------------------------------------------------------
Total liabilities 30,903,468
- ------------------------------------------------------------------------
NET ASSETS $6,151,948,355
========================================================================
NET ASSETS:
Institutional Class $5,264,600,762
========================================================================
Private Investment Class $ 209,443,494
========================================================================
Personal Investment Class $ 112,644,595
========================================================================
Cash Management Class $ 507,247,366
========================================================================
Resource Class $ 58,012,138
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class 5,264,608,015
========================================================================
Private Investment Class 209,445,352
========================================================================
Personal Investment Class 112,644,015
========================================================================
Cash Management Class 507,247,359
========================================================================
Resource Class 58,012,107
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-67
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $287,932,532
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 3,007,431
- -------------------------------------------------------------------
Custodian fees 305,946
- -------------------------------------------------------------------
Administrative services fees 126,321
- -------------------------------------------------------------------
Directors' fees and expenses 44,043
- -------------------------------------------------------------------
Transfer agent fees 426,413
- -------------------------------------------------------------------
Distribution fees (Note 2) 1,471,079
- -------------------------------------------------------------------
Other 782,028
- -------------------------------------------------------------------
Total expenses 6,163,261
- -------------------------------------------------------------------
Less expenses assumed by advisor (61,100)
===================================================================
Net expenses 6,102,161
===================================================================
Net investment income 281,830,371
===================================================================
Net realized gain on sales of investments 3,560
===================================================================
Net increase in net assets resulting from operations $281,833,931
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-68
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 281,830,371 $ 241,891,385
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 3,560 --
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 281,833,931 241,891,385
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (281,830,371) (241,891,385)
- ----------------------------------------------------------------------------
Capital stock transactions-net 1,950,864,683 86,066,761
- ----------------------------------------------------------------------------
Net increase in net assets 1,950,868,243 86,066,761
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,201,080,112 4,115,013,351
- ----------------------------------------------------------------------------
End of period $6,151,948,355 $4,201,080,112
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $6,151,956,848 $4,201,092,165
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (8,493) (12,053)
- ----------------------------------------------------------------------------
$6,151,948,355 $4,201,080,112
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-69
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
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 Prime Portfolio and the Liquid Assets Portfolio. Information presented in
these financial statements pertains only to the Prime Portfolio (the
"Portfolio"). The assets, liabilities and operations of each portfolio are
accounted for separately. The Portfolio consists of five different classes of
shares: the Institutional Class, the Private Investment Class, the Personal
Investment Class, the Cash Management Class and the Resource Class. Matters
affecting each class are voted on exclusively by the shareholders of each
class. The Portfolio's objective is the maximization of current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity
The following is a summary of the significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of sixty days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more
than one class, e.g., advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a monthly fee with respect to the Portfolio calculated by applying a
monthly rate, based upon the following annual rates, to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
------------------------------------------------------
<S> <C>
First $100 million 0.20%
------------------------------------------------------
Over $100 million to $200 million 0.15%
------------------------------------------------------
Over $200 million to $300 million 0.10%
------------------------------------------------------
Over $300 million to $1.5 billion 0.06%
------------------------------------------------------
Over $1.5 billion 0.05%
------------------------------------------------------
</TABLE>
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. AIM voluntarily reimbursed
expenses of $61,100 during the year ended August 31, 1996.
FS-70
<PAGE>
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1996,
the Portfolio reimbursed AIM $126,321 for such services. During the year ended
August 31, 1996, the Fund paid A I M Institutional Fund Services, Inc. ("AIFS")
$424,496 pursuant to a shareholder and transfer agency services agreement.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class of the Portfolio. The Plan provides that the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class may pay FMC up to a maximum annual rate of 0.50%, 0.75%,
0.10% and 0.20%, respectively, of the average daily net assets attributable to
such class. Of this amount, the Fund may pay a service fee of (a) 0.25% of the
average daily net assets of each of the Private Investment Class and the
Personal Investment Class, (b) 0.10% of the average daily net assets of the
Cash Management Class and (c) 0.20% of the average daily net assets of the
Resource Class, to selected banks, broker-dealers and other financial
institutions who offer continuing personal shareholder services to their
customers who purchase and own shares of the Private Investment Class, the
Personal Investment Class, the Cash Management Class or the Resource Class. Any
amounts not paid as a service fee under such Plan would constitute an asset-
based sales charge. During the year ended August 31, 1996, the Private
Investment Class, the Personal Investment Class, the Cash Management Class and
the Resource Class accrued $575,588, $556,024, $242,476 and $96,991,
respectively, as compensation to FMC under the Plan. Certain officers and
directors of the Fund are officers of AIM, FMC and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of
$15,883 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Fund's directors. A member of that firm is a director of the Fund.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 47,809,368,885 $47,809,368,885 30,516,627,315 $30,516,627,315
- ------------------------------------------------------------------------------------------
Private Investment
Class 1,712,695,255 1,712,695,255 1,403,913,359 1,403,913,359
- ------------------------------------------------------------------------------------------
Personal Investment
Class 976,763,335 976,763,335 881,857,651 881,857,651
- ------------------------------------------------------------------------------------------
Cash Management Class 2,572,268,560 2,572,268,560 307,521,987 307,521,987
- ------------------------------------------------------------------------------------------
Resource Class* 1,501,999,293 1,501,999,293 -- --
- ------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 8,231,944 8,231,944 3,106,371 3,106,371
- ------------------------------------------------------------------------------------------
Private Investment
Class 6,300,025 6,300,025 4,691,704 4,691,704
- ------------------------------------------------------------------------------------------
Personal Investment
Class 5,517,924 5,517,924 4,299,720 4,299,720
- ------------------------------------------------------------------------------------------
Cash Management Class 12,713,851 12,713,851 896,094 896,094
- ------------------------------------------------------------------------------------------
Resource Class* 892,705 892,705 -- --
- ------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (46,305,697,661) (46,305,697,661) (30,847,783,300) (30,847,783,300)
- ------------------------------------------------------------------------------------------
Private Investment
Class (1,663,828,112) (1,663,828,112) (1,285,160,664) (1,285,160,664)
- ------------------------------------------------------------------------------------------
Personal Investment
Class (969,266,851) (969,266,851) (789,592,898) (789,592,898)
- ------------------------------------------------------------------------------------------
Cash Management Class (2,272,214,579) (2,272,214,579) (114,310,578) (114,310,578)
- ------------------------------------------------------------------------------------------
Resource Class* (1,444,879,891) (1,444,879,891) -- --
- ------------------------------------------------------------------------------------------
Net increase 1,950,864,683 $ 1,950,864,683 86,066,761 $ 86,066,761
==========================================================================================
</TABLE>
* The Resource Class commenced operations on January 16, 1996.
FS-71
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding of
the Resource Class during the period January 16, 1996 (date operations
commenced) through August 31, 1996.
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Net asset value, beginning of period $ 1.00
- ---------------------------------------------------- -------
Income from investment operations:
Net investment income 0.03
- ---------------------------------------------------- -------
Total from investment operations 0.03
- ---------------------------------------------------- -------
Less distributions:
Dividends from net investment income (0.03)
- ---------------------------------------------------- -------
Net asset value, end of period $ 1.00
==================================================== =======
Total return 5.23%(a)
==================================================== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,012
==================================================== =======
Ratio of expenses to average net assets 0.25%(b)(c)
==================================================== =======
Ratio of net investment income to average net assets 5.18%(b)(d)
==================================================== =======
</TABLE>
(a) Annualized.
(b) Ratios are annualized and based on average net assets of $96,885,122.
(c) Annualized ratio of expenses to average net assets prior to waiver of
distribution fees was 0.29%.
(d) Annualized ratio of net investment income to average net assets prior to
waiver of distribution fees was 5.14%.
FS-72
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for the period January 16, 1996 (date operations commenced) through
August 31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Portfolio as of August 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for the period January
16, 1996 (date operations commenced) through August 31, 1996, in conformity
with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-73
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 high a level of current income as is
CASH consistent with the preservation of capital and liquidity. The Portfolio seeks
MANAGEMENT to achieve its objective by investing in high quality money market instruments
CLASS such as U.S. Government obligations, bank obligations, commercial instruments
and repurchase agreements.
DECEMBER 30, 1996
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end diversified series management investment company. This
Prospectus relates solely to the Cash Management Class of the Portfolio, a
class of shares designed to be a convenient and economical vehicle in which
institutions can invest short-term cash reserves.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class, the Private Investment Class
and the MSTC Cash Reserves Class, as well as shares of classes of another
portfolio, the Prime Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE CASH MANAGEMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE"SEC") AND IS HEREBY INCORPORATED
BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION WITHOUT
CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-7745. THE SEC MAINTAINS A
WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT OF ADDITIONAL
INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER INFORMATION
REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7745
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Cash Management
Class (the "Class") of the Portfolio at net asset value. The Portfolio is a
money market fund which invests in money market instruments, such as U.S.
Government Agencies obligations, bank obligations, commercial instruments and
repurchase agreements. The investment objective of the Portfolio is to provide
as high a level of current income as is consistent with the preservation of
capital and liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Prime Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as "Portfolios."
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical vehicle in which
institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Class may not be purchased by individuals
directly, institutions may purchase shares for accounts maintained for
individuals. See "Suitability for Investors."
PURCHASE OF SHARES
Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $1,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in federal funds or other funds immediately available to the Portfolio.
See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 4:00 p.m. Eastern Time will normally be made on the same day. See
"Redemption of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "Net Asset
Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
2
<PAGE>
On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on
February 7, 1997 (the "Annual Meeting"). The Board of Directors has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on
February 28, 1997. Provided that the Portfolio's shareholders approve the new
advisory agreement at the Annual Meeting and the merger is consummated, the new
advisory agreement with respect to the Portfolio, as well as the new
administrative services and distribution agreements, will automatically become
effective as of the closing of the merger.
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
.10% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions as compensation for distribution-related services. See "Purchase
of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of
foreign branches of major domestic banks and in repurchase agreements. The
Portfolio may purchase delayed delivery or when-issued securities. Accordingly,
an investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--CASH MANAGEMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)--CASH MANAGEMENT CLASS**
Management Fees (after waivers)......................................... 0.02%
12b-1 Fees (after waivers).............................................. 0.08%
Other Expenses (estimated).............................................. 0.03%
----
Total Operating Expenses--Cash Management Class......................... 0.13%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** The fees and expenses set forth in the table are based on estimated average
net assets of the Class' and current fee waivers. Had there been no waivers,
Management Fees, 12b-1 Fees and Total Operating Expenses would be 0.15%,
0.10% and 0.28%, respectively.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year........................................................... $ 1
3 years.......................................................... $ 4
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Class will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) Management fees, 12b-1 fees and other
expenses have been estimated and reflect current fee waivers. Thus, actual
expenses may be greater or less than such estimates. There can be no assurance
that future waivers of fees (if any) will not vary from the figures reflected
in the Table of Fees and Expenses. To the extent any service providers assume
expenses of the Class, such assumption of expenses will have the effect of
lowering the Class' overall expense ratio and increasing its yield to
investors. Beneficial owners of shares of the Class should also consider the
effect of any charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Cash Management Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for the period January 17, 1996 (date operations
commenced) through August 31, 1996. 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>
JANUARY 17,
1996
(COMMENCEMENT
OF
OPERATIONS)
TO AUGUST 31,
1996
-------------
<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..................................................... 5.36%(a)
=======
Ratios/supplemental data:
Net assets, end of period (000s omitted)......................... $53,209
=======
Ratio of expenses to average net assets.......................... 0.10%(b)
=======
Ratio of net investment income to average net assets............. 5.27%(b)
=======
</TABLE>
(a) Annualized.
(b) After waiver of advisory fees, distribution fees and expense
reimbursements. Ratios are annualized and based on average net assets of
$21,002,559. Annualized ratios of expenses and net investment income to
average net assets prior to waivers and reimbursements were 0.34% and
5.03%, respectively.
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or other
similar capacity. It is designed to be a convenient and economical vehicle in
which such institutions can invest short-term cash reserves. Shares of the
Class may not be purchased directly by individuals, although institutions may
purchase shares for accounts maintained by individuals. Prospective investors
should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day. Sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
5
<PAGE>
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, taxable municipal securities, 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 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.
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.
6
<PAGE>
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. 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.
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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 SEC, or privately
without such a registration.
COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note on relatively short notice.
REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. Repurchase transactions are limited to a term not to exceed 365 days.
The Portfolio may enter into repurchase agreements only with institutions
believed by the Fund's Board of Directors to present minimal credit risk. With
regard to repurchase transactions, in the event of a bankruptcy or other
default of a seller of a repurchase agreement (such as the seller's failure to
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying securities
and losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities, 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. Reverse repurchase transactions
are limited to a term not to exceed 92 days. 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:
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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.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
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.
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.
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<PAGE>
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below and notice of such order is
provided to the Portfolio's transfer agent or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which is
not accepted by the Portfolio and any funds received for which an order has not
been received will be returned to the sending institution. An order to purchase
shares of the Class must specify that the "Cash Management Class of the Liquid
Assets Portfolio" is being purchased; otherwise, any funds received will be
returned to the sending institution.
The minimum initial investment in the Class is $1,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
held by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary,
and (b) for accounts for which the institution acts in some other capacity. An
institution's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS") at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
Banks will be required to certify to the Fund that they comply with
applicable state law regarding registration as broker-dealers, or that they are
exempt from such registration.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
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REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the Fund intends to maintain the net asset value per
share of the Portfolio at $1.00 per share. See "Net Asset Value." Redemption
requests with respect to shares of the Class for which certificates have not
been issued are normally made by calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Portfolio to be
redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by AIFS after 4:00 p.m. Eastern
Time or on other than a business day of the Portfolio, the redemption will be
effected at the net asset value of the Portfolio determined as of 4:00 p.m.
Eastern Time on the next business day of the Portfolio, and the proceeds of
such redemption will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmation promptly
after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Portfolio may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in the net asset value of the Portfolio, they are not expected to
be of an amount which would affect the Portfolio's net asset value of $1.00 per
share for purposes of purchases and redemptions. See "Net Asset Value."
Distributions from net realized short-term gains may be declared and paid
yearly or more frequently. See "Taxes." The Portfolio does not expect to
realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Portfolio at the net asset value
of such shares as of 4:00 p.m. Eastern Time on the last business day
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<PAGE>
of the month. Such election, or any revocation thereof, must be made in writing
by the shareholder to AIFS at 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173 and will become effective with dividends paid after its receipt by
AIFS. If a shareholder redeems all the shares in its account at any time during
the month, all dividends declared through the date of redemption are paid to
the shareholder along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's Board of Directors would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent to the extent possible the net asset value per share of the
Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
TAXES
The Portfolio's policy is to distribute to its shareholders at least 90% of
its investment company taxable income for each year and consistent therewith to
meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Portfolio. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend before February 1 of the next
year, a shareholder will be treated for tax purposes as having received the
dividend in the year in which it is declared rather than in January when it is
paid. It is anticipated that no portion of distributions will be eligible for
the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
For purposes of determining taxable income, distribution requirements and
other requirements of Subchapter M, the Portfolio will be treated as a separate
corporation. Therefore, one portfolio of the Fund may not offset its gains
against the other portfolio's losses and each portfolio must specifically
comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
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<PAGE>
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.
YIELD INFORMATION
Yield information for the Class can be obtained by calling FMC at (800) 877-
7745. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.27% and 5.41%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
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MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Certain directors and officers of the Fund are
affiliated with AIM and AIM Management, a holding company engaged in the
financial services business. Information concerning the Board of Directors may
be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages, advises or administers 41 investment company portfolios. As of
December 9, 1996, the total assets of such investment company portfolios were
approximately $63.6 billion. AIM is a wholly-owned subsidiary of AIM
Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees with respect to
the Portfolio which represented 0.01% of the Portfolio's average daily net
assets. During such fiscal year, the expenses of the Class, including AIM's
fees, amounted to 0.10% (annualized) of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Fund's Board of
Directors for providing specified administrative services. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services, as well as the services of
staff responding to various shareholder inquiries.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expenses prior to the end of each fiscal year. FMC may in its discretion
from time to time agree to waive voluntarily its 12b-1 fee but will retain its
ability to be reimbursed prior to the end of the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of
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<PAGE>
the Fund are affiliated with FMC and AIM Management. The Distribution Agreement
provides that FMC has the exclusive right to distribute shares of the Portfolio
either directly or through other broker-dealers, and receives no fees for its
services with respect to the Portfolio pursuant to the Distribution Agreement.
FMC is the distributor of several other mutual funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or Institutions who
have sold or may sell significant amounts of shares. The total amount of such
additional bonus payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.10% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund and may be used to finance
such distribution-related services as expenses of organizing and conducting
sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Plan.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments retained by FMC would be characterized as an asset-based sales
charge pursuant to the Plan. The Plan also imposes a cap on the total amount of
sales charges, including asset-based sales charges, that may be paid by the
Portfolio with respect to the Class. The Plan does not obligate the Fund to
reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund will not be obligated to pay more than that fee. If FMC's
expenses are less than the fee it receives, FMC will retain the full amount of
the fee.
As required by Rule 12b-1 under the 1940 Act, the Plan was initially approved
by the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 19, 1993. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes cast in person at a meeting
called for the purpose of voting upon such amendment. As long as the Plan is in
effect, the selection or nomination of the Qualified Directors is committed to
the discretion of the Qualified Directors.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund except those listed in the next sentence are
prorated among all
15
<PAGE>
classes of such Portfolios. Distribution and service fees, transfer agency fees
and shareholder recordkeeping fees which are directly attributable to a
specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into nine classes, of which four represent interests in
the Portfolio and the remaining five represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable to or allocated to
the respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares. As of December
1, 1996, Oppenheimer & Co. was the owner of record of 31.63%, and Fund Services
Associates was the owner of record of 49.49% of the outstanding shares of the
Class. As long as each of Oppenheimer & Co. and Fund Services Associates owns
over 25% of such shares, it may be presumed to be in "control" of the Cash
Management Class of the Liquid Assets Portfolio, as defined in the 1940 Act.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
16
<PAGE>
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7745.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 877-7745
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 CASH MANAGEMENT CLASS
Houston, Texas 77046-1173
(800) 877-7745 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
Summary.......................... 2
CUSTODIAN
THE BANK OF NEW YORK Table of Fees and Expenses....... 4
90 Washington Street
11th Floor Financial Highlights............. 5
New York, New York 10286
Suitability For Investors........ 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. Investment Program............... 5
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 Purchase of Shares............... 10
Redemption of Shares............. 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE Dividends........................ 11
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS Taxes............................ 12
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND Net Asset Value.................. 13
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED Yield Information................ 13
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THIS Reports to Shareholders.......... 13
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY Management of the Fund........... 14
PERSON TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE. General Information.............. 16
</TABLE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 high a level of current income as is
INSTITUTIONAL consistent with the preservation of capital and liquidity. The Portfolio seeks
CLASS to achieve its objective by investing in high quality money market instruments
such as U.S. Government obligations, bank obligations, commercial instruments
DECEMBER 30, 1996 and repurchase agreements.
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end diversified series management investment company. This
Prospectus relates solely to the Institutional Class of the Portfolio, a class
of shares designed to be a convenient and economical vehicle in which
institutions can invest short-term cash reserves.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Cash Management Class, the Private Investment Class
and the MSTC Cash Reserves Class, as well as shares of classes of another
portfolio, the Prime Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE INSTITUTIONAL CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 659-1005.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 659-1005
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Institutional Class
(the "Class") of the Portfolio at net asset value. The Portfolio is a money
market fund which invests in money market instruments, such as U.S. Government
Agencies obligations, bank obligations, commercial instruments and repurchase
agreements. The investment objective of the Portfolio is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Prime Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as "Portfolios."
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical vehicle in which
institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Class may not be purchased by individuals
directly, institutions may purchase shares for accounts maintained for
individuals. See "Suitability for Investors."
PURCHASE OF SHARES
Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $10,000,000. There is no minimum
amount for subsequent investments. Payment for shares of the Class purchased
must be in federal funds or other funds immediately available to the Portfolio.
See "Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 4:00 p.m. Eastern Time will normally be made on the same day.
See"Redemption of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "Net Asset
Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an Administrative Services Agreement, AIM may be reimbursed by
the Fund for its costs of performing certain accounting and other
administrative services for the Fund. See "Management of the Fund--Investment
Advisor" and "--Administrator."
2
<PAGE>
On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on
February 7, 1997 (the "Annual Meeting"). The Board of Directors has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on February
28, 1997. Provided that the Portfolio's shareholders approve the new advisory
agreement at the Annual Meeting and the merger is consummated, the new advisory
agreement with respect to the Portfolio, as well as the new administrative
services and distribution agreements, will automatically become effective as of
the closing of the merger.
DISTRIBUTOR
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. FMC does not receive any fee for distribution services
from the Fund with respect to the shares of the Class. See "Management of the
Fund--Distributor."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of
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.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--INSTITUTIONAL CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)--INSTITUTIONAL CLASS
Management Fees**....................................................... 0.02%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... 0.03%
----
Total Operating Expenses--Institutional Class **........................ 0.05%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** Had there been no fee waivers, Management Fees and Total Operating Expenses
would have been 0.15% and 0.18%, respectively.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year.......................................................... $ 1
3 years......................................................... $ 2
5 years......................................................... $ 3
10 years......................................................... $ 6
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Class will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) Expenses have been restated to reflect
current fee waivers. There can be no assurance that future waivers of fees (if
any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume expenses of the Class,
such assumption of expenses will have the effect of lowering the Class' overall
expense ratio and increasing its yield to investors. Beneficial owners of
shares of the Class should also consider the effect of any charges imposed by
the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Institutional Class" remain the same in the years
shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for each of the years in the two year period ended
August 31, 1996 and the period November 4, 1993 (date operations commenced)
through August 31, 1994. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
NOVEMBER 4,1993
(COMMENCEMENT
OF OPERATIONS)
TO AUGUST 31,
1996 1995 1994
---------- ---------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of
period............................ $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............ 0.06 0.06 0.03
---------- ---------- ----------
Less distributions:
Dividends from net investment
income.......................... (0.06) (0.06) (0.03)
---------- ---------- ----------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
Total return....................... 5.68% 5.83% 3.83%(a)
========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s
omitted).......................... $1,988,755 $1,287,463 $1,028,350
========== ========== ==========
Ratio of expenses to average net
assets(c)......................... 0.03%(b) 0.11% 0.05%(a)
========== ========== ==========
Ratio of net investment income to
average net assets(d)............. 5.52%(b) 5.69% 3.85%(a)
========== ========== ==========
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $1,762,965,947.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
and expense reimbursements were 0.18% for the periods 1996-1994,
respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees and expense reimbursements were 5.37%, 5.62% and 3.72%
(annualized) for the periods 1996-1994, respectively.
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or other
similar capacity. It is designed to be a convenient and economical vehicle in
which such institutions can invest short-term cash reserves. Shares of the
Class may not be purchased directly by individuals, although institutions may
purchase shares for accounts maintained by individuals. Prospective investors
should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day. Sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.
5
<PAGE>
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, taxable municipal securities, 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 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.
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.
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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. 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.
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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 SEC, or privately
without such a registration.
COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note on relatively short notice.
REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. The Portfolio may enter into repurchase agreements only with
institutions believed by the Fund's Board of Directors to present minimal
credit risk. With regard to repurchase transactions, in the event of a
bankruptcy or other default of a seller of a repurchase agreement (such as the
seller's failure to 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.
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INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Portfolio's assets which
may be concentrated in any specific industry or issuer. The most significant of
these restrictions provide that the Portfolio will not:
1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as 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.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
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.
The SEC has proposed certain changes to Rule 2a-7. While such proposed
changes may have a prospective impact on the investments of the Portfolio, the
Portfolio anticipates no difficulty in complying with any proposed change if
adopted by the SEC. A description of further investment restrictions applicable
to the Portfolio is contained in the Statement of Additional Information.
9
<PAGE>
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below and notice of such order is
provided to the Portfolio's transfer agent or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which is
not accepted by the Portfolio and any funds received for which an order has not
been received will be returned to the sending institution. An order to purchase
shares of the Class must specify that the "Institutional Class of the Liquid
Assets Portfolio" is being purchased; otherwise, any funds received will be
returned to the sending institution.
The minimum initial investment in the Class is $10,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
held by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary,
and (b) for accounts for which the institution acts in some other capacity. An
institution's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS") at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
Banks will be required to certify to the Fund that they comply with
applicable state law regarding registration as broker-dealers, or that they are
exempt from such registration.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
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REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the Fund intends to maintain the net asset value per
share of the Portfolio at $1.00 per share. See "Net Asset Value." Redemption
requests with respect to shares of the Class for which certificates have not
been issued are normally made by calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Portfolio to be
redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by AIFS after 4:00 p.m. Eastern
Time or on other than a business day of the Portfolio, the redemption will be
effected at the net asset value of the Portfolio determined as of 4:00 p.m.
Eastern Time on the next business day of the Portfolio, and the proceeds of
such redemption will normally be wired on the effective day of the redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Portfolio may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Portfolio
unless the Board of Directors of the Fund determines in its sole discretion
that failure to so redeem may have materially adverse consequences to the
shareholders of the Portfolio.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in the net asset value of the Portfolio, they are not expected to
be of an amount which would affect the Portfolio's net asset value of $1.00 per
share for purposes of purchases and redemptions. See "Net Asset Value."
Distributions from net realized short-term gains may be declared and paid
yearly or more frequently. See "Taxes." The Portfolio does not expect to
realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full
11
<PAGE>
and fractional shares of the Portfolio at the net asset value of such shares as
of 4:00 p.m. Eastern Time on the last business day of the month. Such election,
or any revocation thereof, must be made in writing by the shareholder to AIFS
at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become
effective with dividends paid after its receipt by AIFS. If a shareholder
redeems all the shares in its account at any time during the month, all
dividends declared through the date of redemption are paid to the shareholder
along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's Board of Directors would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent to the extent possible the net asset value per share of the
Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
TAXES
The Portfolio's policy is to distribute to its shareholders at least 90% of
its investment company taxable income for each year and consistent therewith to
meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Portfolio. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend before February 1 of the next
year, a shareholder will be treated for tax purposes as having received the
dividend in the year in which it is declared rather than in January when it is
paid. It is anticipated that no portion of distributions will be eligible for
the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
For purposes of determining taxable income, distribution requirements and
other requirements of Subchapter M, the Portfolio will be treated as a separate
corporation. Therefore, one portfolio of the Fund may not offset its gains
against the other portfolio's losses and each portfolio must specifically
comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
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<PAGE>
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.
YIELD INFORMATION
Yield information for the Class can be obtained by calling FMC at (800) 659-
1005. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.34% and 5.49%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
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MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Certain directors and officers of the Fund are
affiliated with AIM and AIM Management, a holding company engaged in the
financial services business. Information concerning the Board of Directors may
be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages, advises or administers 41 investment company portfolios. As of
December 9, 1996, the total assets of such investment company portfolios were
approximately $63.6 billion. AIM is a wholly-owned subsidiary of AIM
Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees with respect to
the Portfolio which represented 0.01% of the Portfolio's average daily net
assets. During such fiscal year, the expenses of the Class, including AIM's
fees, amounted to 0.03% of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Fund's Board of
Directors for providing specified administrative services. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services, as well as the services of
staff responding to various shareholder inquiries.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expenses prior to the end of each fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. FMC does not receive any fee for distribution services
from the Fund with respect to the shares of the Class. The address of FMC is 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173. Certain directors and
officers of the Fund are affiliated with FMC and AIM Management. The
Distribution Agreement provides that FMC has the exclusive right to distribute
shares of the Portfolio either directly or through other broker-dealers, and
receives no fees for its services with respect to the Portfolio pursuant to the
Distribution Agreement. FMC is the distributor of several other mutual funds
managed or advised by AIM.
14
<PAGE>
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund except those listed in the next sentence are
prorated among all classes of such Portfolios. Distribution and service fees,
transfer agency fees and shareholder recordkeeping fees which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into nine classes, of which four represent interests in
the Portfolio and the remaining five represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable to or allocated to
the respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
15
<PAGE>
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 659-1005.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
16
<PAGE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 659-1005
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 INSTITUTIONAL CLASS
Houston, Texas 77046-1173
(800) 659-1005 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
Summary........................ 2
CUSTODIAN
THE BANK OF NEW YORK Table of Fees and Expenses..... 4
90 Washington Street
11th Floor Financial Highlights........... 5
New York, New York 10286
Suitability For Investors...... 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. Investment Program............. 6
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 Purchase of Shares............. 10
Redemption of Shares........... 11
Dividends...................... 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY Taxes.......................... 12
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE Net Asset Value................ 13
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR Yield Information.............. 13
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE Reports to Shareholders........ 13
FUND OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY Management of the Fund......... 14
JURISDICTION TO ANY PERSON TO WHOM SUCH
OFFERING MAY NOT LAWFULLY BE MADE. General Information............ 15
</TABLE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 high a level of current income as is
PRIVATE consistent with the preservation of capital and liquidity. The Portfolio seeks
INVESTMENT to achieve its objective by investing in high quality money market instruments
CLASS such as U.S. Government obligations, bank obligations, commercial instruments
and repurchase agreements.
DECEMBER 30, 1996
The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end diversified series management investment company. This
Prospectus relates solely to the Private Investment Class of the Portfolio, a
class of shares designed to be a convenient and economical vehicle in which
institutions can invest short-term cash reserves.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class, the Cash Management Class and
the MSTC Cash Reserves Class, as well as shares of classes of another
portfolio, the Prime Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE PRIVATE INVESTMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-7748.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.
THE PORTFOLIO'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE PORTFOLIO'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT
THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE
[LOGO APPEARS HERE] LOSS OF PRINCIPAL.
Fund Management Company
11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-7748
</TABLE>
<PAGE>
SUMMARY
THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end diversified series management investment company.
Pursuant to this Prospectus, the Fund offers shares of the Private Investment
Class (the "Class") of the Portfolio at net asset value. The Portfolio is a
money market fund which invests in money market instruments, such as U.S.
Government Agencies obligations, bank obligations, commercial instruments and
repurchase agreements. The investment objective of the Portfolio is to provide
as high a level of current income as is consistent with the preservation of
capital and liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Prime Portfolio, each pursuant to a separate
prospectus. Such classes have different distribution arrangements and are
designed for institutional and other categories of investors. The portfolios of
the Fund are referred to collectively as "Portfolios."
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical vehicle in which
institutions, particularly banks, acting for themselves or in a fiduciary,
advisory, agency, custodial or other similar capacity, can invest short-term
cash reserves. Although shares of the Class may not be purchased by individuals
directly, institutions may purchase shares for accounts maintained for
individuals. See "Suitability for Investors."
PURCHASE OF SHARES
Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $10,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in federal funds or other funds immediately available to the Portfolio. See
"Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 4:00 p.m. Eastern Time will normally be made in federal funds on the
same day. See "Redemption of Shares."
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares of
the Class. Information concerning the amount of the dividends declared on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "Net Asset
Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor and
receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to investment
companies. Under an
2
<PAGE>
Administrative Services Agreement, AIM may be reimbursed by the Fund for its
costs of performing certain accounting and other administrative services for
the Fund. See "Management of the Fund--Investment Advisor" and "--
Administrator."
On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on
February 7, 1997 (the "Annual Meeting"). The Board of Directors has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on
February 28, 1997. Provided that the Portfolio's shareholders approve the new
advisory agreement at the Annual Meeting and the merger is consummated, the new
advisory agreement with respect to the Portfolio, as well as the new
administrative services and distribution agreements, will automatically become
effective as of the closing of the merger.
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
.50% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other financial
institutions as compensation for distribution-related services. See "Purchase
of Shares" and "Management of the Fund--Distribution Plan."
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.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--PRIVATE INVESTMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)--PRIVATE INVESTMENT CLASS**
Management Fees (after waivers)......................................... 0.02%
12b-1 Fees (after waivers)***........................................... 0.30%
Other Expenses (estimated).............................................. 0.03%
----
Total Operating Expenses--Private Investment Class...................... 0.35%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** The fees and expenses set forth in the tables are based on estimated average
net assets of the Class' and current fee waivers. Had there been no waivers,
Management Fees, 12b-1 Fees and Total Operating Expenses would be 0.15%,
0.50% and 0.68% respectively.
*** As a result of 12b-1 fees, a long-term shareholder of the Class may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the Rules of the National Association of Securities Dealers,
Inc.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 year........................................................... $ 4
3 years.......................................................... $11
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Class will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) Management fees, 12b-1 fees and other
expenses have been estimated and reflect current fee waivers. Thus, actual
expenses may be greater or less than such estimates. There can be no assurance
that future waivers of fees (if any) will not vary from the figures reflected
in the Table of Fees and Expenses. To the extent any service providers assume
expenses of the Class, such assumption of expenses will have the effect of
lowering the Class' overall expense ratio and increasing its yield to
investors. Beneficial owners of shares of the Class should also consider the
effect of any charges imposed by the institution maintaining their accounts.
The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses--Private Investment Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for the period February 16, 1996 (date operations
commenced) through August 31, 1996. 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>
FEBRUARY 16, 1996
(COMMENCEMENT
OF OPERATIONS) TO
AUGUST 31, 1996
-----------------
<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.................................................. 5.10%(a)
=======
Ratios/supplemental data:
Net assets, end of period (000s omitted)...................... $44,981
=======
Ratio of expenses to average net assets....................... 0.32%(b)
=======
Ratio of net investment income to average net assets.......... 5.04%(b)
=======
</TABLE>
(a) Annualized.
(b) After waiver of advisory fees, distribution fees and expense
reimbursements. Ratios are annualized and based on average net assets of
$33,852,756. Annualized ratios of expenses and net investment income to
average net assets prior to waivers and reimbursements were 0.69% and
4.67%, respectively.
SUITABILITY FOR INVESTORS
The Class is intended for use primarily by institutions, particularly banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or other
similar capacity. It is designed to be a convenient and economical vehicle in
which such institutions can invest short-term cash reserves. Shares of the
Class may not be purchased directly by individuals, although institutions may
purchase shares for accounts maintained by individuals. Prospective investors
should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio investments;
surveying the market for the best price at which to buy and sell securities;
valuation of portfolio securities; selection and scheduling of maturities of
portfolio securities; receipt, delivery and safekeeping of securities; and
portfolio recordkeeping. It is anticipated that most investors will perform
their own sub-accounting. To assist these institutions, information concerning
the dividends declared by the Portfolio on any particular day will normally be
available by 5:00 p.m. Eastern Time on that day. Sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
5
<PAGE>
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, taxable municipal securities, 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 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.
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.
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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. 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.
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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 SEC, or privately
without such a registration.
COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note on relatively short notice.
REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. Repurchase transactions are limited to a term not to exceed 365 days.
The Portfolio may enter into repurchase agreements only with institutions
believed by the Fund's Board of Directors to present minimal credit risk. With
regard to repurchase transactions, in the event of a bankruptcy or other
default of a seller of a repurchase agreement (such as the seller's failure to
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying securities
and losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by U.S. Treasury securities, 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. Reverse repurchase transactions
are limited to a term not to exceed 92 days. 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;
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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.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except
that the Portfolio may purchase securities of other
investment companies to the extent permitted by
applicable law or exemptive order;
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.
The SEC has proposed certain changes to Rule 2a-7. While such proposed
changes may have a prospective impact on the investments of the Portfolio, the
Portfolio anticipates no difficulty in complying with any proposed change if
adopted by the SEC. A description of further investment restrictions applicable
to the Portfolio is contained in the Statement of Additional Information.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Shares of the Class will earn the dividend declared on the effective
date of purchase.
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A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below and notice of such order is
provided to the Portfolio's transfer agent or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which is
not accepted by the Portfolio and any funds received for which an order has not
been received will be returned to the sending institution. An order to purchase
shares of the Class must specify that the "Private Investment Class of the
Liquid Assets Portfolio" is being purchased; otherwise, any funds received will
be returned to the sending institution.
The minimum initial investment in the Class is $10,000. Institutions may be
requested to maintain separate master accounts in the shares of the Class held
by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary,
and (b) for accounts for which the institution acts in some other capacity. An
institution's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS") at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
Banks will be required to certify to the Fund that they comply with
applicable state law regarding registration as broker-dealers, or that they are
exempt from such registration.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the Fund intends to maintain the net asset value per
share of the Portfolio at $1.00 per share. See "Net Asset Value." Redemption
requests with respect to shares of the Class for which certificates have not
been issued are normally made by calling the Fund.
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by AIFS prior to 4:00 p.m. Eastern Time on a
business day of the Portfolio, the redemption will be effected at the net asset
value next determined on such day and the shares of the Portfolio to be
redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by AIFS after 4:00 p.m. Eastern
Time or on other than a business day of the Portfolio, the redemption will be
effected at the net asset value of the Portfolio determined as of 4:00 p.m.
Eastern Time on the next business day of the Portfolio, and the proceeds of
such redemption will normally be wired on the effective day of the redemption.
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A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Portfolio may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Portfolio are not redeemable at the option of the Portfolio
unless the Board of Directors of the Fund determines in its sole discretion
that failure to so redeem may have materially adverse consequences to the
shareholders of the Portfolio.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class' pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in the net asset value of the Portfolio, they are not expected to
be of an amount which would affect the Portfolio's net asset value of $1.00 per
share for purposes of purchases and redemptions. See "Net Asset Value."
Distributions from net realized short-term gains may be declared and paid
yearly or more frequently. See "Taxes." The Portfolio does not expect to
realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Portfolio at the net asset value
of such shares as of 4:00 p.m. Eastern Time on the last business day of the
month. Such election, or any revocation thereof, must be made in writing by the
shareholder to AIFS at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173
and will become effective with dividends paid after its receipt by AIFS. If a
shareholder redeems all the shares in its account at any time during the month,
all dividends declared through the date of redemption are paid to the
shareholder along with the proceeds of the redemption.
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's Board of Directors would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances the Board of Directors might reduce or suspend the daily dividend
in order to prevent to the extent possible the net asset value per share of the
Portfolio from being reduced below $1.00. Thus, such expenses, losses or
depreciation may result in a shareholder receiving no dividends for the period
during which it held its shares of the Class and cause such a shareholder to
receive upon redemption a price per share lower than the shareholder's original
cost.
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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 advisors concerning the application of
state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
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.
YIELD INFORMATION
Yield information for the Class can be obtained by calling FMC at (800) 877-
7748. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the
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Portfolio's investments, the Portfolio's maturity and the operating expense
ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE PORTFOLIO IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY INSTITUTION. These factors
should be carefully considered by the investor before making an investment in
the Portfolio.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.04% and 5.17%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations may
be transmitted to the beneficial owner of the sub-account if requested by the
institution. The institution will receive a monthly statement setting forth,
for each sub-account, the share balance, income earned for the month, income
earned for the year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Certain directors and officers of the Fund are
affiliated with AIM and AIM Management, a holding company engaged in the
financial services business. Information concerning the Board of Directors may
be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages, advises or administers 41 investment company portfolios. As of
December 9, 1996, the total assets of such investment company portfolios were
approximately $63.6 billion. AIM is a wholly-owned subsidiary of AIM
Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not
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required to be performed by AIM under the Advisory Agreement. The Advisory
Agreement requires AIM to reduce its fee to the extent required to satisfy any
expense limitations imposed by the securities laws or regulations thereunder of
any state in which the Portfolio's shares are qualified for sale.
For the fiscal year ended August 31, 1996, AIM received fees with respect to
the Portfolio which represented 0.01% of the Portfolio's average daily net
assets. During such fiscal year, the expenses of the Class, including AIM's
fees, amounted to 0.32% (annualized) of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Fund's Board of
Directors for providing specified administrative services. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services, as well as the services of
staff responding to various shareholder inquiries.
FEE WAIVERS
AIM or its affiliates 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 for such
fee or expenses prior to the end of each fiscal year. FMC may in its discretion
from time to time agree to waive voluntarily its 12b-1 fee but will retain its
ability to be reimbursed prior to the end of the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and is a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM Management. The Distribution Agreement provides
that FMC has the exclusive right to distribute shares of the Portfolio either
directly or through other broker-dealers, and receives no fees for its services
with respect to the Portfolio pursuant to the Distribution Agreement. FMC is
the distributor of several other mutual funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or Institutions who
have sold or may sell significant amounts of shares. The total amount of such
additional bonus payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.50% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund and may be used to finance
such distribution-related services as expenses of organizing and conducting
sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Plan.
14
<PAGE>
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments retained by FMC would be characterized as an asset-
based sales charge pursuant to the Plan. The Plan also imposes a cap on the
total amount of sales charges, including asset-based sales charges, that may be
paid by the Portfolio with respect to the Class. The Plan does not obligate the
Fund to reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund will not be obligated to pay more than that fee. If FMC's
expenses are less than the fee it receives, FMC will retain the full amount of
the fee.
As required by Rule 12b-1 under the 1940 Act, the Plan was initially approved
by the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 19, 1993. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.
The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes cast in person at a meeting
called for the purpose of voting upon such amendment. As long as the Plan is in
effect, the selection or nomination of the Qualified Directors is committed to
the discretion of the Qualified Directors.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of both Portfolios of
the Fund. Expenses of the Fund except those listed in the next sentence are
prorated among all classes of such Portfolios. Distribution and service fees,
transfer agency fees and shareholder recordkeeping fees which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
15
<PAGE>
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into nine classes, of which four represent interests in
the Portfolio and the remaining five represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemption which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable to or allocated to
the respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares. As of December
1, 1996, Mellon Bank was the owner of record of 98.14% of the outstanding
shares of the Class. As long as Mellon Bank owns over 25% of such shares, it
may be presumed to be in "control" of the Private Investment Class of the
Liquid Assets Portfolio, as defined in the 1940 Act.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286 acts as custodian for the portfolio securities and cash of the Portfolio.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173, acts as transfer agent for shares of the Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality of
the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7748.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
16
<PAGE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 877-7748
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 PRIVATE INVESTMENT CLASS
Houston, Texas 77046-1173
(800) 877-7748 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
Summary.......................... 2
CUSTODIAN
THE BANK OF NEW YORK Table of Fees and Expenses....... 4
90 Washington Street
11th Floor Financial Highlights............. 5
New York, New York 10286
Suitability For Investors........ 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. Investment Program............... 5
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 Purchase of Shares............... 9
Redemption of Shares............. 10
NO PERSON HAS BEEN AUTHORIZED TO GIVE Dividends........................ 11
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS Taxes............................ 12
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND Net Asset Value.................. 12
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED Yield Information................ 12
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THIS Reports to Shareholders.......... 13
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY Management of the Fund........... 13
PERSON TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE. General Information.............. 16
</TABLE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
SHORT-TERM INVESTMENTS CO.
LIQUID ASSETS PORTFOLIO
(CASH MANAGEMENT CLASS)
(INSTITUTIONAL CLASS)
(PRIVATE INVESTMENT CLASS)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS
OF THE ABOVE NAMED FUNDS, 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, 1996 RELATING TO THE
PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE LIQUID ASSETS PORTFOLIO:
CASH MANAGEMENT CLASS PROSPECTUS DATED DECEMBER 30, 1996, INSTITUTIONAL CLASS
PROSPECTUS DATED DECEMBER 30, 1996 AND PRIVATE INVESTMENT CLASS PROSPECTUS DATED
DECEMBER 30, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION 1
GENERAL INFORMATION ABOUT THE FUND 1
The Fund and Its Shares 1
Directors and Officers 3
Remuneration of Directors 6
AIM Funds Retirement Plan for Eligible Directors/Trustees 7
Deferred Compensation Agreements 8
Investment Advisor 9
Administrator 10
Expenses 10
Transfer Agent and Custodian 11
Reports 11
Fee Waivers 11
Principal Holders of Securities 12
PURCHASES AND REDEMPTIONS 16
Net Asset Value Determination 16
The Distribution Agreement 17
Distribution Plan 17
Banking Regulations 18
Performance Information 18
Redemptions in Kind 19
Suspension of Redemption Rights 19
INVESTMENT PROGRAM AND RESTRICTIONS 20
Eligible Securities 20
Commercial Paper Ratings 21
Bond Ratings 22
Repurchase Agreements 23
Investment Restrictions 24
PORTFOLIO TRANSACTIONS 25
TAX MATTERS 27
Qualification as a Regulated Investment Company 27
Excise Tax On Regulated Investment Companies 28
Portfolio Distributions 28
Sale or Redemption of Shares 29
Foreign Shareholders 29
Effect of Future Legislation; Local Tax Considerations 29
</TABLE>
FINANCIAL STATEMENTS FS
ii
<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 the Cash Management Class Prospectus dated December
30, 1996, the Institutional Class Prospectus dated December 30, 1996, and the
Private Investment Class Prospectus dated December 30, 1996 (each a
"Prospectus") . Copies of each 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 each class of the
Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in each Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, each Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the SEC.
