<PAGE>
As filed with the Securities and Exchange Commission on
December 17, 1997
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. 8 X
----- -----
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _____
Amendment No. 9 X
----- -----
(Check appropriate box or boxes.)
SHORT-TERM INVESTMENTS CO.
-----------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
---------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
------------------
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
---------------------------------------------------------------
(Name and Address of Agent for Service)
Copy to:
Lisa A. Moss, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll
11 Greenway Plaza, Suite 100 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)
X immediately upon filing pursuant to paragraph (b)
- ----
____ on (date) 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)
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If appropriate, check the following box:
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Common Stock
<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 each
class of shares of the Liquid Assets Portfolio, except the MSTC Cash Reserves
Class, which is offered pursuant to a separate Statement of Additional
Information, is offered pursuant to 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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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. Pending Legal Proceedings.......................... Not Applicable
</TABLE>
<PAGE>
II. PRIME 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
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. Pending Legal Proceedings................ Not Applicable
III. PRIME PORTFOLIO - PERSONAL INVESTMENT CLASS
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.......... 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
</TABLE>
2
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<TABLE>
<CAPTION>
<S> <C> <C>
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. Pending Legal Proceedings................ Not Applicable
IV. PRIME PORTFOLIO - PRIVATE INVESTMENT CLASS
Part A - Prospectus
Item No. Prospectus Location
- -------- -------------------
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. Pending Legal Proceedings................ Not Applicable
V. PRIME PORTFOLIO - RESOURCE CLASS
Part A - Prospectus
Item No. Prospectus Location
- -------- -------------------
1. Cover Page............................... Cover Page
2. Synopsis................................. Summary; Table of Fees and Expenses
</TABLE>
3
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<TABLE>
<CAPTION>
<S> <C> <C>
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. Pending Legal Proceedings................ Not Applicable
PRIME PORTFOLIO - CASH MANAGEMENT CLASS, INSTITUTIONAL CLASS, PERSONAL
INVESTMENT CLASS, PRIVATE INVESTMENT CLASS AND RESOURCE CLASS
Part B - Statement of Additional Information
Item No. Statement of Additional Information Location
- -------- --------------------------------------------
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
</TABLE>
4
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<TABLE>
<CAPTION>
<S> <C> <C>
Securities Being Offered................. Purchases and Redemptions
20. Tax Status............................... Tax Matters; See Part A - Taxes
21. Underwriters............................. Purchases and Redemptions; Distribution Agreement
22. Calculation of Performance Data.......... Performance Information
23. Financial Statements..................... Financial Statements
VI. LIQUID ASSETS PORTFOLIO - CASH MANAGEMENT CLASS
Part A - Prospectus
Item No. Prospectus Location
- -------- -------------------
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. Pending Legal Proceedings................ Not Applicable
VII. LIQUID ASSETS PORTFOLIO - INSTITUTIONAL CLASS
Part A - Prospectus
Item No. Prospectus Location
- -------- -------------------
1. Cover Page............................... Cover Page
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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. Pending Legal Proceedings................ Not Applicable
VIII. LIQUID ASSETS PORTFOLIO - PRIVATE INVESTMENT CLASS
Part A - Prospectus
Item No. Prospectus Location
- -------- -------------------
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
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
9. Pending Legal Proceedings................ Not Applicable
LIQUID ASSETS PORTFOLIO - CASH MANAGEMENT CLASS, INSTITUTIONAL CLASS AND
PRIVATE INVESTMENT CLASS
Part B - Statement of Additional Information
Item No. Statement of Additional Information Location
- -------- --------------------------------------------
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. Pending Legal Proceedings................ Not Applicable
Part B - Statement of Additional Information
Item No. Statement of Additional Information Location
- -------- --------------------------------------------
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>
<C> <S> <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
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<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME The Prime Portfolio (the "Portfolio") is a money market fund whose investment
PORTFOLIO objective is the maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity. The Portfolio
CASH seeks to achieve its objective by investing in high grade money market
MANAGEMENT instruments, such as U.S. Government obligations, bank obligations, commercial
CLASS instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less.
DECEMBER 17, 1997
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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
[LOGO APPEARS HERE] SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
Fund Management Company LOSS OF PRINCIPAL.
11 Greenway Plaza
Suite 100
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:
the Institutional Class, the Private Investment Class, the Personal Investment
Class and the Resource Class. 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
2
<PAGE>
separate Master 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." Under a Transfer Agency and Service Agreement, A I M
Institutional Fund Services, Inc. ("Transfer Agent"), AIM's wholly owned
subsidiary and a registered transfer agent, receives a fee for its provision of
transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund. It is currently anticipated that, effective on or about
December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a wholly owned
subsidiary of AIM and a registered transfer agent, will become the transfer
agent to the Fund. See "General Information -- Transfer Agent and Custodian."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master 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
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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and, aimfunds.com and Invest With Discipline 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 PER-
CENTAGE 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 expense figures
are based upon actual costs and fees charged to the Class for the fiscal year
ended August 31, 1997. 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 three-year period ended August 31, 1997 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,
1997 1996 1995 1994
-------- -------- -------- -------------
<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 0.06 0.01
-------- -------- -------- -----
Less distributions:
Dividends from net investment
income....................... (0.05) (0.05) (0.06) (0.01)
-------- -------- -------- -----
Net asset value, end of period.. $ 1.00 $1.00 $1.00 $1.00
======== ======== ======== =====
Total return.................... 5.45% 5.55% 5.71% 4.34%(a)
======== ======== ======== =====
Ratios/Supplemental Data:
Net assets, end of period (000s
omitted)....................... $767,304 $507,247 $194,479 $372
======== ======== ======== =====
Ratio of expenses to average net
assets(b)...................... 0.17%(c) 0.17% 0.17% 0.14%(a)
======== ======== ======== =====
Ratio of net investment income
to average net assets(d)....... 5.33%(c) 5.38% 5.69% 4.26%(a)
======== ======== ======== =====
</TABLE>
- ------
(a) Annualized
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.19%, 0.19%, 0.32%, and 0.67% (annualized) for the periods 1997-1994,
respectively.
(c) Ratios are based on average net assets of $526,970,789.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.31%, 5.36%, 5.54%, and 3.73% (annualized) for the
periods 1997-1994, 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. 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.
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. It is anticipated
that most investors will perform their own sub-accounting; however, sub-
accounting services may be arranged through the Fund for shareholders who
prefer not to perform such services.
5
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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.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940 ("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 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
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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, see the Statement of Additional Information.
GOVERNMENT OBLIGATIONS. The Portfolio may 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 may 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 may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign 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.
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.
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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
liquid assets (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.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Portfolio may invest in other
investment companies to the extent permitted by the 1940 Act, and rules and
regulations thereunder, and, if applicable, exemptive orders granted by the
SEC.
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
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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 and except that the
Portfolio may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. 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 Transfer
Agent 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. Following the initial investment, subsequent purchases of
shares of the Class may also be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Cash Management Class must be submitted to and received by
the Transfer Agent for execution on the same day on any day when the U.S.
primary broker-dealer community is closed for business or trading is restricted
due to national holidays.
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
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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 the Transfer Agent, must be completed and sent to
the Transfer Agent, at P.O. Box 4333, Houston, Texas 77210-4333. 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 the Transfer Agent. 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
the Transfer Agent.
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 shares of the
Class purchased is received by The Bank of New York, the Fund's custodian bank,
in the form described above and notice of such order is provided to the
Transfer Agent or (b) at the time the order is placed, if the Portfolio is
assured of payment.
Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Cash Management Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request. Certificates (in
full shares only) will be issued without charge and may be redeposited at any
time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
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REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark-- Remote. 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 the Transfer Agent 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 the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent nor FMC will 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 may be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the 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.
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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 the
Transfer Agent, at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 and
will become effective with dividends paid after its receipt by the Transfer
Agent. 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 the
Transfer Agent.
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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, 1997, 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 5.48% and 5.63%, 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.
13
<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Information concerning the Board of Directors may be found in the
Statement of Additional Information. Certain directors and officers of the Fund
are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the
parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages or advises 55 investment company portfolios. AIM is a wholly owned
subsidiary of AIM Management, a holding company engaged in the financial
services business. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, a publicly-traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
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, 1997, 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 February 28, 1997 with AIM, 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 Master Distribution Agreement dated as of
February 28, 1997 (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 100, 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
<PAGE>
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.
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.
15
<PAGE>
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. 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. As of December
1, 1997 The Bank of New York was the owner of record of 40.75% 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 Cash Management
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.
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
100, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class. It is currently anticipated that, effective on or about December 29,
1997, A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a
registered transfer agent, will become the transfer agent to the Fund.
16
<PAGE>
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7745.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
<PAGE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 December 17, 1997
(800) 877-7745
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 CASH MANAGEMENT CLASS
Houston, Texas 77046-1173
(800) 877-7745 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <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 100 INVESTMENT PROGRAM................ 6
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>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME The Prime Portfolio (the "Portfolio") is a money market fund whose investment
PORTFOLIO objective is the maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity. The Portfolio
INSTITUTIONAL 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 17, 1997 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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
ATTACHED HERETO. 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
[LOGO APPEARS HERE] SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
Fund Management Company LOSS OF PRINCIPAL.
11 Greenway Plaza
Suite 100
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:
the Cash Management Class, the Private Investment Class, the Personal
Investment Class and the Resource Class. 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 a Master 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." Under a Transfer Agency and Service Agreement,
A I M Institutional Fund Services, Inc. ("Transfer Agent"), AIM's wholly owned
subsidiary and a registered transfer agent, receives a fee for its provision of
transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund. It is currently anticipated that, effective on or about
December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a wholly owned
subsidiary of AIM and a registered transfer agent, will become the transfer
agent to the Fund. See "General Information--Transfer Agent and Custodian."
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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline 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, 1997. 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, 1997. 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>
1997 1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<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 0.05 0.06 0.04 0.03 0.04 0.07 0.08
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less
distributions:
Dividends from
net investment
income.......... (0.05) (0.05) (0.06) (0.04) (0.03) (0.04) (0.07) (0.08)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ========== ==========
Total return..... 5.54% 5.64% 5.80% 3.64% 3.20% 4.44% 7.11% 8.72%
========== ========== ========== ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end
of period (000s
omitted)......... $5,593,043 $5,264,601 $3,752,693 $4,080,753 $4,349,945 $3,993,340 $6,108,991 $6,475,123
========== ========== ========== ========== ========== ========== ========== ==========
Ratio of expenses
to average net
assets.......... 0.09%(a) 0.09% 0.09% 0.08% 0.07% 0.08% 0.07% 0.07%
========== ========== ========== ========== ========== ========== ========== ==========
Ratio of net
investment
income to
average net
assets.......... 5.40%(a) 5.48% 5.64% 3.58% 3.15% 4.43% 6.89% 8.39%
========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
1989 1988
----------- -----------
<S> <C> <C>
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income......... 0.09 0.07
----------- -----------
Less
distributions:
Dividends from
net investment
income.......... (0.09) (0.07)
----------- -----------
Net asset value,
end of period .. $ 1.00 $ 1.00
=========== ===========
Total return..... 9.42% 7.34%
=========== ===========
Ratios/supplemental
data:
Net assets, end
of period (000s
omitted)......... $7,003,546 $5,841,901
=========== ===========
Ratio of expenses
to average net
assets.......... 0.08% 0.09%
=========== ===========
Ratio of net
investment
income to
average net
assets.......... 9.07% 7.11%
=========== ===========
</TABLE>
- ------
(a) Ratios are based on average net assets of $6,200,589,926.
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. The minimum initial
investment is $1,000,000. 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.
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. It is anticipated that most investors
will perform their own sub-accounting; however, 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 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.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940 ("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 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 securities eligible under Rule 2a-7 of the 1940 Act. For additional
information, see the Statement of Additional Information.
6
<PAGE>
GOVERNMENT OBLIGATIONS. The Portfolio may 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 may 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 may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign 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.
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
liquid assets (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.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Portfolio may invest in other
investment companies to the extent permitted by the 1940 Act, and rules and
regulations thereunder, and, if applicable, exemptive orders granted by the
SEC.
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
8
<PAGE>
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, and except that the
Portfolio may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests),
the Portfolio may borrow money from banks or obtain funds by entering into
reverse repurchase agreements, and (b) to the extent that entering into
commitments to purchase securities in accordance with the Portfolio's
investment program may be considered the issuance of senior securities. The
Portfolio will not purchase portfolio securities while borrowings in excess
of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio. The investment policies described above
under the heading "Investment Policies" may be changed without the affirmative
vote of a majority of the outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. 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 Transfer
Agent 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. Following the initial investment, subsequent purchases of
shares of the Class may all be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Institutional Class must be submitted to and received by the
Transfer Agent for execution on the same day on any day when the U.S. primary
broker-dealer community is closed for business or trading is restricted due to
national holidays.
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 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
Transfer Agent or (b) at the time the order is placed, if the Portfolio is
assured of payment.
9
<PAGE>
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 the Transfer Agent, at P.O.
Box 4333, Houston, Texas 77210-4333. Account Applications may be obtained from
the Transfer Agent. 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 the Transfer Agent.
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-- Remote. 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 the Transfer Agent 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 the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent nor FMC will 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.
10
<PAGE>
Payment for shares of the Class redeemed by mail and payment for telephone
redemptions in amounts of less than $1,000 may be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the 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 the
Transfer Agent at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 and
will become effective with dividends paid after its receipt by the Transfer
Agent. 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
11
<PAGE>
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 the
Transfer Agent.
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.
For the seven-day period ended August 31, 1997, 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 5.56% and 5.71%, 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.
12
<PAGE>
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. Information concerning the Board of Directors may be found in the
Statement of Additional Information. Certain directors and officers of the Fund
are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the
parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages or advises 55 investment company portfolios. AIM is a wholly owned
subsidiary of AIM Management, a holding company engaged in the financial
services business. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, a publicly-traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
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, 1997, 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 February 28, 1997 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.
13
<PAGE>
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
February 28, 1997 (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 100, 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.
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.
14
<PAGE>
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.
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
100, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class. It is currently anticipated that, effective on or about December 29,
1997, A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a
registered transfer agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, 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
<PAGE>
- -------------------------------------- ---------------------------------------
- -------------------------------------- ---------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 December 17, 1997
(800) 659-1005
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 INSTITUTIONAL CLASS
Houston, Texas 77046-1173
(800) 659-1005 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <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 100 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.............. 14
</TABLE>
- -------------------------------------- ---------------------------------------
- -------------------------------------- ---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SHORT-TERM
INVESTMENTS CO.
Prospectus
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME The Prime Portfolio (the "Portfolio") is a money market fund whose investment
PORTFOLIO objective is the maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity. The Portfolio
PERSONAL seeks to achieve its objective by investing in high grade money market
INVESTMENT instruments such as U.S. Government obligations, bank obligations, commercial
CLASS instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less.
DECEMBER 17, 1997
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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
[LOGO APPEARS HERE] SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
Fund Managment Company LOSS OF PRINCIPAL.
11 Greenway Plaza
Suite 100
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:
the Institutional Class, the Private Investment Class, the Cash Management
Class and the Resource Class. 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 Master 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." Under a Transfer Agency and Service
Agreement, A I M Institutional Fund Services, Inc. ("Transfer Agent"), AIM's
wholly owned subsidiary and a registered transfer agent, receives a fee for its
provision of transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund. It is currently anticipated that, effective
on or about December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a
wholly owned subsidiary of AIM and a registered transfer agent, will become the
transfer agent to the Fund. See "General Information--Transfer Agent and
Custodian."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master 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
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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline 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....................................................... 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, 12b-1 Fees and Total Operating Expenses
would have been 0.75% and 0.84% 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, 1997. 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 six-year period ended August
31, 1997 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>
1997 1996 1995 1994 1993 1992 1991
------- -------- ------- ------ ----- ----- -------
<S> <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
------- -------- ------- ------ ----- ----- -------
Income from investment
operations:
Net investment income.. 0.05 0.05 0.05 0.03 0.03 0.04 0.002
------- -------- ------- ------ ----- ----- -------
Less distributions:
Dividends from net
investment income..... (0.05) (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 $ 1.00
======= ======== ======= ====== ===== ===== =======
Total return............ 5.01% 5.11% 5.27% 3.12% 2.74% 3.94% 5.02%(d)
======= ======== ======= ====== ===== ===== =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted). $97,215 $112,645 $99,630 $3,065 $ 904 $ 727 $ 270
======= ======== ======= ====== ===== ===== =======
Ratio of expenses to
average net assets(a). 0.59%(b) 0.59% 0.59% 0.58% 0.52% 0.54% 0.80%(d)
======= ======== ======= ====== ===== ===== =======
Ratio of net investment
income to average net
assets(c)............. 4.89%(b) 4.99% 5.23% 3.34% 2.71% 3.75% 5.03%(d)
======= ======== ======= ====== ===== ===== =======
</TABLE>
- -------
(a) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.84%, 0.89%, 0.86%, 2.39%, 2.33%, 7.21% and 15.40% for the periods 1997-
1991, respectively.
(b) Ratios are based on average net assets of $96,102,068.
(c) After fee waivers and/or expense reimbursement. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.64%, 4.69%, 4.96%, 1.53%, 0.90%, (2.93%) and (9.57%)
for the periods 1997-1991, respectively.
(d) Annualized.
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. 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. 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. It is anticipated that most investors will
perform their own sub-accounting; however, 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.
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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.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940 ("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 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 securities eligible under Rule 2a-7 of the 1940 Act. For additional
information, see the Statement of Additional Information.
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GOVERNMENT OBLIGATIONS. The Portfolio may 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 may 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 may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign 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.
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.
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.
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<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
liquid assets (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.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Portfolio may invest in other
investment companies to the extent permitted by the 1940 Act, and rules and
regulations thereunder, and, if applicable, exemptive orders granted by the
SEC.
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; and except that the
Portfolio may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order; or
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<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.
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. 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 Transfer
Agent 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. Following the initial investment, subsequent purchases of
shares of the Class may also be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Personal Investment Class must be submitted to and received
by the Transfer Agent for execution on the same day on any day when the U.S.
primary broker-dealer community is closed for business or trading is restricted
due to national holidays.
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.
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<PAGE>
Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from the Transfer Agent, must be completed and sent to
the Transfer Agent at P.O. Box 4333, Houston, Texas 77210-4333. 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 the Transfer Agent. 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
the Transfer Agent.
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 shares of the
Class purchased is received by The Bank of New York, the Fund's custodian bank,
in the form described above and notice of such order is provided to the
Transfer Agent 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.
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-- Remote. 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 the Transfer Agent 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 the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent nor FMC will 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 may be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the 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
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<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 the Transfer
Agent at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 and will
become effective with dividends paid after its receipt by the Transfer Agent.
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 the
Transfer Agent.
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, 1997, 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 5.06% and 5.18%, 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.
13
<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. Information concerning the Board of Directors may be found in the
Statement of Additional Information. Certain directors and officers of the Fund
are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the
parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages or advises 55 investment company portfolios. AIM is a wholly owned
subsidiary of AIM Management, a holding company engaged in the financial
services business. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, a publicly-traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
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, 1997, 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 February 28, 1997 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
February 28, 1997 (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 100, 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.
14
<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.
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. As of December
1, 1997, The Bank of New York and Cullen/Frost Discount Brokers were the owners
of record of 70.46% and 26.15%, respectively, of the outstanding shares of the
Class. As long as each of The Bank of New York and Cullen/Frost Discount
Brokers 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
<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
100 Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class. It is currently anticipated that, effective on or about December 29,
1997, A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a
registered transfer agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or may
be made by calling (800) 877-4744.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
<PAGE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 December 17, 1997
(800) 877-4744
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 PERSONAL INVESTMENT CLASS
Houston, Texas 77046-1173
(800) 877-4744 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
700 Louisiana PAGE
Houston, Texas 77002 ----
<S> <C>
CUSTODIAN SUMMARY......................... 2
THE BANK OF NEW YORK
90 Washington Street, 11th Floor TABLE OF FEES AND EXPENSES...... 4
New York, New York 10286
FINANCIAL HIGHLIGHTS............ 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. SUITABILITY FOR INVESTORS....... 5
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 INVESTMENT PROGRAM.............. 5
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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<TABLE>
<CAPTION>
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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 17, 1997 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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 100
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: the Institutional
Class, the Cash Management Class, the Personal Investment Class and the
Resource Class. 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."
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 Master 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." Under a Transfer Agency and Service
Agreement, A I M Institutional Fund Services, Inc. ("Transfer Agent"), AIM's
wholly owned subsidiary and a registered transfer agent, receives a fee for its
provision of transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund. It is currently anticipated that, effective
on or about December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a
wholly owned subsidiary of AIM and a registered transfer agent, will become the
transfer agent to the Fund. See "General Information--Transfer Agent and
Custodian."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master 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
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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline are service marks of A I M
Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
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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%
====
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* 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.
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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, 1997. 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 four-year period ended
August 31, 1997 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,
1997 1996 1995 1994 1993
-------- -------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income.. 0.05 0.05 0.05 0.03 0.03
-------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income..... (0.05) (0.05) (0.05) (0.03) (0.03)
-------- -------- -------- ------- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======= =======
Total return............ 5.21% 5.32% 5.48% 3.33% 3.24%(a)
======== ======== ======== ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted). $235,447 $209,443 $154,278 $30,834 $17,857
======== ======== ======== ======= =======
Ratio of expenses to
average net assets(b). 0.39%(c) 0.39% 0.39% 0.38% 0.37%(a)
======== ======== ======== ======= =======
Ratio of net investment
income to average net
assets(d)............. 5.10%(c) 5.20% 5.50% 3.32% 2.85%(a)
======== ======== ======== ======= =======
</TABLE>
- -------
(a) Annualized.
(b) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.59%, 0.59%, 0.60%, 1.38% and 0.57% (annualized) for the periods 1997-
1993, respectively.
(c) Ratios are based on average net assets of $228,251,467.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.90%, 5.00%, 5.29%, 2.32% and 2.65% (annualized) for
the periods 1997-1993, 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. 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.
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. It is anticipated that most investors will
perform their own sub-accounting; however, 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 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.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940 ("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 securities eligible under Rule 2a-7 of the 1940 Act. For additional
information, see the Statement of Additional Information.
6
<PAGE>
GOVERNMENT OBLIGATIONS. The Portfolio may 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 may 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 may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign 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.
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
liquid assets (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.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Portfolio may invest in other
investment companies to the extent permitted by the 1940 Act, and rules and
regulations thereunder, and, if applicable, exemptive orders granted by the
SEC.
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
8
<PAGE>
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 and except that the
Portfolio may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order; or
(3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions of
the Portfolio set forth above (as well as certain others set forth in the
Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Portfolio.
In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. 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 Transfer Agent
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. Following the initial investment, subsequent purchases of shares of the
Class may also be made via AIM LINK--Registered Trademark-- Remote, a personal
computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Private Investment Class must be submitted to and received by
the Transfer Agent for execution on the same day on any day when the U.S.
primary broker-dealer community is closed for business or trading is restricted
due to national holidays.
Shares of the Class are sold to customers of banks, certain broker-dealers
and other financial institutions (each, an "Institution" and, collectively,
"Institutions"). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an Institution may invest in the shares of
the Class. Each Institution will render administrative support services to its
customers who are the beneficial owners of the shares of the Class. Such
services may include, among other things, establishment and maintenance of
shareholder accounts and records; assistance in processing purchase and
redemption transactions in shares of the Class; providing periodic statements
showing a customer's account balance in shares of the Class; distribution of
Fund proxy statements, annual reports and other communications to shareholders
whose accounts are serviced
9
<PAGE>
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 the Transfer Agent, must be completed and sent to
the Transfer Agent at P.O. Box 4333, Houston, Texas 77210-4333. 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 the Transfer Agent. 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
the Transfer Agent.
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 shares of the
Class purchased is received by The Bank of New York, the Fund's custodian bank,
in the form described above and notice of such order is provided to the
Transfer Agent 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.
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-- Remote. Normally, the net asset value
per share of the Portfolio will remain constant at $1.00. See "Net Asset Value."
10
<PAGE>
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 the Transfer Agent 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 the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent and nor FMC will 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 may be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the 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 election, or
any revocation thereof, must be made in writing by the Institution to the
Transfer Agent at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 and
will become effective with dividends paid after its receipt by the Transfer
Agent. If a shareholder redeems all the shares of the Class in its account at
any time during the month, all dividends declared through the date of
redemption are paid to the shareholder along with the proceeds of the
redemption.
11
<PAGE>
The Portfolio uses its best efforts to maintain the net asset value per share
of the Portfolio at $1.00 for purposes of sales and redemptions. See "Net Asset
Value." Should the Fund incur or anticipate any unusual expense, loss or
depreciation which could adversely affect the income or net asset value of the
Portfolio, the Fund's Board of Directors would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light
of the then prevailing circumstances. For example, under such unusual
circumstances, the Board of Directors might reduce or suspend the daily
dividend in order to prevent, to the extent possible, the net asset value per
share of the Portfolio from being reduced below $1.00. Thus, such expenses,
losses or depreciation may result in a shareholder receiving no dividends for
the period during which it held its shares of the Class and cause such a
shareholder to receive upon redemption a price per share lower than the
shareholder's original cost.
TAXES
The policy of the Portfolio is to distribute to its shareholders at least 90%
of its investment company taxable income for each year and consistent therewith
to meet the distribution requirements of Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio also intends to
meet the distribution requirements imposed by the Code in order to avoid the
imposition of a 4% excise tax. The Portfolio intends to distribute at least 98%
of its net investment income for the calendar year and at least 98% of its net
realized capital gains, if any, for the period ending on October 31. The
Portfolio also intends to meet the other requirements of Subchapter M,
including the requirements with respect to diversification of assets and
sources of income, so that the Portfolio will pay no taxes on net investment
income and net realized capital gains paid to shareholders.
Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.
The Portfolio will be treated as a separate corporation for purposes of
determining taxable income, distribution requirements and other requirements of
Subchapter M. Therefore, the Portfolio may not offset its gains against the
losses of the other portfolio of the Fund and each Portfolio of the Fund must
specifically comply with all the provisions of the Code.
Distributions and transactions referred to in the preceding paragraphs may be
subject to state, local or foreign taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their own tax 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 the
Transfer Agent.
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 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, 1997, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.26% and 5.39%, 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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<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. Information concerning the Board of Directors may be found in the
Statement of Additional Information. Certain directors and officers of the Fund
are affiliated with AIM and AIM Management Group Inc. ("AIM Management"), the
parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages or advises 55 investment company portfolios. AIM is a wholly owned
subsidiary of AIM Management, a holding company engaged in the financial
services business. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, a publicly-traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
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, 1997, 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 February 28, 1997 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
February 28, 1997 (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 100, 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.
14
<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.
15
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
AIM is responsible for decisions to buy and sell securities for the
Portfolio, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Portfolio are usually
principal transactions, the Portfolio incurs little or no brokerage
commissions. Portfolio securities are normally purchased directly from the
issuer or from a market maker for the securities. The purchase price paid to
dealers serving as market makers may include a spread between the bid and asked
prices. The Portfolio may also purchase securities from underwriters at prices
which include a concession paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to obtain
the best net price and the most favorable execution of the order. To the extent
that the executions and prices offered by more than one dealer are comparable,
AIM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which are deemed by AIM
to be beneficial to the Portfolio's investment program. Certain research
services furnished by dealers may be useful to AIM with respect to clients
other than the Portfolio. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Portfolio.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or a class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into 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. As of December
1, 1997, Huntington Capital Corporation was the owner of record of 38.17% 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.
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
100, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class. It is currently anticipated that, effective on or about December 29,
1997, A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a
registered transfer agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7748.
OTHER INFORMATION
This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
17
<PAGE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 December 17, 1997
(800) 877-7748
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 PRIVATE INVESTMENT CLASS
Houston, Texas 77046-1173
(800) 877-7748 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <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 100 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............................ 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
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME The Prime Portfolio (the "Portfolio") is a money market fund whose investment
PORTFOLIO objective is the maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity. The Portfolio
RESOURCE 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 17, 1997 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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
[LOGO APPEARS HERE] SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
Fund Management Company LOSS OF PRINCIPAL.
11 Greenway Plaza
Suite 100
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:
the Institutional Class, the Private Investment Class, the Personal Investment
Class and the Cash Management Class. 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."
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 Master 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." Under a Transfer Agency and Service
Agreement, A I M Institutional Fund Services, Inc. ("Transfer Agent"), AIM's
wholly owned subsidiary and a registered transfer agent, receives a fee for its
provision of transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund. It is currently anticipated that, effective
on or about December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a
wholly owned subsidiary of AIM and a registered transfer agent, will become the
transfer agent to the Fund. See "General Information--Transfer Agent and
Custodian."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master 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
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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline 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.
** 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
5 years.............................. $14
10 years..............................$32
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, 1997. 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") during the year ended August 31, 1997 and 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,
1997 1996
-------- -------------
<S> <C> <C>
Net asset value, beginning of period............... $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................ 0.05 0.03
-------- -------
Less distributions:
Dividends from net investment income............. (0.05) (0.03)
-------- -------
Net asset value, end of period..................... $ 1.00 $ 1.00
======== =======
Total return....................................... 5.36% 5.23%(a)
======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)........... $161,701 $58,012
======== =======
Ratio of expenses to average net assets(b)......... 0.25%(c) 0.25%(a)
======== =======
Ratio of net investment income to average net
assets(d)......................................... 5.25%(c) 5.18%(a)
======== =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursement were
0.29% and 0.29% (annualized), for the periods 1997-1996, respectively.
(c) Ratios are based on average net assets of $122,225,567.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.21% and 5.14% (annualized), for the periods 1997-
1996, 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. 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. 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. It is anticipated
that most investors will perform their own sub-accounting; however, sub-
accounting services may be arranged through the Fund for shareholders who
prefer not to perform such services.
INVESTMENT PROGRAM
The investment objective of the Portfolio is deemed to be a matter of
fundamental policy that may not be changed without the approval of a majority
of the Portfolio's shares. The Board of Directors of the Fund reserves the
right to change any of the investment policies, strategies or practices of the
Portfolio, as described in this Prospectus and the Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is 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
5
<PAGE>
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.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
Investment Company Act of 1940 ("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 securities eligible under Rule 2a-7 of the 1940 Act. For additional
information, see the Statement of Additional Information.
GOVERNMENT OBLIGATIONS. The Portfolio may 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
6
<PAGE>
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 may 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 may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign 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.
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
liquid assets (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.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Portfolio may invest in other
investment companies to the extent permitted by the 1940 Act, and rules and
regulations thereunder, and, if applicable, exemptive orders granted by the
SEC.
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 and except that the
Portfolio may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order; 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.
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. 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 Transfer
Agent 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. Following the initial investment, subsequent purchases of
shares of the Class may also be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Resource Class must be submitted to and received by the
Transfer Agent for execution on the same day on any day when the U.S. primary
broker-dealer community is closed for business or trading is restricted due to
national holidays.
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 the Transfer Agent, must be completed and sent to
the Transfer Agent at P.O. Box 4333, Houston, Texas 77210-4333. 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 the Transfer Agent. 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
9
<PAGE>
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
the Transfer Agent.
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 shares of the
Class purchased is received by The Bank of New York, the Fund's custodian bank,
in the form described above and notice of such order is provided to the
Transfer Agent 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-- Remote. 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 the Transfer Agent 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 the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
10
<PAGE>
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. Neither the Transfer
Agent and nor FMC will 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 may be made by check mailed within
seven days after receipt of the redemption request in proper form. The Fund may
make payment for telephone redemptions in excess of $1,000 by check when it is
considered to be in the 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 the
Transfer Agent at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 and
will become effective with dividends paid after its receipt by the Transfer
Agent. 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
11
<PAGE>
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 the
Transfer Agent.
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)
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.
12
<PAGE>
For the seven-day period ended August 31, 1997, 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 5.40% and 5.54%, 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. Information concerning the Board of Directors may be found in the
Statement of Additional Information. Certain directors and officers of the Fund
are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the
parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages or advises 55 investment company portfolios. AIM is a wholly owned
subsidiary of AIM Management, a holding company engaged in the financial
services business. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, a publicly-traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
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.
13
<PAGE>
For the fiscal year ended August 31, 1997, 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 February 28, 1997 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 Master Distribution Agreement dated as of
February 28, 1997 (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 100, Houston, Texas 77046-1173. Certain directors and officers of
the Fund are affiliated with FMC and AIM. The Distribution Agreement provides
that FMC has the exclusive right to distribute shares of the Fund either
directly or through other broker-dealers. FMC is the distributor of several of
the mutual funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or financial institutions who sell a
minimum dollar amount of the shares of the Class during a specific period of
time. In some instances, these incentives may be offered only to certain
dealers or financial institutions who have sold or may sell significant amounts
of shares. The total amount of such additional bonus payments or other
consideration shall not exceed 0.05% of the net asset value of the shares of
the Class sold. Any such bonus or incentive programs will not change the price
paid by investors for the purchase of shares of the Class or the amount
received as proceeds from such sales. Sales of the shares of the Class may not
be used to qualify for any incentives to the extent that such incentives may be
prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of shares of the Class in an amount equal to
0.20% on an annualized basis of the average daily net assets of the Portfolio
attributable to the Class. Such amounts may be expended when and if authorized
by the Board of Directors and may be used to finance such distribution-related
services as expenses of organizing and conducting sales seminars, printing of
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature and costs of administering the
Plan.
Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to 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.
14
<PAGE>
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.
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.
15
<PAGE>
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. As of
December 1, 1997, Corestates Registration Company of Oklahoma City was the owner
of record of 58.10% of the outstanding shares of the Class. As long as
Corestates owns over 25% of such shares, it may be presumed to be in "control"
of the Resource 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.
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
100, Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class. It is currently anticipated that, effective on or about December 29,
1997, A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a
registered transfer agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, 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 100
Houston, Texas 77046-1173 December 17, 1997
(800) 825-6858
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 RESOURCE CLASS
Houston, Texas 77046-1173
(800) 825-6858 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <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 100 INVESTMENT PROGRAM................ 5
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............................. 11
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................. 12
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............... 15
</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 100
HOUSTON, TEXAS 77046-1173
(800) 659-1005
------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF EACH
OF THE ABOVE-NAMED FUNDS, COPIES
OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 100, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 659-1005
------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 17, 1997
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE PRIME
PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED DECEMBER 17, 1997,
INSTITUTIONAL CLASS PROSPECTUS DATED DECEMBER 17, 1997, PERSONAL INVESTMENT
CLASS PROSPECTUS DATED DECEMBER 17, 1997, PRIVATE INVESTMENT CLASS PROSPECTUS
DATED DECEMBER 17, 1997 AND RESOURCE CLASS PROSPECTUS DATED DECEMBER 17, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.................................................... A-3
General Information about the Fund.............................. A-3
The Fund and Its Shares....................................... A-3
Directors and Officers........................................ A-4
Remuneration of Directors..................................... A-7
AIM Funds Retirement Plan for Eligible Directors/Trustees..... A-8
Deferred Compensation Agreements.............................. A-8
Investment Advisor............................................ A-8
Administrator................................................. A-10
Expenses...................................................... A-10
Transfer Agent and Custodian.................................. A-11
Reports....................................................... A-11
Fee Waivers................................................... A-11
Principal Holders of Securities............................... A-12
Purchases and Redemptions....................................... A-16
Net Asset Value Determination................................. A-16
Distribution Agreement........................................ A-16
Distribution Plan............................................. A-17
Banking Regulations........................................... A-17
Performance Information....................................... A-18
Investment Program and Restrictions............................. A-18
Investment Program............................................ A-18
Eligible Securities........................................... A-19
Commercial Paper Ratings...................................... A-20
Bond Ratings.................................................. A-20
Investment Restrictions....................................... A-22
Portfolio Transactions.......................................... A-23
Tax Matters..................................................... A-24
Qualification as a Regulated Investment Company............... A-24
Excise Tax On Regulated Investment Companies.................. A-25
Portfolio Distributions....................................... A-25
Sale or Redemption of Shares.................................. A-26
Foreign Shareholders.......................................... A-26
Effect of Future Legislation; Local Tax Considerations........ A-27
Financial Statements............................................ FS
</TABLE>
A-2
<PAGE>
INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of Short-
Term Investments Co. (the "Fund"), a mutual fund. The rules and regulations of
the United States Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning
the activities of the fund being considered for investment. This information is
included in the Cash Management Class Prospectus dated December 17, 1997, the
Institutional Class Prospectus dated December 17, 1997, the Personal Investment
Class Prospectus dated December 17, 1997, the Private Investment Class
Prospectus dated December 17, 1997 and the Resource Class Prospectus dated
December 17, 1997 (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 100, Houston, Texas 77046-1173 or by calling
(800) 659-1005. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning 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").