Copies of the registration statement, including items omitted from each
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE 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 each Prospectus under the captions "General
Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest
in one of two portfolios: the Portfolio and the Prime Portfolio (together, the
"Portfolios"). The Prime Portfolio consists of five classes of shares, each
having different shareholder qualifications and bearing expenses differently.
The Portfolio consists of the following four classes of shares: Cash Management
Class, MSTC Cash Reserves Class, Institutional Class and Private Investment
Class. Each such class has different shareholder qualifications and bears
expenses differently. This Statement of Additional Information and the
associated Prospectus relate to all shares of the Portfolio except the MSTC Cash
Reserve Class. Shares of the MSTC Cash Reserves Class and the classes of the
Prime Portfolio are offered pursuant to separate prospectuses and statements of
additional information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members
1
<PAGE>
of the Board of Directors of the Fund. In such event, the remaining holders
cannot elect any members of the Board of Directors of the Fund.
The Board of Directors may classify or reclassify any unissued shares
of any class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act").
The Charter of the Fund authorizes the issuance of 50 billion shares with a
par value of $.001 each, of which 19 billion shares represent an interest in the
Portfolio (or class thereof) and 22 billion shares represent an interest in the
Prime Portfolio (or class thereof). A share of a portfolio (or class) represents
an equal proportionate interest in such Portfolio (or class) with each other
share of that Portfolio (or class) and is entitled to a proportionate interest
in the dividends and distributions from that Portfolio (or class). Additional
information concerning the rights of share ownership is set forth in the
Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Portfolio, and
constitute the underlying assets of that Portfolio. The underlying assets of the
Portfolios are segregated and each Portfolio is charged with the expenses with
respect to that portfolio and with a share of the general expenses of the Fund.
While the expenses of the Fund are allocated to the separate books of account of
each of the Portfolios, certain expenses may be legally chargeable against the
assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. At such time as less than a majority of the directors
have been elected by the shareholders, the directors then in office will call a
shareholders' meeting for the election of directors. Upon written request by
ten or more shareholders, who have been such for at least six months and who
hold shares constituting 1% of the outstanding shares, stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
director, the Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
2
<PAGE>
Except as otherwise disclosed in the Prospectus and in this Statement
of Additional Information, the directors shall continue to hold office and may
appoint their successors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each director and officer is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046.
CHARLES T. BAUER, Director and Chairman (77)
Director, 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 (52)
906 Frome Lane
McLean, VA 22102
Formerly, Director, President and Chief Executive Officer, COMSAT
Corporation (includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT
Video Enterprises, COMSAT RSI and COMSAT International Ventures); 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 (72)
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 (59)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis & 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 (50)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; and Director and Senior Vice
President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., A I M Institutional Fund Services, Inc. and Fund Management
Company.
______________________________
* A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined
in the 1940 Act.
3
<PAGE>
JOHN F. KROEGER, Director (72)
37 Pippins Way
Morristown, NY 07960
Director, Flag Investors International Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund, Inc., Managed Municipal Fund,
Inc., Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American Government
Bond Fund, Inc. (investment companies). Formerly, Consultant, Wendell & Stockel
Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (54)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (73)
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 (57)
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 (52)
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 (49)
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.
***CAROL F. RELIHAN, Senior Vice President and Secretary (42)
______________________________
*** Mr. Arthur and Ms. Relihan are married to each other.
4
<PAGE>
Senior Vice President, General Counsel and Secretary, A I M Advisors,
Inc.; Vice President, General Counsel and Secretary, A I M Management Group
Inc.; Vice President and General Counsel, Fund Management Company; and Vice
President A I M Capital Management.; A I M Distributors, Inc., A I M Fund
Services, Inc., and A I M Institutional Fund Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (37)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (53)
Vice President and Chief Compliance Officer, A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services,
Inc. and A I M Institutional Fund Services, Inc., and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance Officer,
Charles Schwab Investment Management, Inc.; and Vice President, Integrated
Resources Life Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (36)
Senior Vice President, A I M Capital Management, Inc.; and Vice President,
A I M Advisors, Inc.
J. ABBOTT SPRAGUE, Vice President (41)
Director and President, A I M Institutional Fund Services, Inc. and
Fund Management Company; Director and Senior Vice President, A I M Advisors,
Inc.; and Senior Vice President, A I M Management Group Inc.
The 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.
______________________________
*** Mr. Arthur and Ms. Relihan are married to each other
5
<PAGE>
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Fund maintains a distribution plan pursuant to rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the board and such Committee.
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. Most of the Fund's executive
officers hold similar offices with some or all of such investment companies.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board of Directors or any committee thereof. Each director who is
not also an officer of the Fund is compensated for his or her services according
to a fee schedule which recognizes the fact that such director also serves as
director or trustee of certain other regulated investment companies managed,
administered or distributed by AIM or its affiliates (the "AIM Funds"). Each
such director receives a fee, allocated among the AIM Funds for which he serves
as a director or trustee, which consists of an annual retainer component and a
meeting fee component.
6
<PAGE>
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1996 for each director of the Fund:
<TABLE>
<CAPTION>
DIRECTOR AGGREGATE RETIREMENT TOTAL
COMPENSATION BENEFITS COMPENSATION
FROM FUND(1) ACCRUED FROM ALL AIM FUNDS(3)
BY ALL AIM FUNDS(2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- -----------------------------------------------------------------------------------
Bruce L. Crockett 6,957 3,655 57,750
- -----------------------------------------------------------------------------------
Owen Daly II 8,110 18,622 58,125
- -----------------------------------------------------------------------------------
Carl Frischling 7.891 11,323 57,250(4)
- -----------------------------------------------------------------------------------
Robert H. Graham -0- -0- -0-
- -----------------------------------------------------------------------------------
John F. Kroeger 7,600 22,313 58,125
- -----------------------------------------------------------------------------------
Lewis F. Pennock 6,799 5,067 58,125
- -----------------------------------------------------------------------------------
Ian W. Robinson 6,986 15,381 56,750
- -----------------------------------------------------------------------------------
Louis S. Sklar 7,971 6,632 57,250
- -----------------------------------------------------------------------------------
______________________________
</TABLE>
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1996, including interest earned
thereon, was $28,784.
(2) During the fiscal year ended August 31, 1996, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$45,550. Data reflects compensation earned for the calendar year ended
December 31, 1995.
(3) Each Director serves as a Director or Trustee of a total of 10 AIM Funds.
Data reflects compensation earned for the calendar year ended December 31,
1995.
(4) See also page 9 regarding fees earned by Mr. Frischling's law firm.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 75% of the retainer paid or accrued by the AIM Funds for such director
during the twelve-month period immediately preceding the director's retirement
(including amounts deferred under a separate agreement between the AIM Funds and
the director, for the number of such Director's years of service (not in excess
of 10 years of service) completed with respect to any of the AIM Funds. Such
benefit is payable to each eligible director in quarterly installments for a
period of no more than five years. If an eligible
7
<PAGE>
director dies after attaining the normal retirement date but before receipt of
any benefits under the Plan commences, the director's surviving spouse (if any)
shall receive a quarterly survivor's benefit equal to 50% of the amount payable
to the deceased director, for no more than ten years beginning the first day of
the calendar quarter following the date of the director's death. Payments under
the Plan are not secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1995 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 8, 9, 18, 18, 14, 8 and 6 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Annual Compensation Paid
By All AIM Funds
Number of Years of
Service with the
AIM Funds
- ---------------------------------------------------
<S> <C> <C> <C> <C>
$55,000 $60,000 $65,000
- ---------------------------------------------------
10 $41,250 $45,000 $48,750
- ---------------------------------------------------
9 $37,125 $40,500 $43,875
- ---------------------------------------------------
8 $33,000 $36,000 $39,000
- ---------------------------------------------------
7 $28,875 $31,500 $34,125
- ---------------------------------------------------
6 $24,750 $27,000 $29,250
- ---------------------------------------------------
5 $20,625 $22,500 $24,375
- ---------------------------------------------------
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, and such amounts are placed into a deferral
account. Currently, the deferring directors may select various AIM Funds in
which all or part of their deferral account shall be deemed to be invested.
Distributions from the deferring directors' deferral accounts will be paid in
cash, in generally equal quarterly installments over a period of five years
beginning on the date the deferring director's retirement benefits commence
under the Plan. The Fund's Board of Directors, in its sole discretion, may
accelerate or extend the distribution of such deferral accounts after the
deferring director's termination of service as a director of the Fund. If a
deferring director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring director's death. The Agreements are not funded and, with respect
to the payments of amounts held in the deferral accounts, the deferring
directors have the status of unsecured creditors of the Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1996, $15,925 in directors' fees
and expenses were allocated to the Portfolio.
8
<PAGE>
The Portfolio paid legal fees of $7,775 for the year ended August 31, 1996
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Directors. Carl Frischling, a director of the Fund, is a member of that
firm.
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 41 investment company portfolios. As of December 9, 1996
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $63.6 billion. AIM is a wholly-owned
subsidiary of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Certain of the directors and officers of
AIM are also executive officers of the Fund and their affiliations are shown
under "Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally engaging
in (i) short-term trading of a security, (ii) transactions involving a security
within seven days of an AIM Fund transaction involving the same security, and
(iii) transactions involving securities being considered for investment by an
AIM Fund. The Code also prohibits investment personnel from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews annually such reports
(including information on any substantial violations of the Code). Violations of
the Code may result in censure, monetary penalties, suspension or termination of
employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services with respect to the Portfolio, AIM
receives a fee at the annual rate of 0.15% of the average daily net assets of
the Portfolio. The Advisory Agreement requires AIM to reduce its fee to the
extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
During the period November 4, 1993 (date operations commenced) through
August 31, 1994, AIM voluntarily waived fees of $1,500,977, which it was
entitled to receive pursuant to the Advisory Agreement with respect to the
Portfolio. During the fiscal year ended August 31, 1995, AIM received fees
pursuant to the Advisory Agreement in the amount of $1,323,637 and AIM
voluntarily waived fees of $1,127,509, which it was entitled to receive pursuant
to the Advisory Agreement with respect to the Portfolio. During the fiscal year
ended August 31, 1996, AIM received fees pursuant to the Advisory Agreement in
the amount of $125,264 and AIM voluntarily waived fees of $2,562,094, which it
was entitled to receive pursuant to the Advisory Agreement with respect to the
Portfolio.
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation for
such additional
9
<PAGE>
services, as may be agreed upon by AIM and the Board of Directors, based upon a
finding by the Board of Directors that the provision of such services would be
in the best interest of the Portfolio and its shareholders. The Board of
Directors has made such a finding and, accordingly, the Fund has entered into
the Master Administrative Services Agreement under which AIM will provide the
additional services described below under the caption "Administrator."
The Advisory Agreement will continue in effect until June 30, 1997, 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").
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, 1997, 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 15, 1996.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for
the fiscal years ended August 31, 1996, 1995 and 1994 in the amounts of $52,710,
$97,044 and $39,492, respectively.
A I M Institutional Fund Services, Inc. ("AIFS") receives fees with respect
to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the period from August
31, 1994 through June 30, 1995 and for the period from June 1, 1994 through
August 31, 1994, AIFS or its affiliates received shareholder services fees from
AIM with respect to the Portfolio in the amounts of $38,870 and $5,110,
respectively. For the fiscal year ended August 31, 1996, AIFS received transfer
agency fees from AIM with respect to the Portfolio in the amount of $133,085.
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'
10
<PAGE>
meetings and of preparing, printing and mailing of prospectuses, proxy
statements and reports to shareholders; fees and travel expenses of directors
and director members of any advisory board or committee; all expenses incident
to the payment of any dividend, distribution, withdrawal or redemption, whether
in shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's shares; charges and expenses of legal counsel, including
counsel to the directors of the Fund who are not "interested persons" (as
defined in the 1940 Act) of the Fund or AIM, and of independent accountants in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and directors) of the Fund which
inure to its benefit; and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto). FMC bears the expenses of printing and distributing
prospectuses and statements of additional information (other than those
prospectuses and statements of additional information distributed to existing
shareholders of the Fund) and any other promotional or sales literature used by
FMC or furnished by FMC to purchasers or dealers in connection with the public
offering of the Fund's shares.
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of the Fund based
upon the relative net assets of each class. Expenses of the Fund except those
listed below are prorated among all classes of such Portfolios. The expenses of
the Portfolio are deducted from its total income before dividends are paid.
Distribution and service fees, transfer agency fees and shareholder
recordkeeping fees are charged against the income available for distribution as
dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York ("BONY") acts as custodian for the portfolio
securities and cash of the Portfolio. BONY receives such compensation from the
Fund for its services in such capacity as is agreed to from time to time by BONY
and the Fund. The address of BONY is 90 Washington Street, 11th Floor, New York,
New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .009% of average daily net assets
of the Fund, payable monthly. Such compensation may be changed from time to time
as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
FEE WAIVERS
AIM or its affiliates 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.
11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best knowledge of the Fund, the name and addresses of the holders of
5% or more of the outstanding shares of each class of the Prime Portfolio as of
December 1, 1996, and the percentage of the Prime Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- --------------- --------------
CASH MANAGEMENT CLASS
- ---------------------
Mellon Bank 24.45%
Three Mellon Center Rm 3840
Pittsburgh, PA 15259-0001
Oppenheimer & CO., Inc 16.64%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Southwest Bank of Texas, N.A. 16.38%
4295 San Felipe
Houston, TX 77027
Fund Services Associates 15.68%
11835 West Olympic Blvd
Suite 205
Los Angeles, CA 90064
INSTITUTIONAL CLASS
- -------------------
U.S. Bank of Oregon 12.47%
Trust Operations
321 Southwest Sixth
Portland, OR 97208
Comerica Bank 12.25%
PO Box 75000
Detroit, MI 48275-3455
NationsBank Texas 8.29%
1401 Elm Street 11th Floor
PO Box 831000
Dallas, TX 75283-1000
______________________________
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
12
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD OF*
___________
Boatman's Trust Company 7.03%
100 North Broadway
Attn: Fund Accounting LBT0785
St. Louis, MO 63101
Frost National Bank 5.77%
PO Box 1600
Attn: Trust Securities (T -8)
San Antonio, TX 78296
Liberty Registration Co. Of Oklahoma City 5.66%
Trust Security Processing Dept.
P.O. Box 25848
Oklahoma City, OK 73125
Texas Commerce Bank 5.40%
PO Box 2558
16 HCB-98
Houston, TX 77252-8098
Citicorp, N.A. 5.23%
400 Royal Palm Way
3rd Floor
Palm Beach, FL 33480
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 60.84%**
440 Mamaroneck Avenue
Harrison, NY 10528
Cullen/Frost Discount Brokers 23.18%
PO Box 2358
San Antonio, TX 78299
Mark Twain Capital Markets Group 12.30%
1630 S. Lindbergh Blvd
St. Louis, MO 63131
______________________________
* The Fund has no knowledg as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to in "control" of such class of shares, as defined in the
1940 Act.
13
<PAGE>
NAME AND ADDRESS PERCENT
OF RECORD OWNER OWNED OF
RECORD ONLY*
___________
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corp 62.76%**
41 S High St.
9th Floor
Columbus, OH 43287
First Trust/Var & Co 10.97%
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
Frost National Bank 9.10%
PO Box 1600
Attn: Trust Securities (T - 8)
San Antonio, TX 78296
Cullen/Frost Discount Brokers 6.06%
100 W. Houston St
San Antonio, TX 78205
RESOURCE CLASS
- --------------
Mellon Bank 18.06%
Three Mellon Center Rm 3840
Pittsburgh, PA 15259-0001
Corestates Capital Markets 16.66%
1345 Chestnut St
FC 1-1-9-49
Philadelphia, PA 19101
Huntington Capital Corp 16.53%
41 S High St
Ninth Floor
Columbus, OH 43287
Tulsa & Co. 5.09%
P.O. Box 3688
Tulsa, OK 74101-3688
______________________________
* The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
14
<PAGE>
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of December 1, 1996, the percentage of the Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- --------------- -----------
CASH MANAGEMENT CLASS
- ---------------------
Fund Services Associates 49.49%**
11835 West Olympic Blvd.
Suite 205
Los Angeles, CA 90064
Oppenheimer & Co. 31.63%**
Oppenheimer Tower
World Financial Center
New York, NY 10281
Intellon Corporation 7.79%
5100 West Silver Springs Blvd.
Ocala, FL 34482
Highline Financial Services 6.45%
Canyon Center Rd.
Suite 300
1881 9th St.
Boulder, CO 80302
INSTITUTIONAL CLASS
- -------------------
Wachovia Bank and Trust 16.54%
P.O. Box 3075
Winston-Salem, NC 27150
Trust Company Bank 14.80%
P.O. Box 105504
Atlanta, GA 30348
BZW Barclays Global Investors 6.08%
980 9th St. Suite 600
Sacramento, CA 95814
______________________________
* The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined
in the 1940 Act.
15
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- --------------- -----------
Teacher's Retirement c/o Boston Global 5.73%
50 Rowos Wharf
Boston, MA 20110
Nationsbank 5.55%
1401 Elm St. 11th floor
P.O. Box 831000
Dallas, TX 75283-1000
Norwest Bank 5.01%
733 Marquette Avenue
Minneapolis, MN 55479-0052
MSTC CASH RESERVES CLASS
- ------------------------
A I M Advisors, Inc. 100%**
11 Greenway Plaza
Suite 1919
Houston, TX 77046
PRIVATE INVESTMENT CLASS
- ------------------------
Mellon Bank 98.14%**
P.O. Box 710
Pittsburgh, PA 15230-0710
To the best of the knowledge of the Fund, as of December 1, 1996, the
directors and officers of the Fund beneficially owned less than 1% of any
portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
______________________________
* The fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
16
<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 of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. See "General Information about the Fund -- Directors
and Officers" and "General Information about the Fund -- Investment Advisor" for
information as to the affiliation of certain directors and officers of the Fund
with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right to
distribute shares either directly or through other broker-dealers. The
Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Portfolio and the costs
of preparing and distributing any other supplemental sales literature. FMC has
not undertaken to sell any specified number of shares of the Class. FMC does
not receive any fees with respect to the shares of the Class pursuant to the
Distribution Agreement.
The Distribution Agreement will continue in effect until June 30, 1997 and
from year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of the
directors who are not parties to the Distribution Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or FMC may terminate the Distribution Agreement on 60 days'
written notice, without penalty. The Distribution Agreement will terminate
automatically in the event of its "assignment," as defined in the 1940 Act.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund may enter into
Shareholder Service Agreements ("Service Agreements") with selected broker-
dealers, banks, other financial institutions or their affiliates. Such firms
may receive compensation from the Portfolio for servicing investors as
beneficial owners of the shares of the Cash Management Class, Personal
Investment Class, Private Investment Class and Resource Class of the Portfolio.
These services may include among other things: (i) answering customer inquiries
regarding shares of the
17
<PAGE>
Class and the Portfolio; (ii) assisting customers in changing dividend options,
account designations and addresses; (iii) performing sub-accounting; (iv)
establishing and maintaining shareholder accounts and records; (v) processing
purchase and redemption transactions; (vi) automatic investment of customer cash
accounting balances in shares of the Class; (vii) providing periodic statements
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
such firm; (viii) arranging for bank wires; and (ix) such other services as the
Fund may request on behalf of the Class, to the extent such firms are permitted
to engage in such services by applicable statute, rule or regulation. The Plan
may only be used for the purposes specified above and as stated in the Plan.
Expenses may not be carried over from year to year.
For the fiscal year ended August 31, 1996, FMC received compensation
pursuant to the Plan in the amount of $10,467, or an amount equal to 0.08%
(annualized) of the average net daily assets of the Cash Management Class and
$54,941, or an amount equal to 0.30% (annualized) of the average net daily
assets of the Private Investment Class. With respect to the Cash Management
Class, $0 of such amount (or an amount equal to 0 % of the average daily net
assets of the class) was paid to dealer and financial institutions and $10,467
(or an amount equal to 0.08% of the average daily net asset of the class) was
retained by FMC. With respect to the Private Investment Class, $54,732 of such
amount (or an amount equal to 0.30% of the average daily net assets of the
class) was paid to dealers and financial institutions and $209 (or an amount
equal to 0.00% of the average daily net assets of the class) was retained by
FMC.
FMC is a wholly-owned subsidiary of AIM, which is a wholly-owned subsidiary
of AIM Management. Charles T. Bauer, a Director and Chairman of the Fund and
Robert H. Graham, a Director and President of the Fund, own shares of A I M
Management Group Inc.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations among other
things, generally prohibit federally chartered or supervised banks from engaging
in the business of underwriting, selling or distributing securities, but permit
banks to make shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a bank
were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the Fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the Fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or other
services then being provided by such bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of these
occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus, yield
information for the shares of the Class may be obtained by calling the Fund at
(800) 659-1005. The current yield quoted will be the net average annualized
yield for an identified period, such as seven days or a month. 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
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and losses or unrealized appreciation or depreciation) will be multiplied by 365
and then divided by the number of days in the period, with the resulting figure
carried to the nearest hundredth of one percent. The Portfolio may also furnish
a quotation of effective yield that assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the average annualized
yield for the period, which will be computed by compounding the unannualized
current yield for the period by adding 1 to the unannualized current yield,
raising the sum to a power equal to 365 divided by the number of days in the
period, and then subtracting 1 from the result.
For the seven-day period ended August 31, 1996, the current yield and the
effective yield (which assumes the reinvestment of dividends for a 365-day year
and a return for the entire year equal to the annualized current yield for the
period) for the Class were 5.34% and 5.49%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.
The Portfolio may compare the performance of the Class or the performance
of securities in which it may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of various
types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money Fund
Report/(R)/ of Holliston, Massachusetts or by Lipper Analytical Services, Inc.,
a widely recognized independent service located in Summit, New Jersey, which
monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
. other fixed-income investments such as Certificates of Deposit ("CDs").
The principal value and interest rate of CDs and money market securities
are fixed at the time of purchase whereas the Class' yield will fluctuate.
Unlike some CDs and certain other money market securities, money market mutual
funds are not insured by the FDIC. Investors should give consideration to the
quality and maturity of the portfolio securities of the respective investment
companies when comparing investment alternatives.
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
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the SEC exists making disposition of portfolio securities or the valuation of
the net assets of the Portfolio not reasonably practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
The Portfolio may lend its portfolio securities in amounts up to 33% 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 calendar days or less that
has received a short-term rating (or that has been issued by an issuer that is
rated with respect to a class of short-term debt obligations, or any debt
obligation within that class, that is comparable in priority and security with
the security) by the Requisite NRSROs in one of the two highest rating
categories for short-term debt obligations (within which there may be sub-
categories or gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance had a remaining maturity of more than
397 calendar days 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 debt obligations (or any debt obligation within that
class) that is now comparable in priority and security with the security,
in one of the two highest rating categories (within which there may be sub-
categories or gradations indicating relative standing); or
(iii) an Unrated Security that is of comparable quality to a security
meeting the requirements of paragraphs (a)(9)(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 that is not a Demand Feature is an Eligible Security upon a
finding that the issuer of the commitment presents a minimal risk of
default; and
______________________________
/1/ "Requisite NRSRO" means (a) any two nationally recognized statistical
rating organizations that have issued a rating with respect to a security
or class of debt obligations of an issuer, or (b) if only one NRSRO has
issued a rating with respect to such security or class of debt obligations
of an issuer at the time the fund purchases or rolls over the 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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(B) a security that at the time of issuance had a remaining maturity
of more than 397 calendar days 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 received a long-term rating from any NRSRO
that is not within the NRSRO's three highest long-term rating categories
(within which there may be sub-categories or gradations indicating relative
standing).
COMMERCIAL PAPER RATINGS
The following is a description of the factors underlying the commercial
paper ratings of Moody's, S&P and Fitch Investors Service, Inc. ("Fitch").
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch short-term ratings are as
follows:
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.
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LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings
of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of Moody's.
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the four highest bond ratings of S&P; the lower
two of which are referred to in the foregoing description of its commercial
paper ratings.
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
A
Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior, but to some extent,
also economic conditions.
BBB
The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate. These
bonds have adequate asset coverage and normally are protected by satisfactory
earnings. Their susceptibility to changing conditions, particularly to
depressions, necessitates constant watching. Market values of these bonds are
more responsive to business
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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.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
REPURCHASE AGREEMENTS
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than five percent of its total assets in securities issued by the
issuer of the security, provided that such a fund may invest more than five
percent of its total assets in the First Tier securities of a single issuer for
a period of up to three business days after the purchase thereof if the money
market fund is a diversified investment company, provided further, that the fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of a
fund's total assets that are invested in securities of an issuer, a repurchase
agreement shall be deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the securities from the
money market fund is fully collateralized. To be fully collateralized, the
collateral must, among other things, consist
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entirely of U.S. Government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the highest rating category
by Requisite NRSROs.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of
the U.S. Government, its agencies or instrumentalities) if, immediately
after such purchase, more than 5% of the value of the Portfolio's total
assets would be invested in such issuer, except as permitted by Rule 2a-7
under the 1940 Act, as amended from time to time;
(3) borrow money or issue senior securities except (a) for temporary
or emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities, provided that the Portfolio will not purchase portfolio
securities while borrowings in excess of 5% of its total assets are
outstanding;
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and then
only in an amount up to 33-1/3% of the value of its total assets at the
time of borrowing or entering into a reverse repurchase agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements and (c) by lending
portfolio securities to the extent permitted by law or regulation;
(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
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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.
On December 11, 1996, the Board of Directors of the Fund approved, subject
to shareholder approval, the elimination of and changes to certain fundamental
investment policies of the Portfolio. Sharreholders of the Portfolio will be
asked to approve these changes at an annual meeting of shareholders to be held
on February 7, 1997. If approved, these changes will become effective as of
March 1, 1997.
Reference is made to Investment Restriction Nos.(2) and (10) of the
Portfolio, set forth above. The Board of Directors has approved the elimination
of Investment Restriction No. (10) and a change to Investment Restriction No.
(2) of the Portfolio. In the event shareholders approve the proposed changes,
Investment Restricition No. (10) will no longer apply and Investment
Restricition No. (2) will read in full as follows:
(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, and except that the Portfolio
may purchase securities of other investment comopanies to the extent
permitted by applicable law or exemptive order;
The following investment policy is not fundamental 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.
PORTFOLIO TRANSACTIONS
AIM is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
The Portfolio does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money market. For example, market
conditions frequently result in similar securities trading at different prices.
AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one 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
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<PAGE>
than the Portfolio. Similarly, any research services received by AIM through
placement of portfolio transactions of other clients may be of value to AIM in
fulfilling its obligations to the Portfolio. AIM is of the opinion that the
material received is beneficial in supplementing AIM's research and analysis;
and therefore, it may benefit the Portfolio by improving the quality of AIM's
investment advice. The advisory fees paid by the Portfolio are not reduced
because AIM receives such services.
From time to time, the Fund may sell a security to, or purchase a security
from, an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital"), when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Fund.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with such 5% holder, if the Fund complies with conditions
and procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Portfolio's. It is possible that at
times identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing
and amount of purchase by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts is
considered at or about the same time, transactions in such securities will be
allocated in good faith among such accounts, in accordance with applicable laws
and regulations, in order to obtain the best net price and most favorable
execution. The allocation and combination of simultaneous securities purchases
on behalf of the Portfolio will be made in the same way that such purchases are
allocated among or combined with those of other AIM accounts. Simultaneous
transactions could adversely affect the ability of the Portfolio to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolio as a principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
Furthermore, the 1940 Act prohibits the Fund from purchasing a security being
publicly underwritten by a syndicate of which persons affiliated with the Fund
are members except in accordance with certain conditions. These conditions may
restrict the ability of the Portfolio to purchase money market obligations being
publicly underwritten by such a syndicate, and the Portfolio may be required to
wait until the syndicate has been terminated before buying such securities. At
such time, the market price of the securities may be higher or lower than the
original offering price. A person affiliated with the Fund may, from time to
time, serve as placement agent or financial advisor to an issuer of money market
obligations and be paid a fee by such issuer. The Portfolio may purchase such
money market obligations directly from the issuer, provided that the purchase is
made in accordance with procedures adopted by the Fund's Board of Directors and
such purchase is reviewed at least quarterly by the Fund's Board of Directors
and a determination is made that all such purchases were effected in compliance
with such procedures, including a determination that the placement fee or other
remuneration paid by the issuer to the person affiliated with the Fund was fair
and reasonable in relation to the fees charged by others performing similar
services. During the fiscal year ended
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August 31, 1996, no securities or instruments were purchased by the Portfolio
from issuers who paid placement fees or other compensation to a broker
affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts, will
not be characterized as Short-Short Gains if they are directly related to the
regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is disregarded.
Interest (including original issue discount) received by a fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of a security
within the meaning of the Short-Short Gain Test. However, income that is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In addition to satisfying the requirements described above, a regulated
investment company must satisfy an asset diversification test in order to
qualify for tax purposes as a regulated investment company. Under this test, at
the close of each quarter of a fund's taxable year, at least 50% of the value of
a fund's assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated 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
27
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invested in the securities of any other issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two or
more issuers which a fund controls and which are engaged in the same or similar
trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Portfolio may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Class. Shareholders receiving a distribution in the
form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, dividends declared in October, November or December of any year and
payable to shareholders of record on a specified date in such a month will be
deemed to have been received by the shareholders (and made by the Portfolio) on
December 31 of such calendar year if such dividends are actually paid in January
of the following year.
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."
28
<PAGE>
SALE OR REDEMPTION OF SHARES
A shareholder will recoginize gain or loss on the sale or redemption of
shares of a class in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the class within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a class will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital dividends received on such
shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carred on by a foreign sharehodler, dividends and
distributions (other than capital gains dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the dividend or distribution. Such a foreign shareholder would generally be
exempt from U.S. federal income tax on gains relized on the sale of shares of a
class, capital gain dividends and amounts retained by the Portfolio that are
designated as undistributed capital gains.
If the income from the Portfolio is effectively connected with a U.S. or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realied upon the sale of shares of the
Portfolio will be subject to U.S. federal income tax at the rated applicable to
U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Portfolio may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax unless such shareholders furnish
the Portfolio with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Portfolio, including the applicability of foreign taxes.
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 December
30, 1996. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolio.
29
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
LIQUID ASSETS PORTFOLIO
CASH MANAGEMENT CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 21.61%(a)
CONSUMER DURABLES - 5.32%
AEROSPACE/DEFENSE - 0.48%
Raytheon Co.
5.32% 09/18/96 $ 10,000 $ 9,974,878
- -------------------------------------------------------------------------
AUTOMOBILE - 1.42%
Ford Motor Credit Co.
5.36% 12/03/96 30,000 29,584,600
- -------------------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT - 2.48%
Xerox Corp.
5.32% 12/18/96 52,600 51,760,504
- -------------------------------------------------------------------------
MACHINERY - 0.94%
Dover Corp.
5.33% 09/23/96 8,041 8,014,809
- -------------------------------------------------------------------------
5.33% 09/24/96 11,796 11,755,831
- -------------------------------------------------------------------------
19,770,640
- -------------------------------------------------------------------------
Total Consumer Durables 111,090,622
- -------------------------------------------------------------------------
CONSUMER NONDURABLES - 0.14%
MULTIPLE INDUSTRY - 0.14%
PepsiCo Inc.
5.05% 09/03/96 3,000 2,999,158
- -------------------------------------------------------------------------
Total Consumer Nondurables 2,999,158
- -------------------------------------------------------------------------
FINANCIAL - 14.40%
ASSET-BACKED SECURITIES - 6.14%
Asset Securitization Cooperative Corp.
5.32% 11/04/96 50,000 49,527,111
- -------------------------------------------------------------------------
Ciesco, L.P.
5.30% 12/02/96 31,300 30,876,059
- -------------------------------------------------------------------------
Clipper Receivables Corp.
5.33% 09/20/96 15,300 15,256,960
- -------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.33% 09/05/96 10,025 10,019,063
- -------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.30% 11/25/96 22,700 22,415,935
- -------------------------------------------------------------------------
128,095,128
- -------------------------------------------------------------------------
INSURANCE - 1.43%
Marsh & McLennan Companies Inc.
4.81% 11/01/96 20,000 19,836,994
- -------------------------------------------------------------------------
Prudential Funding Corp.
5.33% 10/29/96 10,000 9,914,128
- -------------------------------------------------------------------------
29,751,122
- -------------------------------------------------------------------------
PERSONAL CREDIT - 1.89%
Household Finance Corp.
5.34% 12/09/96 25,000 24,632,875
- -------------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Transamerica Finance Corp.
5.32% 12/10/96 $ 15,000 $ 14,778,333
- -----------------------------------------------------------------------------
39,411,208
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.94%
International Lease Finance Corp.
5.35% 12/06/96 20,000 19,714,667
- -----------------------------------------------------------------------------
MULTIPLE INDUSTRY - 4.00%
General Electric Capital Corp.
5.35% 09/06/96 10,000 9,992,569
- -----------------------------------------------------------------------------
5.34% 12/16/96 25,000 24,606,917
- -----------------------------------------------------------------------------
5.38% 02/12/97 50,000 48,774,556
- -----------------------------------------------------------------------------
83,374,042
- -----------------------------------------------------------------------------
Total Financial 300,346,167
- -----------------------------------------------------------------------------
OTHER - 1.75%
DIVERSIFIED - 1.18%
BTR Dunlop Finance Inc.
5.30% 12/19/96 25,000 24,598,819
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.57%
Cargill Financial Services Corp.
4.95% 10/29/96 12,000 11,904,300
- -----------------------------------------------------------------------------
Total Other 36,503,119
- -----------------------------------------------------------------------------
Total Commercial Paper 450,939,066
- -----------------------------------------------------------------------------
MEDIUM TERM NOTES - 0.96%
General Electric Capital Corp.
5.084% 01/29/97 10,000 10,003,770
- -----------------------------------------------------------------------------
5.138% 01/30/97 10,000 10,005,974
- -----------------------------------------------------------------------------
Total Medium Term Notes 20,009,744
- -----------------------------------------------------------------------------
PROMISSORY AND MASTER NOTE AGREEMENTS -
20.45%
Goldman Sachs Group (The), L.P.
5.423%(b) 10/25/96 173,000 173,000,000
- -----------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.413%(c) 10/09/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Group Inc.
5.383%(d) 11/29/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Total Promissory and Master Note
Agreements 427,000,000
- -----------------------------------------------------------------------------
U.S. TREASURY NOTES - 1.20%
6.50% 09/30/96 25,000 25,029,024
- -----------------------------------------------------------------------------
Total U.S. Treasury Notes 25,029,024
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 922,977,834
- -----------------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -
56.09%(e)
Daiwa Securities America,
Inc.(f)
5.24% 09/03/96 $ 7,446 $ 7,446,003
- ---------------------------------------------------------------
Dean Witter Reynolds
Inc.(g)
5.30% 09/03/96 100,000 100,000,000
- ---------------------------------------------------------------
Goldman, Sachs, & Co.(h)
5.31% 09/03/96 300,000 300,000,000
- ---------------------------------------------------------------
HSBC Securities, Inc(i)
5.28% 09/03/96 104,000 104,000,000
- ---------------------------------------------------------------
Morgan Stanley Group,
Inc.(j)
5.28% 09/03/96 104,000 104,000,000
- ---------------------------------------------------------------
Nesbitt Burns Securities,
Inc.(k)
5.26% -- 104,000 104,000,000
- ---------------------------------------------------------------
Nikko Securities Co.,
Ltd. (l)
5.30% 09/03/96 200,000 200,000,000
- ---------------------------------------------------------------
Nomura Securities
International, Inc.(m)
5.27% -- 93,000 93,000,000
- ---------------------------------------------------------------
Smith Barney, Inc.(n)
5.28% 09/03/96 54,000 54,000,000
- ---------------------------------------------------------------
UBS Securities LLC.(o)
5.26% 09/03/96 104,000 104,000,000
- ---------------------------------------------------------------
Total Repurchase
Agreements 1,170,446,003
- ---------------------------------------------------------------
TOTAL INVESTMENTS -
100.31% 2,093,423,837(p)
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES - (0.31%) (6,479,515)
- ---------------------------------------------------------------
NET ASSETS - 100.00% $2,086,944,322
===============================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rates shown are the rates in effect on August 31, 1996.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Agreement upon seven calendar days' notice. Interest rates on master
notes are redetermined periodically. Rates shown are the rates in effect on
August 31, 1996.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Agreement will become payable.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on August 31, 1996.
(e) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Portfolio upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(f) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
FS-3
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS-CONTINUED
(g) Entered into on 08/30/96 with a maturing value of $100,058,889.
Collateralized by $148,909,138 U.S. Government Agency obligations, 0% to
9.50% due 02/03/97 to 01/01/31.
(h) Entered into on 08/30/96 with a maturing value of $300,177,000.
Collateralized by $589,000,590 U.S. Government Agency obligations, 5.953%
to 8.00% due 08/01/23 to 05/01/35.
(i) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(j) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(k) Open joint repurchase agreement entered into on 04/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $638,599,000 U.S.
Treasury obligations, 0% to 10.75% due 10/31/96 to 08/15/25.
(l) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,666. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(m) Open joint repurchase agreement entered into on 07/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and by
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(n) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and by $18,291,000 U.S.
Treasury Bill, due 11/15/04.
(o) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(p) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $ 922,977,834
- ------------------------------------------------------------------------
Repurchase agreements 1,170,446,003
- ------------------------------------------------------------------------
Interest receivable 3,398,555
- ------------------------------------------------------------------------
Investment for deferred compensation plan 22,873
- ------------------------------------------------------------------------
Other assets 28,483
- ------------------------------------------------------------------------
Total assets 2,096,873,748
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 9,743,428
- ------------------------------------------------------------------------
Deferred compensation 22,873
- ------------------------------------------------------------------------
Accrued advisory fees 22,846
- ------------------------------------------------------------------------
Accrued distribution fees 13,597
- ------------------------------------------------------------------------
Accrued directors' fees 2,114
- ------------------------------------------------------------------------
Accrued administrative services fees 5,249
- ------------------------------------------------------------------------
Accrued transfer agent fees 16,177
- ------------------------------------------------------------------------
Accrued operating expenses 103,142
- ------------------------------------------------------------------------
Total liabilities 9,929,426
- ------------------------------------------------------------------------
NET ASSETS $2,086,944,322
========================================================================
NET ASSETS:
Institutional Class $1,988,754,678
========================================================================
Cash Management Class $ 53,209,043
========================================================================
Private Investment Class $ 44,980,601
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 1,990,405,063
========================================================================
Cash Management Class 53,254,529
========================================================================
Private Investment Class 45,017,927
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $99,543,502
- ------------------------------------------------------------------
EXPENSES:
Advisory
fees 2,687,358
- ------------------------------------------------------------------
Custodian fees 72,524
- ------------------------------------------------------------------
Administrative services fees 52,710
- ------------------------------------------------------------------
Distribution fees (Note 2) 65,408
- ------------------------------------------------------------------
Directors' fees and expenses 15,925
- ------------------------------------------------------------------
Filing fees 196,512
- ------------------------------------------------------------------
Transfer agent fees 134,459
- ------------------------------------------------------------------
Other 88,733
- ------------------------------------------------------------------
Total expenses 3,313,629
- ------------------------------------------------------------------
Less expenses assumed by advisor (2,679,024)
- ------------------------------------------------------------------
Net expenses 634,605
- ------------------------------------------------------------------
Net investment income 98,908,897
- ------------------------------------------------------------------
Net realized gain (loss) on sales of investments (1,596,067)
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $97,312,830
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 98,908,897 $ 92,913,637
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments (1,596,067) (74,934)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 97,312,830 92,838,703
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (98,908,897) (92,913,637)
- ----------------------------------------------------------------------------
Capital stock transactions -- net 801,077,731 259,187,785
- ----------------------------------------------------------------------------
Net increase in net assets 799,481,664 259,112,851
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,287,462,658 1,028,349,807
- ----------------------------------------------------------------------------
End of period $2,086,944,322 $1,287,462,658
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,088,677,519 $1,287,599,788
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (1,733,197) (137,130)
- ----------------------------------------------------------------------------
$2,086,944,322 $1,287,462,658
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series, diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, each of which offers separate series of shares:
the Liquid Assets Portfolio and the Prime Portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Liquid Assets
Portfolio (the "Portfolio"). The Portfolio consists of three different classes
of shares: the Institutional Class, the Private Investment Class and the Cash
Management Class. Matters affecting each class are voted on exclusively by the
shareholders of each class. The Portfolio's objective is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
The following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of 397 days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Portfolio has a capital
loss carryforward of $1,733,197 (which may be carried forward to offset
future taxable gains, if any) which expires, if not previously utilized,
through the year 2004. The Portfolio cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Expenses - Operating expenses directly attributable to a class of shares
are charged to that class' operations. Expenses which are applicable to
more than one class, e.g., advisory fees, are allocated among them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a fee, paid monthly, with respect to the Portfolio at the annual rate
of 0.15% of the average daily net assets of the Portfolio.
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. During the year ended
August 31, 1996, AIM voluntarily waived fees of $2,562,094 on the Portfolio and
voluntarily reimbursed expenses of $116,930.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1996,
the Portfolio reimbursed AIM $52,710 for such services.
FS-8
<PAGE>
The Portfolio, pursuant to a transfer agency and service agreement, has agreed
to pay A I M Institutional Fund Services, Inc. ("AIFS") a fee for providing
transfer agent and shareholder services to the Portfolio. During the year ended
August 31, 1996, the Portfolio paid AIFS $133,085 for such services.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class and the Cash Management Class of the Portfolio. The Plan
provides that the Private Investment Class and Cash Management Class pay FMC up
to a maximum annual rate of 0.50% and 0.10%, respectively, of the average daily
net assets attributable to such class. Of this amount, the Fund may pay an
asset-based sales charge to FMC and the Fund may pay a service fee of 0.25% and
0.10% of the average daily net assets, respectively, of each of the Private
Investment Class and the Cash Management Class, to selected banks, broker-
dealers and other financial institutions who offer continuing personal
shareholder services to their customers who purchase and own shares of the
Private Investment Class or the Cash Management Class. Any amounts not paid as
a service fee under such Plan would constitute an asset-based sales charge.
During the year ended August 31, 1996, the Private Investment Class and the
Cash Management Class accrued as compensation to FMC amounts of $54,941 and
$10,467, respectively, under the Plan. Certain officers and directors of the
Fund are officers of AIM, FMC, and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of $7,775
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Fund's directors. A member of that firm is a director of the Fund.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 51,676,611,824 $ 51,676,611,824 32,408,905,435 $32,408,905,435
- ----------------------------------------------------------------------------------------------
Cash Management Class* 320,121,330 320,121,330 -- --
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 136,803,186 136,803,186 -- --
- ----------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 4,477,681 4,477,681 2,458,920 2,458,920
- ----------------------------------------------------------------------------------------------
Cash Management Class* 283,906 283,906 -- --
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 727,956 727,956 -- --
- ----------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (50,978,284,230) (50,978,284,230) (32,152,176,570) (32,152,176,570)
- ----------------------------------------------------------------------------------------------
Cash Management Class* (267,150,707) (267,150,707) -- --
- ----------------------------------------------------------------------------------------------
Private Investment
Class** (92,513,215) (92,513,215) -- --
- ----------------------------------------------------------------------------------------------
Net increase 801,077,731 $ 801,077,731 259,187,785 $ 259,187,785
==============================================================================================
</TABLE>
* The Cash Management Class commenced operations on January 17, 1996.