A-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
at least the last five years are set forth below.
*CHARLES T. BAUER, Director and Chairman (78)
11 Greenway Plaza, Suite 100
Houston, TX 77046
Chairman of the Board of Directors, A I M Management Group Inc., A I M
Advisors, Inc., A I M Capital Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., A I M Institutional Fund Services, Inc. and Fund
Management Company; and Vice Chairman and Director, AMVESCAP PLC.
- ------
* A director who is an "interested person" of the Fund and AIM as defined in
the 1940 Act.
A-4
<PAGE>
BRUCE L. CROCKETT, Director (53)
906 Frome Lane
McLean, VA 22102
Director, ACE Limited (insurance company). Formerly, Director, President and
Chief Executive Officer, COMSAT Corporation; and Chairman, Board of Governors
of INTELSAT (international communications company).
OWEN DALY II, Director (73)
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.
JACK M. FIELDS, Director (45)
Texana Global, Inc.
8810 Will Clayton Parkway
Jetero Plaza, Suite E
Humble, TX 77338
Formerly, Member of the U.S. House of Representatives.
**CARL FRISCHLING, Director (60)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis & Frankel (law firm); and Director, ERD
Waste, Inc. (waste management company), Aegis Consumer Finance (auto leasing
company) and Lazard Funds, Inc. (investment companies). Formerly, Partner,
Reid & Priest (law firm); and, prior thereto, Partner, Spengler Carlson Gubar
Brodsky & Frischling (law firm).
*ROBERT H. GRAHAM, Director and President (51)
11 Greenway Plaza, Suite 100
Houston, TX 77046
Director, President and Chief Executive Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc., A I M Institutional Fund Services, Inc. and Fund
Management Company; Director, AMVESCAP PLC; and Chairman of the Board of
Directors of AIM Funds Group Canada Inc.
JOHN F. KROEGER, Director (73)
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).
LEWIS F. PENNOCK, Director (55)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
- ------
** A director who is an "interested person" of the Fund as defined in the 1940
Act.
* A director who is an "interested person" of the Fund and AIM as defined in
the 1940 Act.
A-5
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITIONS HELD DURING AT LEAST THE PAST
NAME, ADDRESS AND AGE WITH REGISTRANT 5 YEARS
--------------------- --------------- ------------------------
- --------------------------------------------------------------------------------
<C> <C> <S>
IAN W. ROBINSON, (74) Director Formerly, Executive Vice
183 River Drive President and Chief
Tequesta, FL 33469 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, (58) Director Executive Vice
Transco Tower, 50th Floor President, Development
2800 Post Oak Blvd. and Operations, Hines
Houston, TX 77056 Interests Limited
Partnership (real estate
development).
- --------------------------------------------------------------------------------
***JOHN J. ARTHUR, (53) Senior Vice President Director, Senior Vice
11 Greenway Plaza, Suite 100 and Treasurer President and Treasurer,
Houston, TX 77046 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, (50) Senior Vice President Director and President,
11 Greenway Plaza, Suite 100 A I M Capital
Houston, TX 77046 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.
and AMVESCAP PLC.
- --------------------------------------------------------------------------------
***CAROL F. RELIHAN, (43) Senior Vice President Director, Senior Vice
11 Greenway Plaza, Suite 100 and Secretary President, General
Houston, TX 77046 Counsel and Secretary,
A I M Advisors, Inc.;
Vice President, General
Counsel and Secretary,
A I M Management Group
Inc.; Director, Vice
President and General
Counsel, Fund Management
Company; General Counsel
and Vice President,
A I M Fund Services,
Inc. and A I M
Institutional Fund
Services, Inc.; and Vice
President, A I M Capital
Management, Inc., and
A I M Distributors, Inc.
- --------------------------------------------------------------------------------
DANA R. SUTTON, (38) Vice President Vice President and Fund
11 Greenway Plaza, Suite 100 and Assistant Treasurer Controller, A I M
Houston, TX 77046 Advisors, Inc.; and
Assistant Vice President
and Assistant Treasurer,
Fund Management Company.
- --------------------------------------------------------------------------------
MELVILLE B. COX, (54) Vice President Vice President and Chief
11 Greenway Plaza, Suite 100 Compliance Officer,
Houston, TX 77046 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.
- --------------------------------------------------------------------------------
KAREN DUNN KELLEY, (37) Vice President Senior Vice President,
11 Greenway Plaza, Suite 100 A I M Capital
Houston, TX 77046 Management, Inc. and
Vice President, A I M
Advisors, Inc.
- --------------------------------------------------------------------------------
J. ABBOTT SPRAGUE, (42) Vice President Director and President,
11 Greenway Plaza, Suite 100 Fund Management Company;
Houston, TX 77046 Director and Senior Vice
President, A I M
Institutional Fund
Services, Inc.;
Director, A I M Fund
Services, Inc.; and
Senior Vice President,
A I M Advisors, Inc. and
A I M Management Group
Inc.
</TABLE>
- ------
*** Mr. Arthur and Ms. Relihan are married to each other.
A-6
<PAGE>
The Board of Directors has an Audit Committee, an Investments Committee, and
a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. 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), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. 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, Fields, Kroeger, Pennock (Chairman), Robinson 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 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.................. $7,926 $38,621 $68,000
Owen Daly II....................... 7,925 82,607 68,000
Jack M. Fields(/4/)................ 4,068 -0- -0-
Carl Frischling(/5/)............... 7,928 56,683 68,000
Robert H. Graham................... -0- -0- -0-
John F. Kroeger.................... 7,925 83,654 66,000
Lewis F. Pennock................... 7,925 33,702 67,000
Ian W. Robinson.................... 7,926 64,973 68,000
Louis S. Sklar..................... 7,822 47,593 66,500
</TABLE>
- ------
(/1/) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1997, including interest earned
thereon, was $35,772.
(/2/) During the fiscal year ended August 31, 1997, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $62,215.
Data reflects compensation earned for the calendar year ended December 31,
1996.
(/3/) Each Director serves as a director or trustee of a total of 11 registered
investment companies advised by AIM (comprised of 47 portfolios). Data
reflects total compensation for the calendar year ended December 31, 1996.
(/4/) Mr. Fields was not serving as a Director during the calendar year ended
December 31, 1996.
(/5/) See also page A-8 regarding fees earned by Mr. Frischling's law firm.
A-7
<PAGE>
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any
of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may
be entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the AIM Funds. Each eligible director is
entitled to receive an annual benefit from the AIM Funds commencing on the
first day of the calendar quarter coincident with or following his date of
retirement equal to 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 a specified level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar are 10, 10, 0, 20, 19, 15, 10 and 7 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
NUMBER OF
YEARS OF ANNUAL RETAINER
SERVICE WITH PAID BY ALL
THE AIM FUNDS AIM FUNDS
------------- ---------------
$80,000
-------
<S> <C>
10................................ $60,000
9................................ $54,000
8................................ $48,000
7................................ $42,000
6................................ $36,000
5................................ $30,000
</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 (5) or
ten (10) years (depending on the Agreement) 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, 1997, $44,129 in directors' fees and
expenses were allocated to the Portfolio.
The Portfolio paid legal fees of $19,291 for the year ended August 31, 1997
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 100, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement").
A-8
<PAGE>
AIM was organized in 1976 and, together with its subsidiaries, advises or
manages 55 investment company portfolios. AIM is a wholly owned subsidiary of A
I M Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976, 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173. A I M Management is an indirect wholly owned
subsidiary of AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, United
Kingdom. AMVESCAP PLC and its subsidiaries are an independent investment
management group engaged in the business of investment management on an
international basis. 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, 1997, 1996 and 1995, AIM received fees
pursuant to the Advisory Agreement with respect to the Portfolio in the amounts
of $4,007,070, $3,007,431, and $2,567,762, respectively. During the fiscal
years ended August 31, 1997, 1996 and 1995 AIM voluntarily waived fees with
respect to the Portfolio in the amounts of $851,042, $746,937 and $455,208,
respectively.
The Advisory Agreement will continue in effect until February 28, 1999, and
from year to year thereafter, provided that it is specifically approved at
least annually by the Fund's Board of Directors and the affirmative vote of a
majority of the directors who are not parties to the Advisory Agreement or
"interested persons" of any such party by votes cast in person at a meeting
called for such purpose. The Fund or AIM may terminate the Advisory Agreement
on 60 days' notice without penalty. The Advisory Agreement terminates
automatically in the event of its "assignment," as defined in the 1940 Act.
A-9
<PAGE>
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement, dated as of February 28, 1997 between AIM
and the Fund (the "Administrative Services Agreement").
Under the Administrative Services Agreement, AIM performs, or arranges for
the performance of, accounting and other administrative services for the
Portfolio which are not required to be performed by AIM under the Advisory
Agreement. As full compensation for the performance of such services, AIM is
reimbursed for any personnel and other costs (including 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.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for the
fiscal years ended August 31, 1997, 1996 and 1995 in the amounts of $114,738,
$126,321 and $154,963, respectively, for fund accounting services for the
Portfolio. For the period from August 31, 1994 through June 30, 1995, A I M
Institutional Fund Services, Inc. or its affiliates received shareholder
services fees from AIM with respect to the Portfolio in the amount of $95,254.
A I M Institutional Fund Services, Inc. ("AIFS") receives fees with respect
to the Portfolio for its provision of transfer agency and shareholder services
pursuant to a Transfer Agency and Service Agreement with the Fund. For the
fiscal years ended August 31, 1997 and 1996, AIFS received transfer agency fees
with respect to the Portfolio in the amounts of $645,673 and $424,496,
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. 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.
A-10
<PAGE>
TRANSFER AGENT AND CUSTODIAN
The Bank of New York ("BONY"), 90 Washington Street, 11th Floor, New York,
New York 10286, 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.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 100,
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. It is currently anticipated that, effective on or about
December 29, 1997, A I M Fund Services, Inc., a wholly owned subsidiary of AIM
and a registered transfer agent, will become the transfer agent to 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, 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.
A-11
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
PRIME PORTFOLIO
To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of December 1, 1997, 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>
THE BANK OF NEW YORK......................................... 40.75%(b)
One Wall Street, 2nd Floor
New York, NY 10286
OPPENHEIMER & CO............................................. 14.79%
Oppenheimer Tower
World Financial Tower
New York, NY 10281
FUND SERVICES ASSOCIATES..................................... 9.27%
11835 West Olympic Blvd
Los Angeles, CA 90064
<CAPTION>
INSTITUTIONAL CLASS
-------------------
<S> <C>
COMERICA BANK................................................ 15.53%
P.O. Box 75000
Detroit, MI 48275-3455
U.S. BANK OF OREGON.......................................... 14.66%
555 Southwest Oak
Portland, OR 97208-3168
FROST NATIONAL BANK.......................................... 7.45%
P.O. Box 1600
San Antonio, TX 78296
TRUST COMPANY BANK........................................... 5.51%
Center 3131
P.O. Box 105504
Atlanta, GA 30348
<CAPTION>
PERSONAL INVESTMENT CLASS
-------------------------
<S> <C>
THE BANK OF NEW YORK......................................... 70.46%(b)
4 Fisher Lane
White Plains, NY 10603
CULLEN/FROST DISCOUNT BROKERS................................ 26.15%(b)
P.O. Box 2358
San Antonio, TX 78299
</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.
A-12
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- ----------------
PRIVATE INVESTMENT CLASS
------------------------
<S> <C>
HUNTINGTON CAPITAL CORP .................................... 38.17%(b)
41 High Street, 9th Floor
Columbus, OH 43287
FROST NATIONAL BANK......................................... 13.83%
P.O. Box 2950
San Antonio, TX 78299-2950
LIBERTY REGISTRATION COMPANY OF OKLAHOMA CITY............... 12.30%
P.O. Box 25848
Oklahoma City, OK 73125-0000
FIRST TRUST................................................. 12.09%
Funds Control, Suite 0404
180 East Fifth St.
St. Paul, MN 55101
LAU & CO. c/o Frost......................................... 7.16%
P.O. Box 2479
San Antonio, TX 78298-2479
<CAPTION>
RESOURCE CLASS
--------------
<S> <C>
CORESTATES CAPITAL MARKETS.................................. 58.10%(b)
1345 Chestnut St.
Philadelphia, PA 19101
MELLON BANK................................................. 19.92%
P.O. Box 710
Pittsburgh, PA 15230-0710
</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.
A-13
<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, 1997, 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. ......................................... 42.04%(b)
World Financial Center
New York, NY 10281
MELLON BANK................................................ 25.65%(b)
P.O. Box 710
Pittsburgh, PA 15230
THE BANK OF NEW YORK....................................... 22.04%
One Wall Street, 2nd Floor
New York, NY 10286
<CAPTION>
INSTITUTIONAL CLASS
-------------------
<S> <C>
STATE STREET BANK AND TRUST COMPANY........................ 15.90%
108 Myrtle Street
North Quincy, MA 02171
TRUST COMPANY BANK......................................... 13.76%
P.O. Box 105504
Atlanta, GA 30348
COMERICA BANK.............................................. 6.99%
P.O. Box 75000
Detroit, MI 48275
PAINE WEBBER INCORPORATED.................................. 6.17%
1000 Harbor Blvd., 6th Floor
Weehawken, NJ 07087
WACHOVIA BANK AND TRUST CO. ............................... 5.08%
P.O. Box 3075
Winston-Salem, NC 27150
U.S. BANK OF OREGON........................................ 5.07%
321 Southwest Sixth
Portland, OR 97208
</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.
A-14
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT OWNED OF
OF RECORD OWNER RECORD ONLY(a)
---------------- ----------------
PRIVATE INVESTMENT CLASS
------------------------
<S> <C>
MELLON BANK............................................... 81.93%(b)
P.O. Box 710
Pittsburgh, PA 15230-0710
<CAPTION>
MSTC CASH RESERVES CLASS
------------------------
<S> <C>
MORGAN STANLEY TRUST COMPANY.............................. 100.00%(b)
1 Pierrepont Plaza
Brooklyn, NY 11201
</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, 1997, the
directors and officers of the Fund as a group beneficially owned less than 1%
of each class of any portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
A complete description of the manner by which shares of a particular class
may be purchased, redeemed or exchanged appears in the Prospectus under the
heading "Purchase of Shares."
The right of redemption may be suspended or the date of payment postponed
when (a) trading on the New York Stock Exchange ("NYSE") is restricted, as
determined by applicable rules and regulations of the SEC, (b) the NYSE is
closed for other than customary weekend and 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 Fund not reasonably practicable.
A "business day" of the Portfolio is any day on which commercial banks in the
New York Federal Reserve district are open for business. The Portfolio,
however, reserves the right to change the time for which purchase and
redemption requests must be submitted to the Portfolio for execution on the
same day on any day when the U.S. primary broker-dealer community is closed for
business or trading is restricted due to national holidays.
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.
A-15
<PAGE>
DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
February 28, 1997 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly owned subsidiary of AIM, to act as the exclusive
distributor of the shares of each class of the Portfolio. The address of FMC is
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. 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 February 28, 1999,
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; (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, 1997, FMC received compensation pursuant
to the Plan in the amount of $684,755, or an amount equal to 0.30% of the
average net daily assets of the Private Investment Class, $480,510 or an amount
equal to 0.50% of the average net daily assets of the Personal Investment
Class, $195,561, or an amount equal to 0.16% of the average net daily assets of
the Resource Class, and $421,577, 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, $590,479 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 $94,276 (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, $375,714 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 $104,796 (or an amount equal to 0.11% of the average daily net
assets) was retained by FMC. With respect to the Resource Class, $195,561 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, $421,034 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 $543 (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, an indirect wholly owned subsidiary
of AMVESCAP PLC. Charles T. Bauer, a Director and Chairman of the Fund and
Robert H. Graham, a Director and President of the Fund, own shares of AMVESCAP
PLC.
A-16
<PAGE>
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 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, 1997, 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 5.56% and 5.71%, for the Institutional Class, were 5.48% and
5.63%, for the Cash Management Class, were 5.06% and 5.18%, for the Personal
Investment Class, were 5.26% and 5.39%, for the Private Investment Class and
were 5.40% and 5.54%, 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' 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.
A-17
<PAGE>
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
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 $1.5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio may
involve risks that are different in some respects from those incurred by an
investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of United Kingdom withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than 5% of its total assets in securities issued by a single
issuer, provided that such a fund may invest more than 5% of its total assets
in the First Tier securities of a single issuer for a period of up to 3
business days after the purchase thereof if the money market fund is a
diversified investment company, provided further, that the fund may not make
more than one investment in accordance with the foregoing proviso at any time.
Under Rule 2a-7, for purposes of determining the percentage of a fund's total
assets that are invested in securities of an issuer, a repurchase agreement
shall be deemed to be an acquisition of the underlying securities, provided
that the obligation of the seller to repurchase the securities from the money
market fund is fully collateralized. To be fully collateralized, the collateral
must, among other things, consist entirely of U.S. Government securities or
securities that, at the time the repurchase agreement is entered into, are
rated in the highest rating category by Requisite NRSROs.
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
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 Investors Service ("Moody's"), Standard & Poor's Rating
Services ("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.
A-18
<PAGE>
FITCH--Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. The short-term rating places greater emphasis than a long-
term rating on the existence of liquidity necessary to meet the issuer's
obligations in a timely manner. Fitch short-term ratings are as follows:
F-1
Exceptionally Strong Credit Quality. Issues assigned this rating are regarded
as having the strongest degree of assurance for timely payment.
F-2
Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F-1."
PLUS(+) AND MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category.
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings of
Moody's, S&P and Fitch.
MOODY'S--The following are the two highest bond ratings of Moody's.
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P--The following are the 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.
A-19
<PAGE>
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guarantees unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of the holders of a majority of the outstanding shares of the
Portfolio (as that term is defined under "General Information about the Fund--
The Fund and its Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities) if, immediately after
such purchase, more than 5% of the value of the Portfolio's total assets
would be invested in such issuer, except as permitted by Rule 2a-7 under the
1940 Act, as amended from time to time, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order;
(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;
A-20
<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; or
(9) invest in any obligation not payable as to principal and interest in
United States currency.
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, except that the Portfolio may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order.
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 broker-dealer are
comparable, AIM may, in its discretion, effect transactions with broker-dealers
that furnish statistical, research or other information or services which are
deemed by AIM to be beneficial to the Portfolio's investment program.
Research services received from broker-dealers supplement AIM's own research
(and the research of sub-advisors to other clients of AIM), and may include the
following types of information: statistical and background information on the
U..S. and foreign economies, industry groups and individual companies;
forecasts and interpretations with respect to U.S. and foreign economies,
securities, markets, specific industry groups and individual companies;
information on federal, state, local and foreign political developments;
portfolio management strategies, performance information on securities, indexes
and investment accounts; information concerning prices of securities; and
information supplied by specialized services to AIM and to the Company's
directors with respect to the performance, investment activities and fees and
expenses of other mutual funds.
A-21
<PAGE>
Such information may be communicated electronically, orally or in written form.
Research services may also include the providing of equipment used to
communicate research information, the providing of specialized consultations
with AIM personnel with respect to computerized systems and data furnished to
AIM as a component of other research services, the arranging of meetings with
management of companies and the providing of access to consultants who supply
research information. Certain research services furnished by broker-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.
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 certain 5% holders, 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, certain 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 certain 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, 1997, 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.
A-22
<PAGE>
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolio or its shareholders, and the discussion here and
in the Prospectus is not intended as a substitute for careful planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Portfolio has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As
a regulated investment company, the Portfolio is not subject to federal income
tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess
of net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Portfolio made
during the taxable year or, under specified circumstances, within twelve months
after the close of the taxable year, will be considered distributions of income
and gains for the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company (1) must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities)
and other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) must
satisfy an asset diversification test in order to qualify for tax purposes as a
regulated investment company (the "Asset Diversification Test"). Under the
Asset Diversification Test, at the close of each quarter of a fund's taxable
year, at least 50% of the value of a fund's assets must consist of cash and
cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which a fund has
not invested more than 5% of the value of a fund's total assets in securities
of such issuer and as to which a fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the
value of its total assets may be invested in the securities of any other issuer
(other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which a fund controls and
which are engaged in the same or similar trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year). The balance of such income
must be distributed during the next calendar year. For the foregoing purposes,
a regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.
A-23
<PAGE>
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Portfolio. Shareholders receiving a distribution in
the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date.
Ordinarily, shareholders are required to take distributions by the Portfolio
into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Portfolio) on December
31 of such calendar year if such dividends are actually paid in January of the
following year.
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.
A-24
<PAGE>
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 17, 1997. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting investment in the Fund.
A-25
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1997
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 78.34%(a)
BASIC INDUSTRY - 3.14%
CHEMICALS - 0.29%
Bayer Corp.
5.50% 09/09/97 $ 20,000 $ 19,975,578
- ----------------------------------------------------------------------
METAL MINING - 0.58%
U.S. Borax, Inc.
5.51% 10/24/97 20,000 19,837,761
- ----------------------------------------------------------------------
5.54% 10/28/97 20,000 19,824,567
- ----------------------------------------------------------------------
39,662,328
- ----------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 2.27%
Weyerhaeuser Co.
5.50% 09/25/97 33,000 32,879,000
- ----------------------------------------------------------------------
Weyerhaeuser Real Estate Co.
5.48% 09/04/97 18,000 17,991,780
- ----------------------------------------------------------------------
5.50% 09/19/97 15,000 14,958,750
- ----------------------------------------------------------------------
5.52% 09/22/97 50,000 49,839,000
- ----------------------------------------------------------------------
5.50% 10/01/97 20,000 19,908,333
- ----------------------------------------------------------------------
5.50% 10/02/97 20,000 19,905,278
- ----------------------------------------------------------------------
155,482,141
- ----------------------------------------------------------------------
Total Basic Industry 215,120,047
- ----------------------------------------------------------------------
BUSINESS SERVICES - 1.09%
COMPUTER SOFTWARE & SERVICES - 1.09%
First Data Corp.
5.50% 09/03/97 30,000 29,990,833
- ----------------------------------------------------------------------
5.51% 09/23/97 25,000 24,915,820
- ----------------------------------------------------------------------
5.50% 10/21/97 20,000 19,847,222
- ----------------------------------------------------------------------
Total Business Services 74,753,875
- ----------------------------------------------------------------------
CAPITAL GOODS - 4.39%
COMPUTERS & OFFICE EQUIPMENT - 0.59%
Electronic Data Systems Corp.
5.50% 09/08/97 40,000 39,957,222
- ----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.25%
Siemens Capital Corp.
5.47% 09/30/97 15,000 14,933,904
- ----------------------------------------------------------------------
Sony Capital Corp.
5.52% 09/12/97 50,000 49,915,743
- ----------------------------------------------------------------------
5.50% 10/03/97 30,000 29,853,333
- ----------------------------------------------------------------------
5.52% 10/07/97 30,000 29,834,400
- ----------------------------------------------------------------------
5.50% 10/09/97 30,000 29,825,833
- ----------------------------------------------------------------------
154,363,213
- ----------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
CAPITAL GOODS - (continued)
MACHINERY - 1.55%
Deere (John) Capital Corp.
5.49% 09/24/97 $ 25,000 $ 24,912,313
- ------------------------------------------------------------------
Dover Corp.
5.50% 09/23/97 23,000 22,922,694
- ------------------------------------------------------------------
5.55% 10/07/97 33,000 32,816,850
- ------------------------------------------------------------------
5.55% 10/10/97 26,000 25,843,675
- ------------------------------------------------------------------
106,495,532
- ------------------------------------------------------------------
Total Capital Goods 300,815,967
- ------------------------------------------------------------------
CONSUMER DURABLES - 10.12%
AUTOMOBILE - 10.12%
Daimler-Benz North America Corp.
5.52% 09/19/97 27,000 26,925,480
- ------------------------------------------------------------------
5.48% 09/23/97 35,000 34,882,789
- ------------------------------------------------------------------
5.50% 10/03/97 25,000 24,877,778
- ------------------------------------------------------------------
5.52% 10/08/97 15,000 14,914,900
- ------------------------------------------------------------------
5.50% 10/14/97 50,000 49,671,528
- ------------------------------------------------------------------
5.51% 10/20/97 25,000 24,812,507
- ------------------------------------------------------------------
5.54% 10/22/97 30,000 29,764,550
- ------------------------------------------------------------------
Ford Motor Credit Co.
5.49% 09/26/97 50,000 49,809,375
- ------------------------------------------------------------------
5.49% 09/30/97 100,000 99,557,750
- ------------------------------------------------------------------
5.49% 10/06/97 50,000 49,733,125
- ------------------------------------------------------------------
Hertz Corp.
5.50% 09/12/97 50,000 49,915,972
- ------------------------------------------------------------------
5.50% 09/17/97 35,000 34,914,444
- ------------------------------------------------------------------
5.50% 10/03/97 35,000 34,828,889
- ------------------------------------------------------------------
Toyota Motor Credit Corp.
5.49% 09/15/97 25,000 24,946,625
- ------------------------------------------------------------------
5.50% 09/19/97 50,000 49,862,500
- ------------------------------------------------------------------
5.48% 09/22/97 20,000 19,936,066
- ------------------------------------------------------------------
5.48% 09/26/97 35,000 34,866,806
- ------------------------------------------------------------------
5.49% 10/03/97 20,000 19,902,400
- ------------------------------------------------------------------
5.50% 10/10/97 20,000 19,880,833
- ------------------------------------------------------------------
Total Consumer Durables 694,004,317
- ------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
CONSUMER NONDURABLES - 6.26%
BEVERAGES - 1.85%
Brown-Forman Corp.
5.50% 09/16/97 $ 11,100 $ 11,074,562
- ---------------------------------------------------------------------------
PepsiCo, Inc
5.47% 09/11/97 49,000 48,925,547
- ---------------------------------------------------------------------------
5.47% 09/17/97 50,000 49,878,444
- ---------------------------------------------------------------------------
5.52% 10/03/97 17,000 16,916,587
- ---------------------------------------------------------------------------
126,795,140
- ---------------------------------------------------------------------------
DRUGS - 2.01%
Abbott Laboratories
5.46% 09/18/97 25,000 24,935,542
- ---------------------------------------------------------------------------
Eli Lilly & Co.
5.48% 09/08/97 30,000 29,968,033
- ---------------------------------------------------------------------------
Pfizer Inc.
5.49% 09/09/97 43,000 42,947,540
- ---------------------------------------------------------------------------
5.48% 09/29/97 40,000 39,829,511
- ---------------------------------------------------------------------------
137,680,626
- ---------------------------------------------------------------------------
FOOD PROCESSING - 1.33%
Campbell Soup Co.
5.49% 09/24/97 22,000 21,922,835
- ---------------------------------------------------------------------------
Heinz (H.J.) Co.
5.48% 09/16/97 15,000 14,965,750
- ---------------------------------------------------------------------------
5.50% 09/22/97 29,200 29,106,317
- ---------------------------------------------------------------------------
5.47% 09/29/97 26,000 25,889,384
- ---------------------------------------------------------------------------
91,884,286
- ---------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.30%
Kimberly-Clark Corp.
5.48% 09/22/97 20,500 20,434,468
- ---------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.44%
Gannett Co., Inc.
5.50% 09/05/97 30,000 29,981,667
- ---------------------------------------------------------------------------
PUBLISHING (EXCLUDING NEWSPAPERS) - 0.33%
Donnelley (R.R.) & Sons Company
5.50% 09/03/97 22,500 22,493,125
- ---------------------------------------------------------------------------
Total Consumer Nondurables 429,269,312
- ---------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ENERGY - 1.65%
OIL & GAS - 1.65%
ARCO Coal Australia Inc.
5.50% 09/17/97 $ 24,856 $ 24,795,241
- ------------------------------------------------------------------------
Exxon Imperial U.S., Inc.
5.47% 09/11/97 38,325 38,266,767
- ------------------------------------------------------------------------
Koch Industries, Inc.
5.46% 09/10/97 50,000 49,931,750
- ------------------------------------------------------------------------
Total Energy 112,993,758
- ------------------------------------------------------------------------
FINANCIAL - 47.23%
ASSET-BACKED SECURITIES - 24.21%
Asset Securitization Cooperative Corp.
5.51% 09/16/97 30,000 29,931,125
- ------------------------------------------------------------------------
5.53% 09/23/97 60,000 59,797,234
- ------------------------------------------------------------------------
5.52% 09/24/97 30,000 29,894,200
- ------------------------------------------------------------------------
5.53% 09/26/97 40,000 39,846,389
- ------------------------------------------------------------------------
5.49% 09/29/97 40,000 39,829,200
- ------------------------------------------------------------------------
Ciesco, L.P.
5.52% 09/10/97 20,000 19,972,400
- ------------------------------------------------------------------------
Clipper Receivables Corp.
5.52% 09/30/97 50,000 49,777,667
- ------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.52% 09/10/97 50,000 49,931,000
- ------------------------------------------------------------------------
5.52% 09/25/97 50,000 49,816,000
- ------------------------------------------------------------------------
5.54% 10/07/97 50,000 49,723,000
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.53% 09/11/97 17,080 17,053,763
- ------------------------------------------------------------------------
5.52% 09/12/97 40,363 40,294,921
- ------------------------------------------------------------------------
5.50% 09/22/97 35,887 35,771,863
- ------------------------------------------------------------------------
Eiger Capital Corp.
5.53% 09/03/97 25,089 25,081,292
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.52% 09/18/97 30,094 30,015,555
- ------------------------------------------------------------------------
5.53% 10/21/97 40,000 39,692,778
- ------------------------------------------------------------------------
Matterhorn Capital Corp.
5.52% 09/23/97 25,000 24,915,667
- ------------------------------------------------------------------------
5.53% 09/23/97 25,530 25,443,723
- ------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.55% 09/02/97 14,952 14,949,695
- ------------------------------------------------------------------------
5.52% 09/04/97 10,000 9,995,400
- ------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)
ASSET-BACKED SECURITIES - (CONTINUED)
Monte Rosa Capital Corp. - (continued)
5.55% 09/04/97 $ 25,000 $ 24,988,438
- ------------------------------------------------------------------------
5.54% 09/05/97 22,071 22,057,414
- ------------------------------------------------------------------------
5.51% 09/16/97 30,000 29,931,125
- ------------------------------------------------------------------------
5.51% 09/19/97 40,000 39,889,800
- ------------------------------------------------------------------------
5.52% 09/24/97 30,000 29,894,200
- ------------------------------------------------------------------------
5.54% 09/25/97 33,500 33,376,273
- ------------------------------------------------------------------------
5.52% 10/08/97 33,000 32,812,780
- ------------------------------------------------------------------------
5.54% 10/09/97 34,138 33,938,369
- ------------------------------------------------------------------------
5.56% 10/10/97 40,000 39,759,067
- ------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.52% 09/10/97 30,850 30,807,427
- ------------------------------------------------------------------------
5.53% 09/10/97 31,625 31,581,278
- ------------------------------------------------------------------------
5.55% 10/08/97 50,000 49,714,792
- ------------------------------------------------------------------------
5.54% 10/15/97 25,200 25,029,368
- ------------------------------------------------------------------------
Receivables Capital Corp.
5.53% 09/05/97 19,483 19,471,030
- ------------------------------------------------------------------------
5.54% 09/05/97 30,000 29,981,533
- ------------------------------------------------------------------------
5.50% 09/09/97 25,000 24,969,444
- ------------------------------------------------------------------------
5.52% 09/11/97 30,133 30,086,796
- ------------------------------------------------------------------------
5.53% 09/12/97 50,000 49,915,514
- ------------------------------------------------------------------------
5.53% 09/15/97 9,735 9,714,064
- ------------------------------------------------------------------------
5.52% 09/16/97 30,000 29,931,000
- ------------------------------------------------------------------------
5.54% 09/22/97 25,000 24,919,208
- ------------------------------------------------------------------------
5.51% 10/16/97 45,706 45,391,200
- ------------------------------------------------------------------------
5.53% 10/23/97 30,210 29,968,689
- ------------------------------------------------------------------------
Sheffield Receivables Corp.
5.54% 09/17/97 23,400 23,342,384
- ------------------------------------------------------------------------
5.52% 09/18/97 27,900 27,827,274
- ------------------------------------------------------------------------
5.54% 09/18/97 44,400 44,283,844
- ------------------------------------------------------------------------
5.50% 09/29/97 19,750 19,665,514
- ------------------------------------------------------------------------
5.52% 09/29/97 27,200 27,083,221
- ------------------------------------------------------------------------
5.52% 09/30/97 50,000 49,777,667
- ------------------------------------------------------------------------
5.54% 10/08/97 40,000 39,772,244
- ------------------------------------------------------------------------
5.54% 10/14/97 28,000 27,814,718
- ------------------------------------------------------------------------
1,659,428,547
- ------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
BANKING - 0.73%
Bank of America
5.50% 09/15/97 $ 50,000 $ 49,893,056
- ------------------------------------------------------------------------------
BROKERAGE/INVESTMENTS - 9.46%
Bear, Stearns & Co. Inc.
5.51% 09/09/97 50,000 49,938,778
- ------------------------------------------------------------------------------
5.53% 09/29/97 30,000 29,870,967
- ------------------------------------------------------------------------------
5.52% 10/27/97 25,000 24,785,333
- ------------------------------------------------------------------------------
CS First Boston, Inc.
5.52% 09/09/97 20,000 19,975,467
- ------------------------------------------------------------------------------
5.52% 09/11/97 40,000 39,938,667
- ------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.54% 09/05/97 50,000 49,969,222
- ------------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.
5.50% 09/15/97 30,000 29,935,833
- ------------------------------------------------------------------------------
5.50% 09/29/97 50,000 49,786,111
- ------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.
5.50% 09/02/97 50,000 49,992,361
- ------------------------------------------------------------------------------
Smith Barney Inc.
5.50% 09/03/97 50,000 49,984,722
- ------------------------------------------------------------------------------
5.49% 09/04/97 50,000 49,977,125
- ------------------------------------------------------------------------------
5.49% 09/05/97 30,000 29,981,700
- ------------------------------------------------------------------------------
5.51% 09/15/97 25,000 24,946,431
- ------------------------------------------------------------------------------
5.51% 09/16/97 50,000 49,885,208
- ------------------------------------------------------------------------------
5.52% 09/17/97 50,000 49,877,334
- ------------------------------------------------------------------------------
5.52% 10/02/97 20,000 19,904,933
- ------------------------------------------------------------------------------
5.53% 10/09/97 30,000 29,824,883
- ------------------------------------------------------------------------------
648,575,075
- ------------------------------------------------------------------------------
BUSINESS CREDIT - 0.92%
CIT Group Holdings, Inc.
5.50% 09/25/97 50,000 49,816,667
- ------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.48% 09/19/97 13,000 12,964,380
- ------------------------------------------------------------------------------
62,781,047
- ------------------------------------------------------------------------------
INSURANCE - 1.61%
Metlife Funding, Inc.
5.47% 09/16/97 35,287 35,206,575
- ------------------------------------------------------------------------------
5.51% 10/03/97 25,596 25,470,636
- ------------------------------------------------------------------------------
Prudential Funding Corp.
5.49% 09/02/97 50,000 49,992,375
- ------------------------------------------------------------------------------
110,669,586
- ------------------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL--(continued)
LEASING COMPANIES - 1.54%
International Lease Finance Corp.
5.49% 09/08/97 $ 73,000 $ 72,922,073
- -------------------------------------------------------------------
5.50% 10/06/97 32,500 32,326,215
- -------------------------------------------------------------------
105,248,288
- -------------------------------------------------------------------
PERSONAL CREDIT - 5.86%
American Express Credit Corp.
5.48% 09/18/97 50,000 49,870,611
- -------------------------------------------------------------------
5.48% 09/30/97 75,000 74,668,917
- -------------------------------------------------------------------
5.52% 10/27/97 40,000 39,656,533
- -------------------------------------------------------------------
Associates Corp. of North America
5.62% 09/02/97 40,000 39,993,756
- -------------------------------------------------------------------
5.52% 09/08/97 25,000 24,973,167
- -------------------------------------------------------------------
5.50% 09/24/97 50,000 49,824,305
- -------------------------------------------------------------------
AVCO Financial Services, Inc.
5.51% 09/24/97 35,000 34,876,790
- -------------------------------------------------------------------
5.49% 09/26/97 45,000 44,828,438
- -------------------------------------------------------------------
5.51% 10/22/97 43,000 42,664,349
- -------------------------------------------------------------------
401,356,866
- -------------------------------------------------------------------
MISCELLANEOUS - 0.36%
USAA Capital Corp.
5.48% 09/04/97 25,000 24,988,583
- -------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.54%
General Electric Capital Corp.
5.625% 09/02/97 25,000 24,996,094
- -------------------------------------------------------------------
5.52% 09/04/97 50,000 49,977,000
- -------------------------------------------------------------------
5.50% 10/03/97 50,000 49,755,555
- -------------------------------------------------------------------
5.52% 10/27/97 50,000 49,570,667
- -------------------------------------------------------------------
174,299,316
- -------------------------------------------------------------------
Total Financial 3,237,240,364
- -------------------------------------------------------------------
RETAIL - 1.16%
DEPARTMENT STORES - 1.16%
Penney (J.C.) Funding Corp.
5.48% 09/12/97 30,000 29,949,767
- -------------------------------------------------------------------
5.50% 09/26/97 50,000 49,809,028
- -------------------------------------------------------------------
Total Retail 79,758,795
- -------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
UTILITIES - 2.57%
TELEPHONE - 2.57%
GTE Funding Inc.
5.52% 09/02/97 $ 24,403 $ 24,399,258
- ----------------------------------------------------------------------------
5.52% 09/03/97 20,000 19,993,867
- ----------------------------------------------------------------------------
5.52% 09/04/97 13,975 13,968,571
- ----------------------------------------------------------------------------
SBC Communications Capital Corp.
5.47% 09/10/97 30,000 29,958,975
- ----------------------------------------------------------------------------
5.48% 09/15/97 28,000 27,940,329
- ----------------------------------------------------------------------------
5.49% 09/19/97 25,000 24,931,375
- ----------------------------------------------------------------------------
5.49% 09/25/97 35,000 34,871,900
- ----------------------------------------------------------------------------
Total Utilities 176,064,275
- ----------------------------------------------------------------------------
OTHER - 0.73%
DIVERSIFIED - 0.73%
Cargill Inc.
5.47% 09/23/97 25,000 24,916,430
- ----------------------------------------------------------------------------
5.48% 10/17/97 25,000 24,824,945
- ----------------------------------------------------------------------------
Total Other 49,741,375
- ----------------------------------------------------------------------------
Total Commercial Paper 5,369,762,085
- ----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 2.56%
Goldman Sachs Group, L.P.
5.625%(b) 10/20/97 71,000 71,000,000
- ----------------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.
5.9875%(c) 08/17/98 102,600 102,600,000
- ----------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.
5.7875%(d) 10/06/97 2,000 2,000,000
- ----------------------------------------------------------------------------
Total Master Note Agreements 175,600,000
- ----------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 5,545,362,085
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 19.56%(e)
Bear, Stearns & Co. Inc.
5.625%(f) -- 60,000 60,000,000
- ----------------------------------------------------------------------------
CIBC Wood Gundy Securities Corp.
5.62%(g) 09/02/97 60,000 60,000,000
- ----------------------------------------------------------------------------
Dean Witter Reynolds Inc.
5.52%(h) 09/02/97 100,000 100,000,000
- ----------------------------------------------------------------------------
Deutche Bank Securities Corp.
5.64%(i) -- 60,000 60,000,000
- ----------------------------------------------------------------------------
Dresdner Securities (USA), Inc.
5.62%(j) 09/02/97 60,000 60,000,000
- ----------------------------------------------------------------------------
Goldman, Sachs & Co.
5.56%(k) 09/02/97 226,100 226,100,475
- ----------------------------------------------------------------------------
5.61%(l) 09/02/97 204,394 204,394,082
- ----------------------------------------------------------------------------
</TABLE>
FS-8
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEEMENTS - (continued)
Greenwich Capital Markets, Inc.
5.62%(m) 09/02/97 $160,000 $ 160,000,000
- ----------------------------------------------------------------------------
HSBC Securities, Inc.
5.64%(n) 09/02/97 85,000 85,000,000
- ----------------------------------------------------------------------------
SBC Capital Markets, Inc.
5.62%(o) 09/02/97 85,000 85,000,000
- ----------------------------------------------------------------------------
Smith Barney Inc.
5.61%(p) -- 40,000 40,000,000
- ----------------------------------------------------------------------------
5.61%(q) 09/02/97 200,000 200,000,000
- ----------------------------------------------------------------------------
Total Repurchase Agreements 1,340,494,557
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.46% 6,885,856,642(r)
- ----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.46%) (31,146,008)
- ----------------------------------------------------------------------------
NET ASSETS - 100.00% $6,854,710,634
============================================================================
</TABLE>
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven business days' prior written notice.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on 08/31/97.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon two business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 08/31/97.
(d) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven days' notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
08/31/97.
(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) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates are redetermined daily. Collateralized by
$268,177,242 U.S. Government obligations, 0% to 11.50% due 02/01/01 to
09/01/27 with an aggregate market value at 08/31/97 of $208,921,813.
(g) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889. Collateralized by $200,585,000 U.S. Government obligations,
5.53% to 7.93% due 02/02/98 to 07/30/07 with an aggregate market value at
08/31/97 of $204,002,656.
(h) Repurchase agreement entered into 08/29/97 with a maturing value of
$100,061,333. Collateralized by $145,600,000 U.S. Government obligations,
0% to 8.55% due 09/04/97 to 06/15/44 with an aggregate market value at
08/31/97 of $102,000,401.
(i) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates are redetermined daily. Collateralized by
$243,062,487 U.S. Government obligations, 0% to 9.00% due 11/24/97 to
08/20/27 with an aggregate market value at 08/31/97 of $204,000,923.
(j) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889. Collateralized by $356,015,498 U.S. Government obligations,
0% to 7.778% due 07/01/01 to 02/01/37 with an aggregate market value at
08/31/97 of $204,000,810.
(k) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$750,463,333. Collateralized by $698,212,000 U.S. Government obligations,
4.75% to 14.00% due 02/28/98 to 08/15/25 with an aggregate market value at
08/31/97 of $765,753,716.
(l) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$400,249,333. Collateralized by $403,862,867 U.S. Government obligations,
5.901% to 8.117% due 12/01/17 to 01/01/35 with an aggregate market value at
08/31/97 of $408,000,001.
FS-9
<PAGE>
(m) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $299,652,416 U.S. Government obligations,
5.50% to 10.00% due 09/01/00 to 06/01/27 with an aggregate market value at
08/31/97 of $306,000,589.
(n) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,188,000. Collateralized by $340,004,979 U.S. Government obligations,
0% to 9.00% due 04/15/98 to 11/01/35 with an aggregate market value at
08/31/97 of $306,000,024.
(o) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $304,538,273 U.S. Government obligations,
6.029% to 9.00% due 06/01/09 to 09/01/36 with an aggregate market value at
08/31/97 of $307,989,473.
(p) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates are redetermined daily. Collateralized by
$124,224,000 U.S. Government obligations, 0% to 8.28% due 03/12/99 to
01/10/25 with an aggregate market value at 08/31/97 of $102,000,492.
(q) Repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,667. Collateralized by $370,666,000 U.S. Government obligations,
0% to 10.70% due 11/24/97 to 07/15/43 with an aggregate market value at
08/31/97 of $204,000,310.
(r) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-10
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $5,545,362,085
- ------------------------------------------------------------------------
Repurchase agreements 1,340,494,557
- ------------------------------------------------------------------------
Interest receivable 1,248,628
- ------------------------------------------------------------------------
Investment for deferred compensation plan 79,009
- ------------------------------------------------------------------------
Other assets 961,282
- ------------------------------------------------------------------------
Total assets 6,888,145,561
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 32,767,074
- ------------------------------------------------------------------------
Deferred compensation 79,009
- ------------------------------------------------------------------------
Accrued advisory fees 333,910
- ------------------------------------------------------------------------
Accrued distribution fees 189,175
- ------------------------------------------------------------------------
Accrued transfer agent fees 53,683
- ------------------------------------------------------------------------
Accrued operating expenses 12,076
- ------------------------------------------------------------------------
Total liabilities 33,434,927
- ------------------------------------------------------------------------
NET ASSETS $6,854,710,634
========================================================================
NET ASSETS:
Institutional Class $5,593,043,187
========================================================================
Private Investment Class $ 235,446,842
========================================================================
Personal Investment Class $ 97,215,227
========================================================================
Cash Management Class $ 767,304,427
========================================================================
Resource Class $ 161,700,951
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class 5,593,048,358
========================================================================
Private Investment Class 235,447,059
========================================================================
Personal Investment Class 97,215,317
========================================================================
Cash Management Class 767,305,136
========================================================================
Resource Class 161,701,102
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $393,373,373
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 4,007,070
- -------------------------------------------------------------------
Custodian fees 283,138
- -------------------------------------------------------------------
Administrative services fees 114,738
- -------------------------------------------------------------------
Directors' fees and expenses 44,129
- -------------------------------------------------------------------
Transfer agent fees 645,673
- -------------------------------------------------------------------
Filing fees 548,666
- -------------------------------------------------------------------
Distribution fees (Note 2) 2,633,445
- -------------------------------------------------------------------
Other 482,093
- -------------------------------------------------------------------
Total expenses 8,758,952
- -------------------------------------------------------------------
Less: Fee waivers and expense reimbursements (855,442)
- -------------------------------------------------------------------
Net expenses 7,903,510
- -------------------------------------------------------------------
Net investment income 385,469,863
- -------------------------------------------------------------------
Net realized gain on sales of investments 2,155
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $385,472,018
===================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 385,469,863 $ 281,830,371
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 2,155 3,560
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 385,472,018 281,833,931
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (334,619,312) (246,851,973)
- ----------------------------------------------------------------------------
Private Investment Class (11,638,406) (9,968,819)
- ----------------------------------------------------------------------------
Personal Investment Class (4,703,034) (5,550,980)
- ----------------------------------------------------------------------------
Cash Management Class (28,088,448) (16,317,285)
- ----------------------------------------------------------------------------
Resource Class (6,420,663) (3,141,314)
- ----------------------------------------------------------------------------
Capital stock transactions-net 702,760,124 1,950,864,683
- ----------------------------------------------------------------------------
Net increase in net assets 702,762,279 1,950,868,243
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,151,948,355 4,201,080,112
- ----------------------------------------------------------------------------
End of period $6,854,710,634 $6,151,948,355
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $6,854,716,972 $6,151,956,848
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (6,338) (8,493)
- ----------------------------------------------------------------------------
$6,854,710,634 $6,151,948,355
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
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"), with assets, liabilities and operations of each portfolio
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 is a money market fund whose 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 - Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses are allocated among the classes.
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>
During the year ended August 31, 1997, AIM voluntarily reimbursed expenses of
$4,400.
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, 1997,
the Portfolio reimbursed AIM $114,738 for such services.
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, 1997, the Portfolio paid AIFS $645,673 for such services. On
September 19, 1997, the Board of Directors of the Fund approved the appointment
of A I M Fund Services, Inc. ("AFS") as transfer agent of the Fund to be
effective in late 1997 or early 1998.
FS-13
<PAGE>
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, 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 an asset-based sales charge to FMC
and the Fund may pay a service fee of (a) 0.25% of the average daily net assets
of each of the Private Investment Class and the Personal Investment Class, (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. The plan also imposes a cap
on the total amount of sales charges, including asset-based sales charges, that
may be paid by the Portfolio with respect to each class. During the year ended
August 31, 1997, the Private Investment Class, the Personal Investment Class,
the Cash Management Class and the Resource Class paid $684,755, $480,510,
$421,577 and $195,561, respectively, as compensation under the Plan. FMC waived
fees of $851,042 for the same period. Certain officers and directors of the
Fund are officers of AIM, FMC, AIFS and AFS.
During the year ended August 31, 1997, the Portfolio paid legal fees of
$19,291 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of 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 may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 77,017,818,307 $77,017,818,307 47,809,368,885 $47,809,368,885
- ------------------------------------------------------------------------------------------
Private Investment
Class 1,686,727,915 1,686,727,915 1,712,695,255 1,712,695,255
- ------------------------------------------------------------------------------------------
Personal Investment
Class 1,399,754,929 1,399,754,929 976,763,335 976,763,335
- ------------------------------------------------------------------------------------------
Cash Management Class 6,007,746,062 6,007,746,062 2,572,268,560 2,572,268,560
- ------------------------------------------------------------------------------------------
Resource Class* 2,959,856,289 2,959,856,289 1,501,999,293 1,501,999,293
- ------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 20,826,765 20,826,765 8,231,944 8,231,944
- ------------------------------------------------------------------------------------------
Private Investment
Class 6,892,975 6,892,975 6,300,025 6,300,025
- ------------------------------------------------------------------------------------------
Personal Investment
Class 4,636,763 4,636,763 5,517,924 5,517,924
- ------------------------------------------------------------------------------------------
Cash Management Class 19,021,334 19,021,334 12,713,851 12,713,851
- ------------------------------------------------------------------------------------------
Resource Class* 3,857,837 3,857,837 892,705 892,705
- ------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (76,710,204,729) (76,710,204,729) (46,305,697,661) (46,305,697,661)
- ------------------------------------------------------------------------------------------
Private Investment
Class (1,667,619,183) (1,667,619,183) (1,663,828,112) (1,663,828,112)
- ------------------------------------------------------------------------------------------
Personal Investment
Class (1,419,820,390) (1,419,820,390) (969,266,851) (969,266,851)
- ------------------------------------------------------------------------------------------
Cash Management Class (5,766,709,619) (5,766,709,619) (2,272,214,579) (2,272,214,579)
- ------------------------------------------------------------------------------------------
Resource Class* (2,860,025,131) (2,860,025,131) (1,444,879,891) (1,444,879,891)
- ------------------------------------------------------------------------------------------
Net increase 702,760,124 $ 702,760,124 1,950,864,683 $ 1,950,864,683
===========================================================================================
</TABLE>
* The Resource Class commenced operations on January 16, 1996.
FS-14
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding of the Cash Management Class during each of years in the three-year
period ended August 31, 1996 and the period June 30, 1994 (date operations
commenced) through August 31, 1994.
<TABLE>
<CAPTION>
1997 1996 1995 1994
-------- -------- -------- -----
<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 0.06 0.01
- ---------------------------------- -------- -------- -------- -----
Less distributions:
Dividends from net investment
income (0.05) (0.05) (0.06) (0.01)
- ---------------------------------- -------- -------- -------- -----
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $1.00
================================== ======== ======== ======== =====
Total return 5.45% 5.55% 5.71% 4.34%(a)
================================== ======== ======== ======== =====
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $767,304 $507,247 $194,479 $372
================================== ======== ======== ======== =====
Ratio of expenses to average net
assets(b) 0.17%(c) 0.17% 0.17% 0.14%(a)
================================== ======== ======== ======== =====
Ratio of net investment income to
average net assets(d) 5.33%(c) 5.38% 5.69% 4.26%(a)
================================== ======== ======== ======== =====
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.19%, 0.19%, 0.32%, and 0.67% (annualized) for the periods 1997-1994,
respectively.
(c) Ratios are based on average net assets of $526,970,789.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.31%, 5.36%, 5.54%, and 3.73% (annualized) for the
periods 1997-1994, respectively.
FS-15
<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, 1997, 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 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, 1997 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, 1997, 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 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 3, 1997
FS-16
<PAGE>
Shown below are the financial highlights for a share of capital stock
outstanding of the Institutional Class during each of the years in the five-
year period ended August 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income 0.05 0.05 0.06 0.04 0.03
- ----------------------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.06) (0.04) (0.03)
- ----------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ========== ========== ========== ========== ==========
Total return 5.54% 5.64% 5.80% 3.64% 3.20%
======================= ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $5,593,043 $5,264,601 $3,752,693 $4,080,753 $4,349,945
======================= ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets 0.09%(a) 0.09% 0.09% 0.08% 0.07%
======================= ========== ========== ========== ========== ==========
Ratio of net investment
income to
average net assets 5.40%(a) 5.48% 5.64% 3.58% 3.15%
======================= ========== ========== ========== ========== ==========
</TABLE>
(a) Ratios are based on average net assets of $6,200,589,926.
FS-17
<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, 1997, 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. 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, 1997 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, 1997, 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, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 3, 1997
FS-18
<PAGE>
Shown below are the financial highlights for a share of capital stock
outstanding of the Personal Investment Class during each of the years in the
five-year period ended August 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- --------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
- ------------------------------- ------- --------- ------- ------ -----
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.03 0.03
- ------------------------------- ------- --------- ------- ------ -----
Less distributions:
Dividends from net investment
income (0.05) (0.05) (0.05) (0.03) (0.03)
- ------------------------------- ------- --------- ------- ------ -----
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
- ------------------------------- ------- --------- ------- ------ -----
Total return 5.01% 5.11% 5.27% 3.12% 2.74%
- ------------------------------- ------- --------- ------- ------ -----
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $97,215 $112,645 $99,630 $3,065 $904
- ------------------------------- ------- --------- ------- ------ -----
Ratio of expenses to average
net assets(a) 0.59%(b) 0.59% 0.59% 0.58% 0.52%
- ------------------------------- ------- --------- ------- ------ -----
Ratio of net investment income
to average net assets(c) 4.89%(b) 4.99% 5.23% 3.34% 2.71%
- ------------------------------- ------- --------- ------- ------ -----
</TABLE>
(a) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.84%, 0.89%, 0.86%, 2.39%, and 2.33%, for the periods 1997-1993,
respectively.
(b) Ratios are based on average net assets of $96,102,068.
(c) After fee waivers and/or expense reimbursement. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.64%, 4.69%, 4.96%, 1.53%, and 0.90%, for the periods
1997-1993, respectively.
FS-19
<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, 1997, 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. 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, 1997 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, 1997, 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, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 3, 1997
FS-20
<PAGE>
Shown below are the financial highlights for a share of capital stock
outstanding of the Private Investment Class during each of the years in the
four-year period ended August 31, 1997 and the period July 8, 1993 (date
operations commenced) through August 31, 1993.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- -------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.03 0.03
- ----------------------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03)
- ----------------------- -------- -------- -------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ======== ======== ======== ======= =======
Total return 5.21% 5.32% 5.48% 3.33% 3.24%(a)
======================= ======== ======== ======== ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $235,447 $209,443 $154,278 $30,834 $17,857
======================= ======== ======== ======== ======= =======
Ratio of expenses to
average net assets(b) 0.39%(c) 0.39% 0.39% 0.38% 0.37%(a)
======================= ======== ======== ======== ======= =======
Ratio of net investment
income to average net
assets(d) 5.10%(c) 5.20% 5.50% 3.32% 2.85%(a)
======================= ======== ======== ======== ======= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.59%, 0.59%, 0.60%, 1.38% and 0.57% (annualized) for the periods 1997-
1993, respectively.
(c) Ratios are annualized and based on average net assets of $228,251,467.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.90%, 5.00%, 5.29%, 2.32% and 2.65% (annualized) for
the periods 1997-1993, 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 the
Prime Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1997, 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 four-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, 1997 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, 1997, 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 four-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 3, 1997
FS-22
<PAGE>
Shown below are the financial highlights for a share of capital stock
outstanding of the Resource Class during the year ended August 31, 1997 and the
period January 16, 1996 (date operations commenced) through August 31, 1996.
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- --------------------------------------------- -------- -------
Income from investment operations:
Net investment income 0.05 0.03
- --------------------------------------------- -------- -------
Less distributions:
Dividends from net investment income (0.05) (0.03)
- --------------------------------------------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00
============================================= ======== =======
Total return 5.36% 5.23%(a)
============================================= ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $161,701 $58,012
============================================= ======== =======
Ratio of expenses to average net assets(b) 0.25%(c) 0.25%(a)
============================================= ======== =======
Ratio of net investment income to average net
assets(d) 5.25%(c) 5.18%(a)
============================================= ======== =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursement were
0.29% and 0.29% (annualized), for the periods 1997-1996, respectively.
(c) Ratios are based on average net assets of $122,225,567.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.21% and 5.14% (annualized), for the periods 1997-
1996, respectively.
FS-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees 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, 1997, 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 year ended August 31, 1997 and 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, 1997 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, 1997, 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 year ended
August 31, 1997 and 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 3, 1997
FS-24
<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 17, 1997
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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 100
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:
the Institutional Class, the Private Investment Class and the MSTC Cash
Reserves Class. 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 a
2
<PAGE>
Master 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." Under a Transfer Agency and Service Agreement, A I M
Institutional Fund Services, Inc. ("Transfer Agent"), AIM's wholly owned
subsidiary and a registered transfer agent, receives a fee for its provision of
transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund. It is currently anticipated that, effective on or about
December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a wholly owned
subsidiary of AIM and a registered transfer agent, will become the transfer
agent to the Fund. See "General Information--Transfer Agent and Custodian."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master 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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline 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
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)--CASH MANAGEMENT CLASS
Management Fees (after waivers)**....................................... 0.04%
12b-1 Fees (after waivers)**............................................ 0.08%
Other Expenses.......................................................... 0.03%
----
Total Operating Expenses--Cash Management Class**....................... 0.15%
====
</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 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........................................................... $ 2
3 years.......................................................... $ 5
5 years.......................................................... $ 8
10 years......................................................... $19
</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.) Expenses have been
restated to reflect current fee waivers. 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") during the year ended August 31, 1997 and 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,
1997 1996
------- -------------
<S> <C> <C>
Net asset value, beginning of period................ $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................. 0.05 0.03
------- -------
Less distributions:
Dividends from net investment income.............. (0.05) (0.03)
------- -------
Net asset value, end of period...................... $ 1.00 $ 1.00
======= =======
Total return........................................ 5.50% 5.36%(a)
======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $83,487 $53,209
======= =======
Ratio of expenses to average net assets(b).......... 0.15%(c) 0.10%(a)
======= =======
Ratio of net investment income to average net
assets(d).......................................... 5.38%(c) 5.27%(a)
======= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.28% and 0.34% (annualized), for the periods 1997-1996, respectively.
(c) Ratios are based on average net assets of $87,629,028.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.25% and 5.03% (annualized), for the periods 1997-
1996, 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 $1,000,000. 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. 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. It is anticipated
that most investors will perform their own sub-accounting; however, 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 may
invest in bankers' acceptances, certificates of deposit, time deposits and
commercial paper, and U.S. Government direct obligations and U.S. Government
agencies securities. Certain U.S. Government obligations with floating or
variable interest rates may have longer maturities. Commercial obligations may
include both domestic and foreign issuers that are U.S. dollar-denominated.
Bankers' acceptances, certificates of deposit and time deposits may be
purchased from U.S. or foreign banks. These instruments, which are collectively
referred to as "Money Market Obligations," are briefly described below.
The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 ("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.
The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.
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, liquid 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 liquid 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.
7
<PAGE>
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 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 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:
8
<PAGE>
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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order; or
3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions
set forth above (as well as certain others set forth in the Statement of
Additional Information) are matters of fundamental policy which may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Portfolio.
In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein. 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 Transfer
Agent 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. Following the initial investment, subsequent purchases of
shares of the Class may also be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Cash Management Class must be submitted to and received by
the Transfer Agent for execution on the same day on any day when the U.S.
primary broker-dealer community is closed for business or trading is restricted
due to national holidays.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for 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
Transfer Agent or (b) at the time the order is placed, if the Portfolio is
assured of payment.
9
<PAGE>
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 the Transfer Agent at P.O.
Box 4333, Houston, Texas 77210-4333. Account Applications may be obtained from
the Transfer Agent. 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 the Transfer Agent.
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-- Remote. 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 the Transfer Agent prior to 4:00 p.m. Eastern
Time on a business day of the Portfolio, the redemption will be effected at the
net asset value next determined on such day and the shares of the Portfolio to
be redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent nor FMC will 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
10
<PAGE>
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 may 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 of the
month. Such election, or any revocation thereof, must be made in writing by the
shareholder to the Transfer Agent at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173 and will become effective with dividends paid after its
receipt by the Transfer Agent. 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.
11
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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 the
Transfer Agent.
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.
12
<PAGE>
YIELD INFORMATION
Yield information for the Class can be obtained by calling FMC at (800) 877-
7745. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the 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, 1997, 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 5.59% and 5.74%, 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. Information concerning the Board of Directors may be
found in the Statement of Additional Information. Certain directors and
officers of the Fund are affiliated with AIM and A I M Management Group Inc.
("AIM Management"), the parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages, advises or administers 55 investment company portfolios. AIM is a
wholly owned subsidiary of AIM Management, a holding company engaged in the
financial services business. AIM Management is an indirect wholly owned
subsidiary of AMVESCAP PLC, a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis.
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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, 1997, AIM received fees with respect to
the Portfolio which represented 0.04% of the Portfolio's average daily net
assets. During such fiscal year, the expenses of the Class, including AIM's
fees, amounted to 0.15% of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of February 28, 1997 with AIM, 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
February 28, 1997 (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 100, Houston, Texas 77046-1173. Certain directors and officers of
the Fund are affiliated with FMC and AIM Management. The Distribution Agreement
provides that FMC has the exclusive right to distribute shares of the Portfolio
either directly or through other broker-dealers, and receives no fees for its
services with respect to the Portfolio pursuant to the Distribution Agreement.
FMC is the distributor of several other mutual funds managed or advised by AIM.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or Institutions who
have sold or may sell significant amounts of shares. The total amount of such
additional bonus payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.
DISTRIBUTION PLAN
The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.10% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund and may be used to finance
such distribution-related services as expenses of organizing and conducting
sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Plan.
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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.
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. As of
December 1, 1997, Oppenheimer & Co. was the owner of record of 42.04%, and
Mellon Bank was the owner of record of 25.65%, of the outstanding shares of the
Class. As long as each of Oppenheimer & Co. and Mellon Bank 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.
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
100, Houston, Texas 77046-1173, acts as transfer agent for shares of the Class.
It is currently anticipated that, effective on or about December 29, 1997,
A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a registered
transfer agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, 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.
16
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SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 December 17, 1997
(800) 877-7745
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 CASH MANAGEMENT CLASS
Houston, Texas 77046-1173
(800) 877-7745 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <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 100 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............................ 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................ 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........... 13
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
- ----------------------------------------------------------------------------------------------------------
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 17, 1997 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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 100
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:
the Cash Management Class, the Private Investment Class and the MSTC Cash
Reserves Class. 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 a Master 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."
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Under a Transfer Agency and Service Agreement, A I M Institutional Fund
Services, Inc. ("Transfer Agent"), AIM's wholly owned subsidiary and a
registered transfer agent, receives a fee for its provision of transfer agency,
dividend distribution and disbursement, and shareholder services to the Fund.
It is currently anticipated that, effective on or about December 29, 1997,
A I M Fund Services, Inc. ("Transfer Agent"), a wholly owned subsidiary of AIM
and a registered transfer agent, will become the transfer agent to the Fund.
See "General Information -- Transfer Agent and Custodian."
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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline are service marks of A I M
Management Group Inc.
3
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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 (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)--INSTITUTIONAL CLASS
Management Fees**....................................................... 0.04%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... 0.02%
----
Total Operating Expenses--Institutional Class **........................ 0.06%
====
</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......................................................... $ 8
</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.) Expenses have been
restated to reflect current fee waivers. 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 three-year period ended
August 31, 1997 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,
1997 1996 1995 1994
---------- ---------- ---------- ---------------
<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 0.06 0.06 0.03
---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income.... (0.05) (0.06) (0.06) (0.03)
---------- ---------- ---------- ----------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total return............ 5.58% 5.68% 5.83% 3.83%(a)
========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted).. $3,787,357 $1,988,755 $1,287,463 $1,028,350
========== ========== ========== ==========
Ratio of expenses to
average net assets(b).. 0.06%(d) 0.03% 0.11% 0.05%(a)
========== ========== ========== ==========
Ratio of net investment
income to average net
assets(c).............. 5.46%(d) 5.52% 5.69% 3.85%(a)
========== ========== ========== ==========
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.18% for the periods 1997-1994 annualized, respectively.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.34%, 5.37%, 5.62% and 3.72% (annualized) for the
periods 1997-1994, respectively.
(d) Ratios are based on average net assets of $2,740,680,327.
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. The minimum initial
investment is $10,000,000. 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.
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. It is anticipated that most investors
will perform their own subaccounting; however, subaccounting 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 may
invest in bankers' acceptances, certificates of deposit, time deposits and
commercial paper, and U.S. Government direct obligations and U.S. Government
agencies securities. Certain U.S. Government obligations with floating or
variable interest rates may have longer maturities. Commercial obligations may
include both domestic and foreign issuers that are U.S. dollar-denominated.
Bankers' acceptances, certificates of deposit and time deposits may be
purchased from U.S. or foreign banks. These instruments, which are collectively
referred to as "Money Market Obligations," are briefly described below.
The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 ("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.
The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.
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, liquid 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 liquid 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.
6
<PAGE>
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.
7
<PAGE>
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 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 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. 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
8
<PAGE>
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, and except that the Portfolio may
purchase securities of other investment companies to the extent permitted by
applicable law or exemptive order; or
3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions
set forth above (as well as certain others set forth in the Statement of
Additional Information) are matters of fundamental policy which may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Portfolio.
In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein. 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 Transfer
Agent 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. Following the initial investment, subsequent purchases of
shares of the Class may also be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Institutional Class must be submitted to and received by the
Transfer Agent for execution on the same day on any day when the U.S. primary
broker-dealer community is closed for business or trading is restricted due to
national holidays.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for 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
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 the Transfer Agent at P.O.
Box 4333, Houston, Texas 77210-4333. Account Applications may be obtained from
the Transfer Agent. 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 the Transfer Agent.
In the interest of economy and convenience, certificates representing shares
of the Class will not be issued except upon written request to the Fund.
Certificates (in full shares only) will be issued without charge and may be
redeposited at any time.
The Fund reserves the right in its sole discretion to withdraw all or any
part of the offering made by this Prospectus or to reject any purchase order.
10
<PAGE>
REDEMPTION OF SHARES
A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark-- Remote. 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 the Transfer Agent prior to 4:00 p.m. Eastern
Time on a business day of the Portfolio, the redemption will be effected at the
net asset value next determined on such day and the shares of the Portfolio to
be redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent nor FMC will 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 may 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
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 the
Transfer Agent at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 and
will become effective with dividends paid after its receipt by the Transfer
Agent. 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 the
Transfer Agent.
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 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, 1997, 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 5.67% and 5.83%, 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.
13
<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 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. Information concerning the Board of Directors may be
found in the Statement of Additional Information. Certain directors and
officers of the Fund are affiliated with AIM and A I M Management Group, Inc.
("AIM Management"), the parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages, advises or administers 55 investment company portfolios. AIM is a
wholly owned subsidiary of AIM Management, a holding company engaged in the
financial services business. AIM Management is an indirect wholly owned
subsidiary of AMVESCAP PLC, a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis.
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, 1997, AIM received fees with respect to
the Portfolio which represented 0.04% of the Portfolio's average daily net
assets. During such fiscal year, the expenses of the Class, including AIM's
fees, amounted to 0.06% of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of February 28, 1997 with AIM, 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
February 28, 1997 (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 100, 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>
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
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
100, Houston, Texas 77046-1173, acts as transfer agent for shares of the Class.
It is currently anticipated that, effective on or about December 29, 1997,
A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a registered
transfer agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
15
<PAGE>
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, 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 100
Houston, Texas 77046-1173 December 17, 1997
(800) 659-1005
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO
DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 INSTITUTIONAL CLASS
Houston, Texas 77046-1173
(800) 659-1005 TABLE OF CONTENTS
AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <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 100 Investment Program............. 6
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 The Liquid Assets Portfolio (the "Portfolio") is a money market fund whose
PORTFOLIO investment objective is to provide as high a level of current income as is consistent
with the preservation of capital and liquidity. The Portfolio seeks to achieve
PRIVATE its objective by investing in high quality money market instruments such
INVESTMENT as U.S. Government obligations, bank obligations, commercial instruments and
CLASS repurchase agreements.
DECEMBER 17, 1997 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 17, 1997, 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
[LOGO APPEARS HERE] SHARE. SHARES OF THE PORTFOLIO INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
Fund Management Company LOSS OF PRINCIPAL.