** The Private Investment Class commenced operations on February 16, 1996.
FS-9
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of capital stock
outstanding of the Cash Management Class during the period January 17, 1996
(date operations commenced) through August 31, 1996.
<TABLE>
<CAPTION>
AUGUST 31,
1996
----------
<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 5.36%(a)
==================================================== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $53,209
==================================================== =======
Ratio of expenses to average net assets 0.10%(b)
==================================================== =======
Ratio of net investment income to average net assets 5.27%(b)
==================================================== =======
</TABLE>
(a) Annualized.
(b) After waiver of advisory fees, distribution fees and expense
reimbursements. Ratios are annualized and based on average net assets of
$21,002,559. Annualized ratios of expenses and net investment income to
average net assets prior to waivers and reimbursements were 0.34% and
5.03%, respectively.
FS-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for the period January 17, 1996 (date operations commenced) through
August 31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Liquid Assets Portfolio as of August 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for the period
January 17, 1996 (date operations commenced) through August 31, 1996, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
_________________________
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-11
<PAGE>
LIQUID ASSETS PORTFOLIO
INSTITUTIONAL CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 21.61%(a)
CONSUMER DURABLES - 5.32%
AEROSPACE/DEFENSE - 0.48%
Raytheon Co.
5.32% 09/18/96 $ 10,000 $ 9,974,878
- -------------------------------------------------------------------------
AUTOMOBILE - 1.42%
Ford Motor Credit Co.
5.36% 12/03/96 30,000 29,584,600
- -------------------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT - 2.48%
Xerox Corp.
5.32% 12/18/96 52,600 51,760,504
- -------------------------------------------------------------------------
MACHINERY - 0.94%
Dover Corp.
5.33% 09/23/96 8,041 8,014,809
- -------------------------------------------------------------------------
5.33% 09/24/96 11,796 11,755,831
- -------------------------------------------------------------------------
19,770,640
- -------------------------------------------------------------------------
Total Consumer Durables 111,090,622
- -------------------------------------------------------------------------
CONSUMER NONDURABLES - 0.14%
MULTIPLE INDUSTRY - 0.14%
PepsiCo Inc.
5.05% 09/03/96 3,000 2,999,158
- -------------------------------------------------------------------------
Total Consumer Nondurables 2,999,158
- -------------------------------------------------------------------------
FINANCIAL - 14.40%
ASSET-BACKED SECURITIES - 6.14%
Asset Securitization Cooperative Corp.
5.32% 11/04/96 50,000 49,527,111
- -------------------------------------------------------------------------
Ciesco, L.P.
5.30% 12/02/96 31,300 30,876,059
- -------------------------------------------------------------------------
Clipper Receivables Corp.
5.33% 09/20/96 15,300 15,256,960
- -------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.33% 09/05/96 10,025 10,019,063
- -------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.30% 11/25/96 22,700 22,415,935
- -------------------------------------------------------------------------
128,095,128
- -------------------------------------------------------------------------
INSURANCE - 1.43%
Marsh & McLennan Companies Inc.
4.81% 11/01/96 20,000 19,836,994
- -------------------------------------------------------------------------
Prudential Funding Corp.
5.33% 10/29/96 10,000 9,914,128
- -------------------------------------------------------------------------
29,751,122
- -------------------------------------------------------------------------
PERSONAL CREDIT - 1.89%
Household Finance Corp.
5.34% 12/09/96 25,000 24,632,875
- -------------------------------------------------------------------------
</TABLE>
FS-12
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Transamerica Finance Corp.
5.32% 12/10/96 $ 15,000 $ 14,778,333
- -----------------------------------------------------------------------------
39,411,208
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.94%
International Lease Finance Corp.
5.35% 12/06/96 20,000 19,714,667
- -----------------------------------------------------------------------------
MULTIPLE INDUSTRY - 4.00%
General Electric Capital Corp.
5.35% 09/06/96 10,000 9,992,569
- -----------------------------------------------------------------------------
5.34% 12/16/96 25,000 24,606,917
- -----------------------------------------------------------------------------
5.38% 02/12/97 50,000 48,774,556
- -----------------------------------------------------------------------------
83,374,042
- -----------------------------------------------------------------------------
Total Financial 300,346,167
- -----------------------------------------------------------------------------
OTHER - 1.75%
DIVERSIFIED - 1.18%
BTR Dunlop Finance Inc.
5.30% 12/19/96 25,000 24,598,819
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.57%
Cargill Financial Services Corp.
4.95% 10/29/96 12,000 11,904,300
- -----------------------------------------------------------------------------
Total Other 36,503,119
- -----------------------------------------------------------------------------
Total Commercial Paper 450,939,066
- -----------------------------------------------------------------------------
MEDIUM TERM NOTES - 0.96%
General Electric Capital Corp.
5.084% 01/29/97 10,000 10,003,770
- -----------------------------------------------------------------------------
5.138% 01/30/97 10,000 10,005,974
- -----------------------------------------------------------------------------
Total Medium Term Notes 20,009,744
- -----------------------------------------------------------------------------
PROMISSORY AND MASTER NOTE AGREEMENTS -
20.45%
Goldman Sachs Group (The), L.P.
5.423%(b) 10/25/96 173,000 173,000,000
- -----------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.413%(c) 10/09/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Group Inc.
5.383%(d) 11/29/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Total Promissory and Master Note
Agreements 427,000,000
- -----------------------------------------------------------------------------
U.S. TREASURY NOTES - 1.20%
6.50% 09/30/96 25,000 25,029,024
- -----------------------------------------------------------------------------
Total U.S. Treasury Notes 25,029,024
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 922,977,834
- -----------------------------------------------------------------------------
</TABLE>
FS-13
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - 56.09%(e)
Daiwa Securities America, Inc.(f)
5.24% 09/03/96 $ 7,446 $ 7,446,003
- -------------------------------------------------------------------------------
Dean Witter Reynolds Inc.(g)
5.30% 09/03/96 100,000 100,000,000
- -------------------------------------------------------------------------------
Goldman, Sachs, & Co.(h)
5.31% 09/03/96 300,000 300,000,000
- -------------------------------------------------------------------------------
HSBC Securities, Inc(i)
5.28% 09/03/96 104,000 104,000,000
- -------------------------------------------------------------------------------
Morgan Stanley Group, Inc.(j)
5.28% 09/03/96 104,000 104,000,000
- -------------------------------------------------------------------------------
Nesbitt Burns Securities, Inc.(k)
5.26% -- 104,000 104,000,000
- -------------------------------------------------------------------------------
Nikko Securities Co., Ltd.(l)
5.30% 09/03/96 200,000 200,000,000
- -------------------------------------------------------------------------------
Nomura Securities International, Inc.(m)
5.27% -- 93,000 93,000,000
- -------------------------------------------------------------------------------
Smith Barney, Inc.(n)
5.28% 09/03/96 54,000 54,000,000
- -------------------------------------------------------------------------------
UBS Securities LLC.(o)
5.26% 09/03/96 104,000 104,000,000
- -------------------------------------------------------------------------------
Total Repurchase Agreements 1,170,446,003
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.31% 2,093,423,837(p)
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.31%) (6,479,515)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $2,086,944,322
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rates shown are the rates in effect on August 31, 1996.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Agreement upon seven calendar days' notice. Interest rates on master
notes are redetermined periodically. Rates shown are the rates in effect on
August 31, 1996.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Agreement will become payable.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on August 31, 1996.
(e) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Portfolio upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(f) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
FS-14
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS-CONTINUED
(g) Entered into on 08/30/96 with a maturing value of $100,058,889.
Collateralized by $148,909,138 U.S. Government Agency obligations, 0% to
9.50% due 02/03/97 to 01/01/31.
(h) Entered into on 08/30/96 with a maturing value of $300,177,000.
Collateralized by $589,000,590 U.S. Government Agency obligations, 5.953%
to 8.00% due 08/01/23 to 05/01/35.
(i) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(j) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(k) Open joint repurchase agreement entered into on 04/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $638,599,000 U.S.
Treasury obligations, 0% to 10.75% due 10/31/96 to 08/15/25.
(l) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,666. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(m) Open joint repurchase agreement entered into on 07/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and by
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(n) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and by $18,291,000 U.S.
Treasury Bill, due 11/15/04.
(o) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(p) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $ 922,977,834
- ------------------------------------------------------------------------
Repurchase agreements 1,170,446,003
- ------------------------------------------------------------------------
Interest receivable 3,398,555
- ------------------------------------------------------------------------
Investment for deferred compensation plan 22,873
- ------------------------------------------------------------------------
Other assets 28,483
- ------------------------------------------------------------------------
Total assets 2,096,873,748
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 9,743,428
- ------------------------------------------------------------------------
Deferred compensation 22,873
- ------------------------------------------------------------------------
Accrued advisory fees 22,846
- ------------------------------------------------------------------------
Accrued distribution fees 13,597
- ------------------------------------------------------------------------
Accrued directors' fees 2,114
- ------------------------------------------------------------------------
Accrued administrative services fees 5,249
- ------------------------------------------------------------------------
Accrued transfer agent fees 16,177
- ------------------------------------------------------------------------
Accrued operating expenses 103,142
- ------------------------------------------------------------------------
Total liabilities 9,929,426
- ------------------------------------------------------------------------
NET ASSETS $2,086,944,322
========================================================================
NET ASSETS:
Institutional Class $1,988,754,678
========================================================================
Cash Management Class $ 53,209,043
========================================================================
Private Investment Class $ 44,980,601
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 1,990,405,063
========================================================================
Cash Management Class 53,254,529
========================================================================
Private Investment Class 45,017,927
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-16
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $99,543,502
- ------------------------------------------------------------------
EXPENSES:
Advisory fees 2,687,358
- ------------------------------------------------------------------
Custodian fees 72,524
- ------------------------------------------------------------------
Administrative services fees 52,710
- ------------------------------------------------------------------
Distribution fees (Note 2) 65,408
- ------------------------------------------------------------------
Directors' fees and expenses 15,925
- ------------------------------------------------------------------
Filing fees 196,512
- ------------------------------------------------------------------
Transfer agent fees 134,459
- ------------------------------------------------------------------
Other 88,733
- ------------------------------------------------------------------
Total expenses 3,313,629
- ------------------------------------------------------------------
Less expenses assumed by advisor (2,679,024)
- ------------------------------------------------------------------
Net expenses 634,605
- ------------------------------------------------------------------
Net investment income 98,908,897
- ------------------------------------------------------------------
Net realized gain (loss) on sales of investments (1,596,067)
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $97,312,830
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 98,908,897 $ 92,913,637
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments (1,596,067) (74,934)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 97,312,830 92,838,703
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (98,908,897) (92,913,637)
- ----------------------------------------------------------------------------
Capital stock transactions -- net 801,077,731 259,187,785
- ----------------------------------------------------------------------------
Net increase in net assets 799,481,664 259,112,851
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,287,462,658 1,028,349,807
- ----------------------------------------------------------------------------
End of period $2,086,944,322 $1,287,462,658
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,088,677,519 $1,287,599,788
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (1,733,197) (137,130)
- ----------------------------------------------------------------------------
$2,086,944,322 $1,287,462,658
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series, diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, each of which offers separate series of shares:
the Liquid Assets Portfolio and the Prime Portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Liquid Assets
Portfolio (the "Portfolio"). The Portfolio consists of three different classes
of shares: the Institutional Class, the Private Investment Class and the Cash
Management Class. Matters affecting each class are voted on exclusively by the
shareholders of each class. The Portfolio's objective is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
The following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of 397 days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Portfolio has a capital
loss carryforward of $1,733,197 (which may be carried forward to offset
future taxable gains, if any) which expires, if not previously utilized,
through the year 2004. The Portfolio cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Expenses - Operating expenses directly attributable to a class of shares
are charged to that class' operations. Expenses which are applicable to
more than one class, e.g., advisory fees, are allocated among them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a fee, paid monthly, with respect to the Portfolio at the annual rate
of 0.15% of the average daily net assets of the Portfolio.
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. During the year ended
August 31, 1996, AIM voluntarily waived fees of $2,562,094 on the Portfolio and
voluntarily reimbursed expenses of $116,930.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1996,
the Portfolio reimbursed AIM $52,710 for such services.
FS-19
<PAGE>
The Portfolio, pursuant to a transfer agency and service agreement, has agreed
to pay A I M Institutional Fund Services, Inc. ("AIFS") a fee for providing
transfer agent and shareholder services to the Portfolio. During the year ended
August 31, 1996, the Portfolio paid AIFS $133,085 for such services.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class and the Cash Management Class of the Portfolio. The Plan
provides that the Private Investment Class and Cash Management Class pay FMC up
to a maximum annual rate of 0.50% and 0.10%, respectively, of the average daily
net assets attributable to such class. Of this amount, the Fund may pay an
asset-based sales charge to FMC and the Fund may pay a service fee of 0.25% and
0.10% of the average daily net assets, respectively, of each of the Private
Investment Class and the Cash Management Class, to selected banks, broker-
dealers and other financial institutions who offer continuing personal
shareholder services to their customers who purchase and own shares of the
Private Investment Class or the Cash Management Class. Any amounts not paid as
a service fee under such Plan would constitute an asset-based sales charge.
During the year ended August 31, 1996, the Private Investment Class and the
Cash Management Class accrued as compensation to FMC amounts of $54,941 and
$10,467, respectively, under the Plan. Certain officers and directors of the
Fund are officers of AIM, FMC, and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of $7,775
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Fund's directors. A member of that firm is a director of the Fund.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 51,676,611,824 $ 51,676,611,824 32,408,905,435 $ 32,408,905,435
- ----------------------------------------------------------------------------------------------------
Cash Management Class* 320,121,330 320,121,330 -- --
- ----------------------------------------------------------------------------------------------------
Private Investment Class** 136,803,186 136,803,186 -- --
- ----------------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 4,477,681 4,477,681 2,458,920 2,458,920
- ----------------------------------------------------------------------------------------------------
Cash Management Class* 283,906 283,906 -- --
- ---------------------------------------------------------------------------------------------------
Private Investment Class** 727,956 727,956 -- --
- ---------------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (50,978,284,230) (50,978,284,230) (32,152,176,570) (32,152,176,570)
- ---------------------------------------------------------------------------------------------------
Cash Management Class* (267,150,707) (267,150,707) -- --
- ---------------------------------------------------------------------------------------------------
Private Investment Class** (92,513,215) (92,513,215) -- --
- ---------------------------------------------------------------------------------------------------
Net increase 801,077,731 $ 801,077,731 259,187,785 $ 259,187,785
===================================================================================================
</TABLE>
* The Cash Management Class commenced operations on January 17, 1996.
** The Private Investment Class commenced operations on February 16, 1996.
FS-20
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of capital stock
outstanding of the Institutional Class during each of the years in the two year
period ended August 31, 1996 and the period November 4, 1993 (date operations
commenced) through August 31, 1994.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.06 0.06 0.03
- ---------------------------------------------------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.06) (0.06) (0.03)
- ---------------------------------------------------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
==================================================== ========== ========== ==========
Total return 5.68% 5.83% 3.83%(a)
==================================================== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,988,755 $1,287,463 $1,028,350
==================================================== ========== ========== ==========
Ratio of expenses to average net assets 0.03%(b)(c) 0.11%(c) 0.05%(c)
==================================================== ========== ========== ==========
Ratio of net investment income to average net assets 5.52%(b)(d) 5.69%(d) 3.85%(d)
==================================================== ========== ========== ==========
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $1,762,965,947.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
and expense reimbursements were 0.18% for the periods 1996-1994,
respectively. Ratios are annualized for periods less than one year.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees and expense reimbursements were 5.37%, 5.62% and 3.72%
(annualized) for the periods 1996-1994, respectively.
FS-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the two year period then ended and the
period November 4, 1993 (date operations commenced) through August 31, 1994.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Liquid Assets Portfolio as of August 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the two year period then ended and the period November 4, 1993 (date
operations commenced) through August 31, 1994, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
_________________________
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-22
<PAGE>
LIQUID ASSETS PORTFOLIO
PRIVATE INVESTMENT CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 21.61%(a)
CONSUMER DURABLES - 5.32%
AEROSPACE/DEFENSE - 0.48%
Raytheon Co.
5.32% 09/18/96 $ 10,000 $ 9,974,878
- -------------------------------------------------------------------------
AUTOMOBILE - 1.42%
Ford Motor Credit Co.
5.36% 12/03/96 30,000 29,584,600
- -------------------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT - 2.48%
Xerox Corp.
5.32% 12/18/96 52,600 51,760,504
- -------------------------------------------------------------------------
MACHINERY - 0.94%
Dover Corp.
5.33% 09/23/96 8,041 8,014,809
- -------------------------------------------------------------------------
5.33% 09/24/96 11,796 11,755,831
- -------------------------------------------------------------------------
19,770,640
- -------------------------------------------------------------------------
Total Consumer Durables 111,090,622
- -------------------------------------------------------------------------
CONSUMER NONDURABLES - 0.14%
MULTIPLE INDUSTRY - 0.14%
PepsiCo Inc.
5.05% 09/03/96 3,000 2,999,158
- -------------------------------------------------------------------------
Total Consumer Nondurables 2,999,158
- -------------------------------------------------------------------------
FINANCIAL - 14.40%
ASSET-BACKED SECURITIES - 6.14%
Asset Securitization Cooperative Corp.
5.32% 11/04/96 50,000 49,527,111
- -------------------------------------------------------------------------
Ciesco, L.P.
5.30% 12/02/96 31,300 30,876,059
- -------------------------------------------------------------------------
Clipper Receivables Corp.
5.33% 09/20/96 15,300 15,256,960
- -------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.33% 09/05/96 10,025 10,019,063
- -------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.30% 11/25/96 22,700 22,415,935
- -------------------------------------------------------------------------
128,095,128
- -------------------------------------------------------------------------
INSURANCE - 1.43%
Marsh & McLennan Companies Inc.
4.81% 11/01/96 20,000 19,836,994
- -------------------------------------------------------------------------
Prudential Funding Corp.
5.33% 10/29/96 10,000 9,914,128
- -------------------------------------------------------------------------
29,751,122
- -------------------------------------------------------------------------
PERSONAL CREDIT - 1.89%
Household Finance Corp.
5.34% 12/09/96 25,000 24,632,875
- -------------------------------------------------------------------------
</TABLE>
FS-23
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Transamerica Finance Corp.
5.32% 12/10/96 $ 15,000 $ 14,778,333
- -----------------------------------------------------------------------------
39,411,208
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.94%
International Lease Finance Corp.
5.35% 12/06/96 20,000 19,714,667
- -----------------------------------------------------------------------------
MULTIPLE INDUSTRY - 4.00%
General Electric Capital Corp.
5.35% 09/06/96 10,000 9,992,569
- -----------------------------------------------------------------------------
5.34% 12/16/96 25,000 24,606,917
- -----------------------------------------------------------------------------
5.38% 02/12/97 50,000 48,774,556
- -----------------------------------------------------------------------------
83,374,042
- -----------------------------------------------------------------------------
Total Financial 300,346,167
- -----------------------------------------------------------------------------
OTHER - 1.75%
DIVERSIFIED - 1.18%
BTR Dunlop Finance Inc.
5.30% 12/19/96 25,000 24,598,819
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.57%
Cargill Financial Services Corp.
4.95% 10/29/96 12,000 11,904,300
- -----------------------------------------------------------------------------
Total Other 36,503,119
- -----------------------------------------------------------------------------
Total Commercial Paper 450,939,066
- -----------------------------------------------------------------------------
MEDIUM TERM NOTES - 0.96%
General Electric Capital Corp.
5.084% 01/29/97 10,000 10,003,770
- -----------------------------------------------------------------------------
5.138% 01/30/97 10,000 10,005,974
- -----------------------------------------------------------------------------
Total Medium Term Notes 20,009,744
- -----------------------------------------------------------------------------
PROMISSORY AND MASTER NOTE AGREEMENTS -
20.45%
Goldman Sachs Group (The), L.P.
5.423%(b) 10/25/96 173,000 173,000,000
- -----------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.413%(c) 10/09/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Group Inc.
5.383%(d) 11/29/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Total Promissory and Master Note
Agreements 427,000,000
- -----------------------------------------------------------------------------
U.S. TREASURY NOTES - 1.20%
6.50% 09/30/96 25,000 25,029,024
- -----------------------------------------------------------------------------
Total U.S. Treasury Notes 25,029,024
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 922,977,834
- -----------------------------------------------------------------------------
</TABLE>
FS-24
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -
56.09%(e)
Daiwa Securities America,
Inc.(f)
5.24% 09/03/96 $ 7,446 $ 7,446,003
- ---------------------------------------------------------------
Dean Witter Reynolds
Inc.(g)
5.30% 09/03/96 100,000 100,000,000
- ---------------------------------------------------------------
Goldman, Sachs, & Co.(h)
5.31% 09/03/96 300,000 300,000,000
- ---------------------------------------------------------------
HSBC Securities, Inc(i)
5.28% 09/03/96 104,000 104,000,000
- ---------------------------------------------------------------
Morgan Stanley Group,
Inc.(j)
5.28% 09/03/96 104,000 104,000,000
- ---------------------------------------------------------------
Nesbitt Burns Securities,
Inc.(k)
5.26% -- 104,000 104,000,000
- ---------------------------------------------------------------
Nikko Securities Co.,
Ltd. (l)
5.30% 09/03/96 200,000 200,000,000
- ---------------------------------------------------------------
Nomura Securities
International, Inc.(m)
5.27% -- 93,000 93,000,000
- ---------------------------------------------------------------
Smith Barney, Inc.(n)
5.28% 09/03/96 54,000 54,000,000
- ---------------------------------------------------------------
UBS Securities LLC.(o)
5.26% 09/03/96 104,000 104,000,000
- ---------------------------------------------------------------
Total Repurchase
Agreements 1,170,446,003
- ---------------------------------------------------------------
TOTAL INVESTMENTS -
100.31% 2,093,423,837(p)
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES - (0.31%) (6,479,515)
- ---------------------------------------------------------------
NET ASSETS - 100.00% $2,086,944,322
===============================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rates shown are the rates in effect on August 31, 1996.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Agreement upon seven calendar days' notice. Interest rates on master
notes are redetermined periodically. Rates shown are the rates in effect on
August 31, 1996.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Agreement will become payable.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on August 31, 1996.
(e) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Portfolio upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(f) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
FS-25
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS-CONTINUED
(g) Entered into on 08/30/96 with a maturing value of $100,058,889.
Collateralized by $148,909,138 U.S. Government Agency obligations, 0% to
9.50% due 02/03/97 to 01/01/31.
(h) Entered into on 08/30/96 with a maturing value of $300,177,000.
Collateralized by $589,000,590 U.S. Government Agency obligations, 5.953%
to 8.00% due 08/01/23 to 05/01/35.
(i) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(j) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(k) Open joint repurchase agreement entered into on 04/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $638,599,000 U.S.
Treasury obligations, 0% to 10.75% due 10/31/96 to 08/15/25.
(l) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,666. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(m) Open joint repurchase agreement entered into on 07/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and by
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(n) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and by $18,291,000 U.S.
Treasury Bill, due 11/15/04.
(o) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(p) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-26
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $ 922,977,834
- ------------------------------------------------------------------------
Repurchase agreements 1,170,446,003
- ------------------------------------------------------------------------
Interest receivable 3,398,555
- ------------------------------------------------------------------------
Investment for deferred compensation plan 22,873
- ------------------------------------------------------------------------
Other assets 28,483
- ------------------------------------------------------------------------
Total assets 2,096,873,748
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 9,743,428
- ------------------------------------------------------------------------
Deferred compensation 22,873
- ------------------------------------------------------------------------
Accrued advisory fees 22,846
- ------------------------------------------------------------------------
Accrued distribution fees 13,597
- ------------------------------------------------------------------------
Accrued directors' fees 2,114
- ------------------------------------------------------------------------
Accrued administrative services fees 5,249
- ------------------------------------------------------------------------
Accrued transfer agent fees 16,177
- ------------------------------------------------------------------------
Accrued operating expenses 103,142
- ------------------------------------------------------------------------
Total liabilities 9,929,426
- ------------------------------------------------------------------------
NET ASSETS $2,086,944,322
========================================================================
NET ASSETS:
Institutional Class $1,988,754,678
========================================================================
Cash Management Class $ 53,209,043
========================================================================
Private Investment Class $ 44,980,601
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 1,990,405,063
========================================================================
Cash Management Class 53,254,529
========================================================================
Private Investment Class 45,017,927
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-27
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $99,543,502
- ------------------------------------------------------------------
EXPENSES:
Advisory
fees 2,687,358
- ------------------------------------------------------------------
Custodian fees 72,524
- ------------------------------------------------------------------
Administrative services fees 52,710
- ------------------------------------------------------------------
Distribution fees (Note 2) 65,408
- ------------------------------------------------------------------
Directors' fees and expenses 15,925
- ------------------------------------------------------------------
Filing fees 196,512
- ------------------------------------------------------------------
Transfer agent fees 134,459
- ------------------------------------------------------------------
Other 88,733
- ------------------------------------------------------------------
Total expenses 3,313,629
- ------------------------------------------------------------------
Less expenses assumed by advisor (2,679,024)
- ------------------------------------------------------------------
Net expenses 634,605
- ------------------------------------------------------------------
Net investment income 98,908,897
- ------------------------------------------------------------------
Net realized gain (loss) on sales of investments (1,596,067)
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $97,312,830
==================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 98,908,897 $ 92,913,637
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments (1,596,067) (74,934)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 97,312,830 92,838,703
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (98,908,897) (92,913,637)
- ----------------------------------------------------------------------------
Capital stock transactions -- net 801,077,731 259,187,785
- ----------------------------------------------------------------------------
Net increase in net assets 799,481,664 259,112,851
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,287,462,658 1,028,349,807
- ----------------------------------------------------------------------------
End of period $2,086,944,322 $1,287,462,658
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,088,677,519 $1,287,599,788
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (1,733,197) (137,130)
- ----------------------------------------------------------------------------
$2,086,944,322 $1,287,462,658
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series, diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, each of which offers separate series of shares:
the Liquid Assets Portfolio and the Prime Portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Liquid Assets
Portfolio (the "Portfolio"). The Portfolio consists of three different classes
of shares: the Institutional Class, the Private Investment Class and the Cash
Management Class. Matters affecting each class are voted on exclusively by the
shareholders of each class. The Portfolio's objective is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
The following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of 397 days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Portfolio has a capital
loss carryforward of $1,733,197 (which may be carried forward to offset
future taxable gains, if any) which expires, if not previously utilized,
through the year 2004. The Portfolio cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Expenses - Operating expenses directly attributable to a class of shares
are charged to that class' operations. Expenses which are applicable to
more than one class, e.g., advisory fees, are allocated among them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a fee, paid monthly, with respect to the Portfolio at the annual rate
of 0.15% of the average daily net assets of the Portfolio.
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. During the year ended
August 31, 1996, AIM voluntarily waived fees of $2,562,094 on the Portfolio and
voluntarily reimbursed expenses of $116,930.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1996,
the Portfolio reimbursed AIM $52,710 for such services.
FS-29
<PAGE>
The Portfolio, pursuant to a transfer agency and service agreement, has agreed
to pay A I M Institutional Fund Services, Inc. ("AIFS") a fee for providing
transfer agent and shareholder services to the Portfolio. During the year ended
August 31, 1996, the Portfolio paid AIFS $133,085 for such services.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class and the Cash Management Class of the Portfolio. The Plan
provides that the Private Investment Class and Cash Management Class pay FMC up
to a maximum annual rate of 0.50% and 0.10%, respectively, of the average daily
net assets attributable to such class. Of this amount, the Fund may pay an
asset-based sales charge to FMC and the Fund may pay a service fee of 0.25% and
0.10% of the average daily net assets, respectively, of each of the Private
Investment Class and the Cash Management Class, to selected banks, broker-
dealers and other financial institutions who offer continuing personal
shareholder services to their customers who purchase and own shares of the
Private Investment Class or the Cash Management Class. Any amounts not paid as
a service fee under such Plan would constitute an asset-based sales charge.
During the year ended August 31, 1996, the Private Investment Class and the
Cash Management Class accrued as compensation to FMC amounts of $54,941 and
$10,467, respectively, under the Plan. Certain officers and directors of the
Fund are officers of AIM, FMC, and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of $7,775
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Fund's directors. A member of that firm is a director of the Fund.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 51,676,611,824 $51,676,611,824 32,408,905,435 $32,408,905,435
- ----------------------------------------------------------------------------------------------
Cash Management Class* 320,121,330 320,121,330 -- --
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 136,803,186 136,803,186 -- --
- ----------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 4,477,681 4,477,681 2,458,920 2,458,920
- ----------------------------------------------------------------------------------------------
Cash Management Class* 283,906 283,906 -- --
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 727,956 727,956 -- --
- ----------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (50,978,284,230) (50,978,284,230) (32,152,176,570) (32,152,176,570)
- ----------------------------------------------------------------------------------------------
Cash Management Class* (267,150,707) (267,150,707) -- --
- ----------------------------------------------------------------------------------------------
Private Investment
Class** (92,513,215) (92,513,215) -- --
- ----------------------------------------------------------------------------------------------
Net increase 801,077,731 $ 801,077,731 259,187,785 $ 259,187,785
==============================================================================================
</TABLE>
* The Cash Management Class commenced operations on January 17, 1996.
** The Private Investment Class commenced operations on February 16, 1996.
FS-30
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of capital stock
outstanding of the Private Investment Class during the period February 16, 1996
(date operations commenced) through August 31, 1996.
<TABLE>
<CAPTION>
AUGUST 31,
1996
----------
<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 5.10%(a)
==================================================== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,981
==================================================== =======
Ratio of expenses to average net assets 0.32%(b)
==================================================== =======
Ratio of net investment income to average net assets 5.04%(b)
==================================================== =======
</TABLE>
(a) Annualized.
(b) After waiver of advisory fees, distribution fees and expense
reimbursements. Ratios are annualized and based on average net assets of
$33,852,756. Annualized ratios of expenses and net investment income to
average net assets prior to waivers and reimbursements are 0.69% and 4.67%,
respectively.
FS-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for the period February 16, 1996 (date operations commenced) through
August 31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Liquid Assets Portfolio as of August 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for the period
February 16, 1996 (date operations commenced) through August 31, 1996, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
_________________________
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-32
<PAGE>
PROSPECTUS
----------
MSTC CASH RESERVES CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA, SUITE 1919
HOUSTON, TEXAS 77046-1173
----------------
The Liquid Assets Portfolio (the "Portfolio") is a money market fund whose
investment objective is to provide as high a level of current income as is
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. This
Prospectus relates solely to the MSTC Cash Reserves Class of the Portfolio, a
class of shares designed to be a convenient and economical vehicle in which
institutions can invest short-term cash reserves.
The Fund also offers shares of other classes of the Portfolio pursuant to
separate prospectuses: the Institutional Class, the Cash Management Class and
the Private Investment Class, as well as shares of classes of another
portfolio, the Prime Portfolio.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE MSTC CASH RESERVES CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") 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, OR CALL (800) 659-1005.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.
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.
PROSPECTUS DATED: DECEMBER 30, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY..................... 2 TAXES.................... 13
TABLE OF FEES AND EXPENSES.. 4 NET ASSET VALUE.......... 14
SUITABILITY FOR INVESTORS... 5 YIELD INFORMATION........ 14
INVESTMENT PROGRAM.......... 5 REPORTS TO SHAREHOLDERS.. 15
PURCHASE OF SHARES.......... 10 MANAGEMENT OF THE FUND... 15
REDEMPTION OF SHARES........ 11 GENERAL INFORMATION...... 18
DIVIDENDS................... 12 </TABLE>
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 MSTC Cash Reserves
Class (the "Class") of the Portfolio at net asset value. The Portfolio is a
money market fund which invests in money market instruments, such as U.S.
Government Agencies obligations, bank obligations, commercial instruments and
repurchase agreements. The investment objective of the Portfolio is to provide
as high a level of current income as is consistent with the preservation of
capital and liquidity.
Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements designed for
institutional and other categories of investors. The Fund also offers shares
of classes of another portfolio, the Prime Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as "Portfolios."
INVESTORS IN THE CLASS
The Class is designed to be a convenient and economical vehicle in which
Morgan Stanley Trust Company ("MSTC"), acting for itself or in a custodial or
other similar capacity, can invest short-term cash reserves. Although shares
of the Class may not be purchased by individuals directly, institutions may
purchase shares for accounts maintained for individuals. See "Suitability for
Investors."
PURCHASE OF SHARES
Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $10,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in federal funds or other funds immediately available to the Portfolio. See
"Purchase of Shares."
REDEMPTION OF SHARES
Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 4:00 p.m. Eastern Time will normally be made on the same day. See
"Redemption of Shares." MSTC may impose an earlier cutoff time for redemption
requests. Please contact your MSTC Coverage Officer for further information.
2
<PAGE>
DIVIDENDS
The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 4:00 p.m. Eastern Time. Dividends are
paid monthly by check or wire transfer unless the shareholder has previously
elected to have such dividends automatically reinvested in additional shares
of the Class. Information concerning the amount of the dividends declared on
any particular day will normally be available by 5:00 p.m. Eastern Time on
that day. See "Dividends."
CONSTANT NET ASSET VALUE
The Portfolio uses the amortized cost method of valuing its portfolio
securities and rounds its per share net asset value to the nearest whole cent.
Accordingly, the Fund intends to maintain the net asset value per share of the
Portfolio at $1.00. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. See "Net Asset Value."
INVESTMENT ADVISOR
A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor
and receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to
investment companies. Under an Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing certain accounting and
other administrative services for the Fund. See "Management of the Fund--
Investment Advisor" and "--Administrator."
On November 4, 1996, A I M Management Group Inc. ("AIM Management")
announced that it had entered into an Agreement and Plan of Merger among
INVESCO plc, INVESCO Group Services Inc. and AIM Management, pursuant to which
AIM Management will be merged with INVESCO Group Services Inc. Subject to a
number of conditions being met, it is currently anticipated that the
transaction will occur in the early part of 1997. The Fund's investment
advisor, AIM, is a wholly-owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that
term is defined under the Investment Company Act of 1940, as amended (the
"1940 Act")) of the investment advisory agreement between the Fund and AIM.
Under the 1940 Act and the investment advisory agreement, an assignment
results in the automatic termination of the investment advisory agreement. On
December 11, 1996, the Board of Directors of the Fund approved a new
investment advisory agreement, subject to shareholder approval, between AIM
and the Fund with respect to the Portfolio. Shareholders will be asked to
approve the proposed advisory agreement at an annual meeting of shareholders
to be held on February 7, 1997 (the "Annual Meeting"). The Board of Directors
has also approved a new administrative services agreement with AIM and a new
distribution agreement with Fund Management Company. There are no material
changes to the terms of the new agreements, including the fees payable by the
Portfolio. No change is anticipated in the investment advisory or other
personnel responsible for the Portfolio as a result of these new agreements.
The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on
February 28, 1997.
3
<PAGE>
Provided that the Portfolio's shareholders approve the new advisory agreement
at the Annual Meeting and the merger is consummated, the new advisory
agreement with respect to the Portfolio, as well as the new administrative
services and distribution agreements, will automatically become effective as
of the closing of the merger.
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay up to
.20% of the average daily net assets of the Portfolio attributable to the
shares of the Class to FMC as well as certain broker-dealers or other
financial institutions as compensation for distribution-related services. See
"Purchase of Shares" and "Management of the Fund--Distribution Plan."
SPECIAL CONSIDERATIONS
The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of
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. There can be no assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00 per share. See "Investment
Program."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are
registered service marks and La Familia AIM de Fondos and La Familia AIM de
Fondos and Design are service marks of A I M Management Group Inc.
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor understand the various
costs and expenses that an investor in the Portfolio will bear directly or
indirectly.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--MSTC CASH RESERVES CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................ None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)....................................................... None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable).... None
Exchange Fee........................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS) (AFTER FEE WAIVERS)--MSTC CASH RESERVES CLASS**
Management Fees (after waivers)........................................ 0.02%
12b-1 Fees............................................................. 0.20%
Other Expenses (estimated)............................................. 0.03%
----
Total Portfolio Operating Expenses--MSTC Cash Reserves Class........... 0.25%
====
</TABLE>
- --------
* Beneficial owners of shares of the Class should consider the effect of
any charges imposed by MSTC for custodial services.
** The expenses set forth in the table are based on estimated average net
assets of $500,000,000 during the Class' current fiscal period. If no
fees were waived, Management Fees and Total Operating Expenses would be
0.15% and 0.38%, respectively.
4
<PAGE>
EXAMPLE
An investor in the Class would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of
each time period.
<TABLE>
<S> <C>
1 year................................................................ $ 3
3 years............................................................... $ 8
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Class will bear directly or
indirectly. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" below.) The Total Portfolio Operating Expenses--
MSTC Cash Reserves Class--figure is based upon costs and the estimated size of
the Class and fees to be charged for the current fiscal period. Thus, actual
expenses may be greater or less than such estimates. Future waivers of fees
(if any) may vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume expenses of the Class,
such assumption of expenses will have the effect of lowering the Class'
overall expense ratio and increasing its yield to investors.
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--MSTC Cash Reserves Class" remain the same in the
years shown.
THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
SUITABILITY FOR INVESTORS
The Class is intended for use by MSTC, acting for itself or in a custodial
or other similar capacity. It is designed to be a convenient and economical
vehicle in which institutions can invest short-term cash reserves. Shares of
the Class may not be purchased directly by individuals, although MSTC may
purchase shares for accounts maintained by individuals. Prospective investors
should determine if an investment in the Class is consistent with the
objectives of an account and with applicable state and federal laws and
regulations.
An investment in the Class may relieve the institution of many of the
investment and administrative burdens encountered when investing in money
market instruments directly. These include: selection of portfolio
investments; surveying the market for the best price at which to buy and sell
securities; valuation of portfolio securities; selection and scheduling of
maturities of portfolio securities; receipt, delivery and safekeeping of
securities; and portfolio recordkeeping. It is anticipated that most investors
will perform their own sub-accounting. To assist these institutions,
information concerning the dividends declared by the Portfolio on any
particular day will normally be available by 5:00 p.m. Eastern Time on that
day. Sub-accounting services may be arranged through the Fund for shareholders
who prefer not to perform such services.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information without shareholder approval, except in those instances where
shareholder approval is expressly required.
5
<PAGE>
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, taxable municipal securities, and bank and commercial
instruments that may be available in the money markets. Such obligations
include U.S. Treasury obligations, repurchase agreements and commercial paper.
The Portfolio may invest in bankers' acceptances, certificates of deposit,
time deposits, 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 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.
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 segregated at the custodian. (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-
6
<PAGE>
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. 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.
7
<PAGE>
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 under the Securities Act of 1933
promulgated by the SEC, or privately without such a registration.
COMMERCIAL PAPER--Commercial paper is a term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
MASTER NOTES--Master notes are unsecured demand notes that permit investment
of fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of
the principal amount of the note on relatively short notice.
8
<PAGE>
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. Repurchase transactions are limited to a term not to exceed 365 days.
The Portfolio may enter into repurchase agreements only with institutions
believed by the Fund's Board of Directors to present minimal credit risk. With
regard to repurchase transactions, in the event of a bankruptcy or other
default of a seller of a repurchase agreement (such as the seller's failure to
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying
securities and losses, including: (a) a possible decline in the value of the
underlying security during the period while the Portfolio seeks to enforce its
rights thereto, (b) possible subnormal levels of income and lack of access to
income during this period, and (c) expenses of enforcing its rights.
Repurchase agreements are considered to be loans by the Portfolio under the
1940 Act. Repurchase agreements will be secured by securities eligible under
Rule 2a-7 of the 1940 Act. 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. Reverse repurchase
transactions are limited to a term not to exceed 92 days. 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
9
<PAGE>
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 from banks 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. A description of further investment restrictions applicable
to the Portfolio is contained in the Statement of Additional Information.
The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject
to shareholder approval. Shareholders will be asked to approve these changes
at the Annual Meeting. If approved, they will become effective on March 1,
1997.
The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.
Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:
(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, and except that the Portfolio
may purchase securities of other investment companies to the extent
permitted by applicable law or exemptive order;
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.
PURCHASE OF SHARES
Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As
discussed below, the Fund reserves the right to reject any purchase order.
Although there is no sales charge imposed on the purchase of shares of the
Class, MSTC may charge a recordkeeping, account maintenance or other fee to
their customers. Beneficial holders of shares of the Class should consult with
MSTC 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. MSTC may impose an earlier cutoff time for purchase
orders. Please contact your MSTC Coverage Officer for further information.
Purchase orders received after such time will be processed at the next day's
net asset value. Shares of the Class will earn the dividend declared on the
effective date of purchase.
10
<PAGE>
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 Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New
York and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin
Luther King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by The Bank of New York, the Portfolio's
custodian bank, in the form described below and notice of such order is
provided to the Portfolio's transfer agent or (b) at the time the order is
placed, if the Portfolio is assured of payment.
Payment for shares of the Portfolio purchased must be in the form of federal
funds or other funds immediately available to the Portfolio. Federal Reserve
wires should be sent as early as possible in order to facilitate crediting to
the shareholder's account. Any funds received with respect to an order which
is not accepted by the Portfolio and any funds received for which an order has
not been received will be returned to the sending institution. An order to
purchase shares of the Class must specify that the "MSTC Cash Reserves Class
of the Liquid Assets Portfolio" is being purchased; otherwise, any funds
received will be returned to the sending institution.
The minimum initial investment in the Class is $10,000. Institutions may be
requested to maintain separate master accounts in the shares of the Class held
by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary,
and (b) for accounts for which the institution acts in some other capacity. An
institution's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to A I M Institutional Fund
Services, Inc. ("Transfer Agent" or "AIFS") at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Account Applications may be obtained from AIFS. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to AIFS.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark--, a personal computer application
software product. Normally, the Fund intends to maintain the net asset value per
share of the Portfolio at $1.00 per share. See "Net Asset Value." Redemption
requests with respect to shares of the Class for which certificates have not
been issued are normally made by calling the Fund.
11
<PAGE>
Payment for redeemed shares of the Class is normally made by Federal Reserve
wire pursuant to instructions designated in the shareholder's Account
Application. If a redemption request is received by AIFS prior to 4:00 p.m.
Eastern Time on a business day of the Portfolio, the redemption will be
effected at the net asset value next determined on such day and the shares of
the Portfolio to be redeemed will not receive the dividend declared on the
effective date of the redemption. MSTC may impose an earlier cutoff time for
redemption requests. Please contact your MSTC Coverage Officer for further
information. If a redemption request is received by AIFS after 4:00 p.m.
Eastern Time or on other than a business day of the Portfolio, the redemption
will be effected at the net asset value of the Portfolio determined as of 4:00
p.m. Eastern Time on the next business day of the Portfolio, and the proceeds
of such redemption will normally be wired on the effective day of the
redemption.
A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Portfolio. The authorized signature on the
notice must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.
Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the Account Application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after transactions.
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts under $1,000 will be made by check mailed within seven
days after receipt of the redemption request in proper form. The Portfolio may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the Portfolio's best interest to do so.
The shares of the Class are not redeemable at the option of the Fund unless
the Board of Directors of the Fund determines in its sole discretion that
failure to so redeem may have materially adverse consequences to the
shareholders of the Fund. The Fund may redeem shares of the Class in cases
where the value of shares of stock in a stockholder's account is less than
$500 and the existence of several such accounts results in higher expenses for
the Fund.
DIVIDENDS
Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time
on the day of declaration. Net income for dividend purposes is determined
daily as of 4:00 p.m. Eastern Time. The dividend accrued and paid for the
Class will consist of (a) income of the Portfolio, the allocation of which is
based upon the Class' pro rata share of the total outstanding shares
representing an interest in the Portfolio, less (b) Fund expenses, such as
custodian fees, directors' fees, accounting and legal expenses, based upon the
Class' pro rata share of the net assets of the Portfolio, less (c) expenses
directly attributable to the Class, such as distribution expenses, if any, and
transfer agency fees. Although realized gains and losses on the assets of the
Portfolio are reflected in the net asset value of the
12
<PAGE>
Portfolio, they are not expected to be of an amount which would affect the
Portfolio's net asset value of $1.00 per share for purposes of purchases and
redemptions. See "Net Asset Value." Distributions from net realized short-term
gains may be declared and paid yearly or more frequently. See "Taxes." The
Portfolio does not expect to realize any long-term capital gains or losses.
All dividends declared during a month will normally be paid by wire
transfer. Payment will normally be made on the first business day of the
following month. A shareholder may elect to have all dividends automatically
reinvested in additional full and fractional shares of the Portfolio at the
net asset value of such shares as of 4:00 p.m. Eastern Time on the last
business day of the month. Such election, or any revocation thereof, must be
made in writing by the shareholder to AIFS at 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 and will become effective with dividends paid after
its receipt by AIFS. If a shareholder redeems all the shares in its account at
any time during the month, all dividends declared through the date of
redemption are paid to the shareholder along with the proceeds of the
redemption.
The Portfolio uses its best efforts to maintain the net asset value per
share of the Portfolio at $1.00 for purposes of sales and redemptions. See
"Net Asset Value." Should the Fund incur or anticipate any unusual expense,
loss or depreciation which could adversely affect the income or net asset
value of the Portfolio, the Fund's Board of Directors would at that time
consider whether to adhere to the present dividend policy described above or
to revise it in light of the then prevailing circumstances. For example, under
such unusual circumstances the Board of Directors might reduce or suspend the
daily dividend in order to prevent to the extent possible the net asset value
per share of the Portfolio from being reduced below $1.00. Thus, such
expenses, losses or depreciation may result in a shareholder receiving no
dividends for the period during which it held its shares of the Class and
cause such a shareholder to receive upon redemption a price per share lower
than the shareholder's original cost.
TAXES
The Portfolio's policy is to distribute to its shareholders at least 90% of
its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). The Portfolio also
intends to meet the distribution requirements imposed by the Code in order to
avoid the imposition of a 4% excise tax. The Portfolio intends to distribute
at least 98% of its net investment income for the calendar year and at least
98% of its net realized capital gains, if any, for the period ending on
October 31. The Portfolio also intends to meet the other requirements of
Subchapter M, including the requirements with respect to diversification of
assets and sources of income so that the Portfolio will pay no taxes on net
investment income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Portfolio. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend before February 1 of the next
year, a shareholder will be treated for tax purposes as having received the
dividend in the year in which it is declared rather than in January when it is
paid. It is anticipated that no portion of distributions will be eligible for
the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
For purposes of determining taxable income, distribution requirements and
other requirements of Subchapter M, the Portfolio will be treated as a
separate corporation. Therefore, one portfolio of the Fund may not offset its
13
<PAGE>
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 advisors concerning the application
of state, local or foreign taxes.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.
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.
YIELD INFORMATION
Yield information for the Class can be obtained by calling your MSTC
Coverage Officer at (800) 688-3705 or FMC at (800) 246-3426. Yields will
fluctuate from time to time and are not necessarily indicative of future
results. Accordingly, the yield information may not provide a basis for
comparison with investments which pay a fixed rate of interest for a stated
period of time. Yield is a function of the type and quality of the Portfolio's
investments, the Portfolio's maturity and the operating expense ratio of the
Class. A SHAREHOLDER'S INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY INSTITUTION. These factors should
be carefully considered by the investor before making an investment in the
Portfolio.
To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 5:00 p.m.
Eastern Time.
14
<PAGE>
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.
REPORTS TO SHAREHOLDERS
The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held in the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors. A copy of
a current list of the investments held in the Portfolio will be sent to
shareholders upon request.
Each shareholder will be provided with a written confirmation for each
transaction. Institutions establishing sub-accounts will receive a written
confirmation for each transaction in a sub-account. Duplicate confirmations
may be transmitted to the beneficial owner of the sub-account if requested by
the institution. The institution will receive a monthly statement setting
forth, for each sub-account, the share balance, income earned for the month,
income earned for the year to date and the total current value of the account.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested
with the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to
the Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Certain directors and officers of the Fund are
affiliated with AIM and AIM Management, a holding company engaged in the
financial services business. Information concerning the Board of Directors may
be found in the Statement of Additional Information.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM, organized in 1976, together with its affiliates, advises or
manages 41 investment company portfolios. As of December 9, 1996, the total
assets of such investment company portfolios were approximately $63.6 billion.
AIM is a wholly-owned subsidiary of AIM Management.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services
for the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
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<PAGE>
For the fiscal year ended August 31, 1996, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.01% of
the Portfolio's average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated
as of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from the Fund reimbursement of
its costs or such reasonable compensation as may be approved by the Fund's
Board of Directors for providing specified administrative services. Currently,
AIM is reimbursed for the services of the Fund's principal financial officer
and his staff, and any expenses related to such services, as well as the
services of staff responding to various shareholder inquiries.
FEE WAIVERS
AIM or its affiliates 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 for
such fee or expenses prior to the end of each fiscal year. FMC may in its
discretion from time to time agree to waive voluntarily all or any portion of
its 12b-1 fee but will retain its ability to be reimbursed prior to the end of
the fiscal year.
DISTRIBUTOR
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive
distributor of the shares of the Class. The address of FMC is 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046-1173. Certain directors and officers
of the Fund are affiliated with FMC and AIM Management. The Distribution
Agreement provides that FMC has the exclusive right to distribute shares of
the Portfolio either directly or through other broker-dealers, and receives no
fees for its services with respect to the Portfolio pursuant to the
Distribution Agreement. FMC is the distributor of several other mutual funds
managed or advised by AIM.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. The Plan provides that the Fund may compensate
FMC in connection with the distribution of the shares of the Class in an
amount equal to 0.20% on an annualized basis of the average daily net assets
of the Portfolio attributable to the Class. Such amounts may be expended when
and if authorized by the Board of Directors of the Fund and may be used to
finance such distribution-related services as expenses of organizing and
conducting sales seminars, printing of prospectuses and statements of
additional information (and supplements thereto) and reports for other than
existing shareholders, preparation and distribution of advertising material
and sales literature and costs of administering the Plan.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. The Plan imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Portfolio with respect to
the Class. The Plan does not obligate the Fund to
16
<PAGE>
reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund will not be obligated to pay more than that fee. If FMC's
expenses are less than the fee it receives, FMC will retain the full amount of
the fee.
As required by Rule 12b-1 under the 1940 Act, the Plan was initially
approved by the Board of Directors, including a majority of the directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreements related to the Plan ("Qualified Directors") on June 11,
1996. In approving the Plan, the directors considered various factors and
determined that there is a reasonable likelihood that the Plan will benefit
the Fund and the shareholders of the Class.
The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.
The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes cast in person at a meeting
called for the purpose of voting upon such amendment. As long as the Plan is
in effect, the selection or nomination of the Qualified Directors is committed
to the discretion of the Qualified Directors.
EXPENSES
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of both Portfolios
of the Fund. Expenses of the Fund except those listed in the next sentence are
prorated among all classes of such Portfolios. Distribution and service fees,
transfer agency fees and shareholder recordkeeping fees which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and
asked prices. The Portfolio may also purchase securities from underwriters at
prices which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the
extent that the executions and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are
deemed by AIM to be beneficial to the Portfolio's investment program. Certain
research services furnished by dealers may be useful to AIM with respect to
clients other than the Portfolio. Similarly, any research services received by
AIM through placement of portfolio transactions of other clients may be of
value to AIM in fulfilling its obligations to the Portfolio.
17
<PAGE>
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into nine classes, of which four represent interests
in the Portfolio and the remaining five represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.
All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of
shares of a particular class will have the exclusive right to vote on any
matter, such as distribution arrangements, which relates solely to such class.
The holders of shares of each portfolio have distinctive rights with respect
to dividends and redemption which are more fully described in this Prospectus.
In the event of liquidation or termination of the Fund, holders of shares of
each portfolio will receive pro rata, subject to the rights of creditors, (a)
the proceeds of the sale of the assets held in the respective portfolio to
which such shares relate, less (b) the liabilities of the Fund attributable to
or allocated to the respective portfolio based on the respective liquidation
value of each portfolio. Fractional shares of each portfolio have the same
rights as full shares to the extent of their proportionate interest.
The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares. As of December
1, 1996, AIM was the owner of record of 100% of the outstanding shares of the
Class. As long as AIM owns over 25% of such shares, it may be presumed to be
in "control" of the MSTC Cash Reserves Class of the Liquid Assets Portfolio,
as defined in the 1940 Act.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the
Fund without shareholder approval.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919, Houston, Texas 77046-1173, acts as transfer agent for shares of the
Class.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and has passed upon the legality
of the shares of the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to your MSTC Coverage Officer at (800) 688-3705 or A I M Institutional Fund
Services, Inc. at (800) 246-3426 or 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173.
18
<PAGE>
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know
about the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or
calling the Fund or FMC. This Prospectus omits certain information contained
in the registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
19
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[This page intentionally left blank]
<PAGE>
SHORT-TERM INVESTMENTS CO. SHORT-TERM
11 Greenway Plaza, Suite 1919 INVESTMENTS CO.
Houston, Texas 77046-1173
(800) 246-3426 MSTC CASH
RESERVES CLASS
INVESTMENT ADVISOR OF THE
A I M ADVISORS, INC. -------------------------------------
11 Greenway Plaza, Suite 1919 LIQUID ASSETS
Houston, Texas 77046-1173 PORTFOLIO PROSPECTUS
(713) 626-1919
DECEMBER 30, 1996
DISTRIBUTOR
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
(800) 659-1005
AUDITORS
KPMG PEAT MARWICK LLP
NationsBank Building
700 Louisiana
Houston, Texas 77002
CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street
11th Floor
New York, New York 10286
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
MSTC CASH RESERVES CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(800) 659-1005
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS,
COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 1919, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 246-3426
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 30, 1996
RELATING TO THE PROSPECTUS DATED DECEMBER 30, 1996
<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 2
Remuneration of Directors 6
AIM Funds Retirement Plan for Eligible Directors/Trustees 7
Deferred Compensation Agreements 7
Investment Advisor 8
Administrator 9
Expenses 9
Transfer Agent and Custodian 10
Reports 10
Fee Waivers 10
Principal Holders of Securities 11
PURCHASES AND REDEMPTIONS 15
Net Asset Value Determination 15
The Distribution Agreement 16
Distribution Plan 16
Banking Regulations 17
Performance Information 17
Redemptions in Kind 18
Suspension of Redemption Rights 18
INVESTMENT PROGRAM AND RESTRICTIONS 18
Eligible Securities 18
Commercial Paper Ratings 18
Bond Ratings 19
Repurchase Agreements 21
Investment Restrictions 21
PORTFOLIO TRANSACTIONS 22
TAX MATTERS 24
Qualification as a Regulated Investment Company 24
Excise Tax On Regulated Investment Companies 25
Portfolio Distributions 25
Sale or Redemption of Shares 26
Foreign Shareholders 26
Effect of Future Legislation; Local Tax Considerations 26
</TABLE>
FINANCIAL STATEMENTS FS
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, 1996 (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) 246-
3426. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the MSTC Cash Reserves Class of
the Portfolio. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus; thus, in order to
avoid repetition, reference will be made to sections of the Prospectus.
Additionally, the Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the SEC.
Copies of the registration statement, including items omitted from the
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUND
THE FUND AND ITS SHARES
The Fund is an open-end, diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993, and had no operations prior to November 4, 1993. Shares of common
stock of the Fund are redeemable at their net asset value at the option of the
shareholder or at the option of the Fund in certain circumstances. For
information concerning the methods of redemption and the rights of share
ownership, investors should consult the Prospectus under the captions "General
Information" and "Redemption of Shares."
The Fund offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Prime Portfolio (together, the
"Portfolios"). The Prime Portfolio consists of five classes of shares, each
having different shareholder qualifications and bearing expenses differently.
The Portfolio consists of the following four classes of shares: Institutional
Class, Private Investment Class, Cash Management Class and MSTC Cash Reserves
Class. Each such class has different shareholder qualifications and bears
expenses differently. This Statement of Additional Information and the
associated Prospectus relate solely to shares of the MSTC Cash Reserves Class
(the "Class") of the Portfolio. Shares of the other classes of the Portfolio and
the classes of the Prime Portfolio are offered pursuant to separate prospectuses
and statements of additional information.
As used in the Prospectus, the term "majority of the outstanding shares" of
the Fund, a particular portfolio or a particular class means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Fund, such portfolio
or such class present at a meeting of the Fund's shareholders, if the holders of
more than 50% of the outstanding shares of the Fund, such portfolio or such
class are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, such portfolio or such class.
Shareholders of the Fund do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the Fund
voting together for election of directors can elect all of the members of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
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
1
<PAGE>
to the issuance of such shares, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act").
The Charter of the Fund authorizes the issuance of 50 billion shares
with a par value of $.001 each, of which 19 billion shares represent an interest
in the Portfolio (or class thereof) and 22 billion shares represent an interest
in the Prime Portfolio (or class thereof). A share of a portfolio (or class)
represents an equal proportionate interest in such portfolio (or class) with
each other share of that portfolio (or class) and is entitled to a proportionate
interest in the dividends and distributions from that portfolio (or class).
Additional information concerning the rights of share ownership is set forth in
the Prospectus.
The assets received by the Fund for the issue or sale of shares of each of
the Portfolios and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Portfolio, and
constitute the underlying assets of that portfolio. The underlying assets of the
Portfolios are segregated and each portfolio is charged with the expenses with
respect to that portfolio and with a share of the general expenses of the Fund.
While the expenses of the Fund are allocated to the separate books of account of
each of the Portfolios, certain expenses may be legally chargeable against the
assets of the entire Fund.
The Charter provides that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, except (i) to the
extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to protect or purport to
protect any director or officer of the Fund against any liability to the Fund or
its shareholders to which such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such office. The Fund shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law. The Fund shall indemnify and advance expenses to its
officers to the same extent as its directors and to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents of the Fund to the fullest extent permitted by the Maryland
General Corporation Law.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. At such time as less than a majority of the directors
have been elected by the shareholders, the directors then in office will call a
shareholders' meeting for the election of directors. Upon written request by
ten or more shareholders, who have been such for at least six months and who
hold shares constituting 1% of the outstanding shares, stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
director, the Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
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.
2
<PAGE>
*CHARLES T. BAUER, Director and Chairman (77)
Director, 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 (52)
906 Frome Lane
McLean, VA 22102
Formerly, Director, President and Chief Executive Officer, COMSAT
Corporation (Includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT
Video Enterprises, COMSAT RSI and COMSAT International Ventures), 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 (72)
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 (59)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis & 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 (50)
Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; and Director and
Senior Vice President, 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.
JOHN F. KROEGER, Director (72)
37 Pippins Way
Morristown, NJ 07960
Director, Flag Investors International Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund, Inc., Managed Municipal Fund,
Inc., Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American Government
Bond Fund, Inc. (investment companies). Formerly, Consultant, Wendell & Stockel
Associates, Inc. (consulting firm).
______________________________
* A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
3
<PAGE>
LEWIS F. PENNOCK, Director (54)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Director (73)
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 (57)
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 (52)
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 (49)
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.
_____________________________
*** Mr. Arthur and Ms. Relihan are married to each other.
4
<PAGE>
***CAROL F. RELIHAN, Senior Vice President and Secretary (41)
Senior Vice President, General Counsel and Secretary, A I M Advisors, Inc.;
Vice President, General Counsel and Secretary, A I M Management Group Inc.; Vice
President and General Counsel, Fund Management Company; and Vice President,
A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services,
Inc. and A I M Institutional Fund Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (37)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (53)
A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company. Formerly, Vice President, Charles
Schwab & Co., Inc.; Assistant Secretary, Charles Schwab Family of Funds and
Schwab Investments; Chief Compliance Officer, Charles Schwab Investment
Management, Inc.; and Vice President, Integrated Resources Life Insurance Co.
and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (36)
Senior Vice President, A I M Capital Management, Inc.; and Vice President,
A I M Advisors, Inc.
J. ABBOTT SPRAGUE, Vice President (41)
Director and President, A I M Institutional Fund Services, Inc. and Fund
Management Company; Director and Senior Vice President, A I M Advisors, Inc.;
and Senior Vice President, A I M Management Group Inc.
The Board of Directors has an Audit Committee, an Investments Committee,
and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger (Chairman),
Pennock and Robinson. The Audit Committee is responsible for meeting with the
Portfolio's auditors to review audit procedures and results and to consider any
matters arising from an audit to be brought to the attention of the directors as
a whole with respect to the Portfolio's fund accounting or its internal
accounting controls, or for considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating individuals
to stand for election as directors who are not interested persons as long as the
Fund maintains a distribution plan pursuant to rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the Dis-Interested
Directors (as defined hereinafter), or considering such matters as may from time
to time be set forth in a charter adopted by the board and such Committee.
______________________________
*** Mr. Arthur and Ms. Relihan are married to each other.
5
<PAGE>
All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors, Inc.
("AIM") or distributed and administered by FMC. Most of the Fund's executive
officers hold similar offices with some or all of such investment companies.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board of Directors or any committee thereof. Each director who is
not also an officer of the Fund is compensated for his or her services according
to a fee schedule which recognizes the fact that such director also serves as a
director or trustee of other regulated investment companies managed,
administered or distributed by AIM or its affiliates (the "AIM Funds"). Each
such director receives a fee, allocated among the AIM Funds for which he serves
as a director or trustee, which consists of an annual retainer component and a
meeting fee component.
Set forth below is information regarding compensation paid or accrued during
the fiscal year ended August 31, 1996 for each director of the Fund:
<TABLE>
<CAPTION>
DIRECTOR AGGREGATE RETIREMENT TOTAL
COMPENSATION BENEFITS COMPENSATION
FROM FUND(1) ACCRUED FROM ALL AIM FUNDS(3)
BY ALL AIM FUNDS(2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- -----------------------------------------------------------------------------------
Bruce L. Crockett 6,957 3,655 57,750
- -----------------------------------------------------------------------------------
Owen Daly II 8,110 18,662 58,125
- -----------------------------------------------------------------------------------
Carl Frischling 7,891 11,323 57,250(4)
- -----------------------------------------------------------------------------------
Robert H. Graham - 0- - 0- - 0-
- -----------------------------------------------------------------------------------
John F. Kroeger 7,600 22,313 58,125
- -----------------------------------------------------------------------------------
Lewis F. Pennock 6,799 5,067 58,125
- -----------------------------------------------------------------------------------
Ian W. Robinson 6,986 15,381 56,750
- -----------------------------------------------------------------------------------
Louis S. Sklar 7,971 6,632 57,250
- -----------------------------------------------------------------------------------
</TABLE>
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1996, including interest earned
thereon, was $28,784.
(2) During the fiscal year ended August 31, 1996, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $45,550.
Data reflect compensation earned for the calendar year ended December 31,
1996.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflect compensation earned for the calendar year ended
December 31, 1996.
(4) See also page 8 regarding fees earned by Mr. Frischling's law firm.
6
<PAGE>
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the first
day of the calendar quarter coincident with or following his date of retirement
equal to 75% of the retainer paid or accrued by the AIM Funds for such director
during the twelve-month period immediately preceding the director's retirement
(including amounts deferred under a separate agreement between the AIM Funds and
the director) for the number of such Director's years of service (not in excess
of 10 years of service) completed with respect to any of the AIM Funds. Such
benefit is payable to each eligible director in quarterly installments. If an
eligible director dies after attaining the normal retirement date but before
receipt of any benefits under the Plan commences, the director's surviving
spouse (if any) shall receive a quarterly survivor's benefit equal to 50% of the
amount payable to the deceased director, for no more than ten years beginning
the first day of the calendar quarter following the date of the director's
death. Payments under the Plan are not secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service as of
December 31, 1996 for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock,
Robinson and Sklar are 8, 9, 18, 18, 14, 8 and 6 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of
Years of Annual Compensation
Service With Paid By All AIM Funds
the AIM Fund
$55,000 $60,000 $65,000
- ---------------------------------------------------------------
10 $41,250 $45,000 $48,750
- ---------------------------------------------------------------
9 $37,125 $40,500 $43,875
- ---------------------------------------------------------------
8 $33,000 $36,000 $39,000
- ---------------------------------------------------------------
7 $28,875 $31,500 $34,125
- ---------------------------------------------------------------
6 $24,750 $27,000 $29,250
- ---------------------------------------------------------------
5 $20,625 $22,500 $24,375
- ---------------------------------------------------------------
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant
to the Compensation Agreements, the deferring directors may elect to defer
receipt of 100% of their compensation payable by the Fund, and such amounts are
placed into a deferral account. Currently, the deferring directors may select
various AIM Funds in which all or part of their deferral accounts shall be
deemed to be invested. Distributions from the deferring directors' deferral
accounts will be paid in cash, in generally equal quarterly installments over a
period of five years beginning on the date the deferring director's retirement
benefits commence under the Plan. The Fund's Board of Directors, in its sole
discretion, may accelerate or extend the distribution of such deferral accounts
after the deferring director's
7
<PAGE>
termination of service as a director of the Fund. If a deferring director dies
prior to the distribution of amounts in his deferral account, the balance of the
deferral account will be distributed to his designated beneficiary in a single
lump sum payment as soon as practicable after such deferring director's death.
The Compensation Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the deferring directors have the status
of unsecured creditors of the Fund and of each other AIM Fund from which they
are deferring compensation.
During the fiscal year ended August 31, 1996, directors' fees and expenses
in the amount of $15,925 were allocated to the Portfolio.
The Portfolio paid legal fees of $7,775 for the year ended August 31, 1996
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Directors. Carl Frischling, a director of the Fund, is a member of that
firm.
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").
AIM was organized in 1976 and, together with its affiliates, advises,
manages or administers 41 investment company portfolios. As of December 9, 1996,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $63.6 billion. AIM is a wholly-owned
subsidiary of A I M Management Group Inc. ("AIM Management"), 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Certain of the directors and officers of
AIM are also executive officers of the Fund and their affiliations are shown
under "Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel and certain other employees (a) to pre-clear personal securities
transactions subject to the Code of Ethics, (b) to file reports or duplicate
confirmations regarding such transactions, (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and (iii) transactions involving securities being considered for
investment by an AIM Fund and (d) to abide by certain other provisions under the
Code of Ethics. The Code of Ethics also prohibits investment personnel and all
other AIM employees from purchasing securities in an initial public offering.
Personal trading reports are reviewed periodically by AIM, and the Board of
Directors reviews quarterly and annual reports (including information on any
substantial violations of the Code of Ethics). Sanctions for violations of the
Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be subject
to the policies and control of the Fund's Board of Directors. AIM shall not be
liable to the Fund or its shareholders for any act or omission by AIM or for any
loss sustained by the Fund or its shareholders except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services with respect to the Portfolio, AIM
receives a fee at the annual rate of 0.15% of the average daily net assets of
the Portfolio. The Advisory Agreement requires AIM to reduce its fee to the
extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.
During the period November 4, 1993 (date operations commenced) through
August 31, 1994, AIM voluntarily waived fees of $1,500,977, which it was
entitled to receive pursuant to the Advisory Agreement with respect to the
Portfolio. During the fiscal year ended August 31, 1996, AIM received fees
pursuant to the Advisory Agreement in the amount of $125,264 with respect to the
Portfolio and AIM voluntarily waived fees of $2,562,094, which it was entitled
to receive pursuant to the Advisory Agreement with respect to the Portfolio.
8
<PAGE>
The Advisory Agreement provides that, upon the request of the Board of
Directors, AIM may perform (or arrange for the performance of) certain
additional services on behalf of the Portfolio which are not required by the
Advisory Agreement. AIM may receive reimbursement or reasonable compensation
for such additional services, as may be agreed upon by AIM and the Board of
Directors, based upon a finding by the Board of Directors that the provision of
such services would be in the best interest of the Portfolio and its
shareholders. The Board of Directors has made such a finding and, accordingly,
the Fund has entered into the Master Administrative Services Agreement under
which AIM will provide the additional services described below under the caption
"Administrator."
The Advisory Agreement will continue in effect until June 30, 1997 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").
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, 1997, 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 directors of the Fund who are
not "interested persons" (as defined in the 1940 Act) of the Fund or AIM (the
"Dis-Interested Directors"), the director of the Fund who are not "interested
persons" (as defined in the 1940 Act) of the Fund or AIM, 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 Dis-
Interested Directors) on May 15, 1996.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for
the fiscal years ended August 31, 1996, 1995 and 1994, in the amounts of
$52,710, $97,044 and $39,492, respectively.
A I M Institutional Fund Services, Inc. ("AIFS") receives fees with respect
to the Portfolio for its provision of shareholder services pursuant to a
Transfer Agency and Service Agreement with the Fund. For the period from August
31, 1994 through June 30, 1995 and for the period from June 1, 1994 through
August 31, 1994, AIFS or its affiliates received shareholder services fees from
AIM with respect to the Portfolio in the amounts of $38,870 and $5,110,
respectively. For the fiscal year ended August 31, 1996, AIFS received transfer
agency fees from AIM with respect to the Portfolio in the amount of $133,085.
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'
9
<PAGE>
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 Dis-Interested Directors, 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 except those
listed in the next sentence 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.
Distribution and service fees, transfer agency fees and shareholder
recordkeeping fees which are directly attributable to a specific class of shares
are charged against the income available for distribution as dividends to the
holders of such shares.
TRANSFER AGENT AND CUSTODIAN
The Bank of New York ("BONY") acts as custodian for the portfolio
securities and cash of the Portfolio. BONY receives such compensation from the
Fund for its services in such capacity as is agreed to from time to time by BONY
and the Fund. The address of BONY is 90 Washington Street, 11th Floor, New York,
New York 10286.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173 serves as a transfer agent and dividend disbursing
agent for the shares of the Class and receives an annual fee from the Fund for
its services in such capacity in the amount of .009% of average daily net assets
of the Fund, payable monthly. Such compensation may be changed from time to
time as is agreed to by AIFS and the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG Peat Marwick LLP, NationsBank Building, 700
Louisiana, Houston, Texas 77002, as the independent auditors to audit the
financial statements and review the tax returns of the Portfolio.
FEE WAIVERS
AIM or its affiliates 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.
10
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of December 1, 1996, and the percentage of the Prime Portfolio's outstanding
shares owned by such shareholders as of such date are as follows:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
CASH MANAGEMENT CLASS
- ---------------------
Mellon Bank 24.45%
Three Mellon Center Rm 3840
Pittsburgh, PA 15259-0001
Oppenheimer CO., Inc 16.64%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Southwest Bank of Texas, N.A. 16.38%
4295 San Felipe
Houston, TX 77027
Fund Services Associates 15.68%
11835 West Olympic Blvd
Suite 205
Los Angeles, CA 90064
INSTITUTIONAL CLASS
- -------------------
U.S. Bank of Oregon 12.47%
Trust Operations
321 Southwest Sixth
Portland, OR 97208
Comerica Bank 12.25%
PO Box 75000
Detroit, MI 48275-3455
NationsBank Texas 8.29%
1401 Elm Street 11th Floor
PO Box 831000
Dallas, TX 75283-1000
- ------------------------------
* 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.
11
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- --------------- -----------
Boatman's Trust Company 7.03%
100 North Broadway
Attn: Fund Accounting LBT0785
St. Louis, MO 63101
Frost National Bank 5.77%
PO Box 1600
Attn: Trust Securities (T - 8)
San Antonio, TX 78296
Liberty Registration Co. of Oklahoma City 5.66%
Trust Security Processing Dept.
PO Box 25848
Oklahoma City, OK 73125
Texas Commerce Bank 5.40%
PO Box 2558
16 HCB-98
Houston, TX 77252-8098
Citicorp, N.A. 5.23%
400 Royal Palm Way
3rd Floor
Palm Beach, FL 33480
PERSONAL INVESTMENT CLASS
- -------------------------
Bank of New York 60.84%**
440 Mamaroneck Avenue
Harrison, NY 10528
Cullen/Frost Discount Brokers 23.18%
P.O. Box 2358
San Antonio, TX 78299
Mark Twain Capital Markets Group 12.30%
1630 S. Lindbergh Blvd.
St. Louis, MO 63131
- ------------------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
12
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corp. 62.76%**
41 S. High Street
9th Floor
Columbus, OH 43287
First Trust / Var & Co. 10.97%
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
Frost National Bank 9.10%
P.O. Box 1600
Attn: Trust Securities (T - 8)
San Antonio, TX 78296
Cullen/Frost Discount Brokers 6.06%
100 W. Houston St.
San Antonio, TX 78205
RESOURCE CLASS
- --------------
Mellon Bank 18.06%
Three Mellon Center, Rm 3840
Pittsburgh, PA 15259-0001
Corestates Capital Markets 16.66%
1345 Chestnut St.
FC 1-1-9-49
Philadelphia, PA 19101
Huntington Capital Corp. 16.53%
41 S. High St.
Ninth Floor
Columbus, OH 43287
Tulsa & Co. 5.09%
P.O. Box 3688
Tulsa, OK 74101-3688
______________________________
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
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<PAGE>
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of December 1, 1996, the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
CASH MANAGEMENT CLASS
- ---------------------
Fund Services Associates 49.49%**
11835 West Olympic Blvd.
Suite 205
Los Angeles, CA 90064
Oppenheimer Co. 31.63%**
Oppenheimer Tower
World Financial Center
New York, NY 10281
Intellon Corporation 7.79%
5100 West Silver Springs Blvd.
Ocala, FL 34482
Highline Financial Services 6.45%
Canyon Center Rd.
Suite 300
1881 9th St.
Boulder, CO 80302
INSTITUTIONAL CLASS
- -------------------
Wachovia Bank & Trust 16.54%
P.O. Box 3075
Winston-Salem, NC 27150
Trust Company Bank 14.80%
P.O. Box 105504
Atlanta, GA 30348
BZW Barclays Global Investors 6.08%
980 9th St., Suite 600
Sacramento, CA 95814
______________________________
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
14
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
- --------------- -----------
Teacher's Retirement c/o Boston Global 5.73 %
50 Rowos Wharf
Boston, MA 20110
NationsBank 5.55%
1401 Elm St., 11th Floor
P.O. Box 831000
Dallas, TX 75283-1000
Norwest Bank 5.01%
733 Marquette Avenue
Minneapolis, MN 55479-0052
MSTC CASH RESERVES CLASS
- ------------------------
A I M Advisors, Inc. 100%**
11 Greenway Plaza
Suite 1919
Houston, TX 77046
PRIVATE INVESTMENT CLASS
- ------------------------
Mellon Bank 98.14%**
P. O. Box 710
Pittsburgh, PA 15230-0710
To the knowledge of the Fund, as of December 1, 1996, the directors and
officers of the Fund beneficially owned less than 1% of any Portfolio's
outstanding shares.
PURCHASES AND REDEMPTIONS
NET ASSET VALUE DETERMINATION
Shares of the Class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
______________________________
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
15
<PAGE>
The valuation of the portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Portfolio is permitted in accordance with applicable rules and regulations
of the SEC, including Rule 2a-7 under the 1940 Act, which require the Portfolio
to adhere to certain conditions. These rules require that the Portfolio maintain
a dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 calendar days or less and invest
only in securities determined by the Board of Directors to be "Eligible
Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Portfolio's price per share
at $1.00 as computed for the purpose of sales and redemptions. Such procedures
include review of the Portfolio's holdings by the Board of Directors, at such
intervals as they may deem appropriate, to determine whether the net asset value
calculated by using available market quotations or other reputable sources for
the Portfolio deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing holders of
the shares. In the event the Board of Directors determines that such a deviation
exists, it will take such corrective action as the Board of Directors deems
necessary and appropriate, including the sales of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity; the withholding of dividends; redemption of shares in kind; or the
establishment of a net asset value per share by using available market
quotations.
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
October 18, 1993 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly-owned subsidiary of AIM, to act as the exclusive distributor
of the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. See "General Information about the Fund --Directors
and Officers" and "General Information about the Fund -- Investment Advisor" for
information as to the affiliation of certain directors and officers of the Fund
with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right to
distribute shares either directly or through other broker-dealers. The
Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Portfolio and the costs
of preparing and distributing any other supplemental sales literature. FMC has
not undertaken to sell any specified number of shares of the Class.
The Distribution Agreement will continue in effect until June 30, 1997 and
from year to year thereafter, provided that it is specifically approved at least
annually by the Fund's Board of Directors and the affirmative vote of the
directors who are not parties to the Distribution Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The Fund or FMC may terminate the Distribution Agreement on 60 days'
written notice, without penalty. The Distribution Agreement will terminate
automatically in the event of its "assignment," as defined in the 1940 Act.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the Fund may enter into
Shareholder Service Agreements ("Service Agreements") with selected broker-
dealers, banks, other financial institutions or their affiliates. Since the
Class is intended for exclusive use by Morgan Stanley Trust Company, it is
anticipated that the Fund will enter into only one Service Agreement. Such firms
may receive compensation from the Portfolio for servicing investors as
beneficial owners of the shares of the Class. These services may include among
other things: (i) answering customer inquiries regarding shares of the Class and
the Portfolio; (ii) assisting customers in changing dividend options, account
designations and addresses; (iii) performing sub-accounting; (iv) establishing
and maintaining shareholder accounts and records; (v) processing purchase and
redemption transactions; (vi) automatic investment of customer cash accounting
balances in shares of the Class; (vii) providing periodic statements
16
<PAGE>
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
such firm; (viii) arranging for bank wires; and (ix) such other services as the
Fund may request on behalf of the Class, to the extent such firms are permitted
to engage in such services by applicable statute, rule or regulation. The Plan
may only be used for the purposes specified above and as stated in the Plan.
Expenses may not be carried over from year to year.
FMC is a wholly-owned subsidiary of AIM, which is a wholly-owned subsidiary
of AIM Management. Charles T. Bauer, a Director and Chairman of the Fund and
Robert H. Graham, a Director and President of the Fund, own shares of AIM
Management.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations among other
things, generally prohibit federally chartered or supervised banks from engaging
in the business of underwriting, selling or distributing securities, but permit
banks to make shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a bank
were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the Fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the Fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or other
services then being provided by such bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of these
occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.
PERFORMANCE INFORMATION
As stated under the caption "Yield Information" in the Prospectus, yield
information for the shares of the Class may be obtained by calling your Morgan
Stanley Trust Company Coverage Officer at (800) 688-3705 or the Fund at (800)
246-3426. The current yield quoted will be the net average annualized yield for
an identified period, such as seven days or a month. Current yield will be
computed by assuming that an account was established with a single share (the
"Single Share Account") on the first day of the period. To arrive at the quoted
yield, the net change in the value of that Single Share Account for the period
(which would include dividends accrued with respect to the share, and dividends
declared on shares purchased with dividends accrued and paid, if any, but would
not include realized gains and losses or unrealized appreciation or
depreciation) will be multiplied by 365 and then divided by the number of days
in the period, with the resulting figure carried to the nearest hundredth of one
percent. The Portfolio may also furnish a quotation of effective yield that
assumes the reinvestment of dividends for a 365-day year and a return for the
entire year equal to the average annualized yield for the period, which will be
computed by compounding the unannualized current yield for the period by adding
1 to the unannualized current yield, raising the sum to a power equal to 365
divided by the number of days in the period, and then subtracting 1 from the
result.
The Portfolio may compare the performance of the Class or the performance
of securities in which it may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of various
types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money Fund
Report--Registered Trademark--of Holliston, Massachusetts or by Lipper
17
<PAGE>
Analytical Services, Inc., a widely recognized independent service located in
Summit, New Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money market
securities as reported by the Federal Reserve Bulletin, by TeleRate, a financial
information network, or by Bloomberg, a financial information firm; and
. other fixed-income investments such as Certificates of Deposit ("CDs").
The principal value and interest rate of CDs and money market securities
are fixed at the time of purchase whereas the Class' yield will fluctuate.
Unlike some CDs and certain other money market securities, money market mutual
funds are not insured by the FDIC. Investors should give consideration to the
quality and maturity of the portfolio securities of the respective investment
companies when comparing investment alternatives.
The Portfolio may reference the growth and variety of money market mutual
funds and AIM's innovation and participation in the industry.
REDEMPTIONS IN KIND
The Fund will not redeem shares representing an interest in the Portfolio
in kind (i.e., by distributing its portfolio securities).
SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended or the date of payment upon
redemption may be postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of the Portfolio not reasonably
practicable.
INVESTMENT PROGRAM AND RESTRICTIONS
The Portfolio may lend its portfolio securities in amounts up to 33-1/3% of
its total assets to financial institutions in accordance with the investment
restrictions of the Portfolio. Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by AIM to be of good standing and only when, in AIM's judgment,
the income to be earned from the loans justifies the attendant risks.
ELIGIBLE SECURITIES
The Fund will invest in "Eligible Securities" as defined in Rule 2a-7 under
the 1940 Act, which the Fund's Board of Directors has determined to present
minimal credit risk.
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").
18
<PAGE>
MOODY'S -- The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
S&P -- Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
FITCH -- Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes. The short-term rating places greater emphasis
than a long-term rating on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner. Fitch short-term ratings are as
follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings
of Moody's, S&P and Fitch.
MOODY'S -- The following are the two highest bond ratings of Moody's.
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
19
<PAGE>
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
S&P -- The following are the four highest bond ratings of S&P; the lower
two of which are referred to in the foregoing description of its commercial
paper ratings.
AAA
Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
A
Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior, but to some extent,
also economic conditions.
BBB
The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate. These
bonds have adequate asset coverage and normally are protected by satisfactory
earnings. Their susceptibility to changing conditions, particularly to
depressions, necessitates constant watching. Market values of these bonds are
more responsive to business and trade conditions than to interest rates. This
group is the lowest which qualifies for commercial bank investment.
FITCH - Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
20
<PAGE>
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
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 up to 25% 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. 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", as such term is defined under Rule 2a-7.
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 from banks in excess of 5% of its total assets
are outstanding;
21
<PAGE>
(4) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings and except for reverse repurchase agreements and then
only in an amount up to 33-1/3% of the value of its total assets at the
time of borrowing or entering into a reverse repurchase agreement;
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements and (c) by lending
portfolio securities to the extent permitted by law or regulation;
(6) underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Portfolio's investment program may be
deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase and
sell securities secured by real estate or interests therein or issued by
issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or calls;
(9) invest in any obligation not payable as to principal and interest
in United States currency; or
(10) Acquire for value the securities of any other investment company,
except in connection with a merger, consolidation, reorganization or
acquisition of assets and except for the investment in such securities of
funds representing compensation otherwise payable to its directors pursuant
to any deferred compensation plan existing at any time between the Fund and
its directors.
On December 11, 1996, the Board of Directors of the Fund approved, subject
to shareholder approval, the elimination of and changes to certain fundamental
investment policies of the Portfolio. Shareholders of the Portfolio will be
asked to approve these changes at an annual meeting of shareholders to be held
on February 7, 1997. If approved, these changes will become effective as of
March 1, 1997.
Reference is made to Investment Restriction Nos.(2) and (10) of the
Portfolio, set forth above. The Board of Directors has approved the elimination
of Investment Restriction No. (10) and a change to Investment Restriction No.
(2) of the Portfolio. In the event shareholders approve the proposed changes,
Investment Restriction (10) will no longer apply and Investment Restriction No.
(2) will read in full as follows:
(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, and except that the Portfolio
may purchase securities of other investment companies to the extent
permitted by applicable law or exemptive order;
The following investment policy is not fundamental 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.
PORTFOLIO TRANSACTIONS
A I M is responsible for decisions to buy and sell securities for the
Portfolio, for selection of broker-dealers and for negotiation of commission
rates. Since purchases and sales of portfolio securities by the Portfolio are
usually principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a commission paid by the issuer to the underwriter.
22
<PAGE>
The Portfolio does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity, but A I M 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.
A I M may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with A I M'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.
A I M'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, A I M may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which are deemed
by A I M to be beneficial to the Portfolio's investment program. Certain
research services furnished by dealers may be useful to A I M with clients
other than the Portfolio. Similarly, any research services received by A I M
through placement of portfolio transactions of other clients may be of value to
A I M in fulfilling its obligations to the Portfolio. A I M is of the opinion
that the material received is beneficial in supplementing A I M's research and
analysis; and therefore, it may benefit the Portfolio by improving the quality
of A I M's investment advice. The advisory fees paid by the Portfolio are not
reduced because A I M receives such services.
From time to time, the Fund may sell a security to, or purchase a security
from, an A I M Fund or another investment account advised by A I M or A I M
Capital Management, Inc. (" A I M Capital"), when such transactions comply with
applicable rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by A I M or A I M
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by A I M or A I M Capital have
been adopted by the Boards of Directors/Trustees of the various A I M Funds,
including the Fund. Although such transactions may result in custodian, tax or
other related expenses, no brokerage commissions or other direct transaction
costs are generated by transactions among the investment accounts advised by
A I M or A I M Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by A I M. 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.
A I M 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 A I M accounts. Simultaneous transactions could adversely affect
the ability of the Portfolio to obtain or dispose of the full amount of a
security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited from
dealing with the Portfolio as a principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
Furthermore, the 1940 Act prohibits the Fund from purchasing a security being
publicly underwritten by a syndicate of which persons affiliated with the Fund
are members except in accordance with
23
<PAGE>
certain conditions. These conditions may restrict the ability of the Portfolio
to purchase money market obligations being publicly underwritten by such a
syndicate, and the Portfolio may be required to wait until the syndicate has
been terminated before buying such securities. At such time, the market price
of the securities may be higher or lower than the original offering price. A
person affiliated with the Fund may, from time to time, serve as placement agent
or financial advisor to an issuer of money market obligations and be paid a fee
by such issuer. The Portfolio may purchase such money market obligations
directly from the issuer, provided that the purchase is made in accordance with
procedures adopted by the Fund's Board of Directors and such purchase is
reviewed at least quarterly by the Fund's Board of Directors and a
determination is made that all such purchases were effected in compliance with
such procedures, including a determination that the placement fee or other
remuneration paid by the issuer to the person affiliated with the Fund was fair
and reasonable in relation to the fees charged by others performing similar
services. During the fiscal year ended August 31, 1995, no securities or
instruments were purchased by the Portfolio from issuers who paid placement fees
or other compensation to a broker affiliated with the Portfolio.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Portfolio is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the
Portfolio made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or of options, futures or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). However, foreign currency
gains, including those derived from options, futures and forward contracts, will
not be characterized as Short-Short Gains if they are directly related to the
regulated investment company's principal business of investing in stock or
securities (or in options or futures thereon). Because of the Short-Short Gain
Test, a fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent a fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is disregarded.
Interest (including original issue discount) received by a fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of a security
within the meaning of the Short-Short Gain Test. However, income that is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
24
<PAGE>
In addition to satisfying the requirements described above, a regulated
investment company must satisfy an asset diversification test in order to
qualify for tax purposes as a regulated investment company. Under this test, at
the close of each quarter of a fund's taxable year, at least 50% of the value of
a fund's assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which a fund has not invested more than 5% of the value of a
fund's total assets in securities of such issuer and as to which a fund does not
hold more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the securities
of any other issuer (other than U.S. Government securities and securities of
other regulated investment companies), or in two or more issuers which a fund
controls and which are engaged in the same or similar trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Portfolio may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the
Portfolio into account in the year in which the distributions are made.
However, dividends declared in October, November or December of any year and
payable to shareholders of record on a specified date in such a month will be
deemed to have been received by the shareholders (and made by the Portfolio) on
December 31 of such calendar year if such dividends are actually paid in January
of the following year.
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
25
<PAGE>
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."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a class in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the class within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a class will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and
distributions (other than capital gains dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the dividend or distribution. Such a foreign shareholder would generally be
exempt from U.S. federal income tax on gains realized on the sale of shares of a
class, a capital gain dividends and amounts retained by the Portfolio that are
designated as undistributed capital gains.