11 Greenway Plaza
Suite 100
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:
the Institutional Class, the Cash Management Class and the MSTC Cash Reserves
Class. 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 a
2
<PAGE>
Master 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." Under a Transfer Agency and Service Agreement, A I M
Institutional Fund Services, Inc. ("Transfer Agent"), AIM's wholly owned
subsidiary and a registered transfer agent, receives a fee for its provision of
transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund. It is currently anticipated that, effective on or about
December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a wholly owned
subsidiary of AIM and registered transfer agent, will become the transfer agent
to the Fund. See "General Information--Transfer Agent and Custodian."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master 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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline 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 (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)--PRIVATE INVESTMENT CLASS
Management Fees (after waivers)....................................... 0.04%**
12b-1 Fees (after waivers)***......................................... 0.30%**
Other Expenses........................................................ 0.02%
----
Total Operating Expenses--Private Investment Class.................... 0.36%
====
</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 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.......................................................... $12
5 years.......................................................... $20
10 years......................................................... $46
</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.) Expenses have been
restated to reflect current fee waivers. 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") during the year ended August 31, 1997 and 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
1997 AUGUST 31, 1996
------- -----------------
<S> <C> <C>
Net asset value, beginning of period............. $ 1.00 $ 1.00
Income from investment operations:
Net investment income.......................... 0.05 0.03
------- -------
Less distributions:
Dividends from net investment income........... (0.05) (0.03)
------- -------
Net asset value, end of period................... $ 1.00 $ 1.00
======= =======
Total return..................................... 5.27% 5.10%(a)
======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)......... $70,856 $44,981
======= =======
Ratio of expenses to average net assets(b) ...... 0.36%(c) 0.32%(a)
======= =======
Ratio of net investment income to average net
assets(d) ...................................... 5.16%(c) 5.04%(a)
======= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68% and 0.69% (annualized), for the periods 1997-1996, respectively.
(c) Ratios are based on average net assets of $56,842,586.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.84% and 4.67% (annualized), for the periods 1997-
1996, 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. 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.
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. It is anticipated that most investors will
perform their own sub-accounting; however, 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 may
invest in bankers' acceptances, certificates of deposit, time deposits and
commercial paper, and U.S. Government direct obligations and U.S. Government
agencies securities. Certain U.S. Government obligations with floating or
variable interest rates may have longer maturities. Commercial obligations may
include both domestic and foreign issuers that are U.S. dollar-denominated.
Bankers' acceptances, certificates of deposit and time deposits may be
purchased from U.S. or foreign banks. These instruments, which are collectively
referred to as "Money Market Obligations," are briefly described below.
The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 ("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.
The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.
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, liquid 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 liquid 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.
7
<PAGE>
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 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 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;
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 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; or
3) borrow money or issue senior securities except (a) for temporary or
emergency purposes (e.g., in order to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption
requests), the Portfolio may borrow money from banks or obtain funds by
entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.
The Portfolio's investment objective and the three investment restrictions
set forth above (as well as certain others set forth in the Statement of
Additional Information) are matters of fundamental policy which may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Portfolio.
In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein. 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 Transfer
Agent 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. Following the initial investment, subsequent purchases of
shares of the Class may also be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. 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. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Private Investment Class must be submitted to and received by
the Transfer Agent for execution on the same day on any day when the U.S.
primary broker-dealer community is closed for business or trading is restricted
due to national holidays.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for 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
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
9
<PAGE>
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 the Transfer Agent at P.O.
Box 4333, Houston, Texas 77210-4333. Account Applications may be obtained from
the Transfer Agent. 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 the Transfer Agent.
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-- Remote. 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 the Transfer Agent prior to 4:00 p.m. Eastern
Time on a business day of the Portfolio, the redemption will be effected at the
net asset value next determined on such day and the shares of the Portfolio to
be redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent nor FMC will 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.
10
<PAGE>
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 may 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 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 of the
month. Such election, or any revocation thereof, must be made in writing by the
shareholder to the Transfer Agent at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173 and will become effective with dividends paid after its
receipt by the Transfer Agent. 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.
11
<PAGE>
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 the
Transfer Agent.
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
12
<PAGE>
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, 1997, 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 5.37% and 5.51%, 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. Information concerning the Board of Directors may be
found in the Statement of Additional Information. Certain directors and
officers of the Fund are affiliated with AIM and A I M Management Group Inc.
("AIM Management"), the parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its subsidiaries,
manages, advises or administers 55 investment company portfolios. AIM is a
wholly owned subsidiary of AIM Management, a holding company engaged in the
financial services business. AIM Management is an indirect wholly owned
subsidiary of AMVESCAP PLC, a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis.
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
13
<PAGE>
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, 1997, AIM received fees with respect to
the Portfolio which represented 0.04% of the Portfolio's average daily net
assets. During such fiscal year, the expenses of the Class, including AIM's
fees, amounted to 0.36% of the Class' average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated as
of February 28, 1997 with AIM, 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
February 28, 1997 (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 100, 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.
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. As of December
1, 1997, Mellon Bank was the owner of record of 81.93% 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 100, Houston,
Texas 77046-1173, acts as transfer agent for shares of the Class. It is
currently anticipated that, effective on or about December 29, 1997, A I M Fund
Services, Inc., a wholly owned subsidiary of AIM and a registered transfer
agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, 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.
11 Greenway Plaza, Suite 100 PROSPECTUS
Houston, Texas 77046-1173
(800) 877-7748 December 17, 1997
INVESTMENT ADVISOR SHORT-TERM
A I M ADVISORS, INC. INVESTMENTS CO.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 ------------
(713) 626-1919
LIQUID ASSETS PORTFOLIO
DISTRIBUTOR
FUND MANAGEMENT COMPANY ------------
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 PRIVATE INVESTMENT CLASS
(800) 877-7748
TABLE OF CONTENTS
AUDITORS
KPMG PEAT MARWICK LLP <TABLE>
700 Louisiana <CAPTION>
Houston, Texas 77002 PAGE
----
CUSTODIAN <S> <C>
THE BANK OF NEW YORK Summary........................... 2
90 Washington Street
11th Floor Table of Fees and Expenses........ 4
New York, New York 10286
Financial Highlights.............. 5
TRANSFER AGENT
A I M INSTITUTIONAL FUND SERVICES, INC. Suitability For Investors......... 5
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 Investment Program................ 5
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 100
HOUSTON, TEXAS 77046-1173
(800) 659-1005
--------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS
OF THE ABOVE NAMED FUNDS, COPIES OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 100, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 659-1005
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 17, 1997 RELATING TO THE
PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE LIQUID ASSETS PORTFOLIO:
CASH MANAGEMENT CLASS PROSPECTUS DATED DECEMBER 17, 1997, INSTITUTIONAL CLASS
PROSPECTUS DATED DECEMBER 17, 1997 AND PRIVATE INVESTMENT CLASS PROSPECTUS DATED
DECEMBER 17, 1997
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION................................................................. 1
GENERAL INFORMATION ABOUT THE FUND........................................... 1
The Fund and Its Shares.................................................... 1
Directors and Officers..................................................... 3
Remuneration of Directors.................................................. 7
AIM Funds Retirement Plan for Eligible Directors/Trustees.................. 8
Deferred Compensation Agreements........................................... 9
Investment Advisor......................................................... 10
Administrator.............................................................. 11
Expenses................................................................... 11
Transfer Agent and Custodian............................................... 12
Reports.................................................................... 12
Fee Waivers................................................................ 12
Principal Holders of Securities............................................ 12
PURCHASES AND REDEMPTIONS.................................................... 17
Net Asset Value Determination.............................................. 17
The Distribution Agreement................................................. 17
Distribution Plan.......................................................... 18
Banking Regulations........................................................ 18
Performance Information.................................................... 19
Redemptions in Kind........................................................ 20
INVESTMENT PROGRAM AND RESTRICTIONS.......................................... 20
Eligible Securities........................................................ 20
Commercial Paper Ratings................................................... 20
Bond Ratings............................................................... 21
Repurchase Agreements...................................................... 23
Investment Restrictions.................................................... 23
PORTFOLIO TRANSACTIONS....................................................... 24
TAX MATTERS.................................................................. 26
Qualification as a Regulated Investment Company............................ 26
Excise Tax On Regulated Investment Companies............................... 27
Portfolio Distributions.................................................... 27
Sale or Redemption of Shares............................................... 27
Foreign Shareholders....................................................... 28
Effect of Future Legislation; Local Tax Considerations..................... 28
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
17, 1997, the Institutional Class Prospectus dated December 17, 1997, and the
Private Investment Class Prospectus dated December 17, 1997 (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 100, Houston, Texas 77046-1173 or by calling (800) 659-
1005. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning 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 Prospectuses 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 of the
Board of Directors of the Fund. In such event, the remaining holders cannot
elect any members of the Board of Directors of the Fund.
1
<PAGE>
The Board of Directors may classify or reclassify any unissued shares of
any class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, 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.
2
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during at least the last five years are set forth below.
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (78) Director and Chairman of the Board of Directors,
11 Greenway Plaza, Suite 100 Chairman A I M Management Group Inc.,
Houston, TX 77046 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; and Vice Chairman and Director,
AMVESCAP PLC.
BRUCE L. CROCKETT (53) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief
McLean, VA 22102 Executive Officer, COMSAT Corporation;
and Chairman, Board of Governors of
INTELSAT (international communications
company).
OWEN DALY II (73) Director Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
JACK M. FIELDS (45) Director Formerly, Member of the U.S. House of
Texana Global, Inc. Representatives.
8810 Will Clayton Parkway
Jetero Plaza, Suite E
Humble, TX 77338
- ---------------------------------
* A director who is an "interested person" of the Fund and AIM as defined in the 1940 Act.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
**CARL FRISCHLING (60) Director Partner, Kramer, Levin, Naftalis & Frankel
919 Third Avenue (law firm); and Director, ERD Waste, Inc.
New York, NY 10022 (waste management company), Aegis
Consumer Finance (auto leasing company)
and Lazard Funds, Inc. (investment
companies). Formerly, Partner, Reid &
Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky &
Frischling (law firm).
*ROBERT H. GRAHAM (51) Director and Director, President and Chief Executive
11 Greenway Plaza, Suite 100 President Officer, A I M Management Group Inc.;
Houston, TX 77046 Director and President, A I M Advisors, Inc.;
Director and Senior Vice President,
A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services,
Inc., A I M Institutional Fund Services, Inc.
and Fund Management Company; Director,
AMVESCAP PLC; and Chairman of the
Board of Directors of AIM Funds Group
Canada Inc.
JOHN F. KROEGER (73) Director Director, Flag Investors International Fund,
37 Pippins Way Inc., Flag Investors Emerging Growth Fund,
Morristown, NJ 07960 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 as defined in the 1940 Act.
* A director who is an "interested person" of the Fund and AIM as defined in the 1940 Act.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
LEWIS F. PENNOCK (55) Director Attorney in private practice in Houston,
6363 Woodway, Suite 825 Texas.
Houston, TX 77057
IAN W. ROBINSON (74) Director Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management
Tequesta, FL 33469 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 (58) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
*JOHN J. ARTHUR (53) Senior Vice Director, Senior Vice President and
11 Greenway Plaza, Suite 100 President and Treasurer, A I M Advisors, Inc.; and Vice
Houston, TX 77046 Treasurer 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 (50) Senior Vice Director and President, A I M Capital
11 Greenway Plaza, Suite 100 President Management, Inc.; Director and Senior Vice
Houston, TX 77046 President, A I M Management Group Inc. and
A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP
PLC.
- ---------------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
***CAROL F. RELIHAN (43) Senior Vice Director, Senior Vice President, General
11 Greenway Plaza, Suite 100 President and Counsel and Secretary, A I M Advisors, Inc.;
Houston, TX 77046 Secretary Vice President, General Counsel and
Secretary, A I M Management Group Inc.;
Director, Vice President and General
Counsel, Fund Management Company;
General Counsel and Vice President,
A I M Fund Services, Inc. and A I M
Institutional Fund Services, Inc.; and Vice
President, A I M Capital Management, Inc.
and A I M Distributors, Inc.
DANA R. SUTTON (38) Vice President Vice President and Fund Controller,
11 Greenway Plaza, Suite 100 and Assistant A I M Advisors, Inc.; and Assistant Vice
Houston, TX 77046 Treasurer President and Assistant Treasurer, Fund
Management Company.
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance Officer,
11 Greenway Plaza, Suite 100 A I M Advisors, Inc., A I M Capital
Houston, TX 77046 Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management
Company.
J. ABBOTT SPRAGUE (42) Vice President Director and President, Fund Management
11 Greenway Plaza, Suite 100 Company; Director and Senior Vice
Houston, TX 77046 President, A I M Institutional Fund Services,
Inc.; Director , A I M Fund Services, Inc.; and
Senior Vice President, A I M Advisors, Inc.
and A I M Management Group Inc.
KAREN DUNN KELLEY (37) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc. and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
===================================================================================================
</TABLE>
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. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. 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.
- ---------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
6
<PAGE>
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly
(Chairman), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. 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, Fields, Kroeger, Pennock (Chairman), Robinson 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.
7
<PAGE>
Set forth below is information regarding compensation paid or accrued 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 7,926 38,621 68,000
Owen Daly II 7,925 82,607 68,000
Jack M. Fields(4) 4,068 -0- -0-
Carl Frischling(5) 7,928 56,683 68,000
Robert H. Graham -0- -0- -0-
John F. Kroeger 7,925 83,654 66,000
Lewis F. Pennock 7,925 33,702 67,000
Ian W. Robinson 7,926 64,973 68,000
Louis S. Sklar 7,822 47,593 66,500
======================================================================================
</TABLE>
- ---------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1997, including interest earned
thereon, was $35,772.
(2) During the fiscal year ended August 31, 1997, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$62,215. Data reflects compensation earned for the calendar year ended
December 31, 1996.
(3) Each Director serves as a director or trustee of a total of 11 registered
investment companies advised by AIM (comprised of 47 portfolios). Data
reflects compensation earned for the calendar year ended December 31,
1996.
(4) Mr. Fields was not serving as a Director during the calendar year ended
December 31, 1996.
(5) See also page 10 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
8
<PAGE>
number of such Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is payable
to each eligible director in quarterly installments for a period of no more than
five years. If an eligible director dies after attaining the normal retirement
date but before receipt of any benefits under the Plan commences, the director's
surviving spouse (if any) shall receive a quarterly survivor's benefit equal to
50% of the amount payable to the deceased director, for no more than 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 a specified level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar are 10, 10, 0, 20, 19, 15, 10 and 7 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
========================================================================
Number of Annual Retainer Paid By All AIM Funds
Years of
Service With $80,000
the AIM Funds
========================================================================
10 $60,000
9 $54,000
8 $48,000
7 $42,000
6 $36,000
5 $30,000
========================================================================
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 (5) or ten
(10) years (depending on the Agreement) 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, 1997, $16,789 in directors' fees
and expenses were allocated to the Portfolio.
9
<PAGE>
The Portfolio paid legal fees of $8,944 for the year ended August 31, 1997
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 100, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated February 28, 1997 (the "Advisory Agreement").
AIM was organized in 1976 and, together with its subsidiaries, advises,
manages or administers 55 investment company portfolios. AIM is a wholly owned
subsidiary of A I M Management Group Inc. ("AIM Management"), a holding company
that has been engaged in the financial services business since 1976, 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR,
United Kingdom. AMVESCAP PLC and its subsidiaries are an independent investment
management group engaged in the business of investment management on an
international basis. 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 fiscal years ended August 31, 1997, 1996 and 1995 AIM received
advisory fees with respect to the Portfolio in the amounts of $1,024,843,
$125,264 and $1,323,637, respectively. During the fiscal years ended August 31,
1997, 1996 and 1995 AIM voluntarily waived fees with respect to the Portfolio in
the amounts of $3,344,852, $2,562,094 and $1,127,509, respectively.
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."
10
<PAGE>
The Advisory Agreement will continue in effect until February 28, 1999, 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 February 28, 1997 between AIM and
the Fund (the "Administrative Services Agreement").
Under the Administrative Services Agreement, AIM performs, or arranges for
the performance of, accounting and other administrative services for the
Portfolio, which are not required to be performed by AIM under the Advisory
Agreement. As full compensation for the performance of such services, AIM is
reimbursed for any personnel and other costs (including 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.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for
the fiscal years ended August 31, 1997, 1996 and 1995 in the amounts of $68,372,
$52,710, and $97,044, respectively.
A I M Institutional Fund Services, Inc. ("AIFS") receives fees with respect
to the Portfolio for its provision of transfer agency and shareholder services
pursuant to a Transfer Agency and Service Agreement with the Fund. For the
period from August 31, 1994 through June 30, 1995 AIFS or its affiliates
received shareholder services fees from AIM with respect to the Portfolio in the
amount of $38,870. For the fiscal years ended August 31, 1997 and 1996, AIFS
received transfer agency and shareholder services fees with respect to the
Portfolio in the amounts of $260,721 and $133,085, 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)
11
<PAGE>
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.
Expenses of the Fund except those listed below are prorated among all classes of
such Portfolios. 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"), 90 Washington Street, 11th Floor, New York,
New York 10286, 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.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 100,
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. It is currently anticipated that,
effective on or about December 29, 1997, A I M Fund Services, Inc., a wholly
owned subsidiary of AIM and a registered transfer agent, will become the
transfer agent to 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, 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.
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, 1997, and the percentage of the Prime Portfolio's outstanding shares
owned by such shareholders as of such date are as follows:
12
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
CASH MANAGEMENT CLASS
- ---------------------
The Bank of New York 40.75%**
One Wall Street 2nd Floor
New York, NY 10286
Oppenheimer & Co. 14.79%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Fund Services Associates 9.27%
11835 West Olympic Blvd
Suite 205
Los Angeles, CA 90064
INSTITUTIONAL CLASS
- -------------------
Comerica Bank 15.53%
P.O. Box 75000
Detroit, MI 48275-3455
U.S. Bank of Oregon 14.66%
555 Southwest Oak
Portland, OR 97208-3168
Frost National Bank 7.45%
P.O. Box 1600
San Antonio, TX 78296
Trust Company Bank 5.51%
Center 3131
P.O. Box 105504
Atlanta, GA 30348
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
13
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
PERSONAL INVESTMENT CLASS
- -------------------------
The Bank of New York 70.46%**
4 Fisher Lane
White Plains, NY 10603
Cullen / Frost Discount Brokers 26.15%**
P.O. Box 2358
San Antonio, TX 78299
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corp. 38.17%**
41 High Street 9th Floor
Columbus, OH 43287
Frost National Bank 13.83%
P.O. Box 2950
San Antonio, TX 78299-2950
Liberty Registration Company 12.30%
of Oklahoma City
P.O. Box 25848
Oklahoma City, OK 73125-0000
First Trust 12.09%
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
LAU & CO. c/o Frost 7.16%
P.O. Box 2479
San Antonio, TX 78298-2479
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record 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*
--------------- -----------
RESOURCE CLASS
- --------------
Corestates Capital Markets 58.10%**
1345 Chestnut Street
Philadelphia, PA 19101
Mellon Bank 19.92%
P.O. Box 710
Pittsburgh, PA 15230-0710
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, 1997, and 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
- ---------------------
Oppenheimer & Co. 42.04%**
Oppenheimer Tower
World Financial Center
New York, NY 10281
Mellon Bank 25.65%**
P.O. Box 710
Pittsburgh, PA 15230
The Bank of New York 22.04%
One Wall Street, 2nd Floor
New York, NY 10286
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record 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*
--------------- -----------
INSTITUTIONAL CLASS
- -------------------
State Street Bank and Trust 15.90%
108 Myrtle Street
North Quincy, MA 02171
Trust Company Bank 13.76%
P.O. Box 105504
Atlanta, GA 30348
Comerica Bank 6.99%
P.O. Box 75000
Detroit, MI 48275
Paine Webber Incorporated 6.17 %
1000 Harbor Blvd. 6th Floor
Weehawken, NJ 07087
Wachovia Bank and Trust Co. 5.08%
P.O. Box 3075
Winston-Salem, NC 27150
U.S. Bank of Oregon 5.07%
321 Southwest Sixth
Portland, OR 97208
PRIVATE INVESTMENT CLASS
- ------------------------
Mellon Bank 81.93%**
P.O. Box 710
Pittsburgh, PA 15230-0710
MSTC CASH RESERVES CLASS
- ------------------------
Morgan Stanley Trust Company 100.00%**
1 Pierrepont Plaza
Brooklyn, NY 11201
- ----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record 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>
To the best of the knowledge of the Fund, as of December 1, 1997, the
directors and officers of the Fund as a group beneficially owned less than 1% of
each class of any portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
A complete description of the manner by which shares of a particular class
may be purchased, redeemed or exchanged appears in the Prospectus under the
heading "Purchase of Shares."
The right of redemption may be suspended or the date of payment postponed
when (a) trading on the New York Stock Exchange ("NYSE") is restricted, as
determined by applicable rules and regulations of the SEC, (b) the NYSE is
closed for other than customary weekend and 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 Fund not reasonably practicable.
A "business day" of the Portfolio is any day on which commercial banks in
the New York Federal Reserve district are open for business. The Portfolio,
however, reserves the right to change the time for which purchase and redemption
requests must be submitted to the Portfolio for execution on the same day on any
day when the U.S. primary broker-dealer community is closed for business or
trading is restricted due to national holidays.
NET ASSET VALUE DETERMINATION
Shares of each class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
The valuation of the portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Portfolio is permitted in accordance with applicable rules and regulations
of the SEC, including Rule 2a-7 under the 1940 Act, which require the Portfolio
to adhere to certain conditions. These rules require that the Portfolio maintain
a dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 calendar days or less and invest
only in securities determined by the Board of Directors to be "Eligible
Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Portfolio's price per share
at $1.00 as computed for the purpose of sales and redemptions. Such procedures
include review of the Portfolio's holdings by the Board of Directors, at such
intervals as they may deem appropriate, to determine whether the net asset value
calculated by using available market quotations or other reputable sources for
the Portfolio deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing holders of
the shares. In the event the Board of Directors determines that such a deviation
exists, it will take such corrective action as the Board of Directors deems
necessary and appropriate, including the sales of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity; the withholding of dividends; redemption of shares in kind; or the
establishment of a net asset value per share by using available market
quotations.
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
February 28, 1997 (the "Distribution Agreement") with FMC, a registered broker-
dealer and a wholly owned subsidiary of AIM, to act as the exclusive distributor
of the shares of each class of the Portfolio. The address of FMC is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. See "General Information about the
Fund -- Directors and
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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 each class of the
Portfolio. FMC does not receive any fees with respect to the shares of the
class of the Portfolio pursuant to the Distribution Agreement.
The Distribution Agreement will continue in effect until February 28, 1999
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 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, 1997, FMC received compensation
pursuant to the Plan in the amount of $70,103, or an amount equal to 0.08% of
the average net daily assets of the Cash Management Class and $170,528, or an
amount equal to 0.30% 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 $70,103 (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, $169,052 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 $1,476 (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, an indirect, wholly owned
subsidiary of AMVESCAP PLC. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund, own shares of
AMVESCAP PLC.
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
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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 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, 1997, 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 5.59% and 5.74% for the Cash Management Class, 5.67% and 5.83% for
the Institutional Class and 5.37% and 5.51% for the Private Investment 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 Portfolio may compare the performance of a 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
Analytical Services, Inc., a widely recognized independent service located in
Summit, New Jersey, which monitors the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate, a
financial information network, or by Bloomberg, a financial information firm;
and
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<PAGE>
. 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' 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).
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 Investors Service ("Moody's"), Standard & Poor's Rating
Services ("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
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<PAGE>
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.
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
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Bonds rated AAA are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market values of
bonds rated AAA move with interest rates, and hence provide the maximum safety
on all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.
A
Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior, but to some extent,
also economic conditions.
BBB
The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate. These
bonds have adequate asset coverage and normally are protected by satisfactory
earnings. Their susceptibility to changing conditions, particularly to
depressions, necessitates constant watching. Market values of these bonds are
more responsive to business and trade conditions than to interest rates. This
group is the lowest which qualifies for commercial bank investment.
FITCH - Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
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AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1."
REPURCHASE AGREEMENTS
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than five percent of its total assets in securities issued by the
issuer of the security, provided that such a fund may invest more than five
percent of its total assets in the First Tier securities of a single issuer for
a period of up to three business days after the purchase thereof if the money
market fund is a diversified investment company, provided further, that the fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of a
fund's total assets that are invested in securities of an issuer, a repurchase
agreement shall be deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the securities from the
money market fund is fully collateralized. To be fully collateralized, the
collateral must, among other things, consist entirely of U.S. Government
securities or securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by Requisite NRSROs.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio (as that term
is defined under "General Information about the Fund -- The Fund and its
Shares"), the Portfolio may not:
(1) concentrate 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and bank instruments, such as
CDs, bankers' acceptances, time deposits and bank repurchase agreements;
(2) purchase securities of any one issuer (other than obligations of
the U.S. Government, its agencies or instrumentalities) if, immediately
after such purchase, more than 5% of the value of the Portfolio's total
assets would be invested in such issuer, except as permitted by Rule 2a-7
under the 1940 Act, as amended from time to time, and except that the
Portfolio may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order;
(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;
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<PAGE>
(5) make loans of money or securities other than (a) through the
purchase of debt securities in accordance with the Portfolio's investment
program, (b) by entering into repurchase agreements and (c) by lending
portfolio securities to the extent permitted by law or regulation;
(6) underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Portfolio's investment program may be
deemed an underwriting;
(7) invest in real estate, except that the Portfolio may purchase and
sell securities secured by real estate or interests therein or issued by
issuers which invest in real estate or interests therein;
(8) purchase or sell commodities or commodity futures contracts,
purchase securities on margin, make short sales or invest in puts or calls;
or
(9) invest in any obligation not payable as to principal and interest
in United States currency.
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, except that the Portfolio may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order.
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.
Research services received from broker-dealers supplement AIM's own
research (and the research of sub-advisors to other clients of AIM), and may
include the following types of information: statistical and background
information on the U.S. and foreign economies, industry groups and individual
companies, forecasts and interpretations with respect to U.S. and foreign
economies, securities, markets, specific industry groups and individual
companies; information on federal, state, local and foreign political
developments; portfolio management strategies, performance information on
securities, indexes and investment accounts; information concerning prices of
securities; and information supplied by specialized services to AIM and to the
Company's directors with respect to the performance, investment activities and
fees and expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the providing of equipment used to communicate research information, the
providing of specialized consultations with AIM personnel with respect to
computerized systems and data furnished to AIM as a component of other research
services, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information. 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
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<PAGE>
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 certain 5% holders, 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, certain 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 certain 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, 1997, 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.
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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 (1) must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) must satisfy
an asset diversification test in order to qualify for tax purposes as a
regulated investment company (the "Asset Diversification Test"). Under the
Asset Diversification Test, at the close of each quarter of a fund's taxable
year, at least 50% of the value of a fund's assets must consist of cash and cash
items, U.S. Government securities, securities of other regulated investment
companies, and securities of other issuers (as to which a fund has not invested
more than 5% of the value of a fund's total assets in securities of such issuer
and as to which a fund does not hold more than 10% of the outstanding voting
securities of such issuer), and no more than 25% of the value of its total
assets may be invested in the securities of any other issuer (other than U.S.
Government securities and securities of other regulated investment companies),
or in two or more issuers which a fund controls and which are engaged in the
same or similar trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
26
<PAGE>
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Portfolio may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
PORTFOLIO DISTRIBUTIONS
The Portfolio anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will not qualify for the 70% dividends received
deduction for corporations.
Distributions by the Portfolio will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the 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."
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 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
27
<PAGE>
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 realized 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
17, 1997. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisors as to the consequences of these and other state
and local tax rules affecting an investment in the Portfolio.
28
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1997
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 21.72%(a)
CAPITAL GOODS - 1.33%
MACHINERY - 1.33%
Caterpillar Financial Services Corp.
5.51% 12/08/97 $20,000 $ 19,700,011
- -----------------------------------------------------------------------
5.54% 01/12/98 2,530 2,478,218
- -----------------------------------------------------------------------
5.54% 01/15/98 12,800 12,532,110
- -----------------------------------------------------------------------
5.53% 04/03/98 19,300 18,665,555
- -----------------------------------------------------------------------
Total Capital Goods 53,375,894
- -----------------------------------------------------------------------
CONSUMER DURABLES - 5.39%
AUTOMOBILE - 3.91%
Daimler-Benz North America Corp.
5.52% 11/07/97 25,000 24,743,167
- -----------------------------------------------------------------------
5.52% 11/18/97 30,000 29,641,200
- -----------------------------------------------------------------------
5.51% 01/16/98 25,000 24,475,784
- -----------------------------------------------------------------------
5.54% 02/04/98 15,000 14,639,900
- -----------------------------------------------------------------------
5.50% 02/11/98 20,000 19,502,397
- -----------------------------------------------------------------------
Ford Motor Credit Co.
5.53% 12/09/97 20,000 19,695,850
- -----------------------------------------------------------------------
Hertz Corp.
5.53% 12/16/97 25,000 24,592,931
- -----------------------------------------------------------------------
157,291,229
- -----------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 0.61%
First Data Corp.
5.51% 01/21/98 25,000 24,456,653
- -----------------------------------------------------------------------
PAPERS & FOREST PRODUCTS - 0.87%
Weyerhaeuser Real Estate Co.
5.60% 09/30/97 35,000 35,000,000
- -----------------------------------------------------------------------
Total Consumer Durables 216,747,882
- -----------------------------------------------------------------------
ENERGY - 2.11%
OIL & GAS (INTEGRATED) - 2.11%
Shell 96
5.70% 09/24/97 30,000 30,000,000
- -----------------------------------------------------------------------
5.63% 10/22/97 30,000 30,000,000
- -----------------------------------------------------------------------
5.62% 12/03/97 25,000 25,000,000
- -----------------------------------------------------------------------
Total Energy 85,000,000
- -----------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - 9.93%
ASSET-BACKED SECURITIES - 1.48%
Delaware Funding Corp.
5.52% 10/20/97 $25,000 $ 24,812,166
- ----------------------------------------------------------------------
5.55% 11/05/97 10,107 10,005,719
- ----------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.53% 12/15/97 25,000 24,596,771
- ----------------------------------------------------------------------
59,414,656
- ----------------------------------------------------------------------
BROKERAGE/INVESTMENTS - 0.62%
Merrill Lynch & Co., Inc.
5.29% 11/10/97 25,000 24,742,847
- ----------------------------------------------------------------------
LEASING COMPANIES - 0.25%
International Lease Finance Corp.
5.52% 11/10/97 10,000 9,892,666
- ----------------------------------------------------------------------
PERSONAL CREDIT - 3.48%
Associates Corp. of North America
5.62% 09/02/97 140,000 139,978,144
- ----------------------------------------------------------------------
MULTIPLE INDUSTRY - 4.10%
General Electric Capital Corp.
5.63% 09/02/97 140,000 139,978,125
- ----------------------------------------------------------------------
5.42% 09/09/97 25,000 24,969,889
- ----------------------------------------------------------------------
164,948,014
- ----------------------------------------------------------------------
Total Financial 398,976,327
- ----------------------------------------------------------------------
UTILITIES - 1.13%
TELEPHONE - 1.13%
MCI Communications Corp.
5.50% 12/04/97 10,000 9,856,389
- ----------------------------------------------------------------------
5.50% 12/16/97 10,000 9,838,056
- ----------------------------------------------------------------------
5.52% 12/18/97 16,000 15,735,040
- ----------------------------------------------------------------------
5.50% 12/22/97 10,000 9,828,889
- ----------------------------------------------------------------------
Total Utilities 45,258,374
- ----------------------------------------------------------------------
OTHER - 1.83%
METAL MINING- 0.61%
RTZ America, Inc.
5.53% 01/13/98 25,000 24,485,403
- ----------------------------------------------------------------------
MISCELLANEOUS - 1.22%
Cargill Incorporated
5.51% 12/19/97 25,000 24,582,924
- ----------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
OTHER - (continued)
MISCELLANEOUS - (CONTINUED)
Cargill Financial Services Corp.
5.52% 01/21/98 $25,000 $ 24,455,667
- ------------------------------------------------------------------------------
49,038,591
- ------------------------------------------------------------------------------
Total Other 73,523,994
- ------------------------------------------------------------------------------
Total Commercial Paper 872,882,471
- ------------------------------------------------------------------------------
BANK NOTES - 1.04%
First U.S.A. Bank
6.03% 09/30/97 42,000 42,013,702
- ------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT - 0.49%
Huntington National Bank
6.23% 04/24/98 20,000 20,040,517
- ------------------------------------------------------------------------------
COMMERCIAL PAPER TRUST CERTIFICATES - 4.23%
Citibank, N.A.
5.82%(b) 12/26/97 170,000 170,000,000
- ------------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 17.27%
Goldman Sachs Group (The), L.P.
5.625%(c) 10/20/97 178,000 178,000,000
- ------------------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.
5.9875%(d) 08/17/98 155,000 155,000,000
- ------------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.7875%(e) 10/06/97 185,000 185,000,000
- ------------------------------------------------------------------------------
Morgan Stanley Group Inc.
5.7875%(f) 11/24/97 177,000 177,000,000
- ------------------------------------------------------------------------------
Total Master Note Agreements 695,000,000
- ------------------------------------------------------------------------------
MEDIUM TERM NOTES - 0.62%
Associates Corp. of North America
5.69%(g) 03/02/98 25,000 24,990,374
- ------------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 1,824,927,064
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 54.87%(h)
Bear, Stearns & Co. Inc.
5.63%(i) -- 140,000 140,000,000
- ------------------------------------------------------------------------------
CIBC Wood Gundy Securities Corp.
5.62%(j) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
Deutsche Bank Securities Corp.
5.64%(k) -- 140,000 140,000,000
- ------------------------------------------------------------------------------
Dresdner Securities (USA) Inc.
5.62%(l) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Goldman, Sachs & Co.
5.60%(m) 09/02/97 $105,916 $ 105,916,016
- ------------------------------------------------------------------------------
5.61%(n) 09/02/97 195,606 195,605,918
- ------------------------------------------------------------------------------
Greenwich Capital Markets, Inc.
5.62%(o) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
HSBC Securities, Inc.
5.64%(p) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
Merrill Lynch Government Securities Inc.
5.69%(q) -- 400,000 400,000,000
- ------------------------------------------------------------------------------
Nesbitt Burns Securities Inc.
5.62%(r) -- 125,000 125,000,000
- ------------------------------------------------------------------------------
Sanwa Securities (USA) Co., L.P.
5.62%(s) 09/02/97 147,732 147,732,342
- ------------------------------------------------------------------------------
SBC Capital Markets, Inc.
5.62%(t) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
UBS Securities LLC.
5.62%(u) 09/02/97 252,650 252,649,596
- ------------------------------------------------------------------------------
Total Repurchase Agreements 2,206,903,872
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.24% 4,031,830,936(v)
- ------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.24)% (9,620,578)
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $4,022,210,358
==============================================================================
</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) Variable rate trust certificates representing an interest in a trust
(comprised of eligible debt obligations) entitling the Portfolio to receive
variable rate interest. The Fund has the right, upon seven calendar days'
notice to the trustee, to put its certificates to the trust at par value
plus accrued interest. Because variable rate trust certificates involve a
trust and a third party put feature, they involve complexities and
potential risks that may not be present where the debt obligation is owned
directly. Rate shown is the rate in effect on 08/31/97.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven business days' prior written notice to
the issuer. Interest rates on master notes are redetermined periodically.
Rate shown is the rate in effect on 08/31/97.
(d) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon two business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 08/31/97.
(e) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven days' notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
08/31/97 .
(f) Master Note Purchase Agreement may be terminated by either party upon three
business days' prior written 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 08/31/97.
(g) Interest rates are redetermined daily. Rate shown is the rate in effect on
08/31/97.
FS-4
<PAGE>
(h) 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.
(i) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $268,177,242 U.S. Government obligations, 0% to 11.50%
due 02/01/01 to 09/01/27 with an aggregate market value at 08/31/97 of
$208,921,813.