If the income from the Portfolio is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Portfolio will be subject to U.S. federal income tax at the rates applicable to
U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Portfolio may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax unless such shareholders furnish
the Portfolio with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Portfolio, including the applicability of foreign taxes.
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 December
30, 1996. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolio.
26
<PAGE>
FINANCIAL STATEMENTS
THE FOOTNOTES TO THE FINANCIAL STATEMENTS APPLY TO THE INSTITUTIONAL CLASS OF
LIQUID ASSETS PORTFOLIO WHICH HAS BEEN IN OPERATION SINCE NOVEMBER 4, 1993. THE
EXPENSES OF THE MSTC CASH RESERVES CLASS WILL DIFFER FROM THOSE OF THE
INSTITUTIONAL CLASS OF LIQUID ASSETS PORTFOLIO.
FS
<PAGE>
LIQUID ASSETS PORTFOLIO
INSTITUTIONAL CLASS
SCHEDULE OF INVESTMENTS
August 31, 1996
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 21.61%(a)
CONSUMER DURABLES - 5.32%
AEROSPACE/DEFENSE - 0.48%
Raytheon Co.
5.32% 09/18/96 $ 10,000 $ 9,974,878
- -------------------------------------------------------------------------
AUTOMOBILE - 1.42%
Ford Motor Credit Co.
5.36% 12/03/96 30,000 29,584,600
- -------------------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT - 2.48%
Xerox Corp.
5.32% 12/18/96 52,600 51,760,504
- -------------------------------------------------------------------------
MACHINERY - 0.94%
Dover Corp.
5.33% 09/23/96 8,041 8,014,809
- -------------------------------------------------------------------------
5.33% 09/24/96 11,796 11,755,831
- -------------------------------------------------------------------------
19,770,640
- -------------------------------------------------------------------------
Total Consumer Durables 111,090,622
- -------------------------------------------------------------------------
CONSUMER NONDURABLES - 0.14%
MULTIPLE INDUSTRY - 0.14%
PepsiCo Inc.
5.05% 09/03/96 3,000 2,999,158
- -------------------------------------------------------------------------
Total Consumer Nondurables 2,999,158
- -------------------------------------------------------------------------
FINANCIAL - 14.40%
ASSET-BACKED SECURITIES - 6.14%
Asset Securitization Cooperative Corp.
5.32% 11/04/96 50,000 49,527,111
- -------------------------------------------------------------------------
Ciesco, L.P.
5.30% 12/02/96 31,300 30,876,059
- -------------------------------------------------------------------------
Clipper Receivables Corp.
5.33% 09/20/96 15,300 15,256,960
- -------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.33% 09/05/96 10,025 10,019,063
- -------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.30% 11/25/96 22,700 22,415,935
- -------------------------------------------------------------------------
128,095,128
- -------------------------------------------------------------------------
INSURANCE - 1.43%
Marsh & McLennan Companies Inc.
4.81% 11/01/96 20,000 19,836,994
- -------------------------------------------------------------------------
Prudential Funding Corp.
5.33% 10/29/96 10,000 9,914,128
- -------------------------------------------------------------------------
29,751,122
- -------------------------------------------------------------------------
PERSONAL CREDIT - 1.89%
Household Finance Corp.
5.34% 12/09/96 25,000 24,632,875
- -------------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
PERSONAL CREDIT - (CONTINUED)
Transamerica Finance Corp.
5.32% 12/10/96 $ 15,000 $ 14,778,333
- -----------------------------------------------------------------------------
39,411,208
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.94%
International Lease Finance Corp.
5.35% 12/06/96 20,000 19,714,667
- -----------------------------------------------------------------------------
MULTIPLE INDUSTRY - 4.00%
General Electric Capital Corp.
5.35% 09/06/96 10,000 9,992,569
- -----------------------------------------------------------------------------
5.34% 12/16/96 25,000 24,606,917
- -----------------------------------------------------------------------------
5.38% 02/12/97 50,000 48,774,556
- -----------------------------------------------------------------------------
83,374,042
- -----------------------------------------------------------------------------
Total Financial 300,346,167
- -----------------------------------------------------------------------------
OTHER - 1.75%
DIVERSIFIED - 1.18%
BTR Dunlop Finance Inc.
5.30% 12/19/96 25,000 24,598,819
- -----------------------------------------------------------------------------
MISCELLANEOUS - 0.57%
Cargill Financial Services Corp.
4.95% 10/29/96 12,000 11,904,300
- -----------------------------------------------------------------------------
Total Other 36,503,119
- -----------------------------------------------------------------------------
Total Commercial Paper 450,939,066
- -----------------------------------------------------------------------------
MEDIUM TERM NOTES - 0.96%
General Electric Capital Corp.
5.084% 01/29/97 10,000 10,003,770
- -----------------------------------------------------------------------------
5.138% 01/30/97 10,000 10,005,974
- -----------------------------------------------------------------------------
Total Medium Term Notes 20,009,744
- -----------------------------------------------------------------------------
PROMISSORY AND MASTER NOTE AGREEMENTS -
20.45%
Goldman Sachs Group (The), L.P.
5.423%(b) 10/25/96 173,000 173,000,000
- -----------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.413%(c) 10/09/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Group Inc.
5.383%(d) 11/29/96 127,000 127,000,000
- -----------------------------------------------------------------------------
Total Promissory and Master Note
Agreements 427,000,000
- -----------------------------------------------------------------------------
U.S. TREASURY NOTES - 1.20%
6.50% 09/30/96 25,000 25,029,024
- -----------------------------------------------------------------------------
Total U.S. Treasury Notes 25,029,024
- -----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 922,977,834
- -----------------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - 56.09%(e)
Daiwa Securities America, Inc.(f)
5.24% 09/03/96 $ 7,446 $ 7,446,003
- -------------------------------------------------------------------------------
Dean Witter Reynolds Inc.(g)
5.30% 09/03/96 100,000 100,000,000
- -------------------------------------------------------------------------------
Goldman, Sachs, & Co.(h)
5.31% 09/03/96 300,000 300,000,000
- -------------------------------------------------------------------------------
HSBC Securities, Inc(i)
5.28% 09/03/96 104,000 104,000,000
- -------------------------------------------------------------------------------
Morgan Stanley Group, Inc.(j)
5.28% 09/03/96 104,000 104,000,000
- -------------------------------------------------------------------------------
Nesbitt Burns Securities, Inc.(k)
5.26% -- 104,000 104,000,000
- -------------------------------------------------------------------------------
Nikko Securities Co., Ltd.(l)
5.30% 09/03/96 200,000 200,000,000
- -------------------------------------------------------------------------------
Nomura Securities International, Inc.(m)
5.27% -- 93,000 93,000,000
- -------------------------------------------------------------------------------
Smith Barney, Inc.(n)
5.28% 09/03/96 54,000 54,000,000
- -------------------------------------------------------------------------------
UBS Securities LLC.(o)
5.26% 09/03/96 104,000 104,000,000
- -------------------------------------------------------------------------------
Total Repurchase Agreements 1,170,446,003
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.31% 2,093,423,837(p)
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.31%) (6,479,515)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $2,086,944,322
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of note upon seven calendar days'
notice. Interest rates on promissory notes are redetermined periodically.
Rates shown are the rates in effect on August 31, 1996.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Agreement upon seven calendar days' notice. Interest rates on master
notes are redetermined periodically. Rates shown are the rates in effect on
August 31, 1996.
(d) Master Note Purchase Agreement may be terminated by either party upon three
business days' notice, at which time all amounts outstanding under the
notes purchased under the Master Note Agreement will become payable.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on August 31, 1996.
(e) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Portfolio upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(f) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $148,238,724. Collateralized by $147,480,000 U.S. Treasury obligations,
5.375% to 7.875% due 11/30/97 to 11/15/07.
FS-3
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS-CONTINUED
(g) Entered into on 08/30/96 with a maturing value of $100,058,889.
Collateralized by $148,909,138 U.S. Government Agency obligations, 0% to
9.50% due 02/03/97 to 01/01/31.
(h) Entered into on 08/30/96 with a maturing value of $300,177,000.
Collateralized by $589,000,590 U.S. Government Agency obligations, 5.953%
to 8.00% due 08/01/23 to 05/01/35.
(i) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,000. Collateralized by $476,251,231 U.S. Government Agency
obligations, 0% to 11.00% due 09/03/96 to 07/01/35.
(j) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $217,553,870 U.S. Government Agency
obligations, 7.50% to 8.00% due 08/01/03 to 04/01/26.
(k) Open joint repurchase agreement entered into on 04/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $638,599,000 U.S.
Treasury obligations, 0% to 10.75% due 10/31/96 to 08/15/25.
(l) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $300,176,666. Collateralized by $343,795,645 U.S. Government Agency
obligations, 5.834% to 8.00% due 04/01/18 to 09/01/26.
(m) Open joint repurchase agreement entered into on 07/16/96; however either
party may terminate the agreement upon demand. Interests rates, par and
collateral are redetermined daily. Collateralized by $336,220,000 U.S.
Government Agency obligations, 0% to 9.40% due 10/11/96 to 06/13/25 and by
$2,075,000 U.S. Treasury obligations, 6.25% to 8.875% due 11/15/97 to
08/15/26.
(n) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,117,333. Collateralized by $362,167,598 U.S. Government Agency
obligations, 0% to 11.00% due 10/25/99 to 09/01/26 and by $18,291,000 U.S.
Treasury Bill, due 11/15/04.
(o) Joint repurchase agreement entered into on 08/30/96 with a maturing value
of $200,116,889. Collateralized by $244,875,836 U.S. Government Agency
obligations, 0% to 10.50% due 03/01/02 to 07/01/26.
(p) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $ 922,977,834
- ------------------------------------------------------------------------
Repurchase agreements 1,170,446,003
- ------------------------------------------------------------------------
Interest receivable 3,398,555
- ------------------------------------------------------------------------
Investment for deferred compensation plan 22,873
- ------------------------------------------------------------------------
Other assets 28,483
- ------------------------------------------------------------------------
Total assets 2,096,873,748
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 9,743,428
- ------------------------------------------------------------------------
Deferred compensation 22,873
- ------------------------------------------------------------------------
Accrued advisory fees 22,846
- ------------------------------------------------------------------------
Accrued distribution fees 13,597
- ------------------------------------------------------------------------
Accrued directors' fees 2,114
- ------------------------------------------------------------------------
Accrued administrative services fees 5,249
- ------------------------------------------------------------------------
Accrued transfer agent fees 16,177
- ------------------------------------------------------------------------
Accrued operating expenses 103,142
- ------------------------------------------------------------------------
Total liabilities 9,929,426
- ------------------------------------------------------------------------
NET ASSETS $2,086,944,322
========================================================================
NET ASSETS:
Institutional Class $1,988,754,678
========================================================================
Cash Management Class $ 53,209,043
========================================================================
Private Investment Class $ 44,980,601
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 1,990,405,063
========================================================================
Cash Management Class 53,254,529
========================================================================
Private Investment Class 45,017,927
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $99,543,502
- ------------------------------------------------------------------
EXPENSES:
Advisory fees 2,687,358
- ------------------------------------------------------------------
Custodian fees 72,524
- ------------------------------------------------------------------
Administrative services fees 52,710
- ------------------------------------------------------------------
Distribution fees (Note 2) 65,408
- ------------------------------------------------------------------
Directors' fees and expenses 15,925
- ------------------------------------------------------------------
Filing fees 196,512
- ------------------------------------------------------------------
Transfer agent fees 134,459
- ------------------------------------------------------------------
Other 88,733
- ------------------------------------------------------------------
Total expenses 3,313,629
- ------------------------------------------------------------------
Less expenses assumed by advisor (2,679,024)
- ------------------------------------------------------------------
Net expenses 634,605
- ------------------------------------------------------------------
Net investment income 98,908,897
- ------------------------------------------------------------------
Net realized gain (loss) on sales of investments (1,596,067)
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $97,312,830
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 98,908,897 $ 92,913,637
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments (1,596,067) (74,934)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 97,312,830 92,838,703
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income (98,908,897) (92,913,637)
- ----------------------------------------------------------------------------
Capital stock transactions -- net 801,077,731 259,187,785
- ----------------------------------------------------------------------------
Net increase in net assets 799,481,664 259,112,851
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,287,462,658 1,028,349,807
- ----------------------------------------------------------------------------
End of period $2,086,944,322 $1,287,462,658
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,088,677,519 $1,287,599,788
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (1,733,197) (137,130)
- ----------------------------------------------------------------------------
$2,086,944,322 $1,287,462,658
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments Co. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end series, diversified management
investment company. The Fund is organized as a Maryland corporation consisting
of two different portfolios, each of which offers separate series of shares:
the Liquid Assets Portfolio and the Prime Portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Liquid Assets
Portfolio (the "Portfolio"). The Portfolio consists of three different classes
of shares: the Institutional Class, the Private Investment Class and the Cash
Management Class. Matters affecting each class are voted on exclusively by the
shareholders of each class. The Portfolio's objective is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
The following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. Security Valuations - The Portfolio invests only in securities which have
maturities of 397 days or less. The securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is accrued daily. Dividends to shareholders are
declared daily and are paid on the first business day of the following
month.
C. Federal Income Taxes - The Portfolio intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Portfolio has a capital
loss carryforward of $1,733,197 (which may be carried forward to offset
future taxable gains, if any) which expires, if not previously utilized,
through the year 2004. The Portfolio cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Expenses - Operating expenses directly attributable to a class of shares
are charged to that class' operations. Expenses which are applicable to
more than one class, e.g., advisory fees, are allocated among them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, AIM
receives a fee, paid monthly, with respect to the Portfolio at the annual rate
of 0.15% of the average daily net assets of the Portfolio.
AIM will, if necessary, reduce its fee for any fiscal year to the extent
required so that the amount of ordinary expenses of the Portfolio (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Portfolio for such fiscal year does not exceed the applicable
expense limitations imposed by the state securities regulations in any state in
which the Portfolio's shares are qualified for sale. During the year ended
August 31, 1996, AIM voluntarily waived fees of $2,562,094 on the Portfolio and
voluntarily reimbursed expenses of $116,930.
The Portfolio, pursuant to a master administrative services agreement with
AIM, has agreed to reimburse AIM for certain costs incurred in providing
accounting services to the Portfolio. During the year ended August 31, 1996,
the Portfolio reimbursed AIM $52,710 for such services.
FS-8
<PAGE>
The Portfolio, pursuant to a transfer agency and service agreement, has agreed
to pay A I M Institutional Fund Services, Inc. ("AIFS") a fee for providing
transfer agent and shareholder services to the Portfolio. During the year ended
August 31, 1996, the Portfolio paid AIFS $133,085 for such services.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class and the Cash Management Class of the Portfolio. The Plan
provides that the Private Investment Class and Cash Management Class pay FMC up
to a maximum annual rate of 0.50% and 0.10%, respectively, of the average daily
net assets attributable to such class. Of this amount, the Fund may pay an
asset-based sales charge to FMC and the Fund may pay a service fee of 0.25% and
0.10% of the average daily net assets, respectively, of each of the Private
Investment Class and the Cash Management Class, to selected banks, broker-
dealers and other financial institutions who offer continuing personal
shareholder services to their customers who purchase and own shares of the
Private Investment Class or the Cash Management Class. Any amounts not paid as
a service fee under such Plan would constitute an asset-based sales charge.
During the year ended August 31, 1996, the Private Investment Class and the
Cash Management Class accrued as compensation to FMC amounts of $54,941 and
$10,467, respectively, under the Plan. Certain officers and directors of the
Fund are officers of AIM, FMC, and AIFS.
During the year ended August 31, 1996, the Portfolio paid legal fees of $7,775
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Fund's directors. A member of that firm is a director of the Fund.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 51,676,611,824 $ 51,676,611,824 32,408,905,435 $ 32,408,905,435
- ----------------------------------------------------------------------------------------------------
Cash Management Class* 320,121,330 320,121,330 -- --
- ----------------------------------------------------------------------------------------------------
Private Investment Class** 136,803,186 136,803,186 -- --
- ----------------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 4,477,681 4,477,681 2,458,920 2,458,920
- ----------------------------------------------------------------------------------------------------
Cash Management Class* 283,906 283,906 -- --
- ---------------------------------------------------------------------------------------------------
Private Investment Class** 727,956 727,956 -- --
- ---------------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (50,978,284,230) (50,978,284,230) (32,152,176,570) (32,152,176,570)
- ---------------------------------------------------------------------------------------------------
Cash Management Class* (267,150,707) (267,150,707) -- --
- ---------------------------------------------------------------------------------------------------
Private Investment Class** (92,513,215) (92,513,215) -- --
- ---------------------------------------------------------------------------------------------------
Net increase 801,077,731 $ 801,077,731 259,187,785 $ 259,187,785
===================================================================================================
</TABLE>
* The Cash Management Class commenced operations on January 17, 1996.
** The Private Investment Class commenced operations on February 16, 1996.
FS-9
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of capital stock
outstanding of the Institutional Class during each of the years in the two year
period ended August 31, 1996 and the period November 4, 1993 (date operations
commenced) through August 31, 1994.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.06 0.06 0.03
- ---------------------------------------------------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.06) (0.06) (0.03)
- ---------------------------------------------------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
==================================================== ========== ========== ==========
Total return 5.68% 5.83% 3.83%(a)
==================================================== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,988,755 $1,287,463 $1,028,350
==================================================== ========== ========== ==========
Ratio of expenses to average net assets 0.03%(b)(c) 0.11%(c) 0.05%(c)
==================================================== ========== ========== ==========
Ratio of net investment income to average net assets 5.52%(b)(d) 5.69%(d) 3.85%(d)
==================================================== ========== ========== ==========
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $1,762,965,947.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
and expense reimbursements were 0.18% for the periods 1996-1994,
respectively. Ratios are annualized for periods less than one year.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees and expense reimbursements were 5.37%, 5.62% and 3.72%
(annualized) for the periods 1996-1994, respectively.
FS-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the two year period then ended and the
period November 4, 1993 (date operations commenced) through August 31, 1994.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Liquid Assets Portfolio as of August 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the two year period then ended and the period November 4, 1993 (date
operations commenced) through August 31, 1994, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
_________________________
KPMG Peat Marwick LLP
Houston, Texas
October 4, 1996
FS-11
<PAGE>
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24.(a) Financial Statements:
(1) Prime Portfolio - Cash Management Class
In Part A: Financial Highlights
<S> <C> <C>
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended August 31, 1996
(5) Statement of Changes in Net Assets for the years ended
August 31, 1996, 1995 and 1994
In Part C: None
(2) Prime Portfolio - Institutional Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended August 31, 1996
(5) Statement of Changes in Net Assets for the years ended
August 31, 1996, 1995 and 1994
In Part C: None
(3) Prime Portfolio - Personal Investment Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended
August 31, 1996
(5) Statement of Changes in Net Assets for the years ended
August 31, 1996, 1995 and 1994
In Part C: None
(4) Prime Portfolio - Private Investment Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended
August 31, 1996
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(5) Statement of Changes in Net Assets for the years ended
August 31, 1996, 1995 and 1994
In Part C: None
(5) Prime Portfolio - Resource Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended
August 31, 1996
(5) Statement of Changes in Net Assets for the period January 16,
1996 (date operations commenced) through August 31, 1996
In Part C: None
(6) Liquid Assets Portfolio - Cash Management Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended
August 31, 1996
(5) Statement of Changes in Net Assets for the period January 17,
1996 (date operations commenced) through August 31, 1996
In Part C: None
(7) Liquid Assets Portfolio - Institutional Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended August 31, 1996
(5) Statement of Changes in Net Assets for the years ended
August 31, 1996 and 1995, and for the period November 4,
1993 (date operations commenced) through August 31, 1994
In Part C: None
(8) Liquid Assets Portfolio - MSTC Cash Reserves Class
In Part A: None
In Part B: Financial Statements of Liquid Assets Portfolio - Institutional Class
(1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(4) Statement of Operations for the year ended August 31, 1996
(5) Statement of Changes in Net Assets for the year ended August
31, 1996 and 1995 and for the period November 4, 1993 (date
operations commenced) through August 31, 1994
In Part C: None
(9) Liquid Assets Portfolio - Private Investment Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31, 1996
(3) Statement of Assets and Liabilities as of August 31, 1996
(4) Statement of Operations for the year ended August 31, 1996
(5) Statement of Changes in Net Assets for the period February 16,
1996 (date operations commenced) through August 31, 1996
In Part C: None
</TABLE>
Exhibit
Number Description
------- ----------------------------------------------------
(1) - (a) Articles of Incorporation of Registrant, as filed with the
State of Maryland on May 3, 1993, were filed as an Exhibit
to Registrant's initial Registration Statement on July 19,
1993, and were filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995, and are
hereby in incorporated by reference.
(b) Certificate of Correction of Registrant, as filed with the
State of Maryland on June 10, 1993, was filed as an Exhibit
to Registrant's initial Registration Statement on July 19,
1993, and was filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995, and is
hereby incorporated by reference.
(c) Articles of Amendment of Registrant, as filed with the
State of Maryland on October 15, 1993, were filed as an
Exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and were filed electronically as an
Exhibit Post-Effective Amendment No. 4 on November 8, 1995,
and are hereby incorporated by reference.
(d) Articles Supplementary of Registrant, as filed with the
State of Maryland on October 10, 1995, were filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and are hereby incorporated by
reference.
(e) Articles Supplementary of Registrant, as filed with the
State of Maryland on November 6, 1995, were filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and are hereby incorporated by
reference.
(f) Articles of Amendment of Registrant, as filed with the
State of Maryland on November 6, 1995, were filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and are hereby incorporated by
reference.
C-3
<PAGE>
(g) Certificate of Correction of Registrant, as filed with the
State of Maryland on November 8, 1995, was filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and is hereby incorporated by
reference.
(h) Certificate of Correction of Registrant as filed with the
State of Maryland on August 5, 1996, is filed herewith
electronically.
(i) Certificate of Correction of Registrant, as filed with the
State of Maryland on August 5, 1996, is filed herewith
electronically.
(j) Articles Supplementary of Registrant as filed with the
State of Maryland on August 5, 1996, is filed herewith
electronically.
(2) - (a) By-Laws of Registrant were filed as an exhibit to
Registrant's initial Registration Statement on July 19,
1993, and were filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995, and are
hereby incorporated by reference.
(b) First Amendment, dated March 14, 1995, to By-Laws of
Registrant was filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995, and is
hereby incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) - (a) Form of Specimen Certificate for Liquid Assets Portfolio
was filed as an exhibit to Registrant's Pre-Effective
Amendment No. 1 on October 1, 1993, and is hereby
incorporated by reference.
(b) Form of Specimen Certificate for Prime Portfolio - Personal
Investment Class was filed as an exhibit to Registrant's
Post-Effective Amendment No. 1 on October 15, 1993, and is
hereby incorporated by reference.
(c) Form of Specimen Certificate for Prime Portfolio - Private
Investment Class was filed as an exhibit to Registrant's
Post-Effective Amendment No. 1 on October 15, 1993, and is
hereby incorporated by reference.
(d) Form of Specimen Certificate for Prime Portfolio -
Institutional Class was filed as an exhibit to Registrant's
Post-Effective Amendment No. 1 on October 15, 1993, and is
hereby incorporated by reference.
(e) Form of Specimen Certificate for Prime Portfolio - Cash
Management Class was filed as an exhibit to Registrant's
Post-Effective Amendment No. 1 on October 15, 1993, and is
hereby incorporated by reference.
(f) Form of Specimen Certificate for Prime Portfolio - Resource
Class was filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995, and is
hereby incorporated by reference.
(g) Form of Specimen Certificate for Liquid Assets Portfolio -
Private Investment Class was filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8,
1995, is hereby incorporated by reference.
C-4
<PAGE>
(h) Form of Specimen Certificate for Liquid Assets Portfolio -
Cash Management Class was filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8,
1995, and is hereby incorporated by reference.
(i) Form of Specimen Certificate for Liquid Assets Portfolio -
MSTC Cash Reserves Class was filed electronically as an
Exhibit to Post-Effective Amendment No. 5 on July 9, 1996
and is hereby incorporated by reference.
(5) - (a) Master Investment Advisory Agreement between Registrant and
A I M Advisors, Inc. dated August 6, 1993 was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 1 on
October 15, 1993.
(b) Master Investment Advisory Agreement, dated October 18,
1993, between Registrant and A I M Advisors, Inc. was filed
as an Exhibit to Registrant's Post-Effective Amendment No.
2 on August 22, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8,
1995, and is hereby incorporated by reference.
(6) - (a) Master Distribution Agreement between Registrant and Fund
Management Company dated August 6, 1993 was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 1 on
October 15, 1993.
(b) Master Distribution Agreement between Registrant and Fund
Management Company, dated October 18, 1993, was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 4 on November 8, 1995, and
is hereby incorporated by reference.
(c) Amendment No. 1, dated September 19, 1995, to Master
Distribution Agreement between Registrant and Fund
Management Company, dated October 18, 1993, was filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and is hereby incorporated by
reference.
(d) Amendment No. 2, dated as of December 4, 1995, to Master
Distribution Agreement between Registrant and Fund
Management Company, dated October 18, 1993, was filed
electronically as an Exhibit to Post-Effective Amendment
No. 5 on July 9, 1996 and is hereby incorporated by
reference.
(e) Amendment No. 3, dated June 11, 1996, to Master
Distribution Agreement between Registrant and Fund
Management Company, dated October 18, 1993, is filed
herewith electronically.
(7) - (a) Retirement Plan for Eligible Directors/Trustees was filed
as an exhibit to Registrant's Post-Effective Amendment No.
2 on August 22, 1994, and is filed herewith electronically.
(b) Form of Deferred Compensation Agreement was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and is filed herewith electronically.
(8) - (a) Second Amended and Restated Custodian Agreement between the
Registrant and The Bank of New York, dated June 16, 1987,
was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 2 on August 22, 1994, and is filed herewith
electronically.
C-5
<PAGE>
(b) Amendment No. 1, dated May 17, 1993, to Second Amended and
Restated Custodian Agreement between Registrant and The
Bank of New York, dated June 16, 1987, was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and is filed herewith electronically.
(c) Assignment and Acceptance of Assignment, dated October 15,
1993, to Second Amended and Restated Custodian Agreement,
dated June 16, 1987, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2 on August 22,
1994, and is filed herewith electronically.
(d) Amendment No. 2, dated October 19, 1993, to Second Amended
and Restated Custodian Agreement, dated June 16, 1987, was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 2 on August 22, 1994, and is filed herewith
electronically.
(e) Letter Agreement, dated July 30, 1996, to Second Amended
and Restated Custodian Agreement, dated June 16, 1987, is
filed herewith electronically.
(9) - (a) Transfer Agency Agreement between the Registrant and State
Street Bank and Trust Company, dated October 15, 1993 was
filed as an exhibit to Registrant's Post-Effective
Amendment No. 2 on August 22, 1994.
(b) Transfer Agency and Service Agreement between A I M
Institutional Fund Services, Inc. and Registrant, dated
September 16, 1994, was filed electronically as an Exhibit
to Post-Effective Amendment No. 4 on November 8, 1995, and
is hereby incorporated by reference.
(c) Amendment No.1, dated July 1, 1995, to Transfer Agency and
Service Agreement between A I M Institutional Fund
Services, Inc. and Registrant, dated September 16, 1994,
was filed electronically as an Exhibit to Post-Effective
Amendment No. 4 on November 8, 1995, and is hereby
incorporated by reference.
(d) Master Administrative Services Agreement between the
Registrant and A I M Advisors, Inc. dated August 6, 1993
was filed as an exhibit to Registrant's Post-Effective
Amendment No. 1 on October 15, 1993.
(e) Master Administrative Services Agreement between the
Registrant and A I M Advisors, Inc., dated October 18,
1993, was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 2 on August 22, 1994, and was filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and is hereby incorporated by
reference.
(f) Amendment No. 1, dated November 2, 1995, to Master
Administrative Services Agreement between the Registrant
and A I M Advisors, Inc., dated October 18, 1993, was filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and is hereby incorporated by
reference.
(g) Amendment No. 2, dated as of December 4, 1995, to Master
Administrative Services Agreement between the Registrant
and A I M Advisors, Inc., dated October 18, 1993, was filed
electronically as an Exhibit to Post-Effective Amendment
No. 5 on July 9, 1996 and is hereby incorporated by
reference.
(h) Amendment No. 3, dated June 11, 1996, to Master
Administrative Services Agreement between the Registrant
and A I M Advisors, Inc. dated October 18, 1993, is filed
herewith electronically.
C-6
<PAGE>
(i) Administrative Service Agreement between A I M Advisors,
Inc. and A I M Fund Services, Inc., dated October 18, 1993,
as amended on May 11, 1994, was filed as an exhibit to
Registrant's Post-Effective Amendment No. 2 on August 22,
1994.
(j) Amendment No. 2 to Administrative Services Agreement
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
dated October 18, 1993, as amended on May 11, 1994, was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 3 on December 21, 1994.
(k) Amendment No. 3 to Administrative Services Agreement
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
dated October 18, 1993, as amended on May 11, 1994, was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 3 on December 21, 1994.
(l) Form of Administrative Services Agreement between A I M
Advisors, Inc. and A I M Institutional Fund Services, Inc.,
on behalf of the Portfolios and Classes of the Registrant
was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 3 on December 21, 1994.
(10) - Opinion of Ballard Spahr Andrews & Ingersoll was filed as an
exhibit to Registrant's Rule 24f-2 Notice for the fiscal year
ending August 31, 1996.
(11) - (a) Consent of Ballard Spahr Andrews & Ingersoll is filed
herewith electronically.
(b) Consent of KPMG Peat Marwick LLP is filed herewith
electronically.
(12) - Financial Statements - None.
(13) - Agreements Concerning Initial Capitalization - None.
(14) - Registrant's Retirement Plan Documents - None.
(15) - (a) Master Distribution Plan Pursuant to Rule 12b-1 under the
1940 Act for Registrant's Prime Portfolio - Personal
Investment Class, Private Investment Class and Cash
Management Class, and related forms of agreements were
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 3 on December 21, 1994 and were filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995 .
(b) Master Distribution Plan Pursuant to Rule 12b-1 under the
1940 Act, dated August 6, 1993, amended as of September 19,
1995 and December 4, 1995, and amended and restated as of
December 4, 1995, for Registrant's Prime Portfolio -
Personal Investment Class, Private Investment Class,
Resource Class and Cash Management Class and Registrant's
Liquid Assets Portfolio - Private Investment Class and Cash
Management Class, and related forms of agreements were
filed electronically as an Exhibit to Post-Effective
Amendment No. 5 on July 9, 1996 and are hereby incorporated
by reference .
(c) Amendment No. 1, dated June 11, 1996, to Master
Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act
Amended and Restated as of December 4, 1995, for
Registrant's Liquid Assets Portfolio - MSTC Cash Reserves
Class is filed herewith electronically.
C-7
<PAGE>
(16) - Schedule of Performance Quotations was filed as an exhibit to
Registrant's Registration Statement on July 19, 1993.
(18) - Multiple Class (Rule 18f-3) Plan is filed herewith
electronically.
(27) - Financial Data Schedule is filed herewith electronically.
Item 25. Persons Controlled by or under Common Control With Registrant
-------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly controlled by
or under common control with the Registrant and as to each such person indicate
(1) if a company, the state or other sovereign power under the laws of which it
is organized, and (2) the percentage of voting securities owned or other basis
of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities
-------------------------------
State in substantially the tabular form indicated, as of a specified date
within 90 days prior to the date of filing, the number of record holders of
each class of securities of the Registrant.
<TABLE>
<CAPTION>
Title of Class As of December 1, 1996
-------------- ----------------------
<S> <C>
Prime Portfolio - Cash Management Class 67
Prime Portfolio - Institutional Class 160
Prime Portfolio - Personal Investment Class 12
Prime Portfolio - Private Investment Class 18
Prime Portfolio - Resource Class 36
Liquid Assets Portfolio - Cash Management Class 8
Liquid Assets Portfolio - Institutional Class 52
Liquid Assets Portfolio - MSTC Cash Reserves Class 3
Liquid Assets Portfolio - Private Investment Class 3
</TABLE>
Item 27. Indemnification
---------------
State the general effect of any contract, arrangement or statute under which
any director, officer, underwriter or affiliated person of the Registrant is
insured or indemnified in any manner against any liability which may be incurred
in such capacity, other than insurance provided by any director, officer,
affiliated person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and the Registrant's
Charter and By-Laws, the Registrant may indemnify any person who was or is a
director, officer, employee or agent of the Registrant to the maximum extent
permitted by the Maryland General Corporation Law. The specific terms of such
indemnification are reflected in the Registrant's Charter and By-Laws, which
are incorporated herein as part of this Registration Statement. No
indemnification will be provided by the Registrant to any director or officer
of the Registrant for any liability to the Registrant or shareholders to
which such director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid
C-8
<PAGE>
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereby, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in such Act and will be governed
by the final adjudication of such issue. Insurance coverage is provided under
a joint Mutual Fund & Investment Advisory Professional Directors & Officers
Liability Policy, issued by ICI Mutual Insurance Company, with a $25,000,000
limit of liability.
Item 28. Business and Other Connections of Investment Advisor
----------------------------------------------------
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's directors and
officers is with the Advisor and its affiliated companies. Reference is also
made to the discussion under the captions "Management of the Fund" of the
Prospectus which comprises Part A of this Registration Statement, and to the
discussion under the caption "General Information about the Fund --Investment
Advisor" of the Statement of Additional Information which comprises Part B of
this Registration Statement, and to Item 29(b) of this Part C of the
Registration Statement.
Item 29. Principal Underwriters
----------------------
(a) Fund Management Company, the Registrant's principal underwriter,
also acts as a principal underwriter to the following investment
companies:
AIM Equity Funds, Inc. (Institutional Classes)
AIM Investment Securities Fund (Limited Maturity Treasury
Portfolio-Institutional Shares)
Short-Term Investments Trust
Tax-Free Investments Co.
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman and Director
J. Abbott Sprague President and Director Vice President
Robert H. Graham Senior Vice President and Director Director and President
William H. Kleh Director None
Mark D. Santero Senior Vice President None
Carol F. Relihan Vice President Senior Vice President & Secretary
& General Counsel
</TABLE>
- -------------------------
* 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173
C-9
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
John J. Arthur Treasurer & Vice President Senior Vice President
& Treasurer
Jesse H. Cole Vice President None
Stephen I. Winer Vice President, Assistant General Assistant Secretary
Counsel & Assistant Secretary
Melville B. Cox Vice President & Vice President
Chief Compliance Officer
Kathleen J. Pflueger Secretary Assistant Secretary
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
Jeffrey L. Horne Assistant Vice President None
Margaret A. Reilly Assistant Vice President None
Dana R. Sutton Assistant Vice President Vice President & Assistant
& Assistant Treasurer Treasurer
Nicholas D. White Assistant Vice President None
Nancy A. Beck Assistant Vice President None
David L. Kite Assistant General Counsel & Assistant Secretary
Assistant Secretary
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Ofelia M. Mayo Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
</TABLE>
(c) Not Applicable
Item 30. Location of Accounts and Records
--------------------------------
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
- ------------------------
* 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173
C-10
<PAGE>
A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, will maintain physical possession of each such account, book or other
document of the Registrant at its principal executive offices, except for
those maintained by the Registrant's Custodian, The Bank of New York, 90
Washington Street, 11th Floor, New York, New York 10286, and Transfer Agent,
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173.
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any management-related
service contract not discussed in Part A or Part B of this Form (because the
contract was not believed to be of interest to a purchaser of securities of the
Registrant) under which services are provided to the Registrant, indicating the
parties to the contract, the total dollars paid and by whom, for the last three
fiscal years.
None.
Item 32. Undertakings
------------
(a) None.
(b) None.
(c) The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the applicable Portfolio's latest annual
report to shareholders, upon request and without charge.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the city of Houston, Texas on the 19th day of
December, 1996.
REGISTRANT: SHORT-TERM INVESTMENTS CO.
By: /s/Robert H. Graham
-----------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/Charles T. Bauer Chairman & Director 12/19/96
- --------------------
(Charles T. Bauer)
Director & President
/s/Robert H. Graham (Principal Executive Officer) 12/19/96
- -------------------
(Robert H. Graham)
/s/Bruce L. Crockett Director 12/19/96
- --------------------
(Bruce L. Crockett)
/s/Owen Daly II Director 12/19/96
- --------------------
(Owen Daly II)
/s/Carl Frischling Director 12/19/96
- --------------------
(Carl Frischling)
/s/John F. Kroeger Director 12/19/96
- --------------------
(John F. Kroeger)
/s/Lewis F. Pennock Director 12/19/96
- -------------------
(Lewis F. Pennock)
/s/Ian W. Robinson Director 12/19/96
- --------------------
(Ian W. Robinson)
/s/Louis S. Sklar Director 12/19/96
- -----------------------
(Louis S. Sklar)
Vice President &
Treasurer (Principal Financial
/s/John J. Arthur and Accounting Officer) 12/19/96
- -----------------------
(John J. Arthur)
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- --------
1(h) Certificate of Correction of Registrant as filed with the State of
Maryland on August 5, 1996
1(i) Certificate of Correction of Registrant as filed with the State of
Maryland on August 5, 1996
1(j) Articles Supplementary of Registrant as filed with the State of
Maryland on August 5, 1996
6(e) Amendment No. 3, dated June 11, 1996, to Master Distribution Agreement
between Registrant and Fund Management Company, dated October 18, 1993
7(a) Retirement Plan for Eligible Directors/Trustees
7(b) Deferred Compensation Plan for Eligible Directors/Trustees
8(a) Second Amended and Restated Custodian Agreement between the Registrant
and The Bank of New York, dated June 16, 1987
8(b) Amendment No. 1, dated May 17, 1993, to Second Amended and Restated
Custodian Agreement between Registrant and The Bank of New York, dated
June 16, 1987
8(c) Assignment and Acceptance of Assignment, dated October 15, 1993, to
Second Amended and Restated Custodian Agreement, dated June 16, 1987
8(d) Amendment No. 2, dated October 19, 1993, to Second Amended and
Restated Custodian Agreement, dated June 16, 1987
8(e) Letter Agreement, dated July 30, 1996, to Second Amended and Restated
Custodian Agreement, dated June 16, 1987
9(h) Amendment No. 3, dated June 11, 1996, to Master Administrative
Services Agreement, between the Registrant and A I M Advisors, Inc.
dated October 18, 1993.
11(a) Consent of Ballard Spahr Andrews & Ingersoll
11(b) Consent of KPMG Peat Marwick LLP
15(c) Amendment No. 1, dated June 11, 1996, to Master Distribution Plan
Pursuant to Rule 12b-1 under the 1940 Act Amended and Restated as of
December 4, 1995 for Registrant's Liquid Assets Portfolio - MSTC Cash
Reserves Class
18 Multiple Class (Rule 18f-3) Plan
27 Financial Data Schedule
<PAGE>
EXHIBIT 1 (h)
SHORT-TERM INVESTMENTS CO.
CERTIFICATE OF CORRECTION
SHORT TERM INVESTMENTS CO., a Maryland corporation registered as an open-
end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: This Certificate of Correction is being filed to correct the
Articles of Amendment of the Corporation which were filed with the State of
Maryland on November 6, 1995.
SECOND: The provision of the Articles of Amendment of the Corporation that
is being corrected originally read as follows:
FIRST: In Article FIFTH, Section(a) of the Corporation's charter
(the"Charter"), the ten billion (10,000,000,000) shares of Liquid Assets
Portfolio shall be redesignated as Liquid Assets Portfolio - Institutional
Shares.
THIRD: The foregoing provision of the Articles of Amendment of the
Corporation is hereby corrected to read as follows:
FIRST: In Article FIFTH, Section(a) of the Corporation's charter
(the"Charter"), the ten billion (10,000,000,000) shares of Liquid Assets
Portfolio shall be redesignated as Liquid Assets Portfolio - Institutional
Class.
The undersigned President acknowledges this Certificate of Correction to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, SHORT-TERM INVESTMENTS CO. has caused this Certificate
of Correction to be executed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on July 26, 1996.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ DAVID L. KITE /s/ ROBERT H. GRAHAM
- --------------------- -------------------------
Assistant Secretary President
2
<PAGE>
EXHIBIT 1 (i)
SHORT-TERM INVESTMENTS CO.
CERTIFICATE OF CORRECTION
SHORT TERM INVESTMENTS CO., a Maryland corporation registered as an open-
end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: This Certificate of Correction is being filed to correct the
Certificate of Correction which was filed with the State of Maryland on November
8, 1995.
SECOND: The provisions of the Certificate of Correction of the Corporation
that are being corrected originally read as follows:
FIRST: The Board of Directors of the Corporation has adopted a resolution
increasing the number of shares of common stock that are classified (but
not increasing the aggregate number of authorized shares) into separate
classes by:
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified
shares of the common stock, par value $.001
per share, with an aggregate par value of
three million dollars ($3,000,000), as
Liquid Assets Portfolio - Cash Management
Class Shares; and
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified
shares of the common stock, par value $.001
per share, with an aggregate par value of
three million dollars ($3,000,000), as
Liquid Assets Portfolio - Private
Investment Class Shares.
****
<PAGE>
FOURTH: Immediately prior to the filing of these Articles
Supplementary, the Corporation had authority to issue 40,000,000,000 shares
with a par value of $.001 each, and an aggregate par value of forty million
dollars ($40,000,000). Of these shares, ten billion (10,000,000,000)
shares had been classified as Liquid Assets Portfolio Shares, three billion
(3,000,000,000) shares had been classified as Prime Portfolio - Personal
Investment Class Shares, three billion (3,000,000,000) shares had been
classified as Prime Portfolio - Private Investment Class Shares, ten
billion (10,000,000,000) shares had been classified as Prime Portfolio -
Institutional Class Shares, three billion (3,000,000,000) shares had been
classified as Prime Portfolio - Cash Management Class Shares, and three
billion (3,000,000,000) shares had been classified as Prime Portfolio -
Resource Class Shares.
FIFTH: As of the filing of these Articles Supplementary, the
Corporation shall have authority to issue 40,000,000,000 shares with a par
value of $.001 each, and an aggregate par value of forty million dollars
($40,000,000). Of these shares, three billion (3,000,000,000) shares are
classified as Liquid Assets Portfolio - Cash Management Class Shares, three
billion (3,000,000,000) shares are classified as Liquid Assets Portfolio -
Private Investment Class Shares, ten billion (10,000,000,000) shares
(including all previously issued and outstanding Liquid Assets Portfolio
Shares) are classified as Liquid Assets Portfolio Shares, three billion
(3,000,000,000) shares have been classified as Prime Portfolio - Personal
Investment Class Shares, three billion (3,000,000,000) shares have been
classified as Prime Portfolio - Private Investment Class Shares, ten
billion (10,000,000,000) shares have been classified as Prime Portfolio -
Institutional Class Shares, three billion (3,000,000,000) shares have been
classified as Prime Portfolio - Cash Management Class Shares, three billion
(3,000,000,000) shares have been classified as Prime Portfolio - Resource
Class Shares, and two billion (2,000,000,000) shares remain unclassified.
THIRD: The foregoing provisions of the Certificate of Correction of
the Corporation are hereby corrected to read as follows:
FIRST: The Board of Directors of the Corporation has adopted a resolution
increasing the number of shares of common stock that are classified (but
not increasing the aggregate number of authorized shares) into separate
classes by:
2
<PAGE>
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified
shares of the common stock, par value $.001
per share, with an aggregate par value of
three million dollars ($3,000,000), as
Liquid Assets Portfolio - Cash Management
Class; and
classifying an additional three billion
(3,000,000,000) shares of the previously
authorized, unissued and unclassified
shares of the common stock, par value $.001
per share, with an aggregate par value of
three million dollars ($3,000,000), as
Liquid Assets Portfolio - Private
Investment Class.
****
FOURTH: Immediately prior to the filing of these Articles
Supplementary, the Corporation had authority to issue 40,000,000,000
shares with a par value of $.001 each, and an aggregate par value of forty
million dollars ($40,000,000). Of these shares, ten billion
(10,000,000,000) shares had been classified as Liquid Assets Portfolio,
three billion (3,000,000,000) shares had been classified as Prime
Portfolio - Personal Investment Class, three billion (3,000,000,000)
shares had been classified as Prime Portfolio - Private Investment Class,
ten billion (10,000,000,000) shares had been classified as Prime Portfolio
- Institutional Class, three billion (3,000,000,000) shares had been
classified as Prime Portfolio - Cash Management Class, and three billion
(3,000,000,000) shares had been classified as Prime Portfolio - Resource
Class.
FIFTH: As of the filing of these Articles Supplementary, the
Corporation shall have authority to issue 40,000,000,000 shares with a par
value of $.001 each, and an aggregate par value of forty million dollars
($40,000,000). Of these shares, three billion (3,000,000,000) shares are
classified as Liquid Assets Portfolio - Cash Management Class, three
billion (3,000,000,000) shares are classified as Liquid Assets Portfolio -
Private Investment Class, ten billion (10,000,000,000) shares (including
all previously issued and outstanding Liquid Assets Portfolio) are
classified as Liquid Assets Portfolio, three billion (3,000,000,000)
shares have
3
<PAGE>
been classified as Prime Portfolio - Personal Investment Class, three
billion (3,000,000,000) shares have been classified as Prime Portfolio -
Private Investment Class, ten billion (10,000,000,000) shares have been
classified as Prime Portfolio - Institutional Class, three billion
(3,000,000,000) shares have been classified as Prime Portfolio - Cash
Management Class, three billion (3,000,000,000) shares have been
classified as Prime Portfolio - Resource Class, and two billion
(2,000,000,000) shares remain unclassified.
The undersigned President acknowledges this Certificate of Correction
to be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, SHORT-TERM INVESTMENTS CO. has caused this
Certificate of Correction to be executed in its name and on its behalf by its
President and witnessed by its Assistant Secretary on July 26, 1996.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ DAVID L. KITE /s/ ROBERT H. GRAHAM
- ------------------------- --------------------------
Assistant Secretary President
4
<PAGE>
EXHIBIT 1(j)
SHORT-TERM INVESTMENTS CO.
ARTICLES SUPPLEMENTARY
SHORT-TERM INVESTMENTS CO., a Maryland corporation registered as an open-
end investment company under the Investment Company Act of 1940 having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to Section 2-105(c) of the Maryland General Corporation
Law ("MGCL"), the Board of Directors of the Corporation hereby increases the
aggregate number of shares of common stock which the Corporation shall have the
authority to issue from 40,000,000,000 to 50,000,000,000 shares with a par value
of $.001 each.
SECOND: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue 40,000,000,000 shares with a par value of
$.001 each, of which three billion (3,000,000,000) shares have been classified
as Liquid Assets Portfolio - Cash Management Class, ten billion (10,000,000,000)
shares have been classified as Liquid Assets Portfolio - Institutional Class,
three billion (3,000,000,000) shares have been classified as Liquid Assets
Portfolio -Private Investment Class, three billion (3,000,000,000) shares have
been classified as Prime Portfolio - Cash Management Class, ten billion
(10,000,000,000) shares have been classified as Prime Portfolio - Institutional
Class, three billion (3,000,000,000) shares have been classified as Prime
Portfolio - Personal Investment Class, three billion (3,000,000,000) shares have
been classified as Prime Portfolio - Private Investment Class, and three billion
(3,000,000,000) shares have been classified as Prime Portfolio - Resource Class.
THIRD: As of the filing of these Articles Supplementary, the Corporation
shall have authority to issue 50,000,000,000 shares with a par value of $.001
each. Of the additional 10,000,000,000 shares, three billion (3,000,000,000)
shares are classified as Liquid Assets Portfolio - MSTC Cash Reserves Class.
The number of shares of stock of each class specified in Article SECOND of these
Articles Supplementary remains unchanged.
FOURTH: All the shares of common stock of the Corporation, both classified
and unclassified, collectively have an aggregate par value of $50,000,000.
FIFTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the shares as set forth in ARTICLE FIFTH, paragraph
(b) of the Corporation's Charter, and in the provisions of the Charter relating
to stock of the Corporation generally, remain unchanged.
SIXTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SEVENTH: The Board of Directors of the Corporation has authorized and
classified the shares, under authority contained in the Charter of the
Corporation in accordance with Section 2-105(c) of the MGCL.
The undersigned President acknowledges these Articles Supplementary to be
the corporate act of the Corporation and states that to the best of his or her
knowledge, information and belief, the
-1-
<PAGE>
matters and facts set forth in these Articles with respect to authorization and
approval are true in all material respects and that this statement is made under
the penalties for perjury.
IN WITNESS WHEREOF, SHORT-TERM INVESTMENTS CO. has caused these Articles
Supplementary to be executed in its name and on its behalf by its President and
witnessed by its Assistant Secretary on July 26, 1996.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
- -------------------------- --------------------------------
Assistant Secretary President
-2-
<PAGE>
EXHIBIT 6 (e)
AMENDMENT NO. 3
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated October 18,
1993, by and between Short-Term Investments Co., a Maryland corporation, and
Fund Management Company, a Texas corporation, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"APPENDIX A
Prime Portfolio
Cash Management Class
Institutional Class
Personal Investment Class
Private Investment Class
Resource Class
Liquid Assets Portfolio
Cash Management Class
Institutional Class
MSTC Cash Reserves Class
Private Investment Class"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: June 11th, 1996
SHORT-TERM INVESTMENTS CO.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
--------------------------- ------------------------------
Assistant Secretary President
(SEAL)
FUND MANAGEMENT COMPANY
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
--------------------------- ------------------------------
Assistant Secretary President
(SEAL)
<PAGE>
EXHIBIT 7(a)
AIM FUNDS
RETIREMENT PLAN FOR ELIGIBLE
DIRECTORS/TRUSTEES
Effective as of March 8, 1994
As Restated September 18, 1995
<PAGE>
AIM FUNDS
RETIREMENT PLAN FOR ELIGIBLE
DIRECTORS/TRUSTEES
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITION OF TERMS AND CONSTRUCTION . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Accrued Benefit . . . . . . . . . . . . . . . . . . . 1
(b) Actuary . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Administrator . . . . . . . . . . . . . . . . . . . . 1
(d) AIM Funds . . . . . . . . . . . . . . . . . . . . . . 1
(e) Board of Directors . . . . . . . . . . . . . . . . . 1
(f) Code . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) Compensation . . . . . . . . . . . . . . . . . . . . 2
(h) Deferred Retirement Date . . . . . . . . . . . . . . 2
(i) Director . . . . . . . . . . . . . . . . . . . . . . 2
(j) Disability . . . . . . . . . . . . . . . . . . . . . 2
(k) Effective Date . . . . . . . . . . . . . . . . . . . 2
(l) Fund . . . . . . . . . . . . . . . . . . . . . . . . 2
(m) Normal Retirement Date . . . . . . . . . . . . . . . 2
(n) Participant . . . . . . . . . . . . . . . . . . . . . 2
(o) Plan . . . . . . . . . . . . . . . . . . . . . . . . 2
(p) Plan Year . . . . . . . . . . . . . . . . . . . . . . 2
(q) Retirement . . . . . . . . . . . . . . . . . . . . . 2
(r) Retirement Benefit . . . . . . . . . . . . . . . . . 3
(s) Service . . . . . . . . . . . . . . . . . . . . . . . 3
(t) Year of Service . . . . . . . . . . . . . . . . . . . 3
1.2 Plurals and Gender . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Directors/Trustees . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II PARTICIPATION . . . . . . . . . . . . . . . . . . . . . 4
2.1 Commencement of Participation . . . . . . . . . . . . . . . . 4
2.2 Termination of Participation . . . . . . . . . . . . . . . . . 4
2.3 Resumption of Participation . . . . . . . . . . . . . . . . . 4
2.4 Determination of Eligibility . . . . . . . . . . . . . . . . . 4
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<PAGE>
Page
----
ARTICLE III BENEFITS UPON RETIREMENT AND OTHER
TERMINATION OF SERVICE. . . . . . . . . . . . . . . . . 4
3.1 Retirement. . .. . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Termination of Service Before Retirement . . . . . . . . . . . 5
3.3 Termination of Service by Reason of Death. . . . . . . . . . . 5
3.4 Benefits Calculated in the Aggregate for all of the AIM Funds. 5
ARTICLE IV DEATH BENEFITS. . . . . . . . . . . . . . . . . . . . . 5
4.1 Death Prior to Commencement of Benefits . . . . . . . . . . . 5
4.2 Death Subsequent to Commencement of Benefits . . . . . . . . 5
4.3 Death of Spouse . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V SUSPENSION OF BENEFITS, ETC. . . . . . . . . . . . . . 6
5.1 Suspension of Benefits Upon Resumption of Service . . . . . . 6
5.2 Payments Due Missing Persons . . . . . . . . . . . . . . . . . 6
ARTICLE VI ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . 7
6.1 Appointment of Administrator . . . . . . . . . . . . . . . . . 7
6.2 Powers and Duties of Administrator . . . . . . . . . . . . . . 7
6.3 Action by Administrator . . . . . . . . . . . . . . . . . . . 8
6.4 Participation by Administrators . . . . . . . . . . . . . . . 8
6.5 Agents and Expenses. . . . . . . . . . . . . . . . . . . . . . 8
6.6 Allocation of Duties . . . . . . . . . . . . . . . . . . . . . 8
6.7 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 9
6.8 Administrator's Action Conclusive . . . . . . . . . . . . . . 9
6.9 Records and Reports . . . . . . . . . . . . . . . . . . . . . 9
6.10 Information from the AIM Funds . . . . . . . . . . . . . . . . 9
6.11 Reservation of Rights by Boards of Directors . . . . . . . . . 9
6.12 Liability and Indemnification. . . . . . . . . . . . . . . . . 9
ARTICLE VII AMENDMENTS AND TERMINATION . . . . . . . . . . . . . . 10
7.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 10
8.1 Rights of Creditors . . . . . . . . . . . . . . . . . . . . . 10
8.2 Liability Limited. . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Incapacity . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.4 Cooperation of Parties . . . . . . . . . . . . . . . . . . . . 11
8.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 11
8.6 Nonguarantee of Directorship . . . . . . . . . . . . . . . . . 12
8.7 Counsel . . . . . . . . . . . . . . . .. . . . . . . . . . . . 12
8.8 Spendthrift Provision . . . . . . . . . . . . . . . . . . . . 12
8.9 Forfeiture for Cause . . . . . . . . . . . . . . . . . . . . . 12
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<PAGE>
Page
----
ARTICLE IX CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . 12
9.1 Notice of Denial . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Right to Reconsideration . . . . . . . . . . . . . . . . . . . 13
9.3 Review of Documents. . . . . . . . . . . . . . . . . . . . . . 13
9.4 Decision by Administrator. . . . . . . . . . . . . . . . . . . 13
9.5 Notice by Administrator. . . . . . . . . . . . . . . . . . . . 13
-iii-
<PAGE>
AIM FUNDS
RETIREMENT PLAN FOR ELIGIBLE
DIRECTORS/TRUSTEES
PREAMBLE
Effective as of March 8, 1994, the regulated investment
companies managed, administered and/or distributed by AIM Advisors, Inc. or its
affiliates (the "AIM Funds") have adopted THE AIM FUNDS RETIREMENT PLAN FOR
ELIGIBLE DIRECTORS/TRUSTEES (the "Plan") for the benefit of each of the
directors and trustees of each of the AIM Funds who is not an employee of any
of the AIM Funds, A I M Management Group Inc. or any of their affiliates. As
the Plan does not benefit any employees of the AIM Funds, it is not intended to
be classified as an employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
------------------------------------
1.1 Definitions.
------------
Unless a different meaning is plainly implied by the context,
the following terms as used in this Plan shall have the following meanings:
(a) "Accrued Benefit" shall mean, as of any date prior to
a Participant's Normal Retirement Date, his Retirement Benefit commencing on
his Normal Retirement Date, but based upon his Compensation and Years of
Service computed as of such date of determination.
(b) "Actuary" shall mean the independent actuary selected
by the Administrator.
(c) "Administrator" shall mean the administrative
committee provided for in Article VI.
(d) "AIM Funds" shall mean the regulated investment
companies managed, administered or distributed by A I M Advisors, Inc. or its
affiliates.
(e) "Board of Directors" shall mean the Board of
Directors of each of the AIM Funds.
<PAGE>
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, or any successor statute.
(g) "Compensation" shall mean, for any Director, the
amount of the retainer paid or accrued by the AIM Funds for such Director
during the twelve month period immediately preceding the Director's Retirement,
including amounts deferred under a separate agreement between the AIM Funds and
the Director. The amount of such retainer Compensation shall be as determined
by the Administrator.
(h) "Deferred Retirement Date" shall mean the first day
of the month coincident with or next following the date on which a Participant
terminated Service after his Normal Retirement Date.
(i) "Director" shall mean an individual who is a director
or trustee of one or more of the AIM Funds which have adopted the Plan but who
is not an employee of any of the AIM Funds, A I M Management Group Inc. or any
of their affiliates.
(j) "Disability" shall mean the inability of the
Participant to participate in meetings of the Board of Directors, either in
person or by telephone, for a period of at least nine (9) months.
(k) "Effective Date" shall mean March 8, 1994.
(l) "Fund" shall mean an AIM Fund which has adopted this
Plan.
(m) "Normal Retirement Date" shall mean, the date on
which a Participant has both attained age 65 (or at least age 55 in the event
of the Director's termination of Service by reason of death or Disability) and
has completed at least five continuous and non-forfeited Years of Service (and
thirty months of Service with one or more of the AIM Funds).
(n) "Participant" shall mean a Director who has met all
of the eligibility requirements of the Plan and who is currently included in
the Plan as provided in Article II hereof.
(o) "Plan" shall mean the "AIM Funds Retirement Plan for
Eligible Directors/Trustees" as described herein or as hereafter amended from
time to time.
(p) "Plan Year" shall mean the calendar year.
(q) "Retirement" shall mean a Director's termination of
his active Service with the AIM Funds on or after his Normal Retirement Date,
due to his death, Disability, or voluntary or involuntary termination of his
Service.
(r) "Retirement Benefit" shall mean the benefit described
under Section 3.1 hereof.
-2-
<PAGE>
(s) "Service" shall mean an individual's serving as a
Director of one or more of the AIM Funds. Furthermore, any unbroken service
provided by a Participant (i) to an AIM Fund immediately prior to its being
managed or administered by A I M Advisors, Inc. (or any of its affiliates) or
(ii) to a predecessor of an AIM Fund immediately prior to its being merged into
such AIM Fund, will be taken into account in determining such Participant's
Years of Service, subject to all restrictions and other forfeiture provisions
contained herein.
(t) "Year of Service" shall mean a twelve consecutive
month period of Service. For all purposes in this Plan, if a Participant's
Service terminates prior to his Retirement, he shall forfeit credit for all
Years of Service completed prior to such termination unless (a) he again
becomes a Director and (b) the number of Years of Service he accumulated prior
to such termination exceeded the number of years in which he did not serve as a
Director.
1.2 Plurals and Gender.
Where appearing in the Plan, the masculine gender shall
include the feminine and neuter genders, and the singular shall include the
plural, and vice versa, unless the context clearly indicates a different
meaning.
1.3 Directors/Trustees.
Where appropriate, the term "director" shall refer to
"trustee", "directorship" shall refer to "trusteeship" and "Board of Directors"
shall refer to "Board of Trustees."
1.4 Headings.
The headings and sub-headings in this Plan are inserted for
the convenience of reference only and are to be ignored in any construction of
the provisions hereof.
1.5 Severability.
In case any provision of this Plan shall be held illegal or
void, such illegality or invalidity shall not affect the remaining provisions
of this Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been inserted
herein.
-3-
<PAGE>
ARTICLE II
PARTICIPATION
-------------
2.1 Commencement of Participation.
------------------------------
Each Director shall become a Participant hereunder on the date
his directorship of one or more of the AIM Funds commences.
2.2 Termination of Participation.
-----------------------------
After commencement or resumption of his participation, a
Director shall remain a Participant until the earliest of the following dates:
(a) His actual Retirement date;
(b) His date of death;
(c) The date on which he otherwise incurs a termination
of Service; or
(d) The effective date of the termination of the Plan.
2.3 Resumption of Participation.
----------------------------
Any Participant whose Service terminates and who thereafter
again becomes a Director shall resume participation immediately upon again
becoming a Director except that, as provided in Section 1.1(t) hereof, if his
Service is terminated prior to his Normal Retirement Date, for all purposes of
this Plan he shall forfeit credit for all Years of Service completed prior to
such termination of his Service.
2.4 Determination of Eligibility.
-----------------------------
The Administrator shall determine the eligibility of Directors
in accordance with the provisions of this Article.
ARTICLE III
BENEFITS UPON
-------------
RETIREMENT AND OTHER TERMINATION OF SERVICE
-------------------------------------------
3.1 Retirement.
-----------
Upon Retirement a Participant shall be entitled to receive an
annual benefit from the AIM Funds commencing on the first day of the calendar
quarter coincident with or next following his date of Retirement, payable in
quarterly installments for a period of no more than
-4-
<PAGE>
ten (10) years (or, if less, the number of his Years of Service) equal
to seventy-five percent (75%) of his Compensation.
3.2 Termination of Service Before Retirement.
-----------------------------------------
In the event that a Participant's Service terminates by reason
of death, Disability or removal by the Board for cause (as defined in Section
8.9) prior to his Normal Retirement Date, he shall not be entitled to receive
any benefits hereunder. If a Participant's Service terminates for any other
reason and he has accumulated at least five (5) continuous and non-forfeited
Years of Service, he shall be entitled to receive his Accrued Benefit
determined as of such date of termination.
3.3 Termination of Service by Reason of Death.
------------------------------------------
No benefits will be paid under this Plan with respect to a
Participant after his death other than as provided in Article IV.
3.4 Benefits Calculated in the Aggregate for all of the AIM Funds.
--------------------------------------------------------------
With respect to each Participant, the benefits payable
hereunder shall be based on the aggregate Compensation paid by the AIM Funds
and on the Participant's non-forfeited Years of Service. Each Fund's share of
the obligation to provide such benefits shall be determined by use of
accounting methods adopted by the Administrator.
ARTICLE IV
DEATH BENEFITS
--------------
4.1 Death Prior to Commencement of Benefits.
----------------------------------------
In the event of a Participant's death subsequent to his Normal
Retirement Date, but prior to the commencement of his Retirement Benefits under
Article III hereof, the surviving spouse (if any) of such Participant shall be
entitled to receive a quarterly survivor's benefit for a period of no more than
ten (10) years (or, if less, the number of the Participant's Years of Service)
beginning on the first day of the calendar quarter next following the date of
the Participant's death equal to fifty percent (50%) of the amount of the
quarterly installments of Retirement Benefits that would have been paid to the
Participant under Sections 3.1 or 3.2 hereof had his Retirement occurred on his
date of death.
4.2 Death Subsequent to Commencement of Benefits.
---------------------------------------------
In the event a Participant dies after the commencement of his
Retirement Benefit under Article III, but prior to the cessation of the payment
of such Retirement Benefits, the surviving spouse (if any) of such Participant
shall be entitled to receive survivor's benefits equal to fifty percent (50%)
of the amount of the annual Retirement Benefit payable to the Participant
-5-
<PAGE>
under Article III hereunder, paid at such times, and for such period, as such
Retirement Benefit would have continued to have been paid to the Participant
had he not died.
4.3 Death of Spouse.
----------------
(a) In the event a Participant is not survived by a
spouse, no benefits will be paid hereunder upon the Participant's death.
(b) If a deceased Participant's surviving spouse dies
while receiving survivor's benefits hereunder, any installments not paid at the
time of the surviving spouse's death shall be forfeited.
ARTICLE V
SUSPENSION OF BENEFITS, ETC.
----------------------------
5.1 Suspension of Benefits Upon Resumption of Service.
--------------------------------------------------
In the case of a Participant who, at a time when he is
receiving Retirement Benefits under Article III of this Plan, resumes Service
with any AIM Fund, such Retirement Benefits shall be suspended until his
subsequent Retirement, termination of Service or death. Subject to the Years
of Service limitations of Section 3.1 hereof, in the event of his Retirement
or termination of Service following such a suspension, the quarterly amount of
his remaining Retirement Benefits shall thereafter be adjusted, if
appropriate, to reflect any additional Years of Service completed by, or a
higher rate of Compensation received by, such Participant.
5.2 Payments Due Missing Persons.
-----------------------------
The Administrator shall make a reasonable effort to locate all
persons entitled to benefits (including Retirement Benefits and survivor's
benefits for spouses) under the Plan; however, notwithstanding any provisions
of this Plan to the contrary, if, after a period of 5 years from the date any
of such benefits first become due, any such persons entitled to benefits have
not been located, their rights under the Plan shall stand suspended. Before
this provision becomes operative, the Administrator shall send a certified
letter to all such persons (if any) at their last known address advising them
that their benefits under the Plan shall be suspended. Any such suspended
amounts shall be held by the AIM Funds for a period of 3 additional years (or a
total of 8 years from the time the benefits first became payable) and
thereafter such amounts shall be forfeited.
-6-
<PAGE>
ARTICLE VI
ADMINISTRATOR
-------------
6.1 Appointment of Administrator.
-----------------------------
This Plan shall be administered by the Nominating and
Compensation Committees of the Boards of Directors of the AIM Funds. The
members of such committees are not "interested persons" (within the meaning of
Section 2(a)(19) of the Investment Company Act of 1940) of any of the AIM
Funds. The term "Administrator" as used in this Plan shall refer to the
members of such committees, either individually or collectively, as
appropriate.
6.2 Powers and Duties of Administrator.
-----------------------------------
Except as provided below, the Administrator shall have the
following duties and responsibilities in connection with the administration of
this Plan:
(a) To promulgate and enforce such rules, regulations and
procedures as shall be proper for the efficient administration of the Plan;
(b) To determine all questions arising in the
administration, interpretation and application of the Plan, including questions
of eligibility and of the status and rights of Participants and any other
persons hereunder;
(c) To decide any dispute arising hereunder; provided,
however, that no Administrator shall participate in any matter involving any
questions relating solely to his own participation or benefits under this Plan;
(d) To advise the Boards of Directors of the AIM Funds
regarding the known future need for funds to be available for distribution;
(e) To correct defects, supply omissions and reconcile
inconsistencies to the extent necessary to effectuate the Plan;
(f) To compute the amount of benefits and other payments
which shall be payable to any Participant or surviving spouse in accordance
with the provisions of the Plan and to determine the person or persons to whom
such benefits shall be paid;
(g) To make recommendations to the Boards of Directors of
the AIM Funds with respect to proposed amendments to the Plan;
(h) To file all reports with government agencies,
Participants and other parties as may be required by law, whether such reports
are initially the obligation of the AIM Funds, or the Plan;
-7-
<PAGE>
(i) To engage the Actuary of the Plan and to cause the
liabilities of the Plan to be evaluated by the Actuary; and
(j) To have all such other powers as may be necessary to
discharge its duties hereunder.
6.3 Action by Administrator.
------------------------
The Administrator may elect a Chairman and Secretary from
among its members and may adopt rules for the conduct of its business. A
majority of the members then serving shall constitute a quorum for the
transacting of business. All resolutions or other action taken by the
Administrator shall be by vote of a majority of those present at such meeting
and entitled to vote. Resolutions may be adopted or other action taken without
a meeting upon written consent signed by at least a majority of the members.
All documents, instruments, orders, requests, directions, instructions and
other papers shall be executed on behalf of the Administrator by either the
Chairman or the Secretary of the Administrator, if any, or by any member or
agent of the Administrator duly authorized to act on the Administrator's
behalf.
6.4 Participation by Administrators.
--------------------------------
No Administrator shall be precluded from becoming a
Participant in the Plan if he would be otherwise eligible, but he shall not be
entitled to vote or act upon matters or to sign any documents relating
specifically to his own participation under the Plan, except when such matters
or documents relate to benefits generally. If this disqualification results in
the lack of a quorum, then the Boards of Directors, by majority vote of the
members of a majority of such Boards of Directors (a "Majority Vote"), shall
appoint a sufficient number of temporary Administrators, who shall serve for
the sole purpose of determining such a question.
6.5 Agents and Expenses.
--------------------
The Administrator may employ agents and provide for such
clerical, legal, actuarial, accounting, medical, advisory or other services as
it deems necessary to perform its duties under this Plan. The cost of such
services and all other expenses incurred by the Administrator in connection
with the administration of the Plan shall be allocated to each Fund pursuant to
the method utilized under Section 3.4 hereof with respect to costs related to
benefit accruals. For purposes of the preceding sentence, if an individual
serves as a Director for more than one Fund, he shall be deemed to be a
separate Director for each such Fund in determining the aggregate number of
Directors of the AIM Funds.
6.6 Allocation of Duties.
---------------------
The duties, powers and responsibilities reserved to the
Administrator may be allocated among its members so long as such allocation is
pursuant to written procedures adopted by the Administrator, in which case no
Administrator shall have any liability, with respect to any duties, powers or
responsibilities not allocated to him, for the acts or omissions of any other
Administrator.
-8-
<PAGE>
6.7 Delegation of Duties.
---------------------
The Administrator may delegate any of its duties to employees
of A I M Advisors, Inc. or any of its affiliates or to any other person or
firm, provided that the Administrator shall prudently choose such agents and
rely in good faith on their actions.
6.8 Administrator's Action Conclusive.
----------------------------------
Any action on matters within the discretion of the
Administrator shall be final and conclusive.
6.9 Records and Reports.
--------------------
The Administrator shall maintain adequate records of its
actions and proceedings in administering this Plan and shall file all reports
and take all other actions as it deems appropriate in order to comply with any
federal or state law.
6.10 Information from the AIM Funds.
-------------------------------
The AIM Funds shall promptly furnish all necessary information
to the Administrator to permit it to perform its duties under this Plan. The
Administrator shall be entitled to rely upon the accuracy and completeness of
all information furnished to it by the AIM Funds, unless it knows or should
have known that such information is erroneous.
6.11 Reservation of Rights by Boards of Directors.
---------------------------------------------
When rights are reserved in this plan to the Boards of
Directors, such rights shall be exercised only by Majority Vote of the Boards
of Directors, except where the Boards of Directors, by unanimous written
resolution, delegate any such rights to one or more persons or to the
Administrator. Subject to the rights reserved to the Boards of Directors as
set forth in this Plan, no member of the Boards of Directors shall have any
duties or responsibilities under this Plan, except to the extent he shall be
acting in the capacity of an Administrator.
6.12 Liability and Indemnification.
------------------------------
(a) The Administrator shall perform all duties required
of it under this Plan in a prudent manner. The Administrator shall not be
responsible in any way for any action or omission of the AIM Funds or their
employees in the performance of their duties and obligations as set forth in
this Plan. The Administrator also shall not be responsible for any act or
omission of any of its agents provided that such agents were prudently chosen
by the Administrator and that the Administrator relied in good faith upon the
action of such agents.
(b) Except for its own gross negligence, willful
misconduct or willful breach of the terms of this Plan, the Administrator shall
be indemnified and held harmless by the AIM Funds against any and all
liability, loss, damages, cost and expense which may arise, occur by reason of,
or be based upon, any matter connected with or related to this Plan or its
-9-
<PAGE>
administration (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending any litigation,
commenced or threatened, or in settlement of any such claim).
ARTICLE VII
AMENDMENTS AND TERMINATION
--------------------------
7.1 Amendments.
-----------
The Boards of Directors reserve the right at any time and from
time to time, and retroactively if deemed necessary or appropriate by them, to
amend in whole or in part by Majority Vote any or all of the provisions of this
Plan, provided that:
(a) No amendment shall make it possible for any part of a
Participant's or former Participant's Retirement Benefit to be used for, or
diverted to, purposes other than for the exclusive benefit of such Participant
or surviving spouse, except to the extent otherwise provided in this Plan;
(b) No amendment may reduce any Participant's or former
Participant's Retirement Benefit as of the effective date of the amendment;
Amendments may be made in the form of Board of Directors'
resolutions or separate written document.
7.2 Termination.
------------
Except as provided below, the Boards of Directors reserve the
right to terminate this Plan at any time by Majority Vote by giving to the
Administrator notice in writing of such desire to terminate. The Plan shall
terminate upon the date of receipt of such notice and the rights of all
Participants to their Retirement Benefits (determined as of the date the Plan
is terminated) shall become payable upon the effective date of the termination
of the Plan in quarterly installments or in an actuarially equivalent lump sum
as determined by the Administrator.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Rights of Creditors.
--------------------
(a) The Plan is unfunded. Neither the Participants nor
any other persons shall have any interest in any fund or in any specific asset
or assets of any of the AIM Funds by
-10-
<PAGE>
reason of any Accrued or Retirement Benefit hereunder, nor any rights to
receive distribution of any Retirement Benefit except and as to the extent
expressly provided hereunder.
(b) The Accrued and Retirement Benefits of each
Participant are unsecured and shall be subject to the claims of the general
creditors of the AIM Funds.
8.2 Liability Limited.
------------------
Neither the AIM Funds, the Administrator, nor any agents,
employees, officers, directors or shareholders of any of them, nor any other
person shall have any liability or responsibility with respect to this Plan,
except as expressly provided herein.
8.3 Incapacity.
-----------
If the Administrator shall receive evidence satisfactory to it
that a Participant or surviving spouse entitled to receive any benefit under
the Plan is, at the time when such benefit becomes payable, physically or
mentally incompetent to receive such benefit and to give a valid release
therefor, and that another person or an institution is then maintaining or has
custody of such Participant or surviving spouse and that no guardian, committee
or other representative of the estate of such Participant or surviving spouse
shall have been duly appointed, the Administrator may make payment of such
benefit otherwise payable to such Participant or surviving spouse to such other
person or institution, and the release of such other person or institution
shall be a valid and complete discharge for the payment of such benefit.
8.4 Cooperation of Parties.
-----------------------
All parties to this Plan and any person claiming any interest
hereunder agree to perform any and all acts and execute any and all documents
and papers which are necessary or desirable for carrying out this Plan or any
of its provisions.
8.5 Governing Law.
--------------
All rights under the Plan shall be governed by and construed
in accordance with rules of Federal law applicable to such plans and, to the
extent not preempted, by the laws of the State of Texas without regard to
principles of conflicts of law. No action shall be brought by or on behalf of
any Participant for or with respect to benefits due under this Plan unless the
person bringing such action has timely exhausted the Plan's claim review
procedure. Any such action must be commenced within three years. This
three-year period shall be computed from the earlier of (a) the date a final
determination denying such benefit, in whole or in part, is issued under the
Plan's claim review procedure or (b) the date such individual's cause of action
first accrued. Any dispute, controversy or claim arising out of or in
connection with this Plan (including the applicability of this arbitration
provision) and not resolved pursuant to the Plan's claim review procedure shall
be determined and settled by arbitration conducted by the American Arbitration
Association ("AAA") in the County and State of the Funds' principal place of
business and in accordance with the then existing rules, regulations, practices
and procedures of the AAA. Any award in such arbitration shall be final,
conclusive and binding upon the
-11-
<PAGE>
parties to the arbitration and may be enforced by either party in any court of
competent jurisdiction. Each party to the arbitration will bear its own costs
and fees (including attorney's fees).
8.6 Nonguarantee of Directorship.
-----------------------------
Nothing contained in this Plan shall be construed as a
guaranty or right of any Participant to be continued as a Director of one or
more of the AIM Funds (or of a right of a Director to any specific level of
Compensation) or as a limitation of the right of the AIM Funds to remove any of
its directors.
8.7 Counsel.
--------
The Administrator may consult with legal counsel, who may be
counsel for one or more of the Boards of Directors of the AIM Funds and for the
Administrator, with respect to the meaning or construction of this Plan, its
obligations or duties hereunder or with respect to any action or proceeding or
any question of law, and they shall be fully protected with respect to any
action taken or omitted by them in good faith pursuant to the advice of legal
counsel.
8.8 Spendthrift Provision.
----------------------
A Participant's interest in his Accrued Benefit or Retirement
Benefit may not be transferred, alienated, assigned nor become subject to
execution, garnishment or attachment, and any attempt to do so will render
benefits hereunder immediately forfeitable.
8.9 Forfeiture for Cause.
---------------------
Notwithstanding any other provision of this Plan to the
contrary, any benefits to which a Participant (or his surviving spouse) may
otherwise be entitled hereunder will be forfeited in the event the
Administrator, in its sole discretion, determines that a Participant's
termination of Service is due to such Participant's willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Director.
ARTICLE IX
CLAIMS PROCEDURE
----------------
9.1 Notice of Denial.
-----------------
If a Participant is denied any Retirement Benefit (or a
surviving spouse is denied a survivor's benefit) under this Plan, either in
total or in an amount less than the full Retirement Benefit to which he would
normally be entitled, the Administrator shall advise the Participant (or
surviving spouse) in writing of the amount of his Retirement Benefit (or
survivor's benefit), if any, and the specific reasons for the denial. The
Administrator shall also furnish the Participant (or surviving spouse) at that
time with a written notice containing:
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<PAGE>
(a) A specific reference to pertinent Plan provisions.
(b) A description of any additional material or
information necessary for the Participant (or surviving spouse) to perfect his
claim, if possible, and an explanation of why such material or information is
needed.
(c) An explanation of the Plan's claim review procedure.
9.2 Right to Reconsideration.
-------------------------
Within 60 days of receipt of the information stated in Section
9.1 above, the Participant (or surviving spouse) shall, if he desires further
review, file a written request for reconsideration with the Administrator.
9.3 Review of Documents.
--------------------
So long as the Participant's (or surviving spouse's) request
for review is pending (including the 60 day period in 9.2 above), the
Participant (or surviving spouse) or his duly authorized representative may
review pertinent Plan documents and may submit issues and comments in writing
to the Administrator.
9.4 Decision by Administrator.
--------------------------
A final and binding decision shall be made by the
Administrator within 60 days of the filing by the Participant (or surviving
spouse) of his request for reconsideration, provided, however, that if the
Administrator, in its discretion, feels that a hearing with the Participant (or
surviving spouse) or his representative present is necessary or desirable, this
period shall be extended an additional 60 days.
9.5 Notice by Administrator.
------------------------
The Administrator's decision shall be conveyed to the
Participant (or surviving spouse) in writing and shall include specific reasons
for the provisions on which the decision is based.
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<PAGE>
EXHIBIT 7(b)
THE AIM GROUP OF FUNDS
DEFERRED COMPENSATION PLAN
FOR ELIGIBLE DIRECTORS/TRUSTEES
<PAGE>
DEFERRED COMPENSATION AGREEMENT
SUMMARY
Your Deferred Compensation Agreement (the "Agreement") allows
you to defer some or all of your annual trustee's fees otherwise payable by the
Funds. Deferred fees are deemed invested in certain mutual funds selected by
you. The deferral is pre-tax, and the deferred amount and the credited gains,
losses and income are not subject to tax until paid out to you.
Your deferrals (and investment experience) are posted to a
bookkeeping account maintained by the Funds in your name. In order for you to
enjoy the tax deferral, the payments due under the Agreement will be paid from
the Funds' general assets, and you are considered a general unsecured creditor
of the Funds; you may not transfer your right to receive payments under the
Agreement to any other person, nor may you pledge that right to secure any debt
or other obligation; finally, an election to defer must be made in writing
before the first day of the calendar year for which the fees are earned (the
"Election Date") and elections can be changed only prospectively, effective for
the next calendar year.
An important change has been made to your Agreement to give
you greater flexibility to select the time of payment of amounts that you
defer: for amounts previously deferred and for future elections you now
designate a specific Payment Date.
PAYMENT DATE ELECTION
Deferred fees (and the income, gains and losses credited
during the deferral period) will be paid out in a single sum in cash within 30
days of the Payment Date elected for that deferral. (For payments in
connection with your termination of service as a trustee, see below.)
Deferrals must be for a minimum three year period (unless the
your retirement date under the Retirement Plan is earlier). Thus, the Payment
Date may be the first day of any calendar quarter that follows the third
anniversary of the applicable Election Date or your retirement date. For your
first Payment Date election that applies to previously deferred fees, the
Election Date is considered to be January 1, 1996. Thus, fees previously
deferred and fees payable for the calendar year beginning January 1, 1996 may
be deferred to the first day of any calendar quarter in any year from 1999.
EXTENDING A PAYMENT DATE
One year prior to any Payment Date, you will have a one-time
opportunity to extend that Date, provided that the additional period of
deferral satisfies the requirements described above.
<PAGE>
TERMINATION OF SERVICE
Upon your death, your account under the Agreement will be paid
out in a single sum in cash as soon as practicable. Payment will be made to
your designated Beneficiary or Beneficiaries or to your estate if there is no
surviving Beneficiary.
Upon termination of your service as trustee for any reason
other than death or your retirement (as defined in the Retirement Plan), your
account will be paid to you as a single sum (or in installments if you had
elected that method) in cash within three months following the end of the
fiscal year in which you terminate, regardless of the Payment Dates you
elected.
<PAGE>
ARTICLE Page
------- ----
1. Definitions of Terms and Construction 1
2. Period During Which Compensation Deferrals are Permitted 2
3. Compensation Deferrals 2
4. Distributions from Deferral Account 4
5. Amendments and Termination 5
6. Miscellaneous
<PAGE>
DEFERRED COMPENSATION AGREEMENT
-------------------------------
AGREEMENT, made on this __ day of _______, 19__, by and
between the registered open-end investment companies listed on Appendix A
hereto (the "Funds"), and
________________________________________________________________ (the
"Director") residing at ___________________________________________________.
WHEREAS, the Funds and the Director have entered into
agreements pursuant to which the Director will serve as a director/trustee of
the Funds; and
WHEREAS, the Funds and the Director have previously entered
into an additional agreement whereby the Funds will provide to the Director a
vehicle under which the Director can defer receipt of directors' fees payable
by the Funds and now desire to amend and restate such agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the Funds and the Director hereby
agree as follows:
1. DEFINITION OF TERMS AND CONSTRUCTION
------------------------------------
1.1 Definitions. Unless a different meaning is plainly implied by
the context, the following terms as used in this Agreement shall have the
following meanings:
(a) "Beneficiary" shall mean such person or persons
designated pursuant to Section 4.3 hereof to receive benefits after the death
of the Director.
(b) "Boards of Directors" shall mean the respective
Boards of Directors of the Funds.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, or any successor statute.
(d) "Compensation" shall mean the amount of directors'
fees paid by each of the Funds to the Director during a Deferral Year prior to
reduction for Compensation Deferrals made under this Agreement.
(e) "Compensation Deferral" shall mean the amount or
amounts of the Director's Compensation deferred under the provisions of Section
3 of this Agreement.
-1-
<PAGE>
(f) "Deferral Accounts" shall mean the accounts
maintained to reflect the Director's Compensation Deferrals made pursuant to
Section 3 hereof and any other credits or debits thereto.
(g) "Deferral Year" shall mean each calendar year during
which the Director makes, or is entitled to make, Compensation Deferrals under
Section 3 hereof.
(h) "Retirement" shall have the same meaning as set forth
under the Retirement Plan.
(i) "Retirement Plan" shall mean the "AIM Funds
Retirement Plan for Eligible Directors/Trustees."
(j) "Valuation Date" shall mean the last business day of
each calendar year and any other day upon which the Funds makes valuations of
the Deferral Accounts.
1.2 Plurals and Gender. Where appearing in this Agreement the
singular shall include the plural and the masculine shall include the feminine,
and vice versa, unless the context clearly indicates a different meaning.
1.3 Directors and Trustees. Where appearing in this Agreement,
"Director" shall also refer to "Trustee" and "Board of Directors" shall also
refer to "Board of Trustees."
1.4 Headings. The headings and sub-headings in this Agreement are
inserted for the convenience of reference only and are to be ignored in any
construction of the provisions hereof.
1.5 Separate Agreement for Each Fund. This Agreement is drafted,
and shall be construed, as a separate agreement between the Director and each
of the Funds.
2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED
--------------------------------------------------------
2.1 Commencement of Compensation Deferrals. The Director may
elect, on a form provided by, and submitted to, the Presidents of the
respective Funds, to commence Compensation Deferrals under Section 3 hereof for
the period beginning on the later of (i) the date this Agreement is executed or
(ii) the date such form is submitted to the Presidents of the Funds.
2.2 Termination of Deferrals. The Director shall not be eligible
to make Compensation Deferrals after the earliest of the following dates:
(a) The date on which he ceases to serve as a Director of
all of the Funds; or
(b) The effective date of the termination of this
Agreement.
-2-
<PAGE>
3. COMPENSATION DEFERRALS
----------------------
3.1 Compensation Deferral Elections.
(a) On or prior to the first day of any Deferral Year,
the Director may elect, on the form described in Section 2.1 hereof, to defer
the receipt of all or a portion of his Compensation for such Deferral Year.
Such writing shall set forth the amount of such Compensation Deferral (in whole
percentage amounts). Such election shall continue in effect for all subsequent
Deferral Years unless it is canceled or modified as provided below.
(b) Compensation Deferrals shall be withheld from each
payment of Compensation by the Funds to the Director based upon the percentage
amount elected by the Director under Section 3.1(a) hereof.
(c) The Director may cancel or modify the amount of his
Compensation Deferrals on a prospective basis by submitting to the Presidents
of the Funds a revised Compensation Deferral election form. Such change will
be effective as of the first day of the Deferral Year following the date such
revision is submitted to the Presidents of the Funds.
3.2 Valuation of Deferral Account.
(a) Each Fund shall establish a bookkeeping Deferral
Account to which will be credited an amount equal to the Director's
Compensation Deferrals under this Agreement made with respect to Compensation
earned from each such Fund. Compensation Deferrals shall be allocated to the
Deferral Accounts on the first business day following the date such
Compensation Deferrals are withheld from the Director's Compensation. As of
the date of this Agreement, the Deferral Accounts also shall be credited with
the amounts credited to the Director under each other outstanding elective
deferred compensation agreement entered into by and between the Funds and the
Director which is superseded by this Agreement pursuant to Section 6.11 hereof.
The Deferral Accounts shall be debited to reflect any distributions from such
Accounts. Such debits shall be allocated to the Deferral Accounts as of the
date such distributions are made.
(b) As of each Valuation Date, income, gain and loss
equivalents (determined as if the Deferral Accounts are invested in the manner
set forth under Section 3.3, below) attributable to the period following the
next preceding Valuation Date shall be credited to and/or deducted from the
Director's Deferral Accounts.
3.3 Investment of Deferral Account Balances.
(a) (1) The Director may select, from various options
made available by the Funds, the investment media in which all or part of his
Deferral Accounts shall be deemed to be invested.
-3-
<PAGE>
(2) The Director shall make an investment
designation on a form provided by the Presidents of the Funds which shall
remain effective until another valid direction has been made by the Director as
herein provided. The Director may amend his investment designation as of the
end of each calendar quarter by giving written direction to the Presidents of
the Funds at least thirty (30) days prior to the end of such calendar quarter.
A timely change to a Director's investment designation shall become effective
on the first day of the calendar quarter following receipt by the Presidents of
the Funds.
(3) The investment media deemed to be made
available to the Director, and any limitation on the maximum or minimum
percentages of the Director's Deferral Accounts that may be invested any
particular medium, shall be the same as from time-to-time communicated to the
Director by the Presidents of the Funds.
(b) Except as provided below, the Director's Deferral
Accounts shall be deemed to be invested in accordance with his investment
designations, provided such designations conform to the provisions of this
Section. If -
(1) the Director does not furnish the Presidents
of the Funds with complete, written investment instructions, or
(2) the written investment instructions from the
Director are unclear,
then the Director's election to make Compensation Deferrals hereunder shall be
held in abeyance and have no force or effect until such time as the Director
shall provide the Presidents of the Funds with complete investment
instructions. Notwithstanding the above, the Boards of Directors, in their
sole discretion, may disregard the Director's election and determine that all
Compensation Deferrals shall be deemed to be invested in a fund determined by
the Boards of Directors. In the event that any fund under which any portion of
the Director's Deferral Accounts is deemed to be invested ceases to exist, such
portion of the Deferral Accounts thereafter shall be held in the successor to
such fund, subject to subsequent deemed investment elections.