(j) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889. Collateralized by $200,585,000 U.S. Government obligations,
5.53% to 7.93% due 02/02/98 to 07/30/07 with an aggregate market value at
08/31/97 of $204,002,656.
(k) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $243,062,487 U.S. Government obligations, 0% to 9.00% due
11/24/97 to 08/20/27 with an aggregate market value at 08/31/97 of
$204,000,923.
(l) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889. Collateralized by $356,015,498 U.S. Government obligations,
0% to 7.778% due 07/01/01 to 02/01/37 with an aggregate market value at
08/31/97 of $204,000,810.
(m) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$250,155,556. Collateralized by $246,226,835 U.S. Government obligations,
6.752% to 8.111 % due 07/01/22 to 08/01/36 with an aggregate market value
at 08/31/97 of $255,000,001.
(n) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$400,249,333. Collateralized by $403,862,867 U.S. Government obligations,
5.901% to 8.117% due 12/01/17 to 01/01/35 with an aggregate market value at
08/31/97 of $408,000,001.
(o) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $299,652,416 U.S. Government obligations,
5.50% to 10.00% due 09/01/00 to 06/01/27 with an aggregate market value at
08/31/97 of $306,000,589.
(p) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,188,000. Collateralized by $340,004,979 U.S. Government obligations,
0% to 9.00% due 04/15/98 to 11/01/35 with an aggregate market value at
08/31/97 of $306,000,024.
(q) Open repurchase agreement. Either party may terminate the agreement upon
demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $467,972,543 U.S. Government obligations 5.50% to 12.00%
due 10/01/01 to 09/01/27 with an aggregate market value at 08/31/97 of
$408,001,549.
(r) Open repurchase agreement. Either party may terminate the agreement upon
demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $130,662,000 U.S. Government obligations, 0% to 7.21% due
10/17/97 to 07/15/20 with an aggregate market value at 08/31/97 of
$127,500,871.
(s) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889 . Collateralized by $203,307,000 U.S. Government obligations,
0% to 7.875% due 09/02/97 to 08/27/12 with an aggregate market value at
08/31/97 of $204,000,079.
(t) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $304,538,273 U.S. Government obligations,
6.029% to 9.00% due 06/01/09 to 09/01/36 with an aggregate market value at
08/31/97 of $307,989,473.
(u) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $351,233,831 U.S. Government obligations,
0% to 9.00% due 01/15/03 to 08/15/27 with an aggregate market value at
08/31/97 of $306,004,400.
(v) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $1,824,927,064
- ------------------------------------------------------------------------
Repurchase agreements 2,206,903,872
- ------------------------------------------------------------------------
Interest receivable 8,221,689
- ------------------------------------------------------------------------
Investment for deferred compensation plan 33,770
- ------------------------------------------------------------------------
Other assets 44,228
- ------------------------------------------------------------------------
Total assets 4,040,130,623
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 17,643,247
- ------------------------------------------------------------------------
Deferred compensation 33,770
- ------------------------------------------------------------------------
Accrued advisory fees 141,022
- ------------------------------------------------------------------------
Accrued distribution fees 35,839
- ------------------------------------------------------------------------
Accrued administrative services fees 6,491
- ------------------------------------------------------------------------
Accrued transfer agent fees 27,000
- ------------------------------------------------------------------------
Accrued operating expenses 32,896
- ------------------------------------------------------------------------
Total liabilities 17,920,265
- ------------------------------------------------------------------------
NET ASSETS $4,022,210,358
========================================================================
NET ASSETS:
Institutional Class $3,787,357,429
========================================================================
Cash Management Class $ 83,487,131
========================================================================
Private Investment Class $ 70,855,883
========================================================================
MSTC Cash Reserves Class $ 80,509,915
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 3,788,657,933
========================================================================
Cash Management Class 83,515,172
========================================================================
Private Investment Class 70,880,159
========================================================================
MSTC Cash Reserves Class 80,537,499
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $160,945,206
- -------------------------------------------------------------------
EXPENSES:
Advisory
fees 4,369,695
- -------------------------------------------------------------------
Custodian fees 174,747
- -------------------------------------------------------------------
Administrative services fees 68,372
- -------------------------------------------------------------------
Distribution fees (Note 2) 427,798
- -------------------------------------------------------------------
Directors' fees and expenses 16,789
- -------------------------------------------------------------------
Transfer agent fees 260,721
- -------------------------------------------------------------------
Other 355,240
- -------------------------------------------------------------------
Total expenses 5,673,362
- -------------------------------------------------------------------
Less: Fee waivers and expense reimbursements (3,476,063)
- -------------------------------------------------------------------
Net expenses 2,197,299
- -------------------------------------------------------------------
Net investment income 158,747,907
- -------------------------------------------------------------------
Net realized gain on sales of investments 352,792
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $159,100,699
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 158,747,907 $ 98,908,897
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments 352,792 (1,596,067)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 159,100,699 97,312,830
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (149,604,986) (97,295,860)
- ----------------------------------------------------------------------------
Cash Management Class (4,717,164) (689,376)
- ----------------------------------------------------------------------------
Private Investment Class (2,931,782) (923,661)
- ----------------------------------------------------------------------------
MSTC Cash Reserves Class (1,493,975) --
- ----------------------------------------------------------------------------
Capital stock transactions -- net 1,934,913,244 801,077,731
- ----------------------------------------------------------------------------
Net increase in net assets 1,935,266,036 799,481,664
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,086,944,322 1,287,462,658
- ----------------------------------------------------------------------------
End of period $4,022,210,358 $2,086,944,322
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,023,590,763 $2,088,677,519
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (1,380,405) (1,733,197)
- ----------------------------------------------------------------------------
$4,022,210,358 $2,086,944,322
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
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 Liquid Assets Portfolio (the
"Portfolio") with assets, liabilities and operations of each portfolio
accounted for separately. The Portfolio consists of four different classes of
shares: the Institutional Class, the Cash Management Class, the Private
Investment Class and the MSTC Cash Reserves Class. Matters affecting each class
are voted on exclusively by the shareholders of each class. The Portfolio is a
money market fund whose 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 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 $1,380,405 (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 - Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses are allocated among the classes.
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 at the annual rate of
0.15% of the average daily net assets of the Portfolio. During the year ended
August 31, 1997, AIM voluntarily waived fees of $3,344,852 on the Portfolio.
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, 1997,
the Portfolio reimbursed AIM $68,372 for such services.
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, 1997, the Portfolio paid AIFS $260,721 for such services. On
September 19, 1997, the Board of Directors of the Fund approved the appointment
of A I M Fund Services, Inc. ("AFS") as transfer agent of the Fund to be
effective in late 1997 or early 1998.
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 Cash Management Class and the MSTC Cash
FS-9
<PAGE>
Reserves Class of the Portfolio. The Plan provides that the Private Investment
Class, Cash Management Class and the MSTC Cash Reserves Class pay FMC up to a
maximum annual rate of 0.50%, 0.10% and 0.20%, respectively, of the average
daily net assets attributable to such class. Of this amount, the Fund may pay
an asset-based sales charge to FMC and the Fund may pay a service fee of 0.25%,
0.10% and 0.20% of the average daily net assets, respectively, of each of the
Private Investment Class, the Cash Management Class and the MSTC Cash Reserves
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 Cash Management Class or
the MSTC Cash Reserves 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, 1997, the Private Investment Class, the Cash Management Class and the MSTC
Cash Reserves Class paid $170,528, $70,103 and $55,956, respectively, as
compensation under the Plan. FMC waived fees of $131,211 for the same period.
Certain officers and directors of the Fund are officers of AIM, FMC, and AIFS.
During the year ended August 31, 1997, the Portfolio paid legal fees of $8,944
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of 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 may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 78,261,661,500 $78,261,661,500 51,676,611,824 $ 51,676,611,824
- ----------------------------------------------------------------------------------------------
Cash Management Class* 1,034,402,514 1,034,402,514 320,121,330 320,121,330
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 342,644,258 342,644,258 136,803,186 136,803,186
- ----------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class*** 408,898,275 408,898,275 -- --
- ----------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 20,480,836 20,480,836 4,477,681 4,477,681
- ----------------------------------------------------------------------------------------------
Cash Management Class* 2,312,729 2,312,729 283,906 283,906
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 2,744,701 2,744,701 727,956 727,956
- ----------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class*** 1,184,333 1,184,333 -- --
- ----------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (76,483,889,456) (76,483,889,456) (50,978,284,230) (50,978,284,230)
- ----------------------------------------------------------------------------------------------
Cash Management Class* (1,006,454,600) (1,006,454,600) (267,150,707) (267,150,707)
- ----------------------------------------------------------------------------------------------
Private Investment
Class** (319,526,727) (319,526,727) (92,513,215) (92,513,215)
- ----------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class*** (329,545,119) (329,545,119) -- --
- ----------------------------------------------------------------------------------------------
Net increase 1,934,913,244 $ 1,934,913,244 801,077,731 $ 801,077,731
==============================================================================================
</TABLE>
*The Cash Management Class commenced operations on January 17, 1996.
**The Private Investment Class commenced operations on February 16, 1996.
***The MSTC Cash Reserves Class commenced operations on September 23, 1996.
FS-10
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding of the Cash Management Class during the year ended August 31, 1997
and the period January 17, 1996 (date operations commenced) through August 31,
1996.
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- ------------------------------------------------------- ------- -------
Income from investment operations:
Net investment income 0.05 0.03
- ------------------------------------------------------- ------- -------
Less distributions:
Dividends from net investment income (0.05) (0.03)
- ------------------------------------------------------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00
======================================================= ======= =======
Total return 5.50% 5.36%(a)
======================================================= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $83,487 $53,209
======================================================= ======= =======
Ratio of expenses to average net assets(b) 0.15%(c) 0.10%(a)
======================================================= ======= =======
Ratio of net investment income to average net assets(d) 5.38%(c) 5.27%(a)
======================================================= ======= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.28% and 0.34% (annualized), for the periods 1997-1996, respectively.
(c) Ratios are based on average net assets of $87,629,028.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.25% and 5.03% (annualized), for the periods 1997-
1996, respectively.
FS-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Trust:
We have audited the accompanying statement of assets and liabilities of the
Liquid Assets Portfolio (a series portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for the year ended August 31, 1997 and 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, 1997 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, 1997, 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 year ended
August 31, 1997 and 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 3, 1997
FS-12
<PAGE>
Shown below are the financial highlights for a share of capital stock
outstanding of the Institutional Class during each of the years in the three-
year period ended August 31, 1997 and the period November 4, 1993 (date
operations commenced) through August 31, 1994.
<TABLE>
<CAPTION>
1997 1996 1995 1994
---------- ---------- ---------- ----------
<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 0.06 0.06 0.03
- ----------------------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.05) (0.06) (0.06) (0.03)
- ----------------------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ========== ========== ========== ==========
Total return 5.58% 5.68% 5.83% 3.83%(a)
======================= ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $3,787,357 $1,988,755 $1,287,463 $1,028,350
======================= ========== ========== ========== ==========
Ratio of expenses to
average net assets(b) 0.06%(d) 0.03% 0.11% 0.05%(a)
======================= ========== ========== ========== ==========
Ratio of net investment
income to average net
assets(c) 5.46%(d) 5.52% 5.69% 3.85%(a)
======================= ========== ========== ========== ==========
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.18% for the periods 1997-1994 annualized, respectively.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.34%, 5.37%, 5.62% and 3.72% (annualized) for the
periods 1997-1994, respectively.
(d) Ratios are based on average net assets of $2,740,680,327.
FS-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders
Short-Term Investments Trust:
We have audited the accompanying statement of assets and liabilities of the
Liquid Assets Portfolio (a series portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1997, 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 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, 1997 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, 1997, 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 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 3, 1997
FS-14
<PAGE>
Shown below are the financial highlights for a share of capital stock
outstanding of the Private Investment Class during the year ended August 31,
1997 and the period February 16, 1996 (date operations commenced) through
August 31, 1996.
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- ------------------------------------------------------- ------- -------
Income from investment operations:
Net investment income 0.05 0.03
- ------------------------------------------------------- ------- -------
Less distributions:
Dividends from net investment income (0.05) (0.03)
- ------------------------------------------------------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00
======================================================= ======= =======
Total return 5.27% 5.10%(a)
======================================================= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,856 $44,981
======================================================= ======= =======
Ratio of expenses to average net assets(b) 0.36%(c) 0.32%(a)
======================================================= ======= =======
Ratio of net investment income to average net assets(d) 5.16%(c) 5.04%(a)
======================================================= ======= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68% and 0.69% (annualized), for the periods 1997-1996, respectively.
(c) Ratios are based on average net assets of $56,842,586.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.84% and 4.67% (annualized), for the periods 1997-
1996, respectively.
FS-15
<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, 1997, 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 year ended August 31, 1997 and 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, 1997 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, 1997, 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 year ended
August 31, 1997 and 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 3, 1997
FS-16
<PAGE>
PROSPECTUS
MSTC CASH RESERVES CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA, SUITE 100
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.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
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 17, 1997, 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 100, 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 17, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................... 2
TABLE OF FEES AND EXPENSES.. 4
FINANCIAL HIGHLIGHTS........ 5
SUITABILITY FOR INVESTORS... 5
INVESTMENT PROGRAM.......... 6
PURCHASE OF SHARES.......... 10
REDEMPTION OF SHARES........ 11
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DIVIDENDS................ 12
TAXES.................... 13
NET ASSET VALUE.......... 14
YIELD INFORMATION........ 14
REPORTS TO SHAREHOLDERS.. 15
MANAGEMENT OF THE FUND... 15
GENERAL INFORMATION...... 18
</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:
the Institutional Class, the Cash Management Class and the Private Investment
Class. 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 a Master 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." Under a Transfer Agency and Service
Agreement, A I M Institutional Fund Services, Inc. ("Transfer Agent"), AIM's
wholly owned subsidiary and a registered transfer agent, receives a fee for
its provision of transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund. It is currently anticipated that, effective
on or about December 29, 1997, A I M Fund Services, Inc. ("Transfer Agent"), a
wholly owned subsidiary of AIM and a registered transfer agent, will become
the transfer agent to the Fund. See "General Information--Transfer Agent and
Custodian."
DISTRIBUTOR AND DISTRIBUTION PLAN
Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master 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, AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline are service marks of A I M
Management Group Inc.
3
<PAGE>
TABLE OF FEES AND EXPENSES
<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 AS-
SETS) (AFTER FEE WAIVERS)--MSTC CASH RESERVES CLASS**
Management Fees (after waivers)**...................................... 0.04%
12b-1 Fees............................................................. 0.20%
Other Expenses......................................................... 0.03%
----
Total Portfolio Operating Expenses--MSTC Cash Reserves Class**......... 0.27%
====
</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 average net assets of
the Class and current fee waivers. If no fees were waived, Management
Fees and Total Operating Expenses would be 0.15% and 0.39%, respectively.
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............................................................... $ 9
5 years............................................................... $15
10 years.............................................................. $34
</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.) Expenses have
been restated to reflect current fee waivers. 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.
4
<PAGE>
FINANCIAL HIGHLIGHTS
Shown below are the per share data, ratios and supplemental data
(collectively, "data") for the period September 23, 1996 (date operations
commenced) through August 31, 1997. 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>
SEPTEMBER 23, 1996
(COMMENCEMENT OF
OPERATIONS)
TO AUGUST 31, 1997
------------------
<S> <C>
Net asset value, beginning of period......................... $ 1.00
Income from investment operations:
Net investment income...................................... 0.05
Less distributions:
Dividends from net investment income....................... (0.05)
-------
Net asset value, end of period............................... $ 1.00
-------
Total return(a).............................................. 5.37%
=======
Ratios/supplemental data:
Net assets, end of period (000s omitted)..................... $80,510
=======
Ratio of expenses to average net assets(b)................... 0.27%(c)
=======
Ratio of net investment income to average net assets(b)...... 5.34%(c)
=======
</TABLE>
- --------
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Annualized ratios of
expenses and net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 0.39% and 5.22%, respectively.
(c) Ratios are annualized and based on average net assets of $29,772,439.
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 record keeping. It is anticipated that most
investors will perform their own subaccounting. 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. Subaccounting 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, 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 Investment Company
Act of 1940 ("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.
The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.
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
6
<PAGE>
settlement date, liquid 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 liquid
assets in the segregated account may not exceed 25% of the Portfolio's total
assets.) The delayed delivery securities, which will not begin to accrue
interest until the settlement date, and the when-issued securities will be
recorded as an asset of the Portfolio and will be subject to the risks of
market value fluctuations. The purchase price of the delayed delivery or when-
issued securities will be recorded as a liability of the Portfolio until
settlement. AIM may also transact sales of securities on a "forward
commitment" basis. In such a transaction, AIM agrees to sell portfolio
securities at a future date at specified prices and yields. Securities subject
to sale on a forward commitment basis will continue to accrue interest until
sold and will be subject to the risks of market value fluctuations. Absent
extraordinary circumstances, the Portfolio's right to acquire delayed delivery
and when-issued securities or its obligation to sell securities on a forward-
commitment basis will not be divested prior to the settlement date.
The Portfolio may invest up to 100% of its total assets in obligations
issued by banks. While the Portfolio will limit its investments in bank
instruments to U.S.dollar-denominated obligations, it may invest in Eurodollar
obligations (i.e., U.S. dollar-denominated obligations issued by a foreign
branch of a domestic bank), Yankee dollar obligations (i.e., U.S. dollar-
denominated obligations issued by a domestic branch of a foreign bank) and
obligations of foreign branches of foreign banks, including time deposits. The
Portfolio will limit its aggregate investments in foreign bank obligations,
including Eurodollar obligations and Yankee dollar obligations, to 25% of its
total assets at the time of purchase, provided that there is no limitation
upon the Portfolio's investments in (a) Eurodollar obligations, if the
domestic parent of the foreign branch issuing the obligation is
unconditionally liable in the event that the foreign branch for any reason
fails to pay on the Eurodollar obligation; and (b) Yankee dollar obligations,
if the U.S. branch of the foreign bank is subject to the same regulation as
U.S. banks.
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets of $5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio
may involve risks that are different in some respects from those incurred by
an investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of foreign country withholding taxes on interest income payable on
Eurodollar CDs or Eurodollar time deposits, and the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on
Eurodollar CDs and Eurodollar time deposits.
The Portfolio may also lend its portfolio securities in amounts up to
33-1/3% of its total assets to financial institutions in accordance with the
investment restrictions of the Portfolio. Such loans would involve risks of
delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even loss of rights in the collateral
should the borrower of the securities fail financially. However, loans will be
made only to borrowers deemed by AIM to be of good standing and only when, in
AIM's judgment, the income to be earned from the loans justifies the attendant
risks.
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Portfolio reserves the right to invest in Money
Market Obligations other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS--These are bills, notes, and bonds issued
by the U.S. Treasury.
7
<PAGE>
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.
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.
8
<PAGE>
MASTER NOTES--Master notes are 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 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
9
<PAGE>
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, and except that the Portfolio
may purchase securities of other investment companies to the extent
permitted by applicable law or exemptive order; 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 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.
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. 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, 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 Transfer Agent 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. Following the initial investment, subsequent
purchases of shares of the Class may also be made via AIM LINK--Registered
Trademark-- Remote, a personal computer application software product. 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
10
<PAGE>
Day. Further, the Portfolio reserves the right to change the time for which
purchase orders for shares of the Class must be submitted to and received by
the Transfer Agent for execution on the same day on any day when the U.S.
primary broker-dealer community is closed for business or trading is
restricted due to national holidays.
Subject to the conditions stated above and the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for 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
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 the Transfer Agent at P.O.
Box 4333, Houston, Texas 77210-4333. Account Applications may be obtained from
the Transfer Agent. 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 the Transfer Agent.
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-- Remote. 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 pursuant to instructions designated in the shareholder's Account
Application. If a redemption request is received by the Transfer Agent prior
to 4:00 p.m. Eastern Time on a business day of the Portfolio, the redemption
will be effected
11
<PAGE>
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 the Transfer Agent 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. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent
for execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.
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. Neither the Transfer
Agent nor FMC will 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 may 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 the Transfer Agent at 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173 and will become effective with dividends
paid after its receipt by the Transfer Agent. 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 the
Transfer Agent.
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. Information concerning the Board of Directors may
be found in the Statement of Additional Information. Certain directors and
officers of the Fund are affiliated with AIM and A I M Management Group Inc.
("AIM Management"), the parent corporation of AIM.
INVESTMENT ADVISOR
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement dated as of February 28, 1997 (the "Advisory
Agreement"). AIM, organized in 1976, together with its subsidiaries, advises
or manages 55 investment company portfolios. AIM is a wholly owned subsidiary
of AIM Management, a holding company engaged in the financial services
business. AIM Management is an indirect wholly owned subsidiary of AMVESCAP
PLC, a publicly-traded holding company that, through its subsidiaries, engages
in the business of investment management on an international basis.
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.
15
<PAGE>
For the fiscal year ended August 31, 1997, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.04% of
the Portfolio's average daily net assets.
ADMINISTRATOR
The Fund has entered into a Master Administrative Services Agreement dated
as of February 28, 1997 with AIM, 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
February 28, 1997 (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 100, 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.
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. As of
December 1, 1997, Morgan Stanley Trust Company was the owner of record of
100.00% of the outstanding shares of the Class. As long as Morgan Stanley Trust
Company 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 100, Houston, Texas 77046-1173, acts as transfer agent for shares of the
Class. It is currently anticipated that, effective on or about December 29,
1997, A I M Fund Services, Inc., a wholly owned subsidiary of AIM and a
registered transfer agent, will become the transfer agent to the Fund.
LEGAL COUNSEL
The law firm of Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon legal matters.
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 100, 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
<PAGE>
SHORT-TERM INVESTMENTS CO. SHORT-TERM
INVESTMENTS CO.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
(800) 246-3426
INVESTMENT ADVISOR
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 MSTC CASH
(713) 626-1919 RESERVES CLASS
OF THE
DISTRIBUTOR --------------------------------------
FUND MANAGEMENT COMPANY
LIQUID ASSETS PORTFOLIO PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
(800) 659-1005
AUDITORS
KPMG PEAT MARWICK LLP
700 Louisiana
Houston, Texas 77002
CUSTODIAN DECEMBER 17, 1997
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 100
Houston, Texas 77046-1173
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTA-
TIONS 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 100
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 100, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 246-3426
----------------------------
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 17, 1997
RELATING TO THE PROSPECTUS DATED DECEMBER 17, 1997
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION............................................................... 1
GENERAL INFORMATION ABOUT THE FUND......................................... 1
The Fund and Its Shares.................................................. 1
Directors and Officers................................................... 3
Remuneration of Directors................................................ 7
AIM Funds Retirement Plan for Eligible Directors/Trustees................ 9
Deferred Compensation Agreements......................................... 9
Investment Advisor....................................................... 10
Administrator............................................................ 11
Expenses................................................................. 12
Transfer Agent and Custodian............................................. 12
Reports.................................................................. 12
Fee Waivers.............................................................. 13
Principal Holders of Securities.......................................... 13
PURCHASES AND REDEMPTIONS.................................................. 17
Net Asset Value Determination............................................ 18
The Distribution Agreement............................................... 18
Distribution Plan........................................................ 19
Banking Regulations...................................................... 19
Performance Information.................................................. 19
Redemptions in Kind...................................................... 20
INVESTMENT PROGRAM AND RESTRICTIONS........................................ 20
Eligible Securities...................................................... 21
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............................. 27
Portfolio Distributions.................................................. 28
Sale or Redemption of Shares............................................. 28
Foreign Shareholders..................................................... 28
Effect of Future Legislation; Local Tax Considerations................... 29
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 a Prospectus dated December 17, 1997 (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 100, 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.
1
<PAGE>
The Board of Directors may classify or reclassify any unissued shares of
any class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, 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.
2
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during at least the last five years are set forth below.
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (78) Director and Chairman of the Board of Directors,
11 Greenway Plaza, Suite 100 Chairman A I M Management Group Inc.,
Houston, TX 77046 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; and Vice Chairman and Director,
AMVESCAP PLC.
BRUCE L. CROCKETT (53) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief
McLean, VA 22102 Executive Officer, COMSAT Corporation;
and Chairman, Board of Governors of
INTELSAT (international communications
company).
OWEN DALY II (73) Director Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
JACK M. FIELDS (45) Director Formerly, Member of the U.S. House of
Texana Global, Inc. Representatives.
8810 Will Clayton Parkway
Jetero Plaza, Suite E
Humble, TX 77338
- --------------------------
* A director who is an "interested person" of the Fund and AIM as defined in the 1940 Act.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
**CARL FRISCHLING (60) Director Partner, Kramer, Levin, Naftalis & Frankel
919 Third Avenue (law firm); and Director, ERD Waste, Inc.
New York, NY 10022 (waste management company), Aegis
Consumer Finance (auto leasing company)
and Lazard Funds, Inc. (investment
companies). Formerly, Partner, Reid &
Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky &
Frischling (law firm).
*ROBERT H. GRAHAM (51) Director and Director, President and Chief Executive
11 Greenway Plaza, Suite 100 President Officer, A I M Management Group Inc.;
Houston, TX 77046 Director and President, A I M Advisors, Inc.;
Director and Senior Vice President,
A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services,
Inc., A I M Institutional Fund Services, Inc.
and Fund Management Company; Director,
AMVESCAP PLC; and Chairman of the
Board of Directors of AIM Funds Group
Canada Inc.
- --------------------------------
** A director who is an "interested person" of the Fund as defined in the 1940 Act.
* A director who is an "interested person" of the Fund and AIM as defined in the 1940 act.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
JOHN F. KROEGER (73) Director Director, Flag Investors International Fund,
37 Pippins Way Inc., Flag Investors Emerging Growth Fund,
Morristown, NJ 07960 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 (55) Director Attorney in private practice in Houston,
6363 Woodway, Suite 825 Texas.
Houston, TX 77057
IAN W. ROBINSON (74) Director Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management
Tequesta, FL 33469 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 (58) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
***JOHN J. ARTHUR (53) Senior Vice Director, Senior Vice President and
11 Greenway Plaza, Suite 100 President and Treasurer, A I M Advisors, Inc.; and Vice
Houston, TX 77046 Treasurer 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 (50) Senior Vice Director and President, A I M Capital
11 Greenway Plaza, Suite 100 President Management, Inc.; Director and Senior Vice
Houston, TX 77046 President, A I M Management Group Inc. and
A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP
PLC.
***CAROL F. RELIHAN (43) Senior Vice Director, Senior Vice President, General
11 Greenway Plaza, Suite 100 President and Counsel and Secretary, A I M Advisors, Inc.;
Houston, TX 77046 Secretary Vice President, General Counsel and
Secretary, A I M Management Group Inc.;
Director, Vice President and General
Counsel, Fund Management Company;
General Counsel and Vice President,
A I M Fund Services, Inc. and A I M
Institutional Fund Services, Inc.; and Vice
President, A I M Capital Management, Inc.
and A I M Distributors, Inc.
DANA R. SUTTON (38) Vice President Vice President and Fund Controller,
11 Greenway Plaza, Suite 100 and Assistant A I M Advisors, Inc.; and Assistant Vice
Houston, TX 77046 Treasurer President and Assistant Treasurer, Fund
Management Company.
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance Officer,
11 Greenway Plaza, Suite 100 A I M Advisors, Inc., A I M Capital
Houston, TX 77046 Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management
Company.
</TABLE>
- -------------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
6
<PAGE>
<TABLE>
<CAPTION>
Positions Held PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE with Registrant PAST 5 YEARS
- ------------------------------- ---------------- ------------------------------------------------
<S> <C> <C>
J. ABBOTT SPRAGUE (42) Vice President Director and President, Fund Management
11 Greenway Plaza, Suite 100 Company; Director and Senior Vice
Houston, TX 77046 President, A I M Institutional Fund Services,
Inc.; Director , A I M Fund Services, Inc.; and
Senior Vice President, A I M Advisors, Inc.
and A I M Management Group Inc.
KAREN DUNN KELLEY (37) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc. and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
===================================================================================================
</TABLE>
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. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. 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), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. 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, Fields, Kroeger, Pennock (Chairman), Robinson 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.
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
7
<PAGE>
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 for
each director of the Fund:
<TABLE>
<CAPTION>
RETIREMENT
AGGREGATE BENEFITS TOTAL
DIRECTOR COMPENSATION ACCRUED COMPENSATION
FROM FUND(1) BY ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
Bruce L. Crockett 7,926 38,621 68,000
Owen Daly II 7,925 82,607 68,000
Jack M. Fields(4) 4,068 - 0- -0-
Carl Frischling(5) 7,928 56,683 68,000
Robert H. Graham - 0- - 0- - 0-
John F. Kroeger 7,925 83,654 66,000
Lewis F. Pennock 7,925 33,702 67,000
Ian W. Robinson 7,926 64,973 68,000
Louis S. Sklar 7,822 47,593 66,500
======================================================================================
</TABLE>
- ---------------------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1997, including interest earned
thereon, was $35,772.
(2) During the fiscal year ended August 31, 1997, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $62,215.
Data reflect compensation earned for the calendar year ended December 31,
1996.
(3) Each Director 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 11 registered investment companies advised by AIM
(comprised of 47 portfolios). Data reflect compensation earned for the
calendar year ended December 31, 1997.
(4) Mr. Fields was not serving as a Director during the calendar year ended
December 31, 1996.
(5) See also page 10 regarding fees earned by Mr. Frischling's law firm.
8
<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 a specified level of
compensation and years of service classifications. The estimated credited years
of service as of December 31, 1997 for Messrs. Crockett, Daly, Fields,
Frischling, Kroeger, Pennock, Robinson and Sklar are 10, 10, 0, 20, 19, 15, 10
and 7 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
Number of Annual Retainer Paid By All AIM Funds
Years of
Service With $80,000
the AIM Funds
====================================================================
10 $60,000
9 $54,000
8 $48,000
7 $42,000
6 $36,000
5 $30,000
====================================================================
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
9
<PAGE>
will be paid in cash, in generally equal quarterly installments over a
period of five (5) or ten (10) years (depending on the Agreement) 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 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, 1997, directors' fees and expenses
in the amount of $16,789 were allocated to the Portfolio.
The Portfolio paid legal fees of $8,944 for the year ended August 31, 1997
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 100, Houston, Texas 77046-1173, acts as the
Portfolio's investment advisor pursuant to a Master Investment Advisory
Agreement dated February 28, 1997 (the "Advisory Agreement").
AIM was organized in 1976 and, together with its subsidiaries, advises,
manages or administers 55 investment company portfolios. AIM is a wholly owned
subsidiary of A I M Management Group, Inc. ("AIM Management"), a holding company
that has been engaged in the financial services business since 1976, 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR,
United Kingdom. AMVESCAP PLC and its subsidiaries are an independent investment
management group engaged in the business of investment management on an
international basis. 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 all 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
10
<PAGE>
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 fiscal years ended August 31, 1997, 1996 and 1995 AIM received
advisory fees with respect to the Portfolio in the amounts of $1,024,843,
$125,264 and $1,323,637, respectively. During the fiscal years ended August 31,
1997, 1996 and 1995 AIM voluntarily waived fees with respect to the Portfolio in
the amounts of $3,344,852, $2,562,094 and $1,127,509, respectively.
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 February 28, 1999 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 February 28, 1997 between AIM and
the Fund (the "Administrative Services Agreement").
Under the Administrative Services Agreement, AIM performs, or arranges for
the performance of accounting and other administrative services for the
Portfolio which are not required to be performed by AIM under the Advisory
Agreement. As full compensation for the performance of such services, AIM is
reimbursed for any personnel and other costs (including 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.
Pursuant to the Administrative Services Agreement, AIM was reimbursed for
the fiscal years ended August 31, 1997, 1996 and 1995, in the amounts of
$68,372, $52,710, and $97,044, respectively.
A I M Institutional Fund Services, Inc. ("AIFS") receives fees with respect
to the Portfolio for its provision of transfer agent and shareholder services
pursuant to a Transfer Agency and Service Agreement with the Fund. For the
period from August 31, 1994 through June 30, 1995, AIFS or its affiliates
received shareholder services fees from AIM with respect to the Portfolio in the
amount of $38,870. For the fiscal years ended August 31, 1997 and 1996, AIFS
received transfer agency and shareholder services fees with respect to the
Portfolio in the amounts of $260,721 and $133,085, respectively.
11
<PAGE>
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 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.
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 record keeping 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"), 90 Washington Street, 11th Floor, New York,
New York 10286, 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.
A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite 100,
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. It is currently anticipated that,
effective on or about December 29, 1997, A I M Fund Services, Inc., a wholly
owned subsidiary of AIM and a registered transfer agent, will become the
transfer agent to 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
12
<PAGE>
selected KPMG Peat Marwick LLP, 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.
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, 1997, 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
- ---------------------
The Bank of New York 40.75%**
One Wall Street 2nd Floor
New York, NY 10286
Oppenheimer & Co. 14.79%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Fund Services Associates 9.27%
11835 West Olympic Blvd
Suite 205
Los Angeles, CA 90064
- -----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
13
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
INSTITUTIONAL CLASS
- -------------------
Comerica Bank 15.53%
P.O. Box 75000
Detroit, MI 48275-3455
U.S. Bank of Oregon 14.66%
555 Southwest Oak
Portland, OR 97208-3168
Frost National Bank 7.45%
P.O. Box 1600
San Antonio, TX 78296
Trust Company Bank 5.51%
Center 3131
P.O. Box 105504
Atlanta, GA 30348
PERSONAL INVESTMENT CLASS
- -------------------------
The Bank of New York 70.46%**
4 Fisher Lane
White Plains, NY 10603
Cullen / Frost Discount Brokers 26.15%**
P.O. Box 2358
San Antonio, TX 78299
PRIVATE INVESTMENT CLASS
- ------------------------
Huntington Capital Corp. 38.17%**
41 High Street 9th Floor
Columbus, OH 43287
- -----------------------
* 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*
--------------- -----------
Frost National Bank 13.83%
P.O. Box 2950
San Antonio, TX 78299-2950
Liberty Registration Company of
Oklahoma City 12.30%
P.O. Box 25848
Oklahoma City, OK 73125-0000
First Trust 12.09%
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
LAU & CO. c/o Frost 7.16%
P.O. Box 2479
San Antonio, TX 78298-2479
RESOURCE CLASS
- --------------
Corestates Capital Markets 58.10%**
1345 Chestnut Street
Philadelphia, PA 19101
Mellon Bank 19.92%
P.O. Box 710
Pittsburgh, PA 15230-0710
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, 1997, and the percentage of the Liquid Assets
Portfolio's outstanding shares owned by such shareholders as of such date are as
follows:
- -----------------------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
15
<PAGE>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
CASH MANAGEMENT CLASS
- ---------------------
Oppenheimer & Co. 42.04%**
Oppenheimer Tower
World Financial Center
New York, NY 10281
Mellon Bank 25.65%**
P.O. Box 710
Pittsburgh, PA 15230
The Bank of New York 22.04%
One Wall Street, 2nd Floor
New York, NY 10286
INSTITUTIONAL CLASS
- -------------------
State Street Bank and Trust 15.90%
108 Myrtle Street
North Quincy, MA 02171
Trust Company Bank 13.76%
Center 3131
P.O. Box 105504
Atlanta, GA 30348
Comerica Bank 6.99%
P.O. Box 75000
Detroit, MI 48275
Paine Webber Incorporated 6.17 %
1000 Harbor Blvd. 6th Floor
Weehawken, NJ 07087
Wachovia Bank and Trust Co. 5.08%
P.O. Box 3075
Winston-Salem, NC 27150
U.S. Bank of Oregon 5.07%
321 Southwest Sixth
Portland, OR 97208
- -----------------------
* 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>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
--------------- -----------
PRIVATE INVESTMENT CLASS
- ------------------------
Mellon Bank 81.93%**
P.O. Box 710
Pittsburgh, PA 15230-0710
MSTC CASH RESERVES CLASS
- ------------------------
Morgan Stanley Trust Company 100.00%**
1 Pierrepont Plaza
Brooklyn, NY 11201
To the best of the knowledge of the Fund, as of December 1, 1997, the
directors and officers of the Fund as a group beneficially owned less than 1% of
each class of any Portfolio's outstanding shares.
PURCHASES AND REDEMPTIONS
A complete description of the manner by which shares of the Class may be
purchased, redeemed or exchanged appears in the Prospectus under the heading
"Purchase of Shares."
The right of redemption may be suspended or the date of payment postponed
when (a) trading on the New York Stock Exchange ("NYSE") is restricted, as
determined by applicable rules and regulations of the SEC, (b) the NYSE is
closed for other than customary weekend and 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 Fund not reasonably practicable.
A "business day" of the Portfolio is any day on which commercial banks in
the New York Federal Reserve district are open for business. The Portfolio,
however, reserves the right to change the time for which purchase and redemption
requests must be submitted to the Portfolio for execution on the same day on any
day when the U.S. primary broker-dealer community is closed for business or
trading is restricted due to national holidays.
- -----------------------
* 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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NET ASSET VALUE DETERMINATION
Shares of the Class are sold at the net asset value of such shares.
Shareholders may at any time redeem all or a portion of their shares at net
asset value. The investor's price for purchases and redemptions will be the net
asset value next determined following the receipt of an order to purchase or a
request to redeem shares.
The valuation of the portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Portfolio is permitted in accordance with applicable rules and regulations
of the SEC, including Rule 2a-7 under the 1940 Act, which require the Portfolio
to adhere to certain conditions. These rules require that the Portfolio maintain
a dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 calendar days or less and invest
only in securities determined by the Board of Directors to be "Eligible
Securities" and to present minimal credit risk to the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Portfolio's price per share
at $1.00 as computed for the purpose of sales and redemptions. Such procedures
include review of the Portfolio's holdings by the Board of Directors, at such
intervals as they may deem appropriate, to determine whether the net asset value
calculated by using available market quotations or other reputable sources for
the Portfolio deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing holders of
the shares. In the event the Board of Directors determines that such a deviation
exists, it will take such corrective action as the Board of Directors deems
necessary and appropriate, including the sales of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity; the withholding of dividends; redemption of shares in kind; or the
establishment of a net asset value per share by using available market
quotations.
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Master Distribution Agreement dated as of
February 28, 1997 (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
100, 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 February 28, 1999
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.
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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 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, 1997, FMC received compensation
pursuant to the Plan in the amount of $55,956 or an amount equal to 0.20% of the
average daily net assets of the Class. $0 of such amount (or an amount equal to
0% of the average daily net assets of the Class) was paid to Morgan Stanley
Trust Company and $55,956 were retained by FMC.
FMC is a wholly owned subsidiary of AIM, an indirect wholly owned
subsidiary of AMVESCAP PLC. Charles T. Bauer, a Director and Chairman of the
Fund and Robert H. Graham, a Director and President of the Fund, own shares of
AMVESCAP PLC.
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
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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 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).
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.
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<PAGE>
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 Investors Service ("Moody's"), Standard & Poor's Rating
Service ("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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<PAGE>
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 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. 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
nationally recognized statistical rating organizations ("NRSRO").
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<PAGE>
INVESTMENT RESTRICTIONS
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.
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, and except that the
Portfolio may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order;
(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;
(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;
or
(9) invest in any obligation not payable as to principal and interest
in United States currency.
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<PAGE>
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, except that the Portfolio may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order.
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.
Research services received from broker-dealers supplement AIM's own
research (and the research of sub-advisors to other clients of AIM), and may
include the following types of information: statistical and background
information on the U.S. and foreign economies, industry groups and individual
companies; forecasts and interpretations with respect to U.S. and foreign
economies, securities, markets, specific industry groups and individual
companies; information on federal, state, local and foreign political
developments; portfolio management strategies, performance information on
securities, indexes and investment accounts; information concerning prices of
securities; and information supplied by specialized services to AIM and to the
Company's directors with respect to the performance, investment activities and
fees and expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the providing of equipment used to communicate research information, the
providing of specialized consultations with AIM personnel with respect to
computerized systems and data furnished to AIM as a component of other research
services, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information. Certain
research services furnished by dealers may be useful to AIM with clients other
than the Portfolio. Similarly, any research services received by AIM through
placement of portfolio transactions of other clients may be of value to AIM in
fulfilling its obligations to the Portfolio. AIM is of the opinion that the
material received is beneficial in supplementing AIM's research and analysis;
and therefore, it may benefit the Portfolio by improving the quality of AIM's
investment advice. The advisory fees paid by the Portfolio are not reduced
because AIM receives such services.
From time to time, the Fund may sell a security to, or purchase a security
from, an AIM Fund or another investment account advised by AIM or A I M Capital
Management, Inc. ("AIM Capital"), when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Fund.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund from purchasing securities or instruments from,
or selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed or advised by AIM. The Fund has
obtained an order of exemption from the SEC which permits the Fund to engage in
certain transactions with
25
<PAGE>
certain 5% holders, 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, certain 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 certain 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, 1997, 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
26
<PAGE>
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 (1) must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) must satisfy
an asset diversification test in order to qualify for tax purposes as a
regulated investment company (the "Asset Diversification Test"). Under the
Asset Diversification 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.
27
<PAGE>
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, 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.
28
<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
17, 1997. 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>
SCHEDULE OF INVESTMENTS
August 31, 1997
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 21.72%(a)
CAPITAL GOODS - 1.33%
MACHINERY - 1.33%
Caterpillar Financial Services Corp.
5.51% 12/08/97 $20,000 $ 19,700,011
- -----------------------------------------------------------------------
5.54% 01/12/98 2,530 2,478,218
- -----------------------------------------------------------------------
5.54% 01/15/98 12,800 12,532,110
- -----------------------------------------------------------------------
5.53% 04/03/98 19,300 18,665,555
- -----------------------------------------------------------------------
Total Capital Goods 53,375,894
- -----------------------------------------------------------------------
CONSUMER DURABLES - 5.39%
AUTOMOBILE - 3.91%
Daimler-Benz North America Corp.
5.52% 11/07/97 25,000 24,743,167
- -----------------------------------------------------------------------
5.52% 11/18/97 30,000 29,641,200
- -----------------------------------------------------------------------
5.51% 01/16/98 25,000 24,475,784
- -----------------------------------------------------------------------
5.54% 02/04/98 15,000 14,639,900
- -----------------------------------------------------------------------
5.50% 02/11/98 20,000 19,502,397
- -----------------------------------------------------------------------
Ford Motor Credit Co.
5.53% 12/09/97 20,000 19,695,850
- -----------------------------------------------------------------------
Hertz Corp.
5.53% 12/16/97 25,000 24,592,931
- -----------------------------------------------------------------------
157,291,229
- -----------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 0.61%
First Data Corp.
5.51% 01/21/98 25,000 24,456,653
- -----------------------------------------------------------------------
PAPERS & FOREST PRODUCTS - 0.87%
Weyerhaeuser Real Estate Co.
5.60% 09/30/97 35,000 35,000,000
- -----------------------------------------------------------------------
Total Consumer Durables 216,747,882
- -----------------------------------------------------------------------
ENERGY - 2.11%
OIL & GAS (INTEGRATED) - 2.11%
Shell 96
5.70% 09/24/97 30,000 30,000,000
- -----------------------------------------------------------------------
5.63% 10/22/97 30,000 30,000,000
- -----------------------------------------------------------------------
5.62% 12/03/97 25,000 25,000,000
- -----------------------------------------------------------------------
Total Energy 85,000,000
- -----------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
FINANCIAL - 9.93%
ASSET-BACKED SECURITIES - 1.48%
Delaware Funding Corp.
5.52% 10/20/97 $25,000 $ 24,812,166
- ----------------------------------------------------------------------
5.55% 11/05/97 10,107 10,005,719
- ----------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.53% 12/15/97 25,000 24,596,771
- ----------------------------------------------------------------------
59,414,656
- ----------------------------------------------------------------------
BROKERAGE/INVESTMENTS - 0.62%
Merrill Lynch & Co., Inc.
5.29% 11/10/97 25,000 24,742,847
- ----------------------------------------------------------------------
LEASING COMPANIES - 0.25%
International Lease Finance Corp.
5.52% 11/10/97 10,000 9,892,666
- ----------------------------------------------------------------------
PERSONAL CREDIT - 3.48%
Associates Corp. of North America
5.62% 09/02/97 140,000 139,978,144
- ----------------------------------------------------------------------
MULTIPLE INDUSTRY - 4.10%
General Electric Capital Corp.
5.63% 09/02/97 140,000 139,978,125
- ----------------------------------------------------------------------
5.42% 09/09/97 25,000 24,969,889
- ----------------------------------------------------------------------
164,948,014
- ----------------------------------------------------------------------
Total Financial 398,976,327
- ----------------------------------------------------------------------
UTILITIES - 1.13%
TELEPHONE - 1.13%
MCI Communications Corp.
5.50% 12/04/97 10,000 9,856,389
- ----------------------------------------------------------------------
5.50% 12/16/97 10,000 9,838,056
- ----------------------------------------------------------------------
5.52% 12/18/97 16,000 15,735,040
- ----------------------------------------------------------------------
5.50% 12/22/97 10,000 9,828,889
- ----------------------------------------------------------------------
Total Utilities 45,258,374
- ----------------------------------------------------------------------
OTHER - 1.83%
METAL MINING- 0.61%
RTZ America, Inc.
5.53% 01/13/98 25,000 24,485,403
- ----------------------------------------------------------------------
MISCELLANEOUS - 1.22%
Cargill Incorporated
5.51% 12/19/97 25,000 24,582,924
- ----------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
OTHER - (continued)
MISCELLANEOUS - (CONTINUED)
Cargill Financial Services Corp.
5.52% 01/21/98 $25,000 $ 24,455,667
- ------------------------------------------------------------------------------
49,038,591
- ------------------------------------------------------------------------------
Total Other 73,523,994
- ------------------------------------------------------------------------------
Total Commercial Paper 872,882,471
- ------------------------------------------------------------------------------
BANK NOTES - 1.04%
First U.S.A. Bank
6.03% 09/30/97 42,000 42,013,702
- ------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT - 0.49%
Huntington National Bank
6.23% 04/24/98 20,000 20,040,517
- ------------------------------------------------------------------------------
COMMERCIAL PAPER TRUST CERTIFICATES - 4.23%
Citibank, N.A.
5.82%(b) 12/26/97 170,000 170,000,000
- ------------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 17.27%
Goldman Sachs Group (The), L.P.
5.625%(c) 10/20/97 178,000 178,000,000
- ------------------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.
5.9875%(d) 08/17/98 155,000 155,000,000
- ------------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.7875%(e) 10/06/97 185,000 185,000,000
- ------------------------------------------------------------------------------
Morgan Stanley Group Inc.
5.7875%(f) 11/24/97 177,000 177,000,000
- ------------------------------------------------------------------------------
Total Master Note Agreements 695,000,000
- ------------------------------------------------------------------------------
MEDIUM TERM NOTES - 0.62%
Associates Corp. of North America
5.69%(g) 03/02/98 25,000 24,990,374
- ------------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 1,824,927,064
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 54.87%(h)
Bear, Stearns & Co. Inc.
5.63%(i) -- 140,000 140,000,000
- ------------------------------------------------------------------------------
CIBC Wood Gundy Securities Corp.
5.62%(j) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
Deutsche Bank Securities Corp.
5.64%(k) -- 140,000 140,000,000
- ------------------------------------------------------------------------------
Dresdner Securities (USA) Inc.
5.62%(l) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Goldman, Sachs & Co.
5.60%(m) 09/02/97 $105,916 $ 105,916,016
- ------------------------------------------------------------------------------
5.61%(n) 09/02/97 195,606 195,605,918
- ------------------------------------------------------------------------------
Greenwich Capital Markets, Inc.
5.62%(o) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
HSBC Securities, Inc.
5.64%(p) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
Merrill Lynch Government Securities Inc.
5.69%(q) -- 400,000 400,000,000
- ------------------------------------------------------------------------------
Nesbitt Burns Securities Inc.
5.62%(r) -- 125,000 125,000,000
- ------------------------------------------------------------------------------
Sanwa Securities (USA) Co., L.P.
5.62%(s) 09/02/97 147,732 147,732,342
- ------------------------------------------------------------------------------
SBC Capital Markets, Inc.
5.62%(t) 09/02/97 140,000 140,000,000
- ------------------------------------------------------------------------------
UBS Securities LLC.
5.62%(u) 09/02/97 252,650 252,649,596
- ------------------------------------------------------------------------------
Total Repurchase Agreements 2,206,903,872
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.24% 4,031,830,936(v)
- ------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (0.24)% (9,620,578)
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $4,022,210,358
==============================================================================
</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) Variable rate trust certificates representing an interest in a trust
(comprised of eligible debt obligations) entitling the Portfolio to receive
variable rate interest. The Fund has the right, upon seven calendar days'
notice to the trustee, to put its certificates to the trust at par value
plus accrued interest. Because variable rate trust certificates involve a
trust and a third party put feature, they involve complexities and
potential risks that may not be present where the debt obligation is owned
directly. Rate shown is the rate in effect on 08/31/97.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven business days' prior written notice to
the issuer. Interest rates on master notes are redetermined periodically.
Rate shown is the rate in effect on 08/31/97.
(d) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon two business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 08/31/97.
(e) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven days' notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
08/31/97 .
(f) Master Note Purchase Agreement may be terminated by either party upon three
business days' prior written 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 08/31/97.
(g) Interest rates are redetermined daily. Rate shown is the rate in effect on
08/31/97.
FS-4
<PAGE>
(h) 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.
(i) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $268,177,242 U.S. Government obligations, 0% to 11.50%
due 02/01/01 to 09/01/27 with an aggregate market value at 08/31/97 of
$208,921,813.
(j) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889. Collateralized by $200,585,000 U.S. Government obligations,
5.53% to 7.93% due 02/02/98 to 07/30/07 with an aggregate market value at
08/31/97 of $204,002,656.
(k) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $243,062,487 U.S. Government obligations, 0% to 9.00% due
11/24/97 to 08/20/27 with an aggregate market value at 08/31/97 of
$204,000,923.
(l) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889. Collateralized by $356,015,498 U.S. Government obligations,
0% to 7.778% due 07/01/01 to 02/01/37 with an aggregate market value at
08/31/97 of $204,000,810.
(m) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$250,155,556. Collateralized by $246,226,835 U.S. Government obligations,
6.752% to 8.111 % due 07/01/22 to 08/01/36 with an aggregate market value
at 08/31/97 of $255,000,001.
(n) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$400,249,333. Collateralized by $403,862,867 U.S. Government obligations,
5.901% to 8.117% due 12/01/17 to 01/01/35 with an aggregate market value at
08/31/97 of $408,000,001.
(o) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $299,652,416 U.S. Government obligations,
5.50% to 10.00% due 09/01/00 to 06/01/27 with an aggregate market value at
08/31/97 of $306,000,589.
(p) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,188,000. Collateralized by $340,004,979 U.S. Government obligations,
0% to 9.00% due 04/15/98 to 11/01/35 with an aggregate market value at
08/31/97 of $306,000,024.
(q) Open repurchase agreement. Either party may terminate the agreement upon
demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $467,972,543 U.S. Government obligations 5.50% to 12.00%
due 10/01/01 to 09/01/27 with an aggregate market value at 08/31/97 of
$408,001,549.
(r) Open repurchase agreement. Either party may terminate the agreement upon
demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $130,662,000 U.S. Government obligations, 0% to 7.21% due
10/17/97 to 07/15/20 with an aggregate market value at 08/31/97 of
$127,500,871.
(s) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$200,124,889 . Collateralized by $203,307,000 U.S. Government obligations,
0% to 7.875% due 09/02/97 to 08/27/12 with an aggregate market value at
08/31/97 of $204,000,079.
(t) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $304,538,273 U.S. Government obligations,
6.029% to 9.00% due 06/01/09 to 09/01/36 with an aggregate market value at
08/31/97 of $307,989,473.
(u) Joint repurchase agreement entered into 08/29/97 with a maturing value of
$300,187,333. Collateralized by $351,233,831 U.S. Government obligations,
0% to 9.00% due 01/15/03 to 08/15/27 with an aggregate market value at
08/31/97 of $306,004,400.
(v) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $1,824,927,064
- ------------------------------------------------------------------------
Repurchase agreements 2,206,903,872
- ------------------------------------------------------------------------
Interest receivable 8,221,689
- ------------------------------------------------------------------------
Investment for deferred compensation plan 33,770
- ------------------------------------------------------------------------
Other assets 44,228
- ------------------------------------------------------------------------
Total assets 4,040,130,623
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 17,643,247
- ------------------------------------------------------------------------
Deferred compensation 33,770
- ------------------------------------------------------------------------
Accrued advisory fees 141,022
- ------------------------------------------------------------------------
Accrued distribution fees 35,839
- ------------------------------------------------------------------------
Accrued administrative services fees 6,491
- ------------------------------------------------------------------------
Accrued transfer agent fees 27,000
- ------------------------------------------------------------------------
Accrued operating expenses 32,896
- ------------------------------------------------------------------------
Total liabilities 17,920,265
- ------------------------------------------------------------------------
NET ASSETS $4,022,210,358
========================================================================
NET ASSETS:
Institutional Class $3,787,357,429
========================================================================
Cash Management Class $ 83,487,131
========================================================================
Private Investment Class $ 70,855,883
========================================================================
MSTC Cash Reserves Class $ 80,509,915
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 3,788,657,933
========================================================================
Cash Management Class 83,515,172
========================================================================
Private Investment Class 70,880,159
========================================================================
MSTC Cash Reserves Class 80,537,499
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $160,945,206
- -------------------------------------------------------------------
EXPENSES:
Advisory
fees 4,369,695
- -------------------------------------------------------------------
Custodian fees 174,747
- -------------------------------------------------------------------
Administrative services fees 68,372
- -------------------------------------------------------------------
Distribution fees (Note 2) 427,798
- -------------------------------------------------------------------
Directors' fees and expenses 16,789
- -------------------------------------------------------------------
Transfer agent fees 260,721
- -------------------------------------------------------------------
Other 355,240
- -------------------------------------------------------------------
Total expenses 5,673,362
- -------------------------------------------------------------------
Less: Fee waivers and expense reimbursements (3,476,063)
- -------------------------------------------------------------------
Net expenses 2,197,299
- -------------------------------------------------------------------
Net investment income 158,747,907
- -------------------------------------------------------------------
Net realized gain on sales of investments 352,792
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $159,100,699
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 158,747,907 $ 98,908,897
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments 352,792 (1,596,067)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 159,100,699 97,312,830
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (149,604,986) (97,295,860)
- ----------------------------------------------------------------------------
Cash Management Class (4,717,164) (689,376)
- ----------------------------------------------------------------------------
Private Investment Class (2,931,782) (923,661)
- ----------------------------------------------------------------------------
MSTC Cash Reserves Class (1,493,975) --
- ----------------------------------------------------------------------------
Capital stock transactions -- net 1,934,913,244 801,077,731
- ----------------------------------------------------------------------------
Net increase in net assets 1,935,266,036 799,481,664
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,086,944,322 1,287,462,658
- ----------------------------------------------------------------------------
End of period $4,022,210,358 $2,086,944,322
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $4,023,590,763 $2,088,677,519
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (1,380,405) (1,733,197)
- ----------------------------------------------------------------------------
$4,022,210,358 $2,086,944,322
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
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 Liquid Assets Portfolio (the
"Portfolio") with assets, liabilities and operations of each portfolio
accounted for separately. The Portfolio consists of four different classes of
shares: the Institutional Class, the Cash Management Class, the Private
Investment Class and the MSTC Cash Reserves Class. Matters affecting each class
are voted on exclusively by the shareholders of each class. The Portfolio is a
money market fund whose 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 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 $1,380,405 (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 - Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses are allocated among the classes.
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 at the annual rate of
0.15% of the average daily net assets of the Portfolio. During the year ended
August 31, 1997, AIM voluntarily waived fees of $3,344,852 on the Portfolio.
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, 1997,
the Portfolio reimbursed AIM $68,372 for such services.
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, 1997, the Portfolio paid AIFS $260,721 for such services. On
September 19, 1997, the Board of Directors of the Fund approved the appointment
of A I M Fund Services, Inc. ("AFS") as transfer agent of the Fund to be
effective in late 1997 or early 1998.
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 Cash Management Class and the MSTC Cash
FS-9
<PAGE>
Reserves Class of the Portfolio. The Plan provides that the Private Investment
Class, Cash Management Class and the MSTC Cash Reserves Class pay FMC up to a
maximum annual rate of 0.50%, 0.10% and 0.20%, respectively, of the average
daily net assets attributable to such class. Of this amount, the Fund may pay
an asset-based sales charge to FMC and the Fund may pay a service fee of 0.25%,
0.10% and 0.20% of the average daily net assets, respectively, of each of the
Private Investment Class, the Cash Management Class and the MSTC Cash Reserves
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 Cash Management Class or
the MSTC Cash Reserves 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, 1997, the Private Investment Class, the Cash Management Class and the MSTC
Cash Reserves Class paid $170,528, $70,103 and $55,956, respectively, as
compensation under the Plan. FMC waived fees of $131,211 for the same period.
Certain officers and directors of the Fund are officers of AIM, FMC, and AIFS.
During the year ended August 31, 1997, the Portfolio paid legal fees of $8,944
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of 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 may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock during the years ended August 31, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 78,261,661,500 $78,261,661,500 51,676,611,824 $ 51,676,611,824
- ----------------------------------------------------------------------------------------------
Cash Management Class* 1,034,402,514 1,034,402,514 320,121,330 320,121,330
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 342,644,258 342,644,258 136,803,186 136,803,186
- ----------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class*** 408,898,275 408,898,275 -- --
- ----------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 20,480,836 20,480,836 4,477,681 4,477,681
- ----------------------------------------------------------------------------------------------
Cash Management Class* 2,312,729 2,312,729 283,906 283,906
- ----------------------------------------------------------------------------------------------
Private Investment
Class** 2,744,701 2,744,701 727,956 727,956
- ----------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class*** 1,184,333 1,184,333 -- --
- ----------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (76,483,889,456) (76,483,889,456) (50,978,284,230) (50,978,284,230)
- ----------------------------------------------------------------------------------------------
Cash Management Class* (1,006,454,600) (1,006,454,600) (267,150,707) (267,150,707)
- ----------------------------------------------------------------------------------------------
Private Investment
Class** (319,526,727) (319,526,727) (92,513,215) (92,513,215)
- ----------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class*** (329,545,119) (329,545,119) -- --
- ----------------------------------------------------------------------------------------------
Net increase 1,934,913,244 $ 1,934,913,244 801,077,731 $ 801,077,731
==============================================================================================
</TABLE>
*The Cash Management Class commenced operations on January 17, 1996.
**The Private Investment Class commenced operations on February 16, 1996.
***The MSTC Cash Reserves Class commenced operations on September 23, 1996.
FS-10
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding of the MSTC Cash Reserves Class during the period September 23,
1996 (date operations commenced) through August 31, 1997.
<TABLE>
<CAPTION>
1997
-------
<S> <C>
Net asset value, beginning of period $ 1.00
- ------------------------------------------------------- -------
Income from investment operations:
Net investment income 0.05
- ------------------------------------------------------- -------
Less distributions:
Dividends from net investment income (0.05)
- ------------------------------------------------------- -------
Net asset value, end of period $ 1.00
======================================================= =======
Total return(a) 5.37%
======================================================= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $80,510
======================================================= =======
Ratio of expenses to average net assets(b) 0.27%(c)
======================================================= =======
Ratio of net investment income to average net assets(b) 5.34%(c)
======================================================= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Annualized ratios of
expenses and net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 0.39% and 5.22%, respectively.
(c) Ratios are annualized and based on average net assets of $29,772,439.
FS-11
<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
Liquid Assets Portfolio (a series portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1997, 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 September 23, 1996 (date operations
commenced) through August 31, 1997. 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, 1997 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, 1997, 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
September 23, 1996 (date operations commenced) through August 31, 1997, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 3, 1997
FS-12
<PAGE>
PART C
OTHER INFORMATION
Item 24. (a) Financial Statements:
(1) Prime Portfolio - Cash Management Class
In Part A: Financial Highlights
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31,
1997
(3) Statement of Assets and Liabilities as of
August 31, 1997
(4) Statement of Operations for the year ended
August 31, 1997
(5) Statement of Changes in Net Assets for
the years ended August 31, 1997
and 1996
(6) Notes to Financial Statements
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,
1997
(3) Statement of Assets and Liabilities
as of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the years ended August 31, 1997
and 1996
(6) Notes to Financial Statements
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,
1997
(3) Statement of Assets and Liabilities as
of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the years ended August 31, 1997 and 1996
(6) Notes to Financial Statements
In Part C: None
(4) Prime Portfolio - Private Investment Class
In Part A: Financial Highlights
C-1
<PAGE>
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of August 31,
1997
(3) Statement of Assets and Liabilities
as of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the years ended August 31, 1997 and 1996
(6) Notes to Financial Statements
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,
1997
(3) Statement of Assets and Liabilities as
of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the year ended August 31, 1997 and the
period January 16, 1996 (date
operations commenced) through
August 31, 1996
(6) Notes to Financial Statements
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,
1997
(3) Statement of Assets and Liabilities as
of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the year ended August 31, 1997 and the
period January 17, 1996 (date
operations commenced) through
August 31, 1996
(6) Notes to Financial Statements
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,
1997
(3) Statement of Assets and Liabilities as
of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the years ended August 31, 1997 and 1996
(6) Notes to Financial Statements
C-2
<PAGE>
In Part C: None
(8) Liquid Assets Portfolio - MSTC Cash Reserves Class
In Part A: None
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of
August 31, 1997
(3) Statement of Assets and Liabilities as
of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the period September 23, 1996 (date
operations commenced) through August 31,
1997
(6) Notes to Financial Statements
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,
1997
(3) Statement of Assets and Liabilities as
of August 31, 1997
(4) Statement of Operations for the year
ended August 31, 1997
(5) Statement of Changes in Net Assets for
the year ended August 31, 1997 and the
period February 16, 1996 (date
operations commenced) through August 31,
1996
(6) Notes to Financial Statements
In Part C: None
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 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.
C-3
<PAGE>
(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.
(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, was filed electronically as an Exhibit
to Post-Effective Amendment No. 7 on December 23, 1996, and is
hereby incorporated by reference.
(i) Certificate of Correction of Registrant, as filed with the State
of Maryland on August 5, 1996, was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on December 23, 1996,
and is hereby incorporated by reference.
(j) Articles Supplementary of Registrant as filed with the State of
Maryland on August 7, 1996, was filed electronically as an Exhibit
to Post-Effective Amendment No. 7 on December 23, 1996, and is
hereby incorporated by reference.
(k) Articles Supplementary of Registrant as filed with the State of
Maryland on June 12, 1997, 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.
(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.
(c) Amended and Restated By-Laws of Registrant, dated December 11,
1996, are filed herewith electronically.
(3) - Voting Trust Agreements - None.
(4) - (a) Form of Specimen Certificate for Liquid Assets Portfolio was filed
as an exhibit to Registrant's Pre-Effective Amendment No. 1 on
October 1, 1993, and is hereby incorporated by reference.
C-4
<PAGE>
(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.
(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.
(c) Master Investment Advisory Agreement dated February 28, 1997,
between Registrant and A I M Advisors, Inc. is filed herewith
electronically.
(6) - (a) Master Distribution Agreement between Registrant and Fund
Management Company dated August 6, 1993 was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on October 15, 1993.
(b) Master Distribution Agreement between Registrant and Fund
Management Company, dated October 18, 1993, was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on August
22, 1994, and was filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995.
C-5
<PAGE>
(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.
(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.
(e) Amendment No. 3, dated June 11, 1996, 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. 7 on December 23, 1996.
(f) Master Distribution Agreement between Registrant and Fund
Management Company dated February 28, 1997 is filed herewith
electronically.
(7) - (a) Retirement Plan for Eligible Directors/Trustees was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on August
22, 1994, and is hereby incorporated by reference.
(b) Form of Deferred Compensation Agreement was filed as an exhibit to
Registrant's Post-Effective Amendment No. 2 on August 22, 1994,
and was filed electronically as an Exhibit to Post-Effective
Amendment No. 7 on December 23, 1996.
(c) Form of Deferred Compensation Agreement 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 was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996, and is hereby
incorporated by reference.
(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 was filed electrically as an Exhibit to Post-Effective
Amendment No. 7 on December 23, 1996, and is hereby incorporated
by reference.
(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 was filed electronically
as an Exhibit to Post-Effective Amendment No. 7 on December 23,
1996, and is hereby incorporated by reference.
(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 was filed electronically as an Exhibit to Post-
Effective Amendment No. 7 on December 23, 1996, and is hereby
incorporated by reference.
(e) Letter Agreement, dated July 30, 1996, to Second Amended and
Restated Custodian Agreement, dated June 16, 1987, and was filed
electronically as an Exhibit to
C-6
<PAGE>
Post-Effective Amendment No. 7 on December 23, 1996, and is hereby
incorporated by reference.
(9) - (a) Transfer Agency Agreement between the Registrant and State Street
Bank and Trust Company, dated October 15, 1993 was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on August
22, 1994.
(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) Amendment No. 2, dated July 1, 1996, to Transfer Agency and
Service Agreement between A I M Institutional Fund Services, Inc.
and Registrant, dated September 16, 1994, is filed herewith
electronically.
(e) Amendment No. 3, dated July 1, 1997, to Transfer Agency and
Service Agreement between A I M Institutional Fund Services, Inc.
and Registrant, dated September 16, 1994, is filed herewith
electronically.
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) 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, was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996.
(k) Master Administrative Services Agreement between the Registrant
and A I M Advisors, Inc., dated February 28, 1997, is filed
herewith electronically.
C-7
<PAGE>
(l) 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.
(m) 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.
(n) 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.
(o) 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.
(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 was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996.
C-8
<PAGE>
(d) Amended and Restated Master Distribution Plan Pursuant to
Rule 12b-1, amended and restated as of June 30, 1997, for
Registrant and form of related agreement are filed herewith
electronically.
(16) - Schedule of Performance Quotations was filed as an exhibit to
Registrant's Registration Statement on July 19, 1993.
(18) - (a) Multiple Class (Rule 18f-3) Plan was filed as an Exhibit to Post-
Effective Amendment No. 7 on December 23, 1996.
(b) Amended and Restated Multiple Class (Rule 18f-3) Plan is filed
herewith electronically.
(c) Second Amended and Restated 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, 1997
-------------- ----------------------
<S> <C> <C>
Prime Portfolio - Cash Management Class 86
Prime Portfolio - Institutional Class 217
Prime Portfolio - Personal Investment Class 18
Prime Portfolio - Private Investment Class 25
Prime Portfolio - Resource Class 55
Liquid Assets Portfolio - Cash Management Class 15
Liquid Assets Portfolio - Institutional Class 132
Liquid Assets Portfolio - MSTC Cash Reserves Class 3
Liquid Assets Portfolio - Private Investment Class 14
</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
C-9
<PAGE>
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 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 (AIM Limited Maturity Treasury Fund -
Institutional Class)
Short-Term Investments Trust
Tax-Free Investment Co.
C-10
<PAGE>
(b) The following table sets forth information with respect to each
director and officer of Fund Management Company:
<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
Mark D. Santero Senior Vice President None
Carol F. Relihan Vice President, Senior Vice President & Secretary
General Counsel and Director
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
Robert W. Morris, Jr. Assistant Vice President None
Ann M. Srubar 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 Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
</TABLE>
- ---------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-11
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
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.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, will maintain physical possession of each such account, book or other
document of the Registrant at its principal executive offices, except for
those maintained by the Registrant's Custodian, The Bank of New York, 90
Washington Street, 11th Floor, New York, New York 10286, and Transfer
Agent, A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
100, 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.
- -------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-12
<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 17th day of
December, 1997.
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 12/17/97
- ------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Director & President 12/17/97
- ------------------------ (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Director 12/17/97
- ------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Director 12/17/97
- ------------------------
(Owen Daly II)
/s/ JACK FIELDS Director 12/17/97
- ------------------------
(Jack Fields)
/s/ CARL FRISCHLING Director 12/17/97
- ------------------------
(Carl Frischling)
/s/ JOHN F. KROEGER Director 12/17/97
- ------------------------
(John F. Kroeger)
/s/ LEWIS F. PENNOCK Director 12/17/97
- ------------------------
(Lewis F. Pennock)
/s/ IAN W. ROBINSON Director 12/17/97
- ------------------------
(Ian W. Robinson)
/s/ LOUIS S. SKLAR Director 12/17/97
- ------------------------
(Louis S. Sklar)
Senior Vice President &
/s/ JOHN J. ARTHUR Treasurer (Principal Financial 12/17/97
- ------------------------ and Accounting Officer)
(John J. Arthur)
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- -------
1(k) Articles Supplementary of Registrant as filed with the State of
Maryland on June 12, 1997
2(c) Amended and Restated By-Laws of Registrant, dated December 11,
1996
5(c) Master Investment Advisory Agreement, dated February 28, 1997,
between A I M Advisors, Inc. and Registrant
6(f) Master Distribution Agreement, dated February 28, 1997, between
Registrant and Fund Management Company
7(c) Form of Deferred Compensation Agreement
9(d) Amendment No. 2, dated July 1, 1996, to Transfer Agency and Service
Agreement between A I M Institutional Fund Services, Inc. and
Registrant, dated September 16, 1994.
9(e) Amendment No. 3, dated July 1, 1997, to Transfer Agency and Service
Agreement between A I M Institutional Fund Services, Inc. and
Registrant, dated September 16, 1994.
9(k) Master Administrative Services Agreement, between the Registrant
and A I M Advisors, Inc. dated February 28, 1997
11(a) Consent of Ballard Spahr Andrews & Ingersoll
11(b) Consent of KPMG Peat Marwick LLP
15(d) Amended and Restated Master Distribution Plan Pursuant to Rule 12b-
1, Amended and Restated as of June 30, 1997, for Registrant and
Form of Related Agreement
18(b) Amended and Restated Multiple Class (Rule 18f-3) Plan
18(c) Second Amended and Restated Multiple Class Plan
27 Financial Data Schedule
<PAGE>
Exhibit 1(k)
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: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue 50,000,000,000 shares of common stock
with a par value of $.001 each.
Of these shares:
(a) 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, and three
billion (3,000,000,000) shares have been classified as Liquid Assets
Portfolio - MSTC Cash Reserve Class;
(b) 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
<PAGE>
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; and
(c) nine billion (9,000,000,000) shares were unclassified.