The Fund shall provide an annual statement to the Director
showing such information as is appropriate, including the aggregate amount in
the Deferral Accounts, as of a reasonably current date.
-4-
<PAGE>
4. DISTRIBUTIONS FROM DEFERRAL ACCOUNTS
------------------------------------
4.1 Payment Date and Methods.
(a) Designation of Date. Each deferral direction given
pursuant to Section 3.1 shall include designation of the Payment Date for the
value of the amount deferred. Such Payment Date shall be the first day of any
calendar quarter, subject to the limitation set forth in paragraph 4.1(c).
(b) Extension Date. One year before the Payment Date
initially designated pursuant to paragraph 4.1(a) above, the Participant may
irrevocably elect to extend such Payment Date to the first day of any calendar
quarter, subject to the limitation set forth in paragraph 4.1(c).
(c) Limitation. The Director shall select a Payment Date
(or extended Payment Date) that is no sooner than the earlier of (i) the
January 1 that follows the third anniversary of the Participant's deferral
election made pursuant to paragraph 4.1(a) or (b) or (ii) the January 1 of the
year after the Participant's Retirement.
(d) Methods of Payment. Distributions from the
Director's Deferral Accounts shall be paid in cash. A Participant may elect,
at the time a Payment Date is selected, to receive the amount which will become
payable as of such Payment Date in generally equal quarterly installments over
a period not to exceed ten (10) years. Except as may be elected pursuant to
this paragraph, all amounts becoming payable under this Plan shall be paid in a
single sum.
(e) Irrevocability. Except as provided in paragraph
4.1(b), a designation of a Payment Date and an election of installment payments
shall be irrevocable; provided, however, that payment shall be made or begin on
a different date as follows:
(1) Upon the Director's death, payment shall be
made in accordance with Section 4.2,
(2) Upon the Director's ceasing to serve as a
director of all of the Funds for reasons other than death or Retirement,
payment shall be made or begin within three months after the end of the
calendar year in which such termination occurs in accordance with the method
elected by the Director pursuant to paragraph 4.1(d), except that the Boards of
Directors, in their sole discretion, may accelerate the distribution of such
Deferral Accounts,
(3) Upon termination of this Agreement, payment
shall be made in accordance with Section 5.2, and
(4) In the event of the liquidation, dissolution
or winding up of a Fund or the distribution of all or substantially all of a
Fund's assets and property relating to one or
-5-
<PAGE>
more series of its shares to the shareholders of such series (for this purpose
a sale, conveyance or transfer of a Fund's assets to a trust, partnership,
association or corporation in exchange for cash, shares or other securities
with the transfer being made subject to, or with the assumption by the
transferee of, the liabilities of the Fund shall not be deemed a termination of
the Fund or such a distribution), all unpaid balances of the Deferral Accounts
related to such Fund as of the effective date thereof shall be paid in a lump
sum on such effective date.
4.2 Death Prior to Complete Distribution of Deferral Accounts.
Upon the death of the Director prior to the commencement of the distribution of
the amounts credited to his Deferral Accounts, the balance of such Accounts
shall be distributed to his Beneficiary in a lump sum as soon as practicable
after the Director's death. In the event of the death of the Director after
the commencement of such distribution, but prior to the complete distribution
of his Deferral Accounts, the balance of the amounts credited to his Deferral
Accounts shall be distributed to his Beneficiary over the remaining period
during which such amounts were distributable to the Director under Section 4.1
hereof. Notwithstanding the above, the Boards of Directors, in their sole
discretion, may accelerate the distribution of the Deferral Accounts.
4.3 Designation of Beneficiary. For purposes of Section 4.2
hereof, the Director's Beneficiary shall be the person or persons so designated
by the Director in a written instrument submitted to the Presidents of the
Funds. In the event the Director fails to properly designate a Beneficiary,
his Beneficiary shall be the person or persons in the first of the following
classes of successive preference Beneficiaries surviving at the death of the
Director: the Director's (1) surviving spouse or (2) estate.
4.4 Payments Due Missing Persons. The Funds shall make a
reasonable effort to locate all persons entitled to benefits under this
Agreement. However, notwithstanding any provisions of this Agreement to the
contrary, if, after a period of five (5) years from the date such benefit shall
be due, any such persons entitled to benefits have not been located, their
rights under this Agreement shall stand suspended. Before this provision
becomes operative, the Funds shall send a certified letter to all such persons
to their last known address advising them that their benefits under this
Agreement shall be suspended. Any such suspended amounts shall be held by the
Funds for a period of three (3) additional years (or a total of eight (8) years
from the time the benefits first become payable) and thereafter, if unclaimed,
such amounts shall be forfeited.
5. AMENDMENTS AND TERMINATION
--------------------------
5.1 Amendments.
(a) The Funds and the Director may, by a written
instrument signed by, or on behalf of, such parties, amend this Agreement at
any time and in any manner.
-6-
<PAGE>
(b) The Funds reserve the right to amend, in whole or in
part, and in any manner, any or all of the provisions of this Agreement by
action of their Boards of Directors for the purposes of complying with any
provision of the Code or any other technical or legal requirements, provided
that:
(1) No such amendment shall make it possible for
any part of the Director's Deferral Accounts to be used for, or diverted to,
purposes other than for the exclusive benefit of the Director or his
Beneficiaries, except to the extent otherwise provided in this Agreement;
and
(2) No such amendment may reduce the amount of
the Director's Deferral Accounts as of the effective date of such amendment.
5.2 Termination. The Director and the Funds may, by written
instrument signed by, or on behalf of, such parties, terminate this Agreement
at any time. In the event of the termination of this Agreement, the Boards of
Directors, in their sole discretion, may choose to pay out the Director's
Deferral Accounts prior to the designated Payment Dates. Otherwise, following
a termination of the Plan, such Accounts shall continue to be maintained in
accordance with the provisions of this Plan until the time they are paid out.
6. MISCELLANEOUS.
--------------
6.1 Rights of Creditors.
(a) This Agreement is unfunded. Neither the Director nor
any other persons shall have any interest in any specific asset or assets of
the Funds by reason of any Deferral Accounts hereunder, nor any rights to
receive distribution of his Deferral Accounts except and as to the extent
expressly provided hereunder. The Funds shall not be required to purchase,
hold or dispose of any investments pursuant to this Agreement; however, if in
order to cover their obligations hereunder the Funds elect to purchase any
investments the same shall continue for all purposes to be a part of the
general assets and property of the Funds, subject to the claims of their
general creditors and no person other than the Funds shall by virtue of the
provisions of this Agreement have any interest in such assets other than an
interest as a general creditor.
(b) The rights of the Director and the Beneficiaries to
the amounts held in the Deferral Accounts are unsecured and shall be subject to
the creditors of the Funds. With respect to the payment of amounts held under
the Deferral Accounts, the Director and his Beneficiaries have the status of
unsecured creditors of the Funds. This Agreement is executed on behalf of the
Funds by an officer, or other representative, of the Funds as such and not
individually. Any obligation of the Funds hereunder shall be an unsecured
obligation of the Funds and not of any other person.
-7-
<PAGE>
6.2 Agents. The Funds may employ agents and provide for such
clerical, legal, actuarial, accounting, advisory or other services as it deems
necessary to perform their duties under this Agreement. The Funds shall bear
the cost of such services and all other expenses they incur in connection with
the administration of this Agreement.
6.3 Liability and Indemnification. Except for their own gross
negligence, willful misconduct or willful breach of the terms of this
Agreement, the Funds shall be indemnified and held harmless by the Director
against liability or losses occurring by reason of any act or omission of the
Funds or any other person.
6.4 Incapacity. If the Funds shall receive evidence satisfactory
to them that the Director or any Beneficiary entitled to receive any benefit
under the Agreement is, at the time when such benefit becomes payable, a minor,
or is physically or mentally incompetent to receive such benefit and to give a
valid release therefor, and that another person or an institution is then
maintaining or has custody of the Director or Beneficiary and that no guardian,
committee or other representative of the estate of the Director or Beneficiary
shall have been duly appointed, the Funds may make payment of such benefit
otherwise payable to the Director or Beneficiary to such other person or
institution, including a custodian under a Uniform Gifts to Minors Act, or
corresponding legislation (who shall be an adult, a guardian of the minor or a
trust company), and the release of such other person or institution shall be a
valid and complete discharge for the payment of such benefit.
6.5 Cooperation of Parties. All parties to this Agreement and any
person claiming any interest hereunder agree to perform any and all acts and
execute any and all documents and papers which are necessary or desirable for
carrying out this Agreement or any of its provisions.
6.6 Governing Law. This Agreement is made and entered into in the
State of Texas and all matters concerning its validity, construction and
administration shall be governed by the laws of the State of Texas.
6.7 Nonguarantee of Directorship. Nothing contained in this
Agreement shall be construed as a contract or guarantee of the right of the
Director to be, or remain as, a director of any of the Funds or to receive any,
or any particular rate of, Compensation from any of the Funds.
6.8 Counsel. The Funds may consult with legal counsel with
respect to the meaning or construction of this Agreement, their obligations or
duties hereunder or with respect to any action or proceeding or any question of
law, and they shall be fully protected with respect to any action taken or
omitted by them in good faith pursuant to the advice of legal counsel.
6.9 Spendthrift Provision. The Director's and Beneficiaries'
interests in the Deferral Accounts may not be anticipated, sold, encumbered,
pledged, mortgaged, charged, transferred,
-8-
<PAGE>
alienated, assigned nor become subject to execution, garnishment or
attachment and any attempt to do so by any person shall render the Deferral
Accounts immediately forfeitable.
6.10 Notices. For purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, or by nationally recognized overnight delivery service providing for a
signed return receipt, addressed to the Director at the home address set forth
in the Funds' records and to the Funds at the address set forth on the first
page of this Agreement, provided that all notices to the Funds shall be
directed to the attention of the Presidents of the Funds or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
6.11 Entire Agreement. This Agreement contains the entire
understanding between the Funds and the Director with respect to the payment of
non-qualified elective deferred compensation by the Fund to the Director.
Effective as of the date hereof, this Agreement replaces, and supersedes, all
other non-qualified elective deferred compensation agreements by and between
the Director and the Funds.
6.12 Interpretation of Agreement. Interpretations of, and
determinations (including factual determinations) related to, this Agreement
made by the Funds in good faith, including any determinations of the amounts of
the Deferral Accounts, shall be conclusive and binding upon all parties; and
the Funds shall not incur any liability to the Director for any such
interpretation or determination so made or for any other action taken by it in
connection with this Agreement in good faith.
6.13 Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the Funds and their successors and assigns
and to the Director and his heirs, executors, administrators and personal
representatives.
6.14 Severability. In the event any one or more provisions of this
Agreement are held to be invalid or unenforceable, such illegality or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof and such other provisions shall remain in full force and
effect unaffected by such invalidity or unenforceability.
6.15 Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
The Funds
________________________ By:_________________________
Witness Name:
Title:
________________________ ____________________________
Witness Director
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<PAGE>
APPENDIX A
----------
AIM EQUITY FUNDS, INC.
AIMS FUNDS GROUP
AIM INTERNATIONAL FUNDS, INC.
AIM INVESTMENT SECURITIES FUNDS
AIM STRATEGIC INCOME FUND, INC.
AIM SUMMIT FUND, INC.
AIM TAX-EXEMPT FUNDS, INC.
AIM VARIABLE INSURANCE FUNDS, INC.
SHORT-TERM INVESTMENTS CO.
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS CO.
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DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION FORM
-------------------------------
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation agreement (the
"Agreement") dated as of ________________ by and between the undersigned and
the AIM Funds, I hereby make the following elections:
Deferral of Compensation
------------------------
Starting with Compensation to be paid to me with respect to
services provided by me to the AIM Funds after the date this election Form is
received by the AIM Funds, I hereby elect that ______ percent (_____%) of my
Compensation (as defined under the Agreement) be reduced and that the Fund
establish a bookkeeping account credited with amounts equal to the amount so
reduced (the "Deferral Account"). The Deferral Account shall be further
credited with income equivalents as provided under the Agreement. I understand
that this election will remain in effect with respect to Compensation I earn in
subsequent years unless I modify or revoke it. I further understand that such
modification or revocation will be effective only prospectively and will apply
commencing with the Compensation I earn in the calendar year that begins after
the change is received by you.
Payment Date
------------
I hereby designate ________ 1 (select the first month in any
calendar quarter) in the year ______ (select a year that is at least four years
after the year this election is made) as the Payment Date for the amounts
credited to my Deferral Account pursuant to the election made above. If my
Retirement (as defined in the Agreement) occurs sooner, I o do o do not (check
the appropriate box) want payment of such amounts to commence effective the
January 1 following my Retirement. I understand that amounts credited to my
Deferral Account may be paid to me prior to the Payment Date as provided in the
Agreement.
Payment Method
--------------
I hereby elect to receive the amounts credited to my Deferral
Account in (check one)
o a single payment in cash
o annual installments for a period of ____ (select no more than 10
years)
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beginning within 30 days following the payment date selected above.
I understand that the amounts credited to my Deferral Account
shall remain the general assets of the AIM Funds and that, with respect to the
payment of such amounts, I am merely a general creditor of the AIM Funds. I
may not sell, encumber, pledge, assign or otherwise alienate the amounts
credited to my Deferral Account.
I hereby agree that the terms of the Agreement are
incorporated herein and are made a part hereof. Dated as of the day and year
first above written.
WITNESS: DIRECTOR:
_________________________ ______________________________
WITNESS: RECEIVED:
_________________________ AIM Funds
By:___________________________
Date:_________________________
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DEFERRED COMPENSATION AGREEMENT
INVESTMENT DIRECTION FORM
-------------------------------
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
"Agreement") dated as of ________________ by and between the undersigned and
the AIM Funds, I hereby elect that my Deferral Account under the Agreement be
considered to be invested as follows (in multiples of 10%):
AIM WEINGARTEN FUND ____________%
AIM CONSTELLATION FUND ____________%
AIM HIGH YIELD FUND ____________%
AIM INTERNATIONAL EQUITY FUND ____________%
AIM AGGRESSIVE GROWTH EQUITY FUND __________%
AIM LIMITED MATURITY TREASURY SHARES FUND __________%
AIM VALUE FUND _____________%
AIM MONEY MARKET FUND ___________%
AIM BALANCED FUND ____________%
AIM CHARTER FUND _____________%
I acknowledge that I may amend this Investment Agreement in
the manner, and at such time, as permitted under the Agreement. Furthermore, I
acknowledge that, pursuant to Section 3.3(b) of the Agreement, the Fund has
reserved the right to disregard the elections made above to consider my
Deferral Account to be deemed to be invested in a fund of its choosing.
WITNESS: DIRECTOR:
_________________________ ______________________________
WITNESS: RECEIVED:
_________________________ AIM Funds
By:___________________________
Date:_________________________
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DEFERRED COMPENSATION AGREEMENT
BENEFICIARY DESIGNATION FORM
-------------------------------
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
"Agreement") dated as of _____________ by and between the undersigned and the
AIM Funds, I hereby make the following beneficiary designations:
I. Primary Beneficiary
-------------------
I hereby appoint the following as my Primary Beneficiary(ies)
to receive at my death the amounts credited to my Deferral Account under the
Agreement. In the event I am survived by more than one Primary Beneficiary,
such Primary Beneficiaries shall share equally in such amounts unless I
indicate otherwise on an attachment to this form:
_________________________________________________________________
Name Relationship
_________________________________________________________________
Address
_________________________________________________________________
City State Zip
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II. Secondary Beneficiary
---------------------
In the event I am not survived by any Primary Beneficiary, I
hereby appoint the following as Secondary Beneficiary(ies) to receive death
benefits under the Agreement. In the event I am survived by more than one
Secondary Beneficiary, such Secondary Beneficiaries shall share equally unless
I indicate otherwise on an attachment to this form:
_________________________________________________________________
Name Relationship
_________________________________________________________________
Address
_________________________________________________________________
City State Zip
I understand that I may revoke or amend the above designations
at any time. I further understand that if I am not survived by a Primary or
Secondary Beneficiary, my Beneficiary shall be as set forth under the
Agreement.
WITNESS: DIRECTOR:
_________________________ ______________________________
WITNESS: RECEIVED:
_________________________ AIM Funds
By:___________________________
Date:_________________________
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INITIAL PAYMENT DATE ELECTION FORM
FOR PREVIOUSLY DEFERRED COMPENSATION
------------------------------------
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation agreement (the
"Agreement") dated as of ________________ by and between the undersigned and
the AIM Funds, pursuant to which I have previously elected to defer
Compensation, I hereby designate ________ 1 (select the first month in any
calendar quarter) in the year ______ (select a year that is at least four years
after the year this election is made) as the Payment Date for the amounts
previously credited to my Deferral Account and amounts subsequently credited
thereto. If my Retirement (as defined in the Agreement) occurs sooner, I o do
o do not (check the appropriate box) want payment of such amounts to commence
effective the January 1 following my Retirement. I understand that amounts
credited to my Deferral Account may be paid to me prior to the Payment Date as
provided in the Agreement.
I understand that I may amend this Investment Agreement in the
manner, and at such time, as permitted under the Agreement.
WITNESS: DIRECTOR:
_________________________ ______________________________
WITNESS: RECEIVED:
_________________________ AIM Funds
By:___________________________
Date:_________________________
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<PAGE>
EXHIBIT 8(a)
SECOND AMENDED AND RESTATED
CUSTODY AGREEMENT
------------------------------
Agreement made as of this 16th day of June , 1987, between
SHORT-TERM INVESTMENTS CO., a Massachusetts business trust organized and
existing under the laws of the Commonwealth of Texas, having its principal
office and place of business at Eleven Greenway Plaza, Suite 1919, Houston,
Texas 77046 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New
York corporation authorized to do a banking business, having its principal
office and place of business at 48 Wall Street, New York, New York 10015
(hereinafter called the "Custodian").
W I T N E S S E T H:
that for and in consideration of the mutual promises hereinafter set forth the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Authorized Person" shall be deemed to include any person, whether or
not such person is an Officer or employee of the Fund, duly authorized by the
Board of Trustees of the Fund to give Oral Instructions and Written
Instructions on behalf of the Fund and listed in the Certificate annexed hereto
as Appendix A or such other Certificate as may be received by the Custodian
from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
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3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received by the Custodian and signed on behalf of
the Fund by any two officers.
5. "Clearing Member" shall mean a registered broker dealer which is a
clearing member under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian for an investment company,
or any broker dealer reasonably believed by the Custodian to be such a clearing
member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities (excluding Futures Contracts) which are owned by the writer thereof
and subject to appropriate restrictions.
8. "Depository" shall mean The Depository Trust Company ("DTC" ), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identified in a certified
copy of a resolution of the Fund's Board of Trustees specifically approving
deposits therein by the Custodian.
9. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
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10. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
11. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
12. "Margin Account" shall mean a segregated account in the name of a
broker, dealer,, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities
held in the Book Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry in its books and records.
13. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority,
commercial paper, certificates of deposit and bankers' acceptances, repurchase
agreements with respect to the same and bank time deposits, where the purchase
and sale of such securities normally requires settlement in federal funds on
the same day as such purchase or sale.
14. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
15. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Clerk, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Clerk, any Assistant Treasurer, and any
other person or persons, whether or not any such other person is an officer of
the Fund, duly authorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
listed in the Certificate annexed hereto as Appendix B or such
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other Certificate as may be received by the Custodian from time to time.
16. "Option" shall mean a Call Option, Covered Call Option, Stock
Index option and/or a Put Option.
17. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
18. "Put option" shall mean an exchange traded option with respect
to Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
19. "Reverse Repurchase Agreement" shall mean an agreement pursuant
to which the Fund sells Securities and agrees to repurchase such Securities at
a described or specified date and price.
20. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds and industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or
representing any other rights or interest therein, or any property or assets.
21. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
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22. "Series" shall mean the various portfolios, if any, of the Fund
as described from time to time in the current and effective prospectus for the
Fund.
23. "Shares" shall mean the shares of beneficial interest of the
Fund, each of which is in the case of a Fund having Series allocated to a
particular Series.
24. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
25. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of cash
determined by reference to the difference between the exercise price and the
value of the index on the date of exercise.
26. "Written Instructions" shall mean written communications
actually received by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized Person by telex or any
other such system whereby the receiver of such communications is able to verify
by codes or otherwise with a reasonable degree of certainty the identity of the
sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned by the Fund during the
period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
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ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered to the
Custodian all Securities and all moneys owned by it, at any time during the
period of this Agreement, and shall specify with respect to such Securities and
money the Series to which the same are specifically allocated. The Custodian
shall segregate, keep and maintain the assets of the Series separate and apart.
The Custodian will not be responsible for any Securities and moneys not
actually received by it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previously made and
moneys are not finally collected. The Fund shall deliver to the Custodian a
certified resolution of the Board of Trustees of the Fund, substantially in the
form of Exhibit A hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis to deposit in the Book-Entry System all
Securities eligible for deposit therein, regardless of the Series to which the
same are specifically allocated and to utilize the Book-Entry System to the
extent possible in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of Securities
collateral. Prior to a deposit of Securities specifically allocated to a
Series in the Depository, the Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit B hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize the Depository to the extent possible with respect to such Securities
in connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral. Securities
and moneys deposited in either the Book-Entry System or the Depository will be
represented in accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for options and transac-
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tions in Options for a Series as provided in this Agreement, the Custodian
shall have received a certified resolution of the Fund's Board of Trustees,
substantially in the form of Exhibit C hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis, until instructed
to the contrary by a Certificate actually received by the Custodian, to accept,
utilize and act in accordance with such confirmations as provided in this
Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts,
in the name of each Series, and shall credit to the separate account for each
Series all moneys received by it for the account of the Fund with respect to
such Series. Money credited to a separate account for a Series shall be
disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the
name and address of the person to whom the payment is to be made, the Series
account from which payment is to be made, and the purpose for which payment is
to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance
with this Agreement during said day. Where Securities are transferred to the
account of the Fund for a Series, the Custodian shall also by book-entry or
otherwise identify as belonging to such Series a quantity of Securities in a
fungible bulk of Securities registered in the name of the Custodian (or its
nominee) or shown on the Custodian's account on the books of the Book-Entry
System or the Depository. At least monthly and from time to time, the Custodian
shall furnish the Fund with a detailed statement, on a per Series basis, of the
Securities and moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities held by the Custodian hereunder, which are
issued or issuable only in bearer form, except such Securities as are held ,
in the Book-Entry System, shall be held by the Custodian in that form; all
other Securities held hereunder may be registered in the name of the Fund, in
the name of any duly appointed
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registered nominee of the Custodian as the Custodian may from time to time
determine, or in the name of the Book-Entry System or the Depository or their
successor or successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository
any Securities which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of
such Series physically segregated at all times from those of any other person
or persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian by itself,
or through the use of the Book-Entry System or the Depository with respect to
Securities held hereunder and therein deposited, shall with respect to
all Securities held for the Fund hereunder in accordance with preceding
paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i) the Custodian
receives a written notice of such call, or (ii) notice of such call appears in
one or more of the publications listed in Appendix C annexed hereto, which may
be amended at any time by the Custodian without the prior notification or
consent of the Fund;
(c) Present for payment and collect the amount payable
upon all Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for the account
of a Series, all rights and similar securities issued with respect to any
Securities held by the Custodian for such Series hereunder.
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6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or the
Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any Securities held
by the Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate in exchange for other Securities
or cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
corporation and receive and hold hereunder specifically allocated to such
Series such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this Article which
may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates
are available. The Fund shall deliver to the Custodian such a Certificate no
later than the business day preceding the availability of any such instrument
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or certificate. Prior to such availability, the Custodian shall comply with
Section 17(f) of the Investment Company Act of 1940, as amended, in connection
with the purchase, sale, settlement, closing out or writing of Futures
Contracts, Options, or Futures Contract Options by making payments or
deliveries specified in Certificates received by the Custodian in connection
with any such purchase, sale, writing, settlement or closing out upon its
receipt from a broker, dealer, or futures commission merchant of a statement or
confirmation reasonably believed by the Custodian to be in the form customarily
used by brokers, dealers, or future commission merchants with respect to such
Futures Contracts, Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the Fund,
provided, however, that payments to or deliveries from the Margin Account shall
be made in accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are available, the
Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Future Contract, Option or Futures Contract Option for which
such instruments or such instruments or such certificates are available only
against receipt by the Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the Custodian
hereunder in accordance with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other
than a purchase of an Option, a Futures Contract, or a Futures Contract Option,
the Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate, Oral
Instructions of Written Instructions, specifying with respect to each such
purchase:
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(a) the Series to which such Securities are to be specifically allocated;
(b) the name of the issuer and the title of the Securities; (c) the number of
shares or the principal amount purchased and accrued interest, if any; (d) the
date of purchase and settlement; (e) the purchase price per unit; (f) the total
amount payable upon such purchase; (g) the name of the person from whom or the
broker through whom the purchase was made, and the name of the clearing broker,
if any; and (h) the name of the broker to whom payment is to be made. The
Custodian shall, upon receipt of Securities purchased by or for the Fund, pay
to the broker specified in the Certificate out of the moneys held for the
account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
2. Promptly after each sale of Securities by the Fund, other than
a sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money Market Securities, a
Certificate, Oral Instructions or Written Instructions, specifying with respect
to each such sale: (a) the Series to which such Securities were specifically
allocated; (b) the name of the issuer and the title of the Security; (c) the
number of shares or principal amount sold, and accrued interest, if any; (d)
the date of sale; (e) the sale price per unit; (f) the total amount payable to
the Fund upon such sale; (g) the name of the broker through whom or the person
to whom the sale was made, and the name of the clearing broker, if any; and (h)
the name of the broker to whom the Securities are to be delivered. The
Custodian shall deliver the Securities specifically allocated to such Series to
the broker specified in the Certificate upon the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount
payable as set forth in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each Option purchased: (a) the
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Series to which such Option is specifically allocated; (b) the type of Option
(put or call); (c) the name of the issuer and the title and number of shares
subject to such Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index Options purchased;
(d) the expiration date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund in connection with such
purchase; (h) the name of the Clearing Member through whom such Option was
purchased; and (i) the name of the broker to whom payment is to be made. The
Custodian shall pay, upon receipt of a Clearing Member's statement confirming
the purchase of such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the Custodian) as
custodian for the Fund, out of moneys held for the account of the Series to
which such Option is to be specifically allocated, the total amount payable
upon such purchase to the Clearing Member through whom the purchase was made,
provided that the same conforms to the total amount payable as set forth in
such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the Series to which
such Option was specifically allocated; (b) the type of Option (put or call);
(c) the name of the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options sold; (d) the date of
sale; (e) the sale price; (f) the date of settlement; (g) the total amount
payable to the Fund upon such sale; and (h) the name of the Clearing Member
through whom the sale was made. The Custodian shall consent to the delivery
of the Option sold by the Clearing Member which previously supplied the
confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Call Option: (a)
the Series to which such Call Option was specifically allocated; (b) the name
of the issuer and the title and number of shares subject to the Call Option;
(c) the expiration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid by the
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Fund upon such exercise; and (g) the name of the Clearing Member through whom
such Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of the
moneys held for the account of the Series to which such Call Option was
specifically allocated the total amount payable to the Clearing Member through
whom the Call Option was exercised, provided that the same conforms to the
total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series to which such Put option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the Put Option; (c)
the expiration date; (d) the date of exercise and settlement; (e) the exercise
price per share; (f) the total amount to be paid to the Fund upon such
exercise; and (g) the name of the Clearing Member through whom such Put Option
was exercised. The Custodian shall, upon receipt of the amount payable upon
the exercise of the Put Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the same conforms to
the amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index
option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c) the number of
options being exercised; (d) the stock index to which such Option relates; (e)
the expiration date; (f) the exercise price; (g) the total amount to be
received by the Fund in connection with such exercise; and (h) the Clearing
Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for
which the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of
the Clearing Member through whom the premium is to be received. The Custodian
shall deliver or cause to
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<PAGE>
be delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts as are
required in accordance with the customs prevailing among Clearing Members
dealing in Covered Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may be required by
such receipts. Notwithstanding the foregoing, the Custodian has the right,
upon prior written notification to the Fund, at any time to refuse to issue
any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised, the Fund
shall promptly deliver to the Custodian a Certificate instructing the Custodian
to deliver, or to direct the Depository to deliver, the Securities subject to
such Covered Call Option and specifying: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title and number of
shares subject to the Covered Call Option; (c) the Clearing Member to whom the
underlying Securities are to be delivered; and (d) the total amount payable to
the Fund upon such delivery. Upon the return and/or cancellation of any
receipts delivered pursuant to paragraph 6 of this Article, the Custodian shall
deliver, or direct the Depository to deliver, the underlying Securities as
specified in the Certificate for the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian
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on the date hereof, and deliver the same to the Clearing Member specified in
the Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery;
(e) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for
such Series; (j) the amount of cash and/or the amount and kind of Securities,
if any, specifically allocated to such Series to be deposited in the Collateral
Account for such Series; and (k) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series to be deposited in
a Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make
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<PAGE>
the deposits, if any, into the Senior Security Account specified in the
Certificate, and either (1) deliver such receipts, if any, which the
Custodian has specifically agreed to issue, which are in accordance with the
customs prevailing among Clearing Members in Stock Index Options and make the
deposits into the Collateral Account specified in the Certificate, or (2) make
the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the Series for which such Stock Index Option
was written; (b) such information as may be necessary to identify the Stock
Index Option being exercised; (c) the Clearing Member through whom such Stock
Index Option is being exercised; (d) the total amount payable upon such
exercise, and whether such amount is to be paid by or to the Fund; (e) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Margin Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account for such
Series; and the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account for such Series. Upon the
return and/or cancellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay out of the moneys
held for the account of the Series to which such Stock Index Option was
specifically allocated to the Clearing Member specified in tihe Certificate the
total amount payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of this Article
in a transaction expressly designated as a "Closing Purchase Transaction" in
order to liquidate its position as a writer of an Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to the
Option being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the option was written; (c) the name of
the issuer and the title and number of shares subject to the option, or, in the
case of a Stock Index Option, the stock index to which such Option relates and
the number of Options held; (d) the exercise price; (e) the premium to be paid
by the Fund; (f) the expiration date; (g) the type of option (put or call) (h)
the date of such purchase; (i) the name of the Clearing Member to whom the
premium is to be paid; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a
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<PAGE>
specified Margin Account, or the Senior Security Account for such Series.
Upon the Custodian's payment of the premium and the return and/or cancellation
of any receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with
respect to the Option being liquidated through the Closing Purchase
Transaction, the Custodian shall remove, or direct the Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to, any Option purchased or written by the
Fund and described in this Articles, the Custodian shall delete such Option
from the statements delivered to the Fund pursuant to paragraph 3 Article III
herein, and upon the return and/or cancellation of any receipts issued by the
Custodian, shall make such withdrawals from the Collateral Account, and the
Margin Account and/or the Senior Security Account as may be specified in a
Certificate received in connection with such expiration, exercise, or
consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or commission, if
any, to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment
out of the moneys specifically allocated to such
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<PAGE>
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash
and/or the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required
to be made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from
a broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made
or received; and (d) the amount of cash and/or Securities to be withdrawn from
the Senior Security Account for such Series. The Custodian shall make the
payment or delivery specified in the Certificate, and delete such Futures
Contract from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate specifying: (a) the items of information
required in a Certificate described in paragraph 1 of this Article, and (b) the
Futures Contract being offset. The Custodian shall make payment out of the
money specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to
be made from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
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<PAGE>
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series to which such
option is specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures Contract
Option purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the amount of premium to be paid by the
Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the
broker, or futures commission merchant, to whom payment is to be made. The
Custodian shall pay out of the moneys specifically allocated to such Series the
total amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that .the same conforms
to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series
to which such Futures Contract Option was specifically allocated; (b) the type
of Future Contract Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund
upon such sale; and (h) the name of the broker of futures commission merchant
through whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed against payment to the
Custodian of the total amount payable to the Fund, provided the same conforms
to the total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract
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<PAGE>
Option was specifically allocated; (b) the particular Futures Contract Option
(put or call) being exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the date of exercise; (e) the name of the broker
or futures commission merchant through whom the Futures Contract Option is
exercised; (f) the net total amount, if any, payable by the Fund; (g) the
amount, if any, to be received by the Fund; and (h) the amount of cash and/or
the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option; (d) the
expiration date; (e) the exercise price; (f) the premium to be received by the
Fund; (g) the name of the broker or futures commission merchant through whom
the premium is to be received; and (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior Security Account for
such Series. The Custodian shall, upon receipt of the premium specified
in the Certificate, make out of the moneys and Securities specifically
allocated to such Series the deposits into the Senior Security Account, if any,
as specified in the Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d)
the name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exer-
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<PAGE>
cise; and (g) the amount of cash and/or the amount and kind of Securities to be
deposited in the Senior Security Account for such Series. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any, specified
in such Certificate make the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The deposits, if
any, to be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type
of Futures Contract underlying such Futures Contract Option; (d) the name of
the broker or futures commission merchant through whom such Futures Contract
Option is exercised; (e) the net total amount, if any, payable to the Fund upon
such exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any.
The Custodian shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in the Certificate, make out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect
to the Futures Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is a closing
transaction; (c) the type of Future Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f)
the expiration date; (g) the name of the broker or futures commission merchant
to whom the premium is to be paid; and (h) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the
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<PAGE>
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased
by the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may
be specified in a Certificate. The deposits to and/or withdrawals from the
Margin Account, if any, shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article
VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold,, and
accrued interest or dividends, if any; (d) the dates of the sale and
settlement; (e) the sale price per unit; (f) the total amount credited to the
Fund upon such sale, if any, (g) the amount of cash and/or the amount and kind
of Securities, if any, which are to be deposited in a Margin Account and the
name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be
deposited in a Senior Security Account, and (i) the name of the broker through
whom such short sale was made. The Custodian shall upon its receipt of a
statement from such broker confirming such sale and that the total amount
credited to the Fund upon such sale, if any, as specified in the Certificate is
held by such broker for the account of the Custodian (or any nominee of the
Custodian) as custodian of the Fund, issue a receipt or make the deposits into
the Margin Account and the Senior Security Account specified in the
Certificate.
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<PAGE>
2. In connection with the closing-out of any short sale, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect
to each such closing-out: (a) the Series for which such transaction is being
made; (b) the name of the issuer and the title of the Security; (c) the number
of shares or the principal amount, and accrued interest or dividends, if any,
required to effect such closing-out to be delivered to the broker; (d) the
dates of closing-out and settlement; (e) the purchase price per unit; (f) the
net total amount payable to the Fund upon such closing-out; (g) the net total
amount payable to the broker upon such closing-out; (h) the amount of cash and
the amount and kind of Securities to be withdrawn, if any, from the Margin
Account; (i) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Senior Security Account; and (j) the name of the
broker through whom the Fund is effecting such closing-out. The Custodian shall,
upon receipt of the net total amount payable to the Fund upon such closing-out,
and the return and/or cancellation of the receipts, if any, issued by the
Custodian with respect to the short sale being closed-out, pay out of the moneys
held for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse
Repurchase Agreement is entered; (b) the total amount payable to the Fund in
connection with such Reverse Repurchase Agreement and specifically allocated to
such Series; (c) the broker or dealer through or with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of Securities to be
delivered by the Fund to such broker or dealer; (e) the date of such Reverse
Repurchase Agreement; and (f) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Senior Security
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<PAGE>
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate, Oral Instructions, or Written Instructions make
the delivery to the broker or dealer, and the deposits, if any, to the Senior
Security Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money
Market Security, a Certificate, Oral Instructions, or Written Instructions to
the Custodian specifying: (a) the Reverse Repurchase Agreement being terminated
and the Series for which same was entered; (b) the total amount payable by the
Fund in connection with such termination; (c) the amount and kind of Securities
to be received by the Fund and specifically allocated to such Series in
connection with such termination; (d) the date of termination; (e) the name of
the broker or dealer with or through whom the Reverse Repurchase Agreement is
to be terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Senior Securities Account for such Series.
The Custodian shall, upon receipt of the.amount and kind of Securities to be
received by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Senior Security Account, specified in such
Certificate; Oral Instructions, or Written Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated. to a Series held by the Custodian hereunder, the Fund shall deliver
or cause to be delivered to the Custodian a Certificate specifying with respect
to each such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities, (c) the number of shares or the principal amount loaned, (d) the
date of loan and delivery, (e) the total amount to be delivered to the
Custodian against the loan of the Securities, including the amount of cash
collateral and the premium, if any, separately identified, and (f) the name of
the broker, dealer, or financial institution to which the loan was made. The
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Custodian shall deliver the Securities thus designated to the broker, dealer or
financial institution to which the loan was made upon receipt of the total
amount designated as to be delivered against the loan of Securities. The
Custodian may accept payment in connection with a delivery otherwise than
through the Book-Entry System or Depository only in the form of a certified or
bank cashier's check payable to the order of the Fund or the Custodian drawn on
New York Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The
Custodian shall receive all Securities returned from the broker, dealer, or
financial institution to which such Securities were loaned and upon receipt
thereof shall pay, out of the moneys held for the account of the Fund, the
total amount payable upon such return of Securities as set forth in the
Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made, and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be
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deposited by the Custodian into, or withdrawn from, a Senior Securities
Account, the Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. on each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a Statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding
the delivery to the Fund of such statement, the Fund shall furnish to the
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Custodian a Certificate or Written Instructions specifying the then market
value of the Securities described in such statement. In the event such then
market value is indicated to be less than the Custodian's obligation with
respect to any outstanding Put Option guarantee letter or similar document, the
Fund shall promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely on Oral
Instructions, Written Instructions or a Certificate setting forth the date of
the declaration of such dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent on
the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions or Certificate, as the case may be, the Custodian shall
pay out of the moneys held for the account of each Series the total amount
payable to the Dividend Agent, and any sub-dividend agent or co-dividend agent
of the Fund with respect to such Series.
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ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and
price; and
(b) The amount of money to be received by the Custodian for the
sale of such Shares and specifically allocated to the separate account in the
name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name of the
Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the
money held for the account of such Series, all original issue or other taxes
required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless
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otherwise instructed by a Certificate, shall, upon receipt of an advice from
the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the moneys held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions, or
Written Instructions or which results in an overdraft in the separate account
of such Series for some other reason, or if the Fund is for any other reason
indebted to the Custodian with respect to a Series (except a borrowing for
investment or for temporary .or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such
rate to be adjusted on the effective date of any change in such prime
commercial lending rate but in no event to be less than 6% per annum. In
addition, the Fund hereby agrees that the Custodian shall have a continuing
lien and security interest in and to any property specifically allocated to
such Series at any time held by it for the benefit of such Series or in
which the Fund may have an interest which is then in the Custodian's possession
or control or in possession or control of any third party acting in the
Custodian's behalf. The Fund authorizes the Custodian, in its sole discretion,
at any time to charge any such overdraft or indebtedness together with interest
due thereon against any balance of account, standing to such Series' credit on
the Custodian's books.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pur-
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suant to a separate agreement, the Custodian) from which it borrows money for
investment or for temporary or emergency purposes using Securities held by the
Custodian hereunder as collateral for such borrowings, a notice or undertaking
in the form currently employed by any such bank setting forth the amount which
such bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the Series to which such
borrowing relates; (b) the name of the bank, (c) the amount and terms of the
borrowing, which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement, (d) the
time and date, if known, on which the loan is to be entered into, (e) the date
on which the loan becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities to be delivered
as collateral for such loan, including the name of the issuer, the title and
the number of shares or the principal amount of any particular Securities, and
(h) a statement specifying whether such loan is for investment purposes or for
temporary or emergency purposes and that such loan is in conformance with the
Investment Company Act of 1940 and the Fund's prospectus. The Custodian shall
deliver on the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against delivery by the
lending bank of the total amount of the loan payable, provided that the same
conforms to the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given
the lending bank by virtue of any promissory note or agreement. The Custodian
shall deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Fund fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
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<PAGE>
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the Custodian nor its nominee
shall be liable for any loss or damage, including counsel fees, resulting from
its action or omission to act or otherwise, either hereunder or under any
Margin Account Agreement, except for any such loss or damage arising out of its
own negligence or willful misconduct. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund or of its own
counsel, at the expense of the Fund, and shall be fully protected with respect
to anything done or omitted by it in good faith in conformity with such advice
or opinion. The Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository arising by
reason of any negligence, misfeasance or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold,
or written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by
the Fund;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall
the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or
held by it at any time as a result of such loan of portfolio Securities, of the
Fund is adequate collateral for the Fund against any loss it might sustain as
a result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund,
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but such duty or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obligation to see that any
broker, dealer or financial institution to which portfolio Securities of the
Fund are lent pursuant to Article XIV of this Agreement makes payment to it of
any dividends or interest which are payable to or for the account of the Fund
during the period of such loan or at the termination of such loan, provided,
however, that the Custodian shall promptly notify the Fund in the event that
such dividends or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account, Exempt Account
or Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see that any
broker, dealer, futures commission merchant or Clearing Member makes payment to
the Fund of any variation margin payment or similar payment which the Fund may
be entitled to receive from such broker, dealer, futures commission merchant or
Clearing Member, to see that any payment received by the Custodian from any
broker, dealer, futures commission merchant or Clearing Member is the amount
the Fund is entitled to receive, or to notify the Fund of the Custodian's
receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by
the final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange, offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depositary, unless the Custodian shall have actually received timely notice
from the Depositary. In no event shall the Custodian have any responsibility or
liability for the failure of the Depositary to collect, or for the late
collection or late crediting by the Depositary of any amount payable upon
Securities deposited in the Depositary which may mature or be redeemed,
retired, called or otherwise become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on Securities held in the
Depositary the Custodian shall make a claim against the Depositary on behalf of
the Fund, except that the Custodian
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<PAGE>
shall not be under any obligation to appear in, prosecute or defend any action
suit or proceeding in respect to any Securities held by the Depositary which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often as
may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action
by a Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such action.
7. The Custodian may appoint one or more banking institutions as
Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund
and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its
then current prospectus, or (b) to ascertain whether any transactions by the
Fund, whether or not involving the Custodian, are such transactions as may
properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation and any expenses with respect to a
Series incurred by the Custodian in the performance of its
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duties pursuant to such agreement against any money specifically allocated to
such Series. Unless and until the Fund instructs the Custodian by a
Certificate to apportion any loss, damage, liability or expense among the
Series in a specified manner, the Custodian shall also be entitled to charge
against any money held by it for the account of a Series such Series' pro rata
share (based on such Series net asset value at the time of the charge to the
aggregate net asset value of all Series at that time) of the amount of any loss,
damage, liability or expense, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement. The expenses
for which the Custodian shall be entitled to reimbursement hereunder shall
include, but are not limited to, the expenses of sub-custodians and foreign
branches of the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be
entitled to rely upon any Oral Instructions and any Written Instructions
actually received by the Custodian hereinabove provided for. The Fund agrees
to forward to the Custodian a Certificate or facsimile thereof confirming such
Oral Instructions or Written Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions or Written Instructions
are given to the Custodian. The Fund agrees that the fact that such
confirming instructions are not received by the Custodian shall in no way
affect the validity of the transactions or enforceability of the transactions
hereby authorized by the Fund. The Fund agrees that the Custodian shall incur
no liability to the Fund in acting upon Oral Instructions or Written
Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any
Margin Account Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
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<PAGE>
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian
shall provide in hard copy or on micro-film, whichever the Custodian elects,
any records included in any such delivery which are maintained by the Custodian
on a computer disc, or are similarly maintained, and the Fund shall reimburse
the Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained
by the Custodian on the system of internal accounting control of the
Book-Entry System, the Depository, or O.C.C., and with such reports on its own
systems of internal accounting control as the Fund may reasonably request from
time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with the Custodian's payment or non-payment of checks pursuant to
paragraph 6 of Article XIII as part of any check redemption privilege program
of the Fund, except for any such liability, claim, loss and demand arising out
of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement, the
Custodian may deliver and receive Securities, and receipts with respect to
such Securities, and arrange for payments to be made and received by the
Custodian in accordance with the customs prevailing from time to time among
brokers or dealers in such Securities.
16. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set
forth in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
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ARTICLE XVI
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant
Clerk, electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits.
In the event such notice is given by the Custodian, the Fund shall, on or
before the termination date, deliver to the Custodian a copy of a resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, designating a successor custodian
or custodians. In the absence of such designation by the Fund, the Custodian
may designate a successor custodian which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and undivided
profits. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of acceptance by
the successor custodian on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Fund and held by it as
Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby
be relieved of all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
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ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or in the event
that other or additional Authorized Persons are elected or appointed. Until
such new Certificate shall be received, the Custodian shall be fully protected
in acting under the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the last delivered
Certificate.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish
to the Custodian a new Certificate in similar form in the event any such
present Officer ceases to be an Officer of the Fund, or in the event that other
or additional Officers are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signatures of the officers as set forth
in the last delivered Certificate.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10015, or at such other place as the
Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
-37-
<PAGE>
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided,, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
7. This Agreement shall be construed in accordance with the laws of the
State of New York.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 38-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
SHORT-TERM INVESTMENTS CO.
By: /s/ ROBERT H. GRAHAM
------------------------------------
Attest:
/s/ WILLIAM H. KLEH
- -------------------------------------
THE BANK OF NEW YORK
By: /s/ ILLEGIBLE
------------------------------------
Attest:
/s/ ILLEGIBLE
- --------------------------------------
-39-
<PAGE>
APPENDIX A
I, Robert H. Graham, Executive Vice President and I, William H. Kleh, Vice
President and Secretary of SHORT-TERM INVESTMENTS CO., a Massachusetts business
trust (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, and the signatures set forth opposite their respective names are their
true and correct signatures:
NAME SIGNATURE
Charles T. Bauer /s/ CHARLES T. BAUER
President -------------------------------------
Robert H. Graham /s/ ROBERT H. GRAHAM
Executive Vice President -------------------------------------
Gary T. Crum /s/ GARY T. CRUM
Vice President -------------------------------------
Harold F. McElraft /s/ HAROLD F. MCELRAFT
Vice President and Treasurer -------------------------------------
J. Abbott Sprague /s/ J. ABBOTT SPRAGUE
Vice President -------------------------------------
Gary V. Beauchamp /s/ GARY V. BEAUCHAMP
Vice President ------------------------------------
William H. Kleh /s/ WILLIAM H. KLEH
Vice President and Secretary ------------------------------------
Alex M. Ciccone /s/ ALEX M. CICCONE
Vice President ------------------------------------
(SEAL) Dated this 23rd day of June 1987
/s/ ROBERT H. GRAHAM
------------------------------------
Robert H. Graham
/s/ WILLIAM H. KLEH
------------------------------------
William H. Kleh
<PAGE>
APPENDIX B
I, Robert H. Graham, Executive Vice President and I, William H. Kleh, Vice
President and Secretary of SHORT-TERM INVESTMENTS CO., a Massachusetts business
trust (the "Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund
and each has been duly elected or appointed by the Board of Trustees of the
Fund to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws, and the signatures set forth opposite their
respective names are their true and correct signatures:
NAME SIGNATURE
Charles T. Bauer /s/ CHARLES T. BAUER
President ------------------------------------
Robert H. Graham /s/ ROBERT H. GRAHAM
Executive Vice President ------------------------------------
Gary T. Crum /s/ GARY T. CRUM
Vice President ------------------------------------
Harold F. McElraft /s/ HAROLD F. MCELRAFT
Vice President and Treasurer ------------------------------------
J. Abbott Sprague /s/ J. ABBOTT SPRAGUE
Vice President -----------------------------------
Gary V. Beauchamp /s/ GARY V. BEAUCHAMP
Vice President -----------------------------------
William H. Kleh /s/ WILLIAM H. KLEH
Vice President and Secretary -----------------------------------
Alex M. Ciccone /s/ ALEX M. CICCONE
Vice President -----------------------------------
Ray Walther /s/ RAY WALTHER
Assistant Treasurer -----------------------------------
<PAGE>
NAME SIGNATURE
Carol F. Relihan /s/ CAROL F. RELIHAN
Assistant Secretary ------------------------------------
Pauletta P. Cohn /s/ PAULETTA P. COHN
Assistant Secretary ------------------------------------
Nancy L. Martin /s/ NANCY L. MARTIN
Assistant Secretary ------------------------------------
(SEAL) Dated this 23rd day of June, 1987
/s/ ROBERT H. GRAHAM
-------------------------------------
Robert H. Graham
/s/ WILLIAM H. KLEH
-------------------------------------
William H. Kleh
<PAGE>
APPENDIX C
I, , an Assistant Vice President with THE BANK
OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, hereby certifies that he or she is the duly elected
and acting of SHORT-TERM INVESTMENTS CO., a Massachusetts business
trust (the "Fund"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting duly held on
, 1987, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of , 1987,(the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the
Book-Entry System, as defined in the Custody Agreement,all securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Book-Entry System
to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of ,1987.
______________________________________
<PAGE>
EXHIBIT 8(b)
AMENDMENT
AMENDMENT made as of this 17th day of May, 1993 to that certain Second
Amended and Restated Custody Agreement dated June 16, 1987 (the "Custody
Agreement") between The Bank of New York as custodian (the "Custodian") and
Short-Term Investment Co. (the "Fund"), a Massachusetts business trust.
WHEREAS, the Custodian and Fund have previously entered into a Custody
Agreement;
WHEREAS, the Fund and the Custodian desire. to amend the Custody Agreement
to provide for the electronic transmission of instructions from the Fund to the
Custodian; and
WHEREAS, the Board of Trustees of the Fund has approved the amendment of
the Custody Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration for the mutual promises set forth, the
Fund and the Custodian agree to amend the Custody Agreement as follows:
1. The definition of the term "Certificate" in Article I is hereby
amended to read in its entirety as follows:
"Certificate" shall mean any notice, instruction, or any other
instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually
received by the Custodian and signed on behalf of the Fund by
any two officers, and the term Certificate shall also include
instructions by the Fund to the Custodian communicated by a
Terminal Link.
2. The definition of the term "Officer" in Article I is hereby amended to
read in its entirety as follows:
"Officer" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Treasurer, and any other
person or persons, whether or not any such other person is an
officer of the Fund, duly authorized by the Board of Trustees
of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix B or such other
Certificate as may be received by the Custodian from time to
time.
<PAGE>
2
3. Article I is hereby further amended by the addition of the following
defined term:
"Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each
use of the Terminal Link by or on behalf of the Fund use of an
authorization code provided by the Custodian and at least two access
codes established by the Fund.
4. A new Article shall be added to read in its entirety as follows:
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be
obligated to have or utilize the Terminal Link, and the provisions of
this Article shall apply if, but only if, the Fund in its sole and
absolute discretion elects to utilize the Terminal Link to transmit
Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Fund only for the
purpose of the Fund providing Certificates to the Custodian with
respect to transactions involving Securities or for the transfer of
money to be applied to the payment of dividends, distributions or
redemptions of Fund Shares, and shall be utilized by the Custodian
only for the purpose of providing notices to the Fund. Such use
shall commence only after the Fund shall have delivered to the
Custodian a Certificate substantially in the form of Appendix 1 and
shall have established access codes and safekeeping procedures to
safeguard and protect the confidentiality and availability of such
access codes. Each use of the Terminal Link by the Fund shall
constitute a representation and warranty that the Terminal Link is
being used only for the purposes permitted hereby, that at least two
Officers have each utilized an access code, that such safekeeping
procedures have been established by the Fund, and that such use does
not contravene the Investment Company Act of 1940, as amended, or the
rules or regulations thereunder.
3. The Fund shall obtain and maintain at its own cost and expense
all equipment and services, including, but not limited to
communications services, necessary for it to utilize the Terminal
Link, and the Custodian shall not be responsible for the reliability
or availability of any such equipment or services.
4. The Fund acknowledges that any data bases made available as
part of, or through the Terminal Link and any proprietary data,
software, processes, information and
<PAGE>
3
documentation (other than which are or become part of the public domain or are
legally required to be made available to the public) (collectively, the
"Information"), are the exclusive and confidential property of the Custodian.
The Fund shall, and shall cause others to which it discloses the Information,
to keep the Information confidential by using the same care and discretion it
uses with respect to its own confidential property and trade secrets, and shall
neither make nor permit any disclosure without the express prior written
consent of the Custodian.
5. Upon termination of this Agreement for any reason, the Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status
of any of the Information. which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Custodian's prior
written consent. The Fund acknowledges that any software or procedures provided
the Fund as part of the Terminal Link are the property of the Custodian and,
accordingly, the Fund agrees that any modifications to the Terminal Link,
whether by the Fund or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. The Fund will cause its Officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the Custodian to act in accordance
with and rely on Certificates received by it through the Terminal Link.
The Fund acknowledges that it is its responsibility to assure that only its
Officers use the Terminal Link on its behalf, and that the Custodian shall not
be responsible nor liable for use of the Terminal Link on the Fund's behalf by
persons other than Officers or by only a single Officer.
<PAGE>
4
9(a). Except as otherwise specifically provided in Section 9 (b) of
this Article, the Custodian shall have no liability for any losses, damages,
injuries, claims, costs or expenses arising out of or in connection with any
failure, malfunction or other problem relating to the Terminal Link except for
money damages suffered as the direct result of the negligence of the Custodian
in an amount not exceeding for any incident $25,000, provided however, that the
Custodian shall have no liability under this Section 9 if the Fund fails to
comply with the provisions of Section 11.
9(b). The Custodian's liability for its negligence in executing or
failing to act in accordance with a Certificate received through Terminal Link
shall be only with respect to a transfer of funds which is not made in
accordance with such Certificate after such Certificate shall have been duly
acknowledged by the Custodian, and shall be contingent upon the Fund complying
with the provisions of section 11 of this Article, and shall be limited to (i)
restoration of the principal amount mistransferred, if and to the extent that
the Custodian would be required to make such restoration under applicable law,
and (ii) the lesser of (A) the Fund's actual pecuniary loss incurred by reason
of its loss of use of the mistransferred funds or the funds which were not
transferred, as the case may be, or (B) compensation for the loss of use of the
mistransferred funds or the funds which were not transferred, as the case may
be, at a rate per annum equal to the average federal funds rate as computed
from the Federal Reserve Bank of New York's daily determination of the
effective rate for federal funds, for the period during which the Fund has lost
use of such funds. In no event shall the Custodian have any liability for
failing to transfer funds in accordance with a Certificate received by the
Custodian through Terminal Link other than through the applicable transfer
module for the particular instructions contained in such Certificate.
10. Without limiting the generality of the foregoing, in no event
shall the Custodian or any manufacturer or supplier of its computer equipment,
software or services relating to the Terminal Link be responsible for any
special, indirect, incidental or consequential damages which the Fund may incur
or experience by reason of its use of the Terminal Link, even if the Custodian
or any manufacturer or supplier has been advised of the possibility of such
damages, nor with respect to the use of the Terminal Link shall the Custodian
or any such manufacturer or supplier be liable for acts of God, or with respect
to the following to the extent beyond such person's reasonable control: machine
or computer breakdown or malfunction, interruption or malfunction of
communication facilities, labor difficulties or any other similar or dissimilar
cause.
<PAGE>
5
11. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of, the
Terminal Link as promptly as practicable, and in any event within 24
hours after the earliest of (i) discovery thereof, (ii) the business
day on which discovery should have occurred through the exercise of
reasonable care, and (iii) in the case of any error, the date of actual
receipt of the earliest notice which reflects such error, it being
agreed that discovery and receipt of notice may only occur on a
business day. The Custodian shall promptly advise the Fund whenever
the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Terminal Link.
12. The Custodian shall verify to the Fund, by use of the
Terminal Link, receipt of each Certificate the Custodian receives
through the Terminal Link, and in the absence of such verification the
Custodian shall not be liable for any failure to act in accordance
with such Certificate and the Fund may not claim that such Certificate
was received by the Custodian. Such verification, which may occur
after the Custodian has acted upon such Certificate, shall be
accomplished on the same day on which such Certificate is received.
5. References in this Amendment to the Custody Agreement are to the
Custody Agreement as amended hereby.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereto affixed as of the day and year first above
written.
THE BANK OF NEW YORK
By: ILLEGIBLE
--------------------------------
Title: VICE PRESIDENT
ATTEST:
/s/ JOSEPH F. KEENAN
- -------------------------------
SHORT-TERM INVESTMENT CO.
By: /s/ WILLIAM H. KLEH
-------------------------------------
Title: VICE PRESIDENT
ATTEST:
/s/ CAROL F. RELIHAN
- ---------------------------------
<PAGE>
APPENDIX 1
The undersigned, _____________, hereby certifies that he or
she is the duly elected and acting Assistant Secretary of Short-Term
Investments Co. (the "Fund"), further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
_____________ , at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that the officers of the Fund be and they hereby are
authorized to negotiate and execute an amendment to the Fund's
custodian contract in order to implement the Automated Funds Transfer
Processing system available through The Bank of New York; provided,
that such amendment shall not be executed until such time as the
officers of the Fund are satisfied that appropriate safeguards and
controls by The Bank of New York regarding use of such system will
prevent the Fund, its advisor and/or its distributor from being
considered a "self-custodian" under Investment Company Act Rule
17f-4.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of
the Fund as of this ____ day of ___________________, 19__.
___________________________
<PAGE>
APPENDIX B
The undersigned, ____________ Vice President and Assistant
Secretary of Short-Term Investments Co. (the "Company"), a Massachusetts
business trust, hereby certifies that the following individuals serve in the
positions shown with the Company, that each individual has been duly elected or
appointed to each such position and qualified therefor in conformity with the
Company's Declaration of Trust and By-Laws, and that the signatures set forth
opposite their respective names are their true and correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
---- -------- ---------
<S> <C> <C>
Charles T. Bauer Chairman & President _________________
Robert H. Graham Executive Vice President _________________
John J. Arthur Vice President & Treasurer _________________
William H. Kleh Vice President & Secretary _________________
Carol F. Relihan Vice President & _________________
Assistant Secretary
Polly A. Ahrendts Vice President _________________
Gary V. Beauchamp Vice President _________________
Melville B. Cox Vice President _________________
Gary T. Crum Vice President _________________
Karen Dunn Kelley Vice President _________________
J. Abbott Sprague Vice President _________________
Dana R. Sutton Assistant Vice President _________________
& Assistant Treasurer
Joseph A. Dichiara Assistant Vice President _________________
Sidney M. Dilgren Assistant Vice President _________________
Dineen Hughes Assistant Vice President _________________
Nancy L. Martin Assistant Secretary _________________
Kathleen J. Pflueger Assistant Secretary _________________
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Samuel D. Sirko Assistant Secretary _________________
Mary J. Benson Assistant Treasurer _________________
</TABLE>
In addition, I hereby certify that in accordance with the terms of the
Company's Custodian Agreement, the Custodian for the Company be, and hereby is,
authorized to act upon written instructions executed by any two of the
following individuals and that the signatures set forth opposite their
respective names are their true and correct signatures:
<TABLE>
<CAPTION>
Name Signature
---- ---------
<S> <C>
Polly A. Ahrendts __________________
John J. Arthur __________________
Charles T. Bauer __________________
Gary V. Beauchamp __________________
Stuart W. Coco __________________
Gary T. Crum __________________
Robert H. Graham __________________
William E. Hoppe __________________
Karen Dunn Kelley __________________
William H. Kleh __________________
Mark E. McMeans __________________
Margaret A. Reilly __________________
Carol F. Relihan __________________
J. Abbott Sprague __________________
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand as Assistant
Secretary of the Company and affixed the seal this _____ day of _________,
19___.
(SEAL)
_____________________________________
<PAGE>
EXHIBIT 8 (c)
ASSIGNMENT AND ACCEPTANCE OF ASSIGNMENT
OF
CUSTODY AGREEMENT
DATED OCTOBER 15, 1993
SHORT-TERM INVESTMENTS CO., a Massachusetts business trust, on behalf of
its Prime Portfolio, Treasury Portfolio, Limited Maturity Treasury Portfolio,
and Treasury TaxAdvantage Portfolio, ("ASSIGNOR") does hereby assign all of its
rights and obligations under the Custody Agreement dated June 16, 1987, as
amended, between ASSIGNOR and The Bank of New York (the "Custody Agreement") to
SHORT-TERM INVESTMENTS CO., a Maryland corporation, on behalf of its Prime
Portfolio, to SHORT-TERM INVESTMENTS TRUST, a Delaware business trust, on behalf
of its Treasury Portfolio and Treasury TaxAdvantage Portfolio, and to AIM
INVESTMENT SECURITIES FUNDS, a Delaware business trust, on behalf of its Limited
Maturity Treasury Portfolio (individually, an "ASSIGNEE" and collectively, the
"ASSIGNEES").
ASSIGNEE does hereby accept this assignment and warrants that:
a. ASSIGNEE is a trust/corporation duly organized and existing and in good
standing under the laws in which it is duly organized.
b. ASSIGNEE is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform the Custody Agreement.
c. All corporate proceedings required by said Charter and By-Laws have
been taken to authorize ASSIGNEE to enter into and perform the Custody
Agreement.
d. ASSIGNEE is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
e. A registration statement under the Securities Act of 1933, as amended
on behalf of ASSIGNEE'S shares is currently effective and will remain
effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all ASSIGNEE'S shares
being offered for sale.
<PAGE>
IN WITNESS WHEREOF the Parties have caused this Assignment and Acceptance
thereof to be executed as of this 19th day of Oct., 1994.
SHORT-TERM INVESTMENTS CO.
(a Massachusetts business trust)
ASSIGNOR
Attest: /s/ CAROL F. RELIHAN By: /s/ CHARLES T. BAUER
-------------------- ------------------------
Title: Asst. Secty Title: Chairman CEO
-------------------- ------------------------
SHORT-TERM INVESTMENTS CO.
(a Maryland corporation)
ASSIGNEE
Attest: /s/ CAROL F. RELIHAN By: /s/ CHARLES T. BAUER
-------------------- ------------------------
Title: Asst. Secty. Title: Chairman CEO
-------------------- ------------------------
SHORT-TERM INVESTMENTS TRUST
(a Delaware business trust)
ASSIGNEE
Attest: /s/ CAROL F. RELIHAN By: /s/ CHARLES T. BAUER
-------------------- ------------------------
Title: Asst. Secty. Title: Chairman CEO
-------------------- ------------------------
AIM INVESTMENT SECURITIES FUNDS
(a Delaware business trust)
ASSIGNEE
Attest: /s/ CAROL F. RELIHAN By: /s/ CHARLES T. BAUER
-------------------- ------------------------
Title: Asst. Secty. Title: Chairman CEO
-------------------- ------------------------
<PAGE>
CONSENT TO ASSIGNMENT
THE BANK OF NEW YORK
By: /s/ FRED J. RICCIADI
---------------------
Title: Senior Vice President
---------------------
Attest: /s/ JOSEPH F. KEENAN
---------------------
Title: Assistant Vice President
------------------------
<PAGE>
EXHIBIT 8(d)
AMENDMENT NO. 2
TO
CUSTODY AGREEMENT
Short-Term Investments Co., a Massachusetts business trust ("STIC-Mass"), on
behalf of its Prime Portfolio, assigned all of its rights and obligations under
the Custody Agreement ("Agreement") dated June 16, 1987, as amended, between
STIC-Mass and The Bank of New York (the "Custodian"), to Short-Term Investments
Co., a Maryland corporation (the "Fund"), with respect to its Prime Portfolio on
October 15, 1993.
Pursuant to Article XVII of the Agreement, the Fund hereby requests that the
Custodian render services as custodian to the following additional portfolio:
Liquid Assets Portfolio
Please indicate acceptance of this addition by signing and returning this
Amendment to our offices at 11 Greenway Plaza, Suite 1919, Houston, Texas
77046.
Effective Date: October 19, 1993
SHORT-TERM INVESTMENTS CO.
Attest: /s/ STEPHEN I. WINER By: /s/ ROBERT H. GRAHAM
---------------------------- -----------------------------
Title: Asst. Secretary Title: Executive Vice President
---------------------------- -----------------------------
THE BANK OF NEW YORK
Attest: /s/ JOSEPH F. KEENAN By: /s/ ILLEGIBLE
---------------------------- -----------------------------
Title: VICE PRESIDENT Title: VP
---------------------------- -----------------------------
<PAGE>
EXHIBIT 8 (e)
[BANK OF NEW YORK LETTERHEAD]
July 30, 1996
Mr. Robert H. Graham
President
AIM Funds Group-AIM Municipal Bond Fund
AIM Investment Securities Funds
AIM Tax-Exempt Funds, Inc.
Short-Term Investments Co.
Short-Term Investments Trust
Tax-Free Investments Co.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Dear Mr. Graham
Upon reviewing the existing Terminal Link Amendment dated May 17, 1993, we have
noted that originally the process called for The Bank of New York receiving data
transmissions directly from AIM, and not via a third party. Now that DST is
involved and will be acting as an intermediary there is a need to modify the
Terminal Link Amendment.
It is our understanding that the new methodology for receiving data
transmissions from DST via NDM software line utilizes NDM's Secure-Point-of-
Entry security. This process calls for the issuance of a Security ID by DST for
AIM's sole use. This security ID along with DST's specific NDM node name will
identify each transmission sent to the Bank. Internally, the Bank has pre-set
an associated security ID that will allow the data transmission to be processed
according to the method pre-selected for the AIM Funds. Both the AIM Security
ID and the DST name node must match to what the Bank expects to receive before
the file is accepted and processed.
In light of how far along all parties are in this project, and in order to not
detain its implementation due to legal considerations, we ask that you please
acknowledge receipt of this letter as confirmation of AIM's understanding of the
process until such time as the new Terminal Link Amendment is drafted.
We would like to thank you and your staff for your time and cooperation
throughout this project.
<PAGE>
Mr. Robert Graham
July 30, 1996
Page 2
It is understood that this Amendment applies to the Custodian Agreements between
The Bank of New York and the entities listed below:
Aim Funds Group - AIM Municipal Bond Fund (Date of Agreement:
October 19, 1995)
AIM Investment Securities Funds (Date of Agreement: June 16, 1987)
AIM Tax-Exempt Funds, Inc. (Date of Agreement: October 19, 1995)
Short-Term Investments Co. (Date of Agreement: June 16, 1987)
Short-Term Investments Trust (Date of Agreement: June 16, 1987)
Tax-Free Investments Co. (Date of Agreement: October 19, 1995)
Sincerely,
/s/ MAYRA ADONNINO
Mayra Adonnino
Vice President
Relationship Management
Acknowledged by:
/s/ ROBERT H. GRAHAM
- --------------------
Robert H. Graham
Date: July 30, 1996
<PAGE>
EXHIBIT 9(h)
AMENDMENT NO. 3
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated
October 18, 1993, by and between Short-Term Investments Co., a Maryland
corporation, and A I M Advisors, Inc., a Delaware corporation, is hereby amended
as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"SHORT-TERM INVESTMENTS CO.
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
Prime Portfolio
Institutional Class
Personal Investment Class
Private Investment Class
Cash Management Class
Resource Class
Liquid Assets Portfolio
Institutional Class
Private Investment Class
Cash Management Class
MSTC Cash Reserves Class"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: June 11th, 1996
SHORT-TERM INVESTMENTS CO.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
---------------------- ------------------------
Assistant Secretary President
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
---------------------- ------------------------
Assistant Secretary President
(SEAL)
<PAGE>
EXHIBIT 11(a)
CONSENT OF COUNSEL
SHORT-TERM INVESTMENTS CO.
We hereby consent to the use of our name and to the references to our firm
under the captions "General Information --Legal Counsel" in the Prospectuses and
"Miscellaneous Information -- Legal Matters" in the Statements of Additional
Information forming a part of Post-Effective Amendment No. 7 to the Registration
Statement under the Securities Act of 1933 (No. 33-66240) and Amendment No. 8 to
the Registration Statement under the Investment Company Act of 1940 (No. 811-
7892) on Form N-1A of Short-Term Investments Co.
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
---------------------------------
Ballard Spahr Andrews & Ingersoll
Philadelphia, Pennsylvania
December 30, 1996
<PAGE>
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
Short-Term Investments Co.
We consent to the use of our reports on the Prime Portfolio and Liquid Assets
Portfolio (portfolios of Short-Term Investments Co.) dated October 4, 1996
included herein and to the references to our firm under the headings "Financial
Highlights" in the Prospectuses and "Reports" in the Statements of Additional
Information.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
December 9, 1996
<PAGE>
EXHIBIT 15(c)
AMENDMENT NO. 1
MASTER DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
The Master Distribution Plan (the "Plan"), pursuant to Rule 12b-1 of Short-
Term Investments Co., a Maryland corporation, is hereby amended as follows:
Appendix A of the Plan is hereby deleted in its entirety and replaced with
the following:
"APPENDIX A TO
MASTER DISTRIBUTION PLAN
OF
SHORT-TERM INVESTMENTS CO.
The Company shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each Class
as designed below, a Distribution Fee * determined by applying the annual rate
set forth below as to each Class to the average daily net asset value of the
Class for the plan year, computed in a manner used for the determination of the
offering price of shares of the Class.
Liquid Assets Portfolio Annual Rate
- ----------------------- -----------
Private Investment Class 0.50%
MSTC Cash Reserves Class 0.20%
Cash Management Class 0.10%
Prime Portfolio Annual Rate
- ----------------------- -----------
Personal Investment Class 0.75%
Private Investment Class 0.50%
Resource Class 0.20%
Cash Management Class 0.10%
- -----------------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Class. The amount of the
Distribution Fee is subject to any applicable limitations imposed from time to
time by applicable Rules of the National Association of Securities Dealers,
Inc."
<PAGE>
All other terms and provisions of the Plan not amended herein shall remain
in full force and effect.
Dated June 11th, 1996
SHORT-TERM INVESTMENTS CO.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
------------------- --------------------
Assistant Secretary President
(SEAL)
-2-
<PAGE>
EXHIBIT 18
MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS
1. This Multiple Class Plan (the "Plan") adopted in accordance with Rule
18f-3 under the Act shall govern the terms and conditions under which
the Funds may issue separate Classes of Shares representing interests
in one or more Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. CDSC - contingent deferred sales charge.
c. CDSC Period - the period of years following acquisition of
Shares during which such Shares may be assessed a CDSC upon
redemption.
d. Class - a class of Shares of a Fund representing an interest
in a Portfolio.
e. Class A Shares - shall mean those Shares designated as Class A
Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class A Shares for purposes of this Plan.
f. Class B Shares - shall mean those Shares designated as Class B
Shares in the Fund's organizing documents.
g. Class C Shares - shall mean those Shares designated as Class C
Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class C Shares for purposes of this Plan.
h. Directors - the directors or trustees of a Fund.
i. Distribution Expenses - expenses incurred in activities which
are primarily intended to result in the distribution and sale
of Shares as defined in a Plan of Distribution and/or
agreements relating thereto.
j. Distribution Fee - a fee paid by a Fund to the Distributor to
compensate the Distributor for Distribution Expenses.
k. Distributor - A I M Distributors, Inc. or Fund Management
Company, as applicable.
l. Fund - those investment companies advised by A I M Advisors,
Inc. which have adopted this Plan.
1
<PAGE>
m. Institutional Shares - shall mean Shares of a Fund
representing an interest in a Portfolio offered for sale to
institutional customers as may be approved by the Directors
from time to time and as set forth in the Fund's prospectus.
n. Plan of Distribution - Any plan adopted under Rule 12b-1 under
the Act with respect to payment of a Distribution Fee.
o. Portfolio - a series of the Shares of a Fund constituting a
separate investment portfolio of the Fund.
p. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders
and/or the maintenance of shareholder accounts.
q. Share - a share of common stock of or beneficial interest in a
Fund, as applicable.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Each Class shall bear directly
any and all Distribution Fees and/or Service Fees payable by
such Class pursuant to a Plan of Distribution adopted by the
Fund with respect to such Class.
b. Transfer Agency and Shareholder Recordkeeping Fees - Each
Class shall bear directly the transfer agency and other
shareholder recordkeeping fees attributable to that Class.
c. Allocation of Other Expenses - Each Class shall bear
proportionately all other expenses incurred by a Fund based on
the relative net assets attributable to each such Class.
d. Allocation of Income, Gains and Losses - The Portfolio will
allocate income and realized and unrealized capital gains and
losses to a Class based on the relative net assets of each
Class; provided, however, that if permitted by Rule 18f-3
under the Act, as amended, the Portfolio may allocate its
income on the basis of settled shares in the manner described
in Rule 18f-3 under the Act, as amended.
e. Waiver and Reimbursement of Expenses - A Portfolio's adviser,
underwriter or any other provider of services to the Portfolio
may waive or reimburse the expenses of a particular Class or
Classes.
4. Distribution and Servicing Arrangements. The distribution and
servicing arrangements identified below will apply for the following
Classes offered by a Fund with respect to a Portfolio. The provisions
of the Fund's prospectus describing the distribution and servicing
arrangements in detail are incorporated herein by this reference.
a. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Directors and set forth in the Fund's prospectus,
may be reduced or eliminated for certain money market fund
shares, for larger purchases, under a combined purchase
privilege, under a right of
2
<PAGE>
accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Rule 22(d) of the Act
and as set forth in the Fund's prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing shall be subject to a CDSC for the CDSC Period set
forth in Section 5(a) of this Plan if so provided in the Fund's
prospectus. The offering price of Shares subject to a front-end
sales charge shall be computed in accordance with Rule 22c-1
and Section 22(d) of the Act and the rules and regulations
thereunder. Class A Shares shall be subject to ongoing Service
Fees and/or Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus. Although
shares of AIM Limited Maturity Treasury Shares, AIM Tax-Exempt
Bond Fund of Connecticut, AIM Tax- Exempt Cash Fund and AIM
Tax-Free Intermediate Shares are not designated as "Class A"
they are substantially similar to Class A Shares as defined
herein and shall be deemed to be Class A Shares for the
purposes of this Plan.
b. Class B Shares. Class B Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC Period set
forth in Section 5(b), (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Directors
and set forth in the Fund's prospectus and (4) converted to
Class A Shares eight years from the end of the calendar month
in which the shareholder's order to purchase was accepted as
set forth in the Fund's prospectus.
c. Class C Shares. Class C Shares shall be (1) offered at net
asset value and (2) subject to ongoing Service Fees approved
from time to time by the Directors and set forth in the Fund's
prospectus.
d. Institutional Shares. Institutional Shares shall be (1)
offered at net asset value, (2) offered only to certain
categories of institutional customers as approved from time to
time by the Directors and as set forth in the Fund's
prospectus and (3) may be subject to ongoing Service Fees
and/or Distribution Fees as approved from time to time by the
Directors and set forth in the Fund's prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that
do not incur a front-end sales charge and of Class B Shares as
follows:
a. Class A Shares. The CDSC Period for Class A Shares shall be
18 months. The CDSC Rate shall be as set forth in the Fund's
prospectus, the relevant portions of which are incorporated
herein by this reference. No CDSC shall be imposed on Class A
Shares unless so provided in a Fund's prospectus.
b. Class B Shares. The CDSC Period for the Class B Shares shall
be six years. The CDSC Rate for the Class B Shares shall be
as set forth in the Fund's prospectus, the relevant portions
of which are incorporated herein by this reference.
c. Method of Calculation. The CDSC shall be assessed on an
amount equal to the lesser of the then current market value or
the cost of the Shares being redeemed. No sales charge shall
be imposed on increases in the net asset value of the Shares
being redeemed above the initial purchase price. No CDSC
shall be assessed on Shares derived from reinvestment of
dividends or capital gains distributions. The order in which
Shares are to be redeemed when not all of such Shares would be
3
<PAGE>
subject to a CDSC shall be determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.
d. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares and disclosed in
the Fund's prospectus or statement of additional information
and, for the Class A Shares, as allowed under Rule 6c-10 under
the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between
Funds as follows:
a. Class A Shares may be exchanged for Class A Shares of another
Portfolio, subject to certain limitations set forth in the
Fund's prospectus as it may be amended from time to time,
relevant portions of which are incorporated herein by this
reference.
b. Class B Shares may be exchanged for Class B Shares of another
Portfolio at their relative net asset value.
c. Class C Shares may be exchanged for Class A Shares of any
other Portfolio.
d. Depending upon the Portfolio from which and into which an
exchange is being made and when the shares were purchased,
shares being acquired in an exchange may be acquired at their
offering price, at their net asset value or by paying the
difference in sales charges, as disclosed in the Fund's
prospectus and statement of additional information.
e. CDSC Computation. The CDSC payable upon redemption of Class
A Shares and Class B Shares subject to a CDSC shall be
computed in the manner described in the Fund's prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's
prospectus, relevant portions of which are incorporated herein by this
reference. All other terms and conditions with respect to Service
Fees and Distribution Fees shall be governed by the Plan of
Distribution adopted by the Fund with respect to such fees and Rule
12b-1 of the Act.
8. Conversion of Class B Shares.
a. Shares Received upon Reinvestment of Dividends and
Distributions - Shares purchased through the reinvestment of
dividends and distributions paid on Shares subject to
conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a Shareholder's account
(other than Shares held in the sub-account) convert to Class A
Shares, a proportionate number of Shares held in the sub-
account shall also convert to Class A Shares.
b. Conversions on Basis of Relative Net Asset Value - All
conversions shall be effected on the basis of the relative net
asset values of the two Classes without the imposition of any
sales load or other charge.
4
<PAGE>
c. Amendments to Plan of Distribution for Class A Shares - If any
amendment is proposed to the Plan of Distribution under which
Service Fees and Distribution Fees are paid with respect to
Class A Shares of a Fund that would increase materially the
amount to be borne by those Class A Shares, then no Class B
Shares shall convert into Class A Shares of that Fund until
the holders of Class B Shares of that Fund have also approved
the proposed amendment. If the holders of such Class B Shares
do not approve the proposed amendment, the Directors of the
Fund and the Distributor shall take such action as is
necessary to ensure that the Class voting against the
amendment shall convert into another Class identical in all
material respects to Class A Shares of the Fund as constituted
prior to the amendment.
9. This Plan shall not take effect until a majority of the Directors of a
Fund, including a majority of the Directors who are not interested
persons of the Fund, shall find that the Plan, as proposed and
including the expense allocations, is in the best interests of each
Class individually and the Fund as a whole.
10. This Plan may not be amended to materially change the provisions of
this Plan unless such amendment is approved in the manner specified in
Section 9 above.
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO CASH MANAGEMENT CLASS FOR THE YEAR ENDED AUGUST
31, 1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 4
<NAME> PRIME PORTFOLIO CASH MANAGEMENT CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 6,181,284,600
<INVESTMENTS-AT-VALUE> 6,181,284,600
<RECEIVABLES> 431,498
<ASSETS-OTHER> 1,135,725
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,182,851,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,903,468
<TOTAL-LIABILITIES> 30,903,468
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,151,956,848
<SHARES-COMMON-STOCK> 6,151,956,848
<SHARES-COMMON-PRIOR> 4,201,092,165
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,493)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,151,948,355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 287,932,532
<OTHER-INCOME> 0
<EXPENSES-NET> (6,102,161)
<NET-INVESTMENT-INCOME> 281,830,371
<REALIZED-GAINS-CURRENT> 3,560
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 281,833,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (281,830,371)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,573,095,328
<NUMBER-OF-SHARES-REDEEMED> 52,655,887,094
<SHARES-REINVESTED> 33,656,449
<NET-CHANGE-IN-ASSETS> 1,950,868,243
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12,053)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,007,431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,163,261
<AVERAGE-NET-ASSETS> 303,094,444
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO INSTITUTIONAL CLASS FOR THE YEAR ENDED AUGUST
31, 1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 1
<NAME> PRIME PORTFOLIO INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 6,181,284,600
<INVESTMENTS-AT-VALUE> 6,181,284,600
<RECEIVABLES> 431,498
<ASSETS-OTHER> 1,135,725
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,182,851,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,903,468
<TOTAL-LIABILITIES> 30,903,468
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,151,956,848
<SHARES-COMMON-STOCK> 6,151,956,848
<SHARES-COMMON-PRIOR> 4,201,092,165
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,493)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,151,948,355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 287,932,532
<OTHER-INCOME> 0
<EXPENSES-NET> (6,102,161)
<NET-INVESTMENT-INCOME> 281,830,371
<REALIZED-GAINS-CURRENT> 3,560
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 281,833,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (281,830,371)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,573,095,328
<NUMBER-OF-SHARES-REDEEMED> 52,655,887,094
<SHARES-REINVESTED> 33,656,449
<NET-CHANGE-IN-ASSETS> 1,950,868,243
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12,053)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,007,431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,163,261
<AVERAGE-NET-ASSETS> 4,508,079,574
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO PERSONAL INVESTMENT CLASS FOR THE YEAR ENDED
AUGUST 31, 1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 3
<NAME> PRIME PORTFOLIO PERSONAL INVESTMENT CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 6,181,284,600
<INVESTMENTS-AT-VALUE> 6,181,284,600
<RECEIVABLES> 431,498
<ASSETS-OTHER> 1,135,725
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,182,851,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,903,468
<TOTAL-LIABILITIES> 30,903,468
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,151,956,848
<SHARES-COMMON-STOCK> 6,151,956,848
<SHARES-COMMON-PRIOR> 4,201,092,165
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,493)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,151,948,355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 287,932,532
<OTHER-INCOME> 0
<EXPENSES-NET> (6,102,161)
<NET-INVESTMENT-INCOME> 281,830,371
<REALIZED-GAINS-CURRENT> 3,560
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 281,833,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (281,830,371)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,573,095,328
<NUMBER-OF-SHARES-REDEEMED> 52,655,887,094
<SHARES-REINVESTED> 33,656,449
<NET-CHANGE-IN-ASSETS> 1,950,868,243
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12,053)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,007,431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,163,261
<AVERAGE-NET-ASSETS> 111,204,901
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO PRIVATE INVESTMENT CLASS FOR THE YEAR ENDED
AUGUST 31, 1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 2
<NAME> PRIME PORTFOLIO PRIVATE INVESTMENT CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 6,181,284,600
<INVESTMENTS-AT-VALUE> 6,181,284,600
<RECEIVABLES> 431,498
<ASSETS-OTHER> 1,135,725
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,182,851,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,903,468
<TOTAL-LIABILITIES> 30,903,468
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,151,956,848
<SHARES-COMMON-STOCK> 6,151,956,848
<SHARES-COMMON-PRIOR> 4,201,092,165
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,493)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,151,948,355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 287,932,532
<OTHER-INCOME> 0
<EXPENSES-NET> (6,102,161)
<NET-INVESTMENT-INCOME> 281,830,371
<REALIZED-GAINS-CURRENT> 3,560
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 281,833,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (281,830,371)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,573,095,328
<NUMBER-OF-SHARES-REDEEMED> 52,655,887,094
<SHARES-REINVESTED> 33,656,449
<NET-CHANGE-IN-ASSETS> 1,950,868,243
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12,053)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,007,431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,163,261
<AVERAGE-NET-ASSETS> 191,862,808
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO RESOURCE CLASS FOR THE YEAR ENDED AUGUST 31,
1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 8
<NAME> PRIME PORTFOLIO RESOURCE CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 6,181,284,600
<INVESTMENTS-AT-VALUE> 6,181,284,600
<RECEIVABLES> 431,498
<ASSETS-OTHER> 1,135,725
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,182,851,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,903,468
<TOTAL-LIABILITIES> 30,903,468
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,151,956,848
<SHARES-COMMON-STOCK> 6,151,956,848
<SHARES-COMMON-PRIOR> 4,201,092,165
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,493)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,151,948,355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 287,932,532
<OTHER-INCOME> 0
<EXPENSES-NET> (6,102,161)
<NET-INVESTMENT-INCOME> 281,830,371
<REALIZED-GAINS-CURRENT> 3,560
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 281,833,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (281,830,371)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,573,095,328
<NUMBER-OF-SHARES-REDEEMED> 52,655,887,094
<SHARES-REINVESTED> 33,656,449
<NET-CHANGE-IN-ASSETS> 1,950,868,243
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12,053)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,007,431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,163,261
<AVERAGE-NET-ASSETS> 96,885,122
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. LIQUID ASSETS PORTFOLIO CASH MANAGEMENT CLASS FOR THE YEAR ENDED
AUGUST 31, 1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 7
<NAME> LIQUID ASSETS PORTFOLIO CASH MANAGEMENT CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 2,093,423,837
<INVESTMENTS-AT-VALUE> 2,093,423,837
<RECEIVABLES> 3,398,555
<ASSETS-OTHER> 51,356
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,096,873,748
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,929,426
<TOTAL-LIABILITIES> 9,929,426
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,088,677,519
<SHARES-COMMON-STOCK> 2,088,677,519
<SHARES-COMMON-PRIOR> 1,287,599,788
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,733,197)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,086,944,322
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 99,543,502
<OTHER-INCOME> 0
<EXPENSES-NET> (634,605)
<NET-INVESTMENT-INCOME> 98,908,897
<REALIZED-GAINS-CURRENT> (1,596,067)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 97,312,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (98,908,897)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52,133,536,340
<NUMBER-OF-SHARES-REDEEMED> 51,337,948,152
<SHARES-REINVESTED> 5,489,543
<NET-CHANGE-IN-ASSETS> 799,481,664
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (137,130)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,687,358
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,313,629
<AVERAGE-NET-ASSETS> 21,002,559
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR TEH SHORT-TERM
INVESTMENTS CO. LIQUID ASSETS PORTFOLIO INSTITUTIONAL CLASS FOR THE YEAR ENDED
AUGUST 31, 1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 5
<NAME> LIQUID ASSETS PORTFOLIO INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 2,093,423,837
<INVESTMENTS-AT-VALUE> 2,093,423,837
<RECEIVABLES> 3,398,555
<ASSETS-OTHER> 51,356
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,096,873,748
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,929,426
<TOTAL-LIABILITIES> 9,929,426
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,088,677,519
<SHARES-COMMON-STOCK> 2,088,677,519
<SHARES-COMMON-PRIOR> 1,287,599,788
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,733,197)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,086,944,322
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 99,543,502
<OTHER-INCOME> 0
<EXPENSES-NET> (634,605)
<NET-INVESTMENT-INCOME> 98,908,897
<REALIZED-GAINS-CURRENT> (1,596,067)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 97,312,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (98,908,897)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52,133,536,340
<NUMBER-OF-SHARES-REDEEMED> 51,337,948,152
<SHARES-REINVESTED> 5,489,543
<NET-CHANGE-IN-ASSETS> 799,481,664
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (137,130)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,687,358
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,313,629
<AVERAGE-NET-ASSETS> 1,762,965,947
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. LIQUID ASSETS PORTFOLIO PRIVATE INVESTMENT CLASS FOR THE YEAR
ENDED AUGUST 31, 1996.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
<NUMBER> 6
<NAME> LIQUID ASSETS PORTFOLIO PRIVATE INVESTMENT CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 2,093,423,837
<INVESTMENTS-AT-VALUE> 2,093,423,837
<RECEIVABLES> 3,398,555
<ASSETS-OTHER> 51,356
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,096,873,748
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,929,426
<TOTAL-LIABILITIES> 9,929,426
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,088,677,519
<SHARES-COMMON-STOCK> 2,088,677,519
<SHARES-COMMON-PRIOR> 1,287,599,788
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,733,197)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,086,944,322
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 99,543,502
<OTHER-INCOME> 0
<EXPENSES-NET> (634,605)
<NET-INVESTMENT-INCOME> 98,908,897
<REALIZED-GAINS-CURRENT> (1,596,067)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 97,312,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (98,908,897)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52,133,536,340
<NUMBER-OF-SHARES-REDEEMED> 51,337,948,152
<SHARES-REINVESTED> 5,489,543
<NET-CHANGE-IN-ASSETS> 799,481,664
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (137,130)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,687,358
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,313,629
<AVERAGE-NET-ASSETS> 33,852,756
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