SECOND: As of the filing of these Article Supplementary, the Corporation
hereby classifies an additional five billion (5,000,000,000) shares as Prime
Portfolio - Institutional Class. As a result of such classification, of the
50,000,000,000 shares authorized by the Charter of the Corporation:
(a) three billion (3,000,000,000) shares are classified as Liquid
Assets Portfolio - Cash Management Class, ten billion (10,000,000,000)
shares are classified as Liquid Assets Portfolio - Institutional Class,
three billion (3,000,000,000) shares are classified as Liquid Assets
Portfolio - Private Investment Class, and three billion (3,000,000,000)
shares are classified as Liquid Assets Portfolio - MSTC Cash Reserve Class;
(b) three billion (3,000,000,000) shares are classified as Prime
Portfolio - Cash Management Class, fifteen billion (15,000,000,000) shares
are classified as Prime Portfolio - Institutional Class, three billion
(3,000,000,000) shares are classified as Prime Portfolio - Personal
Investment Class, three billion (3,000,000,000) shares are classified as
Prime Portfolio - Private Investment
<PAGE>
Class, and three billion (3,000,000,000) shares are classified as Prime
Portfolio -Resource Class; and
(c) four billion (4,000,000,000) shares are unclassified.
THIRD: Unissued shares of common stock (both classified and unclassified)
may be classified and reclassified by the Board of Directors.
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 Class A 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 classified the
Prime Portfolio - Institutional Class shares under authority contained in the
Charter of the Corporation in accordance with Section 2-105(c) of Maryland
General Corporate Law.
<PAGE>
The undersigned President acknowledges these Articles Supplementary to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
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 June 12, 1997.
SHORT-TERM INVESTMENTS CO.
Witness:
/s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------ -------------------------------
Assistant Secretary President
<PAGE>
EXHIBIT 2(c)
AMENDED AND RESTATED BYLAWS
OF
SHORT-TERM INVESTMENTS CO.,
A MARYLAND CORPORATION
ADOPTED EFFECTIVE DECEMBER 11, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
STOCKHOLDERS - 1 -
Section 1. Time and Place of Meetings - 1 -
Section 2. Annual Meetings - 1 -
Section 3. Special Meetings - 1 -
Section 4. Notice of Meeting of Stockholders - 1 -
Section 5. Closing of Transfer Books, Record Dates - 2 -
Section 6. Quorum, Adjournment of Meeting - 2 -
Section 7. Voting and Inspectors - 2 -
Section 8. Conduct of Stockholders Meetings - 3 -
Section 9. Validity of Proxies and Ballots - 3 -
Section 10. Nominations and Stockholder Business - 3 -
ARTICLE II
BOARD OF DIRECTORS - 4 -
Section 1. Number and Term of Office - 4 -
Section 2. Increase or Decrease in Number of Directors - 4 -
Section 3. Place of Meetings - 4 -
Section 4. Regular Meetings - 4 -
Section 5. Special Meetings - 5 -
Section 6. Quorum - 5 -
Section 7. Telephonic Meetings - 5 -
Section 8. Executive Committee - 5 -
Section 9. Other Committees - 5 -
Section 10. Informal Action by Directors - 5 -
Section 11. Compensation of Directors - 6 -
ARTICLE III
OFFICERS - 6 -
Section 1. Executive Officers - 6 -
Section 2. Term of Office - 6 -
Section 3. President - 6 -
Section 4. Chairman of the Board - 6 -
Section 5. Other Officers - 6 -
Section 6. Secretary - 7 -
Section 7. Treasurer - 7 -
ARTICLE IV
STOCK - 7 -
Section 1. Stock Certificates - 7 -
Section 2. Transfer of Shares - 7 -
Section 3. Stock Ledgers - 7 -
Section 4. Lost, Stolen or Destroyed Certificates - 7 -
i
<PAGE>
Page
----
ARTICLE V
CORPORATE SEAL - 8 -
ARTICLE VI
FISCAL YEAR - 8 -
ARTICLE VII
INDEMNIFICATION AND ADVANCES FOR EXPENSES - 8 -
Section 1. Indemnification of Directors and Officers - 8 -
Section 2. Advances - 8 -
Section 3. Procedure - 9 -
Section 4. Indemnification of Employees and Agents - 9 -
Section 5. Other Rights - 9 -
Section 6. Subsequent Changes to Law - 9 -
ARTICLE VIII
AMENDMENT OF BYLAWS - 9 -
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
SHORT-TERM INVESTMENTS CO.,
A MARYLAND CORPORATION
ARTICLE I
STOCKHOLDERS
Section 1. Time and Place of Meetings. Meetings of the stockholders
of the Corporation need not be held except as required under the general laws of
the State of Maryland, as the same may be amended from time to time. Meetings
of the stockholders shall be held at places within the United States designated
by the Board of Directors and set forth in the notice of the meeting.
Section 2. Annual Meetings. If a meeting of the stockholders of the
Corporation is required by the Investment Company Act of 1940, as amended, to
take action with respect to the election of directors, then such matter shall be
submitted to the stockholders at a special meeting called for such purpose,
which shall be deemed the annual meeting of stockholders for that year. In
years in which no such action by stockholders is so required, no annual meeting
of stockholders need be held.
Section 3. Special Meetings. Special meetings of the stockholders
for any purpose or purposes may be called by the Chairman of the Board of
Directors, if any, by the President or by a majority of the Board of Directors.
In addition, such special meetings shall be called by the Secretary upon receipt
of a request in writing, signed by stockholders entitled to cast at least ten
percent (10%) of all the votes entitled to be cast at the meeting, which states
the purpose of the meeting and the matters proposed to be acted on at the
meeting. Unless requested by stockholders entitled to cast a majority of all
the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at a special meeting of the stockholders held during the preceding twelve
(12) months.
Section 4. Notice of Meeting of Stockholders. Written or printed
notice of every meeting of stockholders, stating the time and place thereof (and
the purpose of any special meeting), shall be given, not less than ten (10) days
nor more than ninety (90) days before the date of the meeting, to each
stockholder entitled to vote at the meeting and each other stockholder entitled
to notice, by delivering such notice personally, or leaving such notice at each
stockholder's residence or usual place of business, or by mailing such notice,
postage prepaid, addressed to each stockholder at such stockholder's address as
it appears upon the books of the Corporation. Each person who is entitled to
notice of any meeting shall be deemed to have waived notice if present at the
meeting in person or by proxy or if such person signs a waiver of notice (either
before or after the meeting) which is filed with the records of stockholders
meetings.
-1-
<PAGE>
Section 5. Closing of Transfer Books, Record Dates. The Board of
Directors may set a record date for the purpose of making any proper
determination with respect to stockholders, including determining which
stockholders are entitled to notice of and to vote at a meeting, receive a
dividend or be allotted other rights. The record date may not be prior to the
close of business on the day the record date is fixed and shall be not more than
ninety (90) days before the date on which the action requiring the determination
is taken. In the case of a meeting of stockholders, the record date shall be at
least ten (10) days before the date of the meeting. Only stockholders of record
on such date shall be entitled to notice of and to vote at such meeting, or to
receive such dividends or rights, as the case may be.
Section 6. Quorum, Adjournment of Meeting. The presence in person or
by proxy of stockholders entitled to cast thirty percent (30%) of all votes
entitled to be cast at the meeting shall constitute a quorum at all meetings of
the stockholders, except with respect to any matter which by law or the charter
of the Corporation requires the separate approval of one or more classes or
series of the capital stock of the Corporation, in which case the holders of
one-third of the shares of each such class or series (or of such classes or
series voting together as a single class) entitled to vote on the matter shall
constitute a quorum; and a majority, or with respect to the election of
Directors, a plurality, of all votes cast at a meeting (or cast by the holders
of shares of any such classes or series whose separate approval on a matter is
required) at which a quorum is present shall be sufficient to approve any matter
which properly comes before the meeting, unless otherwise provided by applicable
law, the Charter of the Corporation or these Bylaws. If at any meeting of the
stockholders there shall be less than a quorum present, the stockholders present
at such meeting may, by a majority of all votes cast and without further notice,
adjourn the same from time to time (but not more than 120 days after the
original record date for such meeting) until a quorum shall attend, but no
business shall be transacted at any such adjourned meeting except business which
might have been lawfully transacted had the meeting not been adjourned.
Section 7. Voting and Inspectors.
(a) At all meetings of the stockholders, every stockholder of record
entitled to vote thereat shall be entitled to vote at such meeting either in
person or by written proxy signed by the stockholder or by his duly authorized
attorney in fact. A stockholder may duly authorize such attorney in fact
through written, electronic, telephonic, computerized, facsimile,
telecommunication, telex or oral communication or by any other form of
communication. Unless a proxy provides otherwise, such proxy shall not be valid
more than eleven (11) months after its date.
(b) At any meeting of stockholders considering the election of
directors, the Board of Directors prior to the convening of such meeting may,
or, if the Board has not so acted, the Chairman of the meeting may, appoint two
(2) inspectors of election, who shall first subscribe an oath or affirmation to
execute faithfully the duties of inspectors at such election in strict
impartiality and according to the best of their ability, and shall after the
election certify the result of the vote taken. No candidate for election as a
director shall be appointed to act as an inspector of election.
(c) The Chairman of the meeting may cause a vote by ballot to be
taken with respect to any election or matter.
-2-
<PAGE>
Section 8. Conduct of Stockholders Meetings.
(a) The meetings of the stockholders shall be presided over by the
Chairman of the Board, or if the Chairman shall not be present or if there is no
Chairman, by the President, or if the President shall not be present, by a Vice
President, or if no Vice President is present, by a chairman elected for such
purpose at the meeting. The Secretary of the Corporation, if present, shall act
as Secretary of such meetings, or if the Secretary is not present, an Assistant
Secretary of the Corporation shall so act, and if no Assistant Secretary is
present, then a person designated by the Secretary of the Corporation shall so
act, and if the Secretary has not designated a person, then the meeting shall
elect a secretary for the meeting.
(b) The Board of Directors of the Corporation shall be entitled to
make such rules and regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing: an agenda or order of business for the
meeting; rules and procedures for maintaining order at the meeting and the
safety of those present; limitations on participation in such meeting to
stockholders of record of the corporation and their duly authorized and
constituted proxies, and such other persons as the chairman shall permit;
restrictions on entry to the meeting after the time fixed for the commencement
thereof; limitations on the time allotted to questions or comments by
participants; and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot, unless and to the
extent the Board of Directors or the chairman of the meeting determines that
meetings of stockholders shall not be required to be held in accordance with the
rules of parliamentary procedure.
Section 9. Validity of Proxies and Ballots. At every meeting of the
stockholders, all proxies shall be received and maintained by, and all ballots
shall be received and canvassed by, the secretary of the meeting, who shall
decide all questions concerning the qualification of voters, the validity of
proxies, and the acceptance or rejection of votes, unless inspectors of election
shall have been appointed, in which case the inspectors of election shall decide
all such questions.
Section 10. Nominations and Stockholder Business.
(a) Annual Meetings of Stockholders.
(1) Nominations of individuals for election to the board of directors
shall be made by the Board of Directors or a nominating committee of the Board
of Directors, if one has been established (the "Nominating Committee"). Any
stockholder of the Corporation may submit names of individuals to be considered
by the Nominating Committee or the Board of Directors, as applicable, provided,
however, (i) that such person was a stockholder of record at the time of
submission of such names and is entitled to vote at the meeting, and (ii) that
the Nominating Committee or the Board of Directors, as applicable, shall make
the final determination of persons to be nominated.
(2) The business to be considered by the stockholders at an annual
meeting shall be determined by the Board of Directors of the Corporation.
-3-
<PAGE>
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting.
(c) General.
(1) Only such persons who are nominated in accordance with the
provisions of this Section 10 shall be eligible to serve as directors and only
such business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the provisions of this Section 10.
The presiding officer of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made in accordance with the provisions of this Section 10 and, if any
proposed nomination or business is not in compliance with this Section 10, to
declare that such defective nomination or proposal be disregarded.
(2) Notwithstanding the foregoing provisions of this Section 10, a
stockholder shall also comply with all applicable requirements of state law and
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations thereunder with respect to the matters set forth in this
Section 10. Nothing in this Section 10 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The business and affairs of
the Corporation shall be managed under the direction of a Board of Directors
initially consisting of three (3) directors, which number may be increased or
decreased as herein provided. Directors shall hold office until their
respective successors have been duly elected and qualify. Directors need not be
stockholders.
Section 2. Increase or Decrease in Number of Directors. The Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of directors to a number not exceeding fifteen (15), and may appoint
directors to fill the vacancies created by any increase in the number of
directors, and such appointed directors shall hold office until their successors
have been duly elected and qualify. The Board of Directors, by the vote of a
majority of the entire Board, may decrease the number of directors to a number
not less than three (3) or the number of stockholders, whichever is less, but
any such decrease shall not affect the term of office of any director.
Vacancies occurring other than by reason of any increase in the number of
directors shall be filled as provided by the Maryland General Corporation Law.
Section 3. Place of Meetings. The directors may hold their meetings
and keep the books of the Corporation outside the State of Maryland, at any
office or offices of the Corporation or at any other place as they may from time
to time determine; and in the case of meetings, as shall be specified in the
respective notices of such meetings.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and on such notice, if any, as the
directors may from time to time determine.
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Section 5. Special Meetings. Special meetings of the Board of
Directors may be held from time to time upon call of the Chairman of the Board
of Directors, if any, the President, or any two (2) or more of the directors, by
oral, telegraphic, telephonic or written notice duly given to each director not
less than one (1) business day before such meeting or, sent or mailed to each
director, not less than three (3) business days before such meeting. Each
director who is entitled to notice shall be deemed to have waived notice if such
director is present at the meeting or, either before or after the meeting, such
director signs a waiver of notice which is filed with the minutes of the
meeting. Such notice or waiver of notice need not state the purpose or purposes
of such meeting.
Section 6. Quorum. One third (1/3) of the directors then in office
(but in no event less than two (2) directors) shall constitute a quorum of the
Board of Directors for the transaction of business. If at any meeting of the
Board there shall be less than a quorum present, a majority of those directors
present may adjourn the meeting from time to time until a quorum shall have been
attained. The action of a majority of the directors present at any meeting at
which there is a quorum shall be the action of the Board of Directors, except as
may be otherwise specifically provided by applicable law, the Charter or these
Bylaws.
Section 7. Telephonic Meetings. The members of the Board of
Directors, or any committee of the Board of Directors, may participate in a
meeting by means of a conference telephone call or similar communications
equipment if all persons participating in such meeting can simultaneously hear
each other, and participation in a meeting by these means constitutes presence
in person at such meeting.
Section 8. Executive Committee. The Board of Directors may appoint
an Executive Committee consisting of two (2) or more directors. Between
meetings of the Board of Directors, the Executive Committee, if any, shall have
and may exercise any or all of the powers of the Board of Directors with respect
to the management of the business and affairs of the Corporation, except (a) as
otherwise provided by law, and (b) the power to increase or decrease the size
of, or fill vacancies on, the Board of Directors. The Executive Committee may
determine its own rules of procedure, and may meet when and as the Executive
Committee determines, or when directed by resolution of the Board of Directors.
The presence of a majority of the Executive Committee shall constitute a quorum.
The Board of Directors shall have the power at any time to change the members
and powers of, to fill vacancies on, and to dissolve the Executive Committee.
In the absence of any member of the Executive Committee, the members present at
any meeting, whether or not they constitute a quorum, may appoint a director to
act in the place of such absent member.
Section 9. Other Committees. The Board of Directors may appoint
other nominees which shall in each case consist of such number of directors (not
less than two (2)), which shall have and may exercise such powers as the Board
may from time to time determine, subject to applicable law. A majority of all
members of any such committee may determine its action, and the time and place
of its meetings, unless the Board of Directors shall provide otherwise. The
Board of Directors shall have the power at any time to change the members and
powers of, to fill vacancies on, and to dissolve any such committee. In the
absence of any member of such committee, the members present at any meeting,
whether or not they constitute a quorum, may appoint a director to act in the
place of such absent member.
Section 10. Informal Action by Directors. Except to the extent
otherwise specifically prohibited by applicable law, any action required or
permitted to be taken at any
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meeting of the Board of Directors or any committee thereof may be taken without
a meeting, if a written consent to such action is signed by all members of the
Board or such committee, and such consent is filed with the minutes of
proceedings of the Board or such committee.
Section 11. Compensation of Directors. Directors shall be entitled
to receive such compensation from the Corporation for their services as
directors as the Board of Directors may from time to time determine.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The initial executive officers of the
Corporation shall be elected by the Board of Directors as soon as practicable
after the incorporation of the Corporation. The executive officers may include
a Chairman of the Board, and shall include a President, one or more Vice
Presidents (the number thereof to be determined by the Board of Directors), a
Secretary and a Treasurer. The Chairman of the Board, if any, shall be selected
from among the directors. The Board of Directors may also in its discretion
appoint Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers,
and other officers, agents and employees, who shall have such authority and
perform such duties as the Board may determine. The Board of Directors may fill
any vacancy which may occur in any office. Any two (2) offices, except those of
President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument on behalf of the Corporation
in more than one (1) capacity, if such instrument is required by law or by these
Bylaws to be executed, acknowledged or verified by two (2) or more officers.
Section 2. Term of Office. Unless otherwise specifically determined
by the Board of Directors, the officers shall serve at the pleasure of the Board
of Directors. If the Board of Directors in its judgment finds that the best
interests of the Corporation will be served, the Board of Directors may remove
any officer of the Corporation at any time with or without cause.
Section 3. President. The President shall be the chief executive
officer of the Corporation and, subject to the Board of Directors, shall
generally manage the business and affairs of the Corporation. If there is no
Chairman of the Board, or if the Chairman of the Board has been appointed but is
absent, the President shall, if present, preside at all meetings of the
stockholders and the Board of Directors.
Section 4. Chairman of the Board. The Chairman of the Board, if any,
shall preside at all meetings of the stockholders and the Board of Directors, if
the Chairman of the Board is present. The Chairman of the Board shall have such
other powers and duties as shall be determined by the Board of Directors, and
shall undertake such other assignments as may be requested by the President.
Section 5. Other Officers. The Chairman of the Board or one or more
Vice Presidents shall have and exercise such powers and duties of the President
in the absence or inability to act of the President, as may be assigned to them,
respectively, by the Board of Directors or, to the extent not so assigned, by
the President. In the absence or inability to act of the President, the powers
and duties of the President not otherwise assigned by the Board of
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Directors or the President shall devolve upon the Chairman of the Board, or in
the Chairman's absence, the Vice Presidents in the order of their election.
Section 6. Secretary. The Secretary shall have custody of the seal
of the Corporation, and shall keep the minutes of the meetings of the
stockholders, Board of Directors and any committees thereof, and shall issue all
notices of the Corporation. The Secretary shall have charge of the stock
records and such other books and papers as the Board may direct, and shall
perform such other duties as may be incidental to the office or which are
assigned by the Board of Directors. The Secretary shall also keep or cause to
be kept a stock book, which may be maintained by means of computer systems,
containing the names, alphabetically arranged, of all persons who are
stockholders of the Corporation, showing their places of residence, the number
and class or series of any class of shares of stock held by them, respectively,
and the dates when they became the record owners thereof, and such book shall be
open for inspection as prescribed by the laws of the State of Maryland.
Section 7. Treasurer. The Treasurer shall have the care and custody
of the funds and securities of the Corporation and shall deposit the same in the
name of the Corporation in such bank or banks or other depositories, subject to
withdrawal in such manner as these Bylaws or the Board of Directors may
determine. The Treasurer shall, if required by the Board of Directors, give
such bond for the faithful discharge of duties in such form as the Board of
Directors may require.
ARTICLE IV
STOCK
Section 1. Stock Certificates. Each stockholder of the Corporation
shall be entitled to a certificate or certificates for the full number of shares
of each class or series of stock of the Corporation owned by such stockholder,
in such form as the Board of Directors may from time to time determine, subject
to applicable law.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder(s) thereof, in person
or by such holder's duly authorized attorney or legal representative, upon
surrender and cancellation of certificates, if any, for the same number of
shares, duly endorsed or accompanied by proper instruments of assignment and
transfer, with such proof of the authenticity of the signature(s) as the
Corporation or its agents may reasonably require. In the case of shares not
represented by certificates, the same or similar requirements may be imposed by
the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them, respectively, shall be kept at the principal offices of the
Corporation, or if the Corporation has appointed a transfer agent, at the
offices of such transfer agent.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors may determine the conditions upon which a new stock certificate of any
class or series may be issued in place of a certificate which is alleged to have
been lost, stolen or destroyed. The Board of Directors may in its discretion
require the owner of such certificate to give bond, with sufficient surety to
the Corporation and the transfer agent, if any, to indemnify the Corporation and
such
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transfer agent against any and all losses or claims which may arise by reason of
the issuance of a replacement certificate.
ARTICLE V
CORPORATE SEAL
The Board of Directors may provide for a suitable corporate seal, in
such form and bearing such inscriptions as it may determine. In lieu of fixing
the Corporation's seal to a document, it is sufficient to meet the requirements
of any law, rule or regulation relating to a corporate seal to place the word
("seal") adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board of
Directors.
ARTICLE VII
INDEMNIFICATION AND ADVANCES FOR EXPENSES
Section 1. Indemnification of Directors and Officers. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law. The Corporation
shall indemnify its directors and officers who while serving as directors or
officers also serve at the request of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided for by this Article shall continue as to a person who has ceased to be
a director or officer, and shall inure to the benefit of the heirs, executors
and administrators of such a person. This Article shall not protect any such
person against any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office ("disabling conduct").
Section 2. Advances. The Corporation shall advance payment to any
current or former director or officer of the Corporation for reasonable expenses
incurred in connection with any proceeding in which the individual is made a
party by reason of service as a director or officer in the manner and to the
fullest extent permissible under the Maryland General Corporation Law. Upon
receipt by the Corporation of a written affirmation of his or her good faith
belief that the standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking to repay any such advance if
it should ultimately be determined that the requisite standard of conduct has
not been met. In addition, at least one of the following conditions must be
satisfied: (a) the individual shall provide security in form and amount
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acceptable to the Corporation for the foregoing undertaking, (b) the Corporation
shall be insured against losses arising by reason of the advance, or (c) a
majority of a quorum of directors of the Corporation who are neither interested
persons, as defined in Section 2(a)(19) of the Investment Company Act of 1940,
as amended, nor parties to the proceeding ("disinterested non-party directors"),
or independent legal counsel in a written opinion, shall have determined, based
on a review of facts readily available to the Corporation at the time the
advance is proposed to be made, that there is reason to believe that the person
seeking indemnification will ultimately be found to meet the requisite standard
of conduct.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct, or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by, (i) the vote of a majority of a quorum of disinterested
non-party directors, or (ii) an independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the Corporation may be indemnified,
and reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940, as amended.
Section 5. Other Rights. The Board of Directors may make further
provision consistent with law for indemnification and advancement of expenses to
directors, officers, employees and agents by resolution, agreement or otherwise.
The indemnification provided for by this Article shall not be deemed exclusive
of any other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled under any insurance, other agreement,
resolution of stockholders or disinterested directors, or otherwise.
Section 6. Subsequent Changes to Law. References in this Article are
to the Maryland General Corporation Law and to the Investment Company Act of
1940 as from time to time amended. No amendment of these Bylaws shall affect
any right of any person under this Article based on any event, omission or
proceeding occurring prior to such amendment.
ARTICLE VIII
AMENDMENT OF BYLAWS
These Bylaws may be altered, amended or repealed at any meeting of the
Board of Directors without prior notice that such alteration, amendment or
repeal will be considered at such meeting.
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EXHIBIT 5(c)
SHORT-TERM INVESTMENTS CO.
MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997, by and between
Short-Term Investments Co., a Maryland corporation (the "Company") with respect
to its series of shares shown on the Appendix A attached hereto, as the same may
be amended from time to time, and A I M Advisors, Inc., a Delaware corporation
(the "Advisor").
RECITALS
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Company's charter authorizes the Board of Directors of the
Company to classify or reclassify authorized but unissued shares of the Company,
and as of the date of this Agreement, the Company's Board of Directors has
authorized the issuance of two series of shares representing interests in two
investment portfolios (such portfolios and any other portfolios hereafter added
to the Company being referred to individually herein as a "Fund," collectively
as the "Funds"); and
WHEREAS, the Company and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Company's Board of Directors. The Advisor shall
give the Company and the Funds the benefit of its best judgment, efforts and
facilities in rendering its services as investment advisor.
2. Investment Analysis and Implementation. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers
<PAGE>
engage, or with respect to securities which the Advisor considers desirable
for inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in
the Funds' investment portfolios and regularly report thereon to the
Company's Board of Directors; and
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Company's Board of Directors;
and take, on behalf of the Company and the Funds, all actions which appear to
the Company and the Funds necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including but not limited to
the placing of orders for the purchase and sale of securities for the Funds.
3. Delegation of Responsibilities. Subject to the approval of the Board
of Directors and the shareholders of the Funds, the Advisor may delegate to a
sub-advisor certain of its duties enumerated in Section 2 hereof, provided that
the Advisor shall continue to supervise the performance of any such sub-advisor.
4. Control by Board of Directors. Any investment program undertaken by
the Advisor pursuant to this Agreement, as well as any other activities
undertaken by the Advisor on behalf of the Funds, shall at all times be subject
to any directives of the Board of Directors of the Company.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act
and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Company, as
the same may be amended from time to time under the Securities Act of 1933
and the 1940 Act;
(c) the provisions of the corporate charter of the Company, as the
same may be amended from time to time;
(d) the provisions of the by-laws of the Company, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
6. Broker-Dealer Relationships. The Advisor is responsible for decisions
to buy and sell securities for the Funds, broker-dealer selection, and
negotiation of brokerage commission rates. The Advisor's primary consideration
in effecting a security transaction will be to obtain execution at the most
favorable price. In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the best
net price available; the reliability, integrity and financial condition of the
broker-dealer; the size of and the difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Funds on a continuing basis. Accordingly, the price to the
Funds in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may from time to time determine, the Advisor shall not be deemed to
have acted unlawfully
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or to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Funds to pay a broker or dealer that provides
brokerage and research services to the Advisor an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
a particular Fund, other Funds of the Company, and to other clients of the
Advisor as to which the Advisor exercises investment discretion. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Funds to
such brokers and dealers who also provide research or statistical material, or
other services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocations regularly to the Board
of Directors of the Company indicating the brokers to whom such allocations have
been made and the basis therefor. In making decisions regarding broker-dealer
relationships, the Advisor may take into consideration the recommendations of
any sub-advisor appointed to provide investment research or advisory services in
connection with the Funds, and may take into consideration any research services
provided to such sub-advisor by broker-dealers.
7. Compensation. The Company shall pay the Advisor as compensation for
services rendered to a Fund hereunder an annual fee, payable monthly, based upon
the average daily net assets of such Fund as the same is set forth in Appendix A
attached hereto. Such compensation shall be paid solely from the assets of such
Fund. The average daily net asset value of the Funds shall be determined in the
manner set forth in the corporate charter and registration statement of the
Company, as amended from time to time.
8. Additional Services. Upon the request of the Company's Board of
Directors, the Advisor may perform certain accounting, shareholder servicing or
other administrative services on behalf of the Funds which are not required by
this Agreement. Such services will be performed on behalf of the Funds and the
Advisor may receive from the Funds such reimbursement for costs or reasonable
compensation for such services as may be agreed upon between the Advisor and the
Company's Board of Directors based on a finding by the Board of Directors that
the provision of such services by the Advisor is in the best interests of the
Company and its shareholders. Payment or assumption by the Advisor of any Fund
expense that the Advisor is not otherwise required to pay or assume under this
Agreement shall not relieve the Advisor of any of its obligations to the Funds
nor obligate the Advisor to pay or assume any similar Fund expense on any
subsequent occasions. Such services may include, but are not limited to:
(a) the services of a principal financial officer of the Company
(including applicable office space, facilities and equipment) whose normal
duties consist of maintaining the financial accounts and books and records
of the Company and the Funds, including the review and calculation of daily
net asset value and the preparation of tax returns; and the services
(including applicable office space, facilities and equipment) of any of the
personnel operating under the direction of such principal financial
officer;
(b) the services of staff to respond to shareholder inquiries
concerning the status of their accounts; providing assistance to
shareholders in exchanges among the mutual funds managed or advised by the
Advisor; changing account designations or changing addresses; assisting in
the purchase or redemption of shares; supervising the operations of the
custodian, transfer agent(s) or dividend disbursing agent(s) for the Funds;
or otherwise providing services to shareholders of the Funds; and
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(c) such other administrative services as may be furnished from time
to time by the Advisor to the Company or the Funds at the request of the
Company's Board of Directors.
9. Expenses of the Funds. All of the ordinary business expenses incurred
in the operations of the Funds and the offering of their shares shall be borne
by the Funds unless specifically provided otherwise in this Agreement. These
expenses borne by the Funds include but are not limited to brokerage
commissions, taxes, legal, accounting, auditing, or governmental fees, the cost
of preparing share certificates, custodian, transfer and shareholder service
agent costs, expenses of issue, sale, redemption and repurchase of shares,
expenses of registering and qualifying shares for sale, expenses relating to
directors and shareholder meetings, the cost of preparing and distributing
reports and notices to shareholders, the fees and other expenses incurred by the
Company on behalf of the Funds in connection with membership in investment
company organizations and the cost of printing copies of prospectuses and
statements of additional information distributed to the Funds' shareholders.
10. Expense Limitation. If, for any fiscal year of the Company, the total
of all ordinary business expenses of the Funds, including all investment
advisory fees, but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses, such as litigation costs, would exceed the applicable
expense limitations imposed by state securities regulations in any state in
which the Funds' shares are qualified for sale, as such limitations may be
raised or lowered from time to time, the aggregate of all such investment
advisory fees shall be reduced by the amount of such excess. The amount of any
such reduction to be borne by the Advisor shall be deducted from the monthly
investment advisory fee otherwise payable to the Advisor during such fiscal
year. If required pursuant to such state securities regulations, the Advisor
will, not later than the last day of the first month of the next succeeding
fiscal year, reimburse the Funds for any such annual operating expenses (after
reduction of all investment advisory fees in excess of such limitation). For
the purposes of this paragraph, the term "fiscal year" shall exclude the portion
of the current fiscal year which shall have elapsed prior to the date hereof and
shall include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement. The application of
expense limitations shall be applied to each Fund of the Company separately
unless the laws or regulations of any state shall require that the expense
limitations be imposed with respect to the Company as a whole.
11. Non-Exclusivity. The services of the Advisor to the Company and the
Funds are not to be deemed to be exclusive, and the Advisor shall be free to
render investment advisory and administrative or other services to others
(including other investment companies) and to engage in other activities. It is
understood and agreed that officers or directors of the Advisor may serve as
officers or directors of the Company, and that officers or directors of the
Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
12. Term and Approval. This Agreement shall become effective with respect
to a Fund if approved by the shareholders of such Fund, and if so approved, this
Agreement shall thereafter continue in force and effect until February 28, 1999,
and may be continued from year to year thereafter, provided that the
continuation of the Agreement is specifically approved at least annually;
(a) (i) by the Company's Board of Directors or (ii) by the vote of "a
majority of the outstanding voting securities" of such Fund (as defined in
Section 2(a)(42) of the 1940 Act); and
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(b) by the affirmative vote of a majority of the directors who are
not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of a party to this Agreement (other than as Company directors),
by votes cast in person at a meeting specifically called for such purpose.
13. Termination. This Agreement may be terminated as to the Company or as
to any one or more of the Funds at any time, without the payment of any penalty,
by vote of the Company's Board of Directors or by vote of a majority of the
outstanding voting securities of the applicable Fund or by the Advisor, on sixty
(60) days' written notice to the other party. The notice provided for herein
may be waived by the party entitled to receipt thereof. This Agreement shall
automatically terminate in the event of its assignment, the term "assignment"
for purposes of this paragraph having the meaning defined in Section 2(a)(4) of
the 1940 Act.
14. Liability of Advisor and Indemnification. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Company or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company shall be and that of the Advisor shall be Eleven
Greenway Plaza, Suite 1919, Houston, Texas 77046.
16. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act or the Advisers Act shall be resolved
by reference to such term or provision of the 1940 Act or the Advisers Act and
to interpretations thereof, if any, by the United States Courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Acts.
In addition, where the effect of a requirement of the 1940 Act or the Advisers
Act reflected in any provision of the Agreement is revised by rule, regulation
or order of the Securities and Exchange Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
17. License Agreement. The Company shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only so
long as A I M Advisors, Inc. serves as investment manager or advisor to the
Company with respect to such series of shares.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
SHORT-TERM INVESTMENTS CO.
(a Maryland corporation)
Attest:
/s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
- --------------------- ----------------------------
Assistant Secretary President
(SEAL)
A I M ADVISORS, INC.
Attest:
/s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
- ---------------------- -----------------------------
Assistant Secretary President
(SEAL)
6
<PAGE>
APPENDIX A
TO
MASTER INVESTMENT ADVISORY AGREEMENT
OF
SHORT-TERM INVESTMENTS CO.
The Company shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered and all facilities furnished hereunder, a
management fee for such Fund set forth below. Such fee shall be calculated by
applying the following annual rates to the average daily net assets of such Fund
for the calendar year computed in the manner used for the determination of the
net asset value of shares of such Fund.
PRIME PORTFOLIO
NET ASSETS ANNUAL RATE
- ---------- -----------
First $100 million 0.20%
Over $100 million to $200 million 0.15%
Over $200 million to $300 million 0.10%
Over $300 million to $1.5 billion 0.06%
Over $1.5 billion 0.05%
LIQUID ASSETS PORTFOLIO
NET ASSETS ANNUAL RATE
- ---------- -----------
All assets 0.15%
7
<PAGE>
EXHIBIT 6(f)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
SHORT-TERM INVESTMENTS CO.
AND
FUND MANAGEMENT COMPANY
THIS AGREEMENT is made this 28th day of February, 1997, by and between
SHORT-TERM INVESTMENTS CO., a Maryland corporation (hereinafter referred to as
the "Company"), and FUND MANAGEMENT COMPANY, a Texas corporation, (hereinafter
referred to as the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt whereof is hereby acknowledged, the parties
hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its exclusive agent
for the sale of the shares set forth in Appendix A attached hereto (the
"Shares") of the Company to the public directly and through investment dealers
and financial institutions in the United States and throughout the world in
accordance with the terms of the Company's current prospectus applicable to the
Shares.
SECOND: The Company shall not sell any Shares except through the
Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however,
(A) the Company may issue Shares of one or more classes of its shares of
common stock to any other investment company or personal holding company, or to
the shareholders thereof, in exchange for all or a majority of the shares or
assets of any such company; and
(B) the Company may issue Shares at their net asset value in connection
with certain categories of transactions or to certain categories of persons, in
accordance with Rule 22d-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), provided that any such category is specified in the then
current prospectuses of the Company.
THIRD: The Distributor hereby accepts appointment as exclusive agent for
the sale of the Shares and agrees that it will use its best efforts to sell such
Shares; provided, however, that:
(A) the Distributor may, and when requested by the Company shall, suspend
its efforts to effectuate such sales at any time when, in the opinion of the
Distributor or of the Company, no sales should be made because of market or
other economic considerations or abnormal circumstance of any kind; and
-1-
<PAGE>
(B) the Company may withdraw the offering of the Shares (i) at any time with
the consent of the Distributor, or (ii) without such consent when so required by
the provisions of any statute or of any order, rule or regulation of any
governmental body having jurisdiction. It is mutually understood and agreed
that the Distributor does not undertake to sell any specific amount of the
Shares. The Company shall have the right to specify minimum amounts for initial
and subsequent orders for the purchase of Shares.
FOURTH:
(A) The public offering price of Shares of the Company (the "offering
price") shall be the net asset value per Share. Net asset value per Share shall
be determined in accordance with the provisions of the then current Shares'
prospectus and statement of additional information.
(B) No provision of this Agreement shall be deemed to prohibit any payments
by the Company to the Distributor or by the Company or the Distributor to
investment dealers and financial institutions where such payments are made under
a distribution plan adopted by the Company, on behalf of the applicable Shares,
pursuant to Rule 12b-1 under the 1940 Act and approved by the Company's
directors and by the holders of the Shares in a manner consistent with such
rule.
FIFTH: The Distributor shall act as agent of the Company in connection with
the sale and repurchase of Shares of the Company. Except with respect to such
sales and repurchases, the Distributor shall act as principal in all matters
relating to the promotion of the sale of Shares of the Company and shall enter
into all of its own engagements, agreements and contracts as principal on its
own account. The Distributor shall enter into agreements with investment
dealers and financial institutions selected by the Distributor, authorizing such
investment dealers and financial institutions to offer and sell Shares of the
Company to the public upon the terms and conditions set forth therein, which
shall not be inconsistent with the provisions of this Agreement. Each agreement
shall provide that the investment dealer and financial institution shall act as
a principal, and not as an agent of the Company.
SIXTH: The Company shall bear
(A) the expenses of qualification of the Shares for sale in connection with
such public offerings in such states as shall be selected by the Distributor and
of continuing the qualification therein until the Distributor notifies the
Company that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH: The Distributor shall bear
(A) the expenses of printing from the final proof and distributing
prospectuses and statements of additional information (including supplements
thereto) of the Company relating to the Shares in connection with public
offerings made by the Distributor pursuant to this Agreement
-2-
<PAGE>
(which shall not include those prospectuses and statements of additional
information, and supplements thereto, to be distributed to shareholders by the
Company), and any other promotional or sales literature used by the Distributor
or furnished by the Distributor to dealers in connection with such public
offerings; and
(B) expenses of advertising in connection with such public offerings;
provided however, that the Distributor may be reimbursed for all or a portion of
the expenses described in sections (A) and (B) of this paragraph, or may receive
reasonable compensation for distribution related services, to the extent
permitted by a distribution plan adopted by the Company pursuant to Rule 12b-1
under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of Shares only
to the extent of purchase orders actually received and not in excess of such
orders, and it will not avail itself of any opportunity of making a profit by
expediting or withholding orders. It is mutually understood and agreed that the
Company may reject purchase orders where, in the judgment of the Company, such
rejection is in the best interest of the Company.
NINTH: The Company and the Distributor shall each comply with all
applicable provisions of the 1940 Act, the Securities Act of 1933 and of all
other federal and state laws, rules and regulations governing the issuance and
sale of the Shares.
TENTH:
(A) In absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company agrees to indemnify the Distributor against any and all
claims, demands, liabilities and expenses which the Distributor may incur under
the Securities Act of 1933, or common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in any
registration statement or prospectuses of the Company, or any omission to state
a material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance upon,
and in conformity with, information furnished to the Company in connection
therewith by or on behalf of the Distributor. The Distributor agrees to
indemnify the Company against any and all claims, demands, liabilities and
expenses which the Company may incur arising out of or based upon any act or
deed of the Distributor or its sales representatives which has not been
authorized by the Company in its prospectuses or in this Agreement.
(B) The Distributor agrees to indemnify the Company against any and all
claims, demands, liabilities and expenses which the Company may incur under the
Securities Act of 1933, or common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in any registration
statement or prospectuses of the Company, or any omission to state a material
fact therein if such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Company in connection therewith by
or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the Distributor
shall not be liable for any errors of the Company's transfer agent or for any
failure of such transfer agent to perform its duties.
-3-
<PAGE>
ELEVENTH: Nothing herein contained shall require the Company to take any
action contrary to any provision of its charter or to any applicable statute or
regulation.
TWELFTH: This Agreement shall become effective as of the date hereof, shall
continue until February 28, 1999, and shall continue in force and effect from
year to year thereafter, provided, that such continuance is specifically
approved at least annually (a)(i) by the Board of Directors of the Company, or
(ii) by the vote of a majority of the Company's outstanding voting securities
(as defined in Section 2(a)(42) of the Investment Company Act), and (b) by vote
of a majority of the Company's directors who are not parties to this Agreement
or "interested persons" (as defined in Section 2(a)(19) of the Investment
Company Act) of any party to this Agreement cast in person at a meeting called
for such purpose.
THIRTEENTH:
(A) This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Board of Directors of the Company or by vote of a
majority of the outstanding voting securities of the Company, or by the
Distributor, on sixty (60) days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning as defined in Section
2(a)(4) of the Investment Company Act.
FOURTEENTH: Any notice under this Agreement shall be in writing, addressed
and delivered, or mailed, postage paid, to the other party at such address as
such other party may designate for the receipt of such notices. Until further
notice to the other party, it is agreed that the address of both the Company and
the Distributor shall be Eleven Greenway Plaza, Suite 1919, Houston, Texas
77046.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate as of the day and year first above written.
SHORT-TERM INVESTMENTS CO.
By: /s/ ROBERT H. GRAHAM
---------------------------------------------
Name: Robert H. Graham
Title: President
Attest:
/s/ DAVID L. KITE
- ---------------------------------------
Name: DAVID L. KITE
Title: ASSISTANT SECRETARY
FUND MANAGEMENT COMPANY
By: /s/ J. ABBOTT SPRAGUE
---------------------------------------------
Name: J. Abbott Sprague
Title: President
Attest:
/s/ OFELIA M. MAYO
- ----------------------------------------------------
Name: OFELIA M. MAYO
Title: ASSISTANT SECRETARY
-5-
<PAGE>
APPENDIX A TO
MASTER DISTRIBUTION AGREEMENT OF
SHORT-TERM INVESTMENTS CO.
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
-6-
<PAGE>
EXHIBIT 7(c)
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 and method of payment of amounts that you defer:
for amounts previously deferred and for future elections you now designate a
specific Payment Date and payment method which generally may be changed with at
least one year's advance notice.
PAYMENT DATE ELECTION
Deferred fees (and the income, gains and losses credited during the
deferral period) generally will be paid out as elected by you in installments or
a single sum in cash within 30 days of the Payment Date elected. (For payments
in connection with your termination of service as a trustee, see below.)
Deferrals must be for a minimum two year period (unless 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 second anniversary of the
applicable Election Date or your retirement date. Thus, fees previously
deferred and fees payable for the calendar year beginning January 1, 1997 may be
deferred to the first day of any calendar quarter in any year from 1999.
EXTENDING A PAYMENT DATE
At least one year prior to any Payment Date, you may extend that Date,
provided that the additional period of deferral is at least two years. You may
make this change in Payment Date only once.
<PAGE>
Payment Method
The value of your deferrals (based on your election as to how your deferral
account is to be considered invested) will be paid in cash, in one lump sum or
in annual installments (over a period not to exceed 10 years) as you select at
the time you select your Payment Data. You may change this election, but the
change will not be given effect unless it is made at least one year before your
Payment Date or your ceasing to be a trustee (whichever occurs first). This one
year requirement is waived in the case of your death (see Termination of
Service, below).
Termination of Service
Upon your death, your account under the Agreement will be paid out as
elected by you in installments or 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 timely 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.
-2-
<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
"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, if 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 (or pursuant to any prior agreement) 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 by giving
written direction to the Presidents of the Funds in such manner and at such
time as the Funds may pemit, but no less frequently than quarterly on thirty
(30) days' notice prior to the end of a calendar quarter. A timely change to a
Director's investment designation shall become effective as soon as practicable
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. At least 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 second 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 in a single sum unless the
Participant elects, at the time a Payment Date is selected pursuant to
paragraph 4.1(a) or 4.1(b), to receive the amount payable in generally equal
quarterly installments over a period not to exceed ten (10) years. In
addition, as least one year before the Payment Date, a Director may change the
method of payment previously selected.
(e) Irrevocability. Except as provided in paragraph
4.1(b) and 4.1(d), 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) provided the designation
of such method had been made at least one year before such termination occurred,
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 accordance with the method of
payment selected pursuant to paragraph 4.1(d), commencing 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.
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<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 this Agreement, such Accounts shall continue to be maintained
in accordance with the provisions of this Agreement 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
-10-
<PAGE>
APPENDIX A
----------
AIM ADVISOR FUNDS, INC.
AIM EQUITY FUNDS, INC.
AIM FUNDS GROUP
AIM INTERNATIONAL FUNDS, INC.
AIM INVESTMENT SECURITIES FUNDS
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.
-11-
<PAGE>
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 50 percent (50%) 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 two 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 quarterly installments for a period of ____ years (select no more
than 10 years)
o annual installments for a period of ____ (select no more than 10
years)
-12-
<PAGE>
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:_________________________
-13-
<PAGE>
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
<PAGE>
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:_________________________
-2-
<PAGE>
Exhibit 9(d)
AMENDMENT NO. 2
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated
September 16, 1994, as amended July 1, 1995, by and between Short-Term
Investments Co., a Maryland corporation and A I M Institutional Fund Services,
Inc., a Delaware corporation, is hereby amended as follows (terms used herein
but not otherwise defined herein have the meaning ascribed them in the
Agreement):
1) Section 2.01 of the Agreement is hereby deleted in its entirety and
replaced with the following: "For performance by the Transfer Agent pursuant to
this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the
Transfer Agent an annual fee in the amount of .009% of average daily net assets,
payable monthly. Such fee may be changed from time to time subject to mutual
written agreements between the Fund and the Transfer Agent."
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: July 1, 1996
SHORT-TERM INVESTMENTS CO.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
------------------------- -------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M INSTITUTIONAL FUND SERVICES, INC.
Attest: /s/ DAVID L. KITE By: /s/ J. ABBOTT SPRAGUE
------------------------- -------------------------
Assistant Secretary J. Abbott Sprague
President
(SEAL)
<PAGE>
Exhibit 9(e)
AMENDMENT NO. 3
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated
September 16, 1994, as amended on July 1, 1995 and July 1, 1996, by and between
Short-Term Investments Co., a Maryland corporation and A I M Institutional Fund
Services, Inc., a Delaware corporation, is hereby amended as follows (terms used
herein but not otherwise defined herein have the meaning ascribed them in the
Agreement):
1) A new Section 2.03 to the Agreement is hereby added in its entirety as
follows: "In addition to the fee paid under Section 2.01 above, the Fund agrees
to reimburse the Transfer Agent for out-of-pocket expenses or advances incurred
by the Transfer Agent for the reconcilement of demand deposit accounts on behalf
of each of the Portfolios. In addition, any other expenses incurred by the
Transfer Agent at the request or with the consent of the Fund, will be
reimbursed by the Fund on behalf of the applicable Shares."
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: July 1,1997
SHORT-TERM INVESTMENTS CO.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
------------------------- -------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M INSTITUTIONAL FUND SERVICES, INC.
Attest: /s/ OFELIA M. MAYO By: /s/ JOHN CALDWELL
------------------------- -------------------------
Assistant Secretary John Caldwell
President
(SEAL)
<PAGE>
EXHIBIT 9(k)
MASTER ADMINISTRATIVE SERVICES AGREEMENT
This MASTER ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made
this 28th day of February, 1997 by and between A I M ADVISORS, INC., a Delaware
corporation (the "Administrator"), and SHORT-TERM INVESTMENTS CO., a Maryland
corporation (the "Company"), with respect to the separate series set forth from
time to time in Appendix A to this Agreement (the "Portfolios").
W I T N E S S E T H:
--------------------
WHEREAS, the Company is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Portfolios are separate series of common stock representing
interests in separate investment portfolios of the Company; and
WHEREAS, the Company, on behalf of the Portfolios, has retained the
Administrator to provide investment advisory services pursuant to a Master
Investment Advisory Agreement which provides that the Administrator may perform
(or arrange for the performance of) accounting, shareholder servicing and other
administrative services as well as investment advisory services to the
Portfolios, and that the Administrator may receive reasonable compensation or
may be reimbursed for its costs in providing such additional services, upon the
request of the Board of Directors and upon a finding by the Board of Directors
that the provision of such services is in the best interest of the Portfolios
and their shareholders; and
WHEREAS, the Board of Directors has found that the provision of such
administrative services is in the best interest of the Portfolios and their
shareholders, and has requested that the Administrator perform such services;
NOW, THEREFORE, the parties hereby agree as follows:
1. The Administrator hereby agrees to provide, or arrange for the
provision of, any or all of the following services by the Administrator or its
affiliates:
(a) the services of a principal financial officer of the Company
(including related office space, facilities and equipment) whose normal
duties consist of maintaining the financial accounts and books and records
of the Company and the Portfolios, including the review of daily net asset
value calculations and the preparation of tax returns; and the services
(including related office space, facilities and equipment) of any of the
personnel operating under the direction of such principal financial
officer;
(b) the services of staff to respond to shareholder inquiries concerning
the status of their accounts; providing assistance to shareholders in
exchanges among the mutual funds managed or advised by the Administrator;
changing account designations or changing addresses; assisting in the
purchase or redemption of shares of the Portfolios; supervising the
operations of the custodian(s), transfer agent(s) or
<PAGE>
dividend agent(s) for the Portfolios; or otherwise providing services to
shareholders of the Portfolios; and
(c) such other administrative services as may be furnished from time to
time by the Administrator to the Company or the Portfolios at the request
of the Company's Board of Directors.
2. The services provided hereunder shall at all times be subject to the
direction and supervision of the Company's Board of Directors.
3. As full compensation for the services performed and the facilities
furnished by or at the direction of the Administrator, the Portfolios shall
reimburse the Administrator for expenses incurred by them or their affiliates in
accordance with the methodologies established from time to time by the Company's
Board of Directors. Such amounts shall be paid to the Administrator on a
quarterly basis.
4. The Administrator shall not be liable for any error of judgment or for
any loss suffered by the Company or the Portfolios in connection with any matter
to which this Agreement relates, except a loss resulting from the
Administrator's willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement.
5. The Company and the Administrator each hereby represent and warrant,
but only as to themselves, that each has all requisite authority to enter into,
execute, deliver and perform its obligations under this Agreement and that this
Agreement is legal, valid and binding, and enforceable in accordance with its
terms.
6. Nothing in this Agreement shall limit or restrict the rights of any
director, officer or employee of the Administrator who may also be a director,
officer or employee of the Company to engage in any other business or to devote
his time and attention in part to the management or other aspects of any
business, whether of a similar or a dissimilar nature, nor limit or restrict the
right of the Administrator to engage in any other business or to render services
of any kind to any other corporation, firm, individual or association.
7. This Agreement shall continue in effect until February 28, 1999 and
shall continue in effect from year to year thereafter; provided that such
continuance is specifically approved at least annually:
(a) (i) by the Company's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Company (as defined in
Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Company's directors
who are not parties to this Agreement or interested persons of a party to
this Agreement, by votes cast in person at a meeting specifically called
for such purpose.
This Agreement shall terminate automatically in the event of its assignment
(as defined in Section 2(a) (4) of the 1940 Act) or, with respect to one or more
Portfolios in the event of termination
2
<PAGE>
of the Master Investment Advisory Agreement relating to such Portfolio(s)
between the Company and the Administrator.
8. This Agreement may be amended or modified with respect to one or more
Portfolios, but only by a written instrument signed by both the Company and the
Administrator.
9. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (a) to the Administrator at Eleven Greenway Plaza, Suite
1919, Houston, Texas 77046, Attention: President, with a copy to the General
Counsel, or (b) to the Company at Eleven Greenway Plaza, Suite 1919, Houston,
Texas 77046, Attention: President, with a copy to the General Counsel.
10. This Agreement contains the entire agreement between the parties
hereto and supersedes all prior agreements, understandings and arrangements with
respect to the subject matter hereof.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
A I M ADVISORS, INC.
Attest: /s/ DAVID L. KITE By: /s/ ROBERT H. GRAHAM
---------------------- ---------------------------
Assistant Secretary President
(SEAL)
SHORT-TERM INVESTMENTS CO.
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
---------------------- ---------------------------
Assistant Secretary President
(SEAL)
3
<PAGE>
SHORT-TERM INVESTMENTS CO.
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
FEBRUARY 28, 1997
Liquid Assets Portfolio
Prime Portfolio
4
<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 caption "General Information -- Legal Counsel" in the Prospectus
of each of the Cash Management Class, Institutional Class, Personal Investment
Class, Private Investment Class and Resource Class, each a class of the Prime
Portfolio of Short-Term Investments Co. (the "Company"), and in the Prospectus
of each of the Cash Management Class, Institutional Class, Private Investment
Class and MSTC Cash Reserves Class, each a class of the Liquid Assets Portfolio
of the Company, which Prospectuses form a part of Post-Effective Amendment No. 8
to the Registration Statement under the Securities Act of 1933 (No. 33-66240)
and Amendment No. 9 to the Registration Statement under the Investment Company
Act of 1940 (No. 811-7892) on Form N-1A of the Company.
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
-------------------------------------
Ballard Spahr Andrews & Ingersoll
Philadelphia, Pennsylvania
December 11, 1997
<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 the Liquid
Assets Portfolio (portfolios of Short-Term Investment Co.) dated October 3, 1997
included therein and to the references to our firm under the headings "Financial
Highlights" in the Prospectuses and "Financial Statement" in the Statements of
Additional Information.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
December 17, 1997
<PAGE>
EXHIBIT 15(d)
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
OF
SHORT-TERM INVESTMENTS CO.
WHEREAS, Short-Term Investments Co. (the "Company") is engaged in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the shares of common stock of the Company may be divided into a
number of separate series, (hereinafter referred to as the "Portfolios"); and
WHEREAS, the Portfolios' shares are offered to customers through certain
banks and broker-dealers that may offer special shareholder services to such
customers; and
WHEREAS, the Company desires to adopt, on behalf of the shares of common
stock set forth in Appendix A attached hereto (the "Shares"), a plan pursuant to
Rule 12b-1 under the Act with respect to the Shares, and the directors of the
Company have determined that there is a reasonable likelihood that adoption of
this plan will benefit the Company, the Portfolios and the holders of the
Shares; and
WHEREAS, the Company has employed A I M Advisors, Inc. ("AIM") as its
investment advisor with respect to the Portfolios to supply investment advice;
and
WHEREAS, the Company on behalf of the Portfolios has entered into a Master
Distribution Agreement (the "Distribution Agreement") designating a principal
distributor of Shares (the "Distributor").
NOW, THEREFORE, the Company hereby adopts, on behalf of the Portfolios, the
following terms constituting a plan pursuant to Rule 12b-1 under the 1940 Act
with respect to the classes of Shares set forth in Appendix A:
1. The Company may act as a distributor of the Shares of which the Company
is the issuer, pursuant to Rule 12b-1 under the 1940 Act, according to the terms
of this Distribution Plan (the "Plan").
2. Amounts set forth in Appendix A may be expended when and if authorized
in advance by the Company's Board of Directors. Such amounts may be used to
finance any activity which is primarily intended to result in the sale of the
Shares, including, but not limited to, expenses of organizing and conducting
sales seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, supplemental payments to the Distributor and the
costs of administering the Plan. All amounts expended pursuant to the Plan
shall be paid (i) to the Distributor, as an asset-based sales charge, and (ii)
as a service fee to certain broker-dealers, banks, and other financial
institutions ("Service Providers") who offer continuing personal shareholder
services to their customers who invest in the Shares, and who have entered into
Shareholder Service Agreements substantially in the form of Exhibit A hereto.
<PAGE>
The maximum shareholder service fee payable to any Service Provider shall
not exceed twenty-five one hundredths of one percent (0.25%) per annum. Amounts
paid under the Plan that are not paid as service fees shall be deemed to be
asset-based sales charges. No provision of this Plan shall be interpreted to
prohibit any payments by the Company during periods when the Company has
suspended or otherwise limited sales.
The activities, the payment of which by the Company are intended to be
within the scope of the Plan, shall include, but not necessarily be limited to,
payments to the Distributor for its distribution-related activities and to
Service Providers as asset-based sales charges or as a service fee in respect of
the Shares owned by shareholders with whom such Service Provider has a
shareholder servicing relationship. Shareholder servicing may include, among
other things: (i) answering client inquiries regarding the Shares and the
Portfolio; (ii) assisting clients in changing dividend options, account
designations and addresses; (iii) performing sub-accounting; (iv) establishing
and maintaining shareholder accounts and records; (v) processing purchase and
redemption transactions; (vi) automatic investment in Shares of customer cash
account balances; (vii) providing periodic statements showing a customer's
account balance and integrating such statements with those of other transactions
and balances in the customer's other accounts serviced by such firm; (viii)
arranging for bank wires; and (ix) such other services as the Company may
request on behalf of the Shares, to the extent such firms are permitted to
engage in such services by applicable statute, rule or regulation.
3. No additional payments are to be made by the Company on behalf of a
Portfolio with respect to the Shares as a result of the Plan other than the
payments such Portfolio is otherwise obligated to make (i) to AIM pursuant to
the Master Investment Advisory Agreement, and (ii) for the expenses otherwise
incurred by the Portfolio and the Company on behalf of the Shares in the normal
conduct of the Portfolio's business pursuant to the Master Investment Advisory
Agreement. However, to the extent any payments by the Company on behalf of a
Portfolio to AIM or such Portfolio's shareholder servicing and transfer agent;
by AIM to any Service Providers pursuant to any Shareholder Service Agreement;
or, generally, by the Company on behalf of the Portfolio to any party for the
Portfolio's operating expenses, are deemed to be payments for the financing of
any activity primarily intended to result in the sale of the Portfolio's shares
within the context of Rule 12b-1 under the 1940 Act, then such payments shall be
deemed to be made pursuant to the Plan as set forth herein.
4. Notwithstanding any of the foregoing, while the Plan is in effect, the
following terms and provisions will apply:
a. The officers of the Company shall report quarterly in writing to
the Board of Directors on the amounts and purpose of payments for any of the
activities in paragraph 1 and shall furnish the Board of Directors with such
other information as the Board may reasonably request in connection with
such payments in order to enable the Board to make an informed determination
of the nature and value of such expenditures.
b. The Plan shall continue in effect for a period of more than one
year from the date written below only so long as such continuance is
specifically approved, at least annually, by the Company's Board of
Directors, including, the non-interested directors by vote cast in
person at a meeting called for the purpose of voting on the Plan.
-2-
<PAGE>
c. The Plan may be terminated with respect to any class of Shares
at any time by vote of a majority of the non-interested directors,or by
vote of a majority of the outstanding voting securities of the
applicable class of Shares on not more than sixty (60) days' written
notice to any other party to the Plan.
d. The Plan may not be amended to materially increase the amount to
be spent hereunder, or to permit the Company on behalf of a Portfolio
to make payments for distribution other than to the Distributor, or
with respect to a Shareholder Service Agreement, or without approval by
the holders of the applicable class of Shares, and all material
amendments to the Plan shall be approved by vote of the dis-interested
directors cast in person at a meeting called for the purpose of voting
on such amendment.
e. So long as the Plan is in effect, the selection and nomination
of the Company's dis-interested directors shall be committed to the
discretion of such dis-interested directors.
5. This Plan shall be subject to the laws of the State of Texas and shall
be interpreted and construed to further promote the operation of the Company as
an open-end investment company. As used herein the terms "Net Asset Value,"
"Offering Price," "Investment Company," "Open-End Investment Company,"
"Assignment," "Principal Underwriter," "Interested Person," "Parent,"
"Affiliated Person," and "Majority of the Outstanding Voting Securities" shall
have the meanings set forth in the Securities Act of 1933, as amended, or the
1940 Act, and the rules and regulations thereunder.
6. Nothing herein shall be deemed to protect the parties to any
Shareholder Service Agreement entered into pursuant to this Plan against any
liability to the Company or its shareholders to which they would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of their duties hereunder, or by reason of their reckless disregard
of their obligations and duties hereunder.
IN WITNESS WHEREOF, the undersigned has executed this document as
constituting a Plan pursuant to Rule 12b-1.
SHORT-TERM INVESTMENTS CO.
Attest: /s/ OFELIA M. MAYO By: /s/ CAROL F. RELIHAN
----------------------------- --------------------------------
Assistant Secretary Senior Vice President
Effective as of August 6, 1993, as amended as of September 19, 1995, as further
amended as of December 4, 1995, and amended and restated as of December 4,
1995.
Amended and restated as of June 30, 1997.
-3-
<PAGE>
APPENDIX A
TO
MASTER DISTRIBUTION PLAN
OF
SHORT-TERM INVESTMENTS CO.
(DISTRIBUTION FEE)
The Company shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each class
as designated below, a Distribution Fee* determined by applying the annual rate
set forth below as to each class to the average daily net asset value of the
class for the plan year, computed in a manner used for the determination of the
offering price of shares of the class.
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.
-4-
<PAGE>
EXHIBIT A
[Logo appears here] FUND MANAGEMENT COMPANY
Fund Management Company SHAREHOLDER SERVICE AGREEMENT
(BROKER-DEALERS AND BANKS)
_________________________, 19_____
Fund Management Company
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with Fund Management Company ("FMC") as
agent on behalf of the funds listed on Schedule A hereto (the "Funds"), for the
provision of continuing personal shareholder services to our clients who are
shareholders of, and/or the administration of accounts in, the Funds. We
understand that this Shareholder Service Agreement (the "Agreement") has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act") by each of the Funds, under a Distribution Plan (the "Plan") adopted
pursuant to said Rule, and is subject to applicable rules of the National
Association of Securities Dealers, Inc. ("NASD"). This Agreement defines the
services to be provided by us for which we are to receive payments pursuant to
the Plan. The Plan and the Agreement have been approved by a majority of the
directors or trustees of the applicable Fund in accordance with the requirements
of Rule 12b-1. The terms and conditions of this Agreement will be as follows:
1. We will provide continuing personal shareholder services and/or
administrative support services to our customers who may from time to time
beneficially own shares of the Funds, including but not limited to,
answering routine customer inquiries regarding the Funds, assisting
customers in changing dividend options, account designations and addresses,
and in enrolling into any of several special investment plans offered in
connection with the purchase of the Funds, forwarding sales literature,
assisting in the establishment and maintenance of customer accounts and
records and in the processing of purchase and redemption transactions,
investing dividends and capital gains distributions automatically in shares
of the Funds and providing such other services as FMC or the customer may
reasonably request, and you will pay us a fee periodically. We represent
that we will accept payment of fees hereunder only so long as we continue to
provide such services.
2. Shares of the Funds purchased by us on behalf of our clients may be
registered in our name or the name of our nominee. The client will be the
beneficial owner of the shares of the Funds purchased and held by us in
accordance with the client's instructions and the client may exercise all
applicable rights of a holder of such Shares. We agree to transmit to FMC
in a timely manner, all purchase orders and redemption requests of our
clients and to forward to each client all proxy statements, periodic
shareholder reports and other communications received from FMC by us on
behalf of our clients. FMC on behalf of the Funds agrees to pay all out-of-
pocket expenses actually incurred by us in connection with the transfer by
us of such proxy statements and reports to our clients as required under
applicable law or regulation.
Exhibit A has been replaced as of (3/97)
<PAGE>
Shareholder Service Agreement Page 2
3. We agree to transfer to the Funds' custodian, in a timely manner as set
forth in the applicable prospectus, federal funds in an amount equal to the
amount of all purchase orders placed by us on behalf of our clients and
accepted by FMC. In the event that FMC fails to receive such federal funds
on such date (other than through the fault of FMC or the Fund's custodian),
we will indemnify the applicable Fund or FMC against any expense (including
overdraft charges) incurred by the applicable Fund or FMC as a result of the
failure to receive such federal funds.
4. We agree to make available, upon FMC's request, such information relating to
our clients who are beneficial owners of Fund shares and their transactions
in such shares as may be required by applicable laws and regulations or as
may be reasonably requested by FMC.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record ownership
will be promptly transferred to the client in the event that the person or
entity ceases to be our client.
6. We acknowledge that if we use AIM LINK(TM) we are solely responsible for the
registration of account information for FMC's and A I M Institutional Fund
Services, Inc.'s ("AIFS") subaccounting customers through AIM LINK(TM), and
that neither FMC, AIFS nor any Fund is responsible for the accuracy of such
information; and we will indemnify and hold harmless FMC, AIFS and the Funds
for any claims or expenses resulting from the inaccuracy or inadequacy of
such information.
7. We will provide such facilities and personnel (which may be all or any part
of the facilities currently used in our business, or all or any personnel
employed by us) as may be necessary or beneficial in carrying out the
purposes of this Agreement.
8. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those contained in
the then current applicable prospectus applicable to the Funds, copies of
which will be supplied to us by FMC; and we will have no authority to act as
agent for any Fund. Neither a Fund nor A I M Advisors, Inc. ("AIM") will be
a party, nor will they be represented as a party, to any agreement that we
may enter into with our clients and neither a Fund nor AIM will participate,
directly or indirectly, in any compensation that we may receive from our
clients in connection with our acting on their behalf with respect to this
Agreement.
9. In consideration of the services and facilities described herein, we will
receive a maximum annual service fee, payable monthly, as set forth in
Schedule A. We understand that this Agreement and the payment of such fees
has been authorized and approved by the Board of Directors or Trustees of
the applicable Fund, and that the payment of fees hereunder is subject to
limitations imposed by the rules of the NASD. Service fees may be remitted
to us net of any amounts due and payable to FMC, AIFS or the Funds from us.
A schedule of fees relating to subaccounting and administration is attached
hereto as Schedule B.
10. FMC reserves the right, at its discretion and without notice, to suspend the
sale of any Fund shares or withdraw the sale of shares of a Fund.
11. We represent that our activities on behalf of our clients and pursuant to
this Agreement either (i) are not such as to require our registration as a
broker-dealer with the Securities and
<PAGE>
Shareholder Service Agreement Page 3
Exchange Commission (the "SEC") or in the state(s) in which we engage in
such activities, or (ii) we are registered as a broker-dealer with the SEC
and in the state(s) in which we engage in such activities.
12. If we are a broker-dealer registered with the SEC, we represent that we are
a member in good standing of the NASD, and agree to abide by the Rules of
Fair Practice of the NASD and all other federal and state rules and
regulations that are now or may become applicable to transactions hereunder.
Our expulsion from the NASD will automatically terminate this agreement
without notice. Our suspension from the NASD or a violation by us of
applicable state and federal laws and rules and regulations of authorized
regulatory agencies will terminate this agreement effective upon notice
received by us from FMC.
13. This Agreement or Schedule A hereto may be amended at any time without our
prior consent by FMC, by mailing a copy of an amendment to us at the address
set forth below. Such amendment will become effective on the date set forth
in such amendment unless we terminate this Agreement within thirty (30) days
of our receipt of such amendment.
14. This Agreement may be terminated at any time by FMC on not less than 60
days' written notice to us at our principal place of business. We, on 60
days' written notice addressed to FMC at its principal place of business,
may terminate this Agreement. FMC may also terminate this Agreement for
cause on violation by us of any of the provisions of this Agreement, said
termination to become effective on the date of mailing notice to us of such
termination. FMC's failure to terminate for any cause will not constitute a
waiver of FMC's right to terminate at a later date for any such cause. This
Agreement will terminate automatically in the event of its assignment, the
term "assignment" for this purpose having the meaning defined in Section
2(a) (4) of the 1940 Act.
15. All communications to FMC will be sent to it at P.O. Box 4333, Houston,
Texas 77210-4333. Any notice to us will be duly given if mailed or
telegraphed to us at the address shown on this Agreement.
16. We agree that under this Agreement we will be acting as an independent
contractor and not as your employee or agent, nor as an employee or agent of
the Funds, and we may not hold ourselves out to any other party as your
agent with the authority to bind you or the Funds in any manner.
17. We agree that this Agreement and the arrangement described herein are
intended to be non-exclusive and that either of us may enter into similar
agreements and arrangements with other parties.
<PAGE>
Shareholder Service Agreement Page 4
18. This Agreement will become effective as of the date when it is executed and
dated below by FMC. This Agreement and all rights and obligations of the
parties hereunder will be governed by and construed under the laws of the
State of Texas.
------------------------------------------------------
(Firm Name)
------------------------------------------------------
(Address)
------------------------------------------------------
City/State/Zip/County
BY:
------------------------------------------------------
Name:
------------------------------------------------------
Title:
------------------------------------------------------
Dated:
------------------------------------------------------
For administrative convenience, please supply the
following information, which may be updated in writing
at any time. Wiring instructions for service fees
payable by FMC:
---------------------------- -----------------
(Bank Name) (Bank ABA Number)
------------------------------------------------------
(Reference Account Name and Number)
Contact person for operational issues:
---------------------------- ----------------
(Name) (Phone Number)
ACCEPTED:
FUND MANAGEMENT COMPANY
BY:
--------------------
Name:
--------------------
Title:
--------------------
Dated:
--------------------
<PAGE>
Shareholder Service Agreement Page 5
SCHEDULE A
FUNDS FEE
- ----- ---
Short-Term Investments Co.
- --------------------------
Prime Portfolio - Personal Investment Class .40%*
Prime Portfolio - Private Investment Class .25%
Prime Portfolio - Resource Class .16%
Prime Portfolio - Cash Management Class .08%
Liquid Assets Portfolio - Private Investment Class .25%
Liquid Assets Portfolio - MSTC Cash Reserves Class .20%
Liquid Assets Portfolio - Cash Management Class .08%
Short-Term Investments Trust
- ----------------------------
Treasury Portfolio - Personal Investment Class .40%*
Treasury Portfolio - Private Investment Class .25%
Treasury Portfolio - Resource Class .16%
Treasury Portfolio - Cash Management Class .08%
Treasury TaxAdvantage Portfolio - Private Investment Class .25%
Tax-Free Investments Co.
- ------------------------
Cash Reserve Portfolio - Private Investment Class .25%
*Fees in excess of .25% are for services of an administrative nature, as
described in Paragraph 1 of this Agreement.
<PAGE>
Shareholder Service Agreement Page 6
SCHEDULE B
SUBACCOUNTING AND ADMINISTRATION FEES
We will be assessed a fee, payable monthly, in the amount of ______ basis
points of our monthly average net assets managed by your affiliates. As
described in the attached Shareholder Service Agreement, we understand that the
amount of any service fees remitted to us will be net of any amounts due and
payable to FMC, AIFS or the Funds, including the ______ basis points of monthly
average net assets related to subaccounting and administration services provided
to us by AIFS.
<PAGE>
EXHIBIT 18(b)
AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS
1. This Amended and Restated 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 fees and expenses and other
shareholder recordkeeping fees and expenses specifically 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 - Except to the extent provided
in the following sentence, each Portfolio will allocate income and
realized and unrealized capital gains and losses to a Class based on
the relative net assets of each Class. Notwithstanding the foregoing,
each Portfolio that declares dividends on a daily basis will allocate
income on the basis of settled shares.
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
2
<PAGE>
shares, for larger purchases, under a combined purchase privilege,
under a right of 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 AIM
Cash Reserve Shares, AIM Limited Maturity Treasury Shares, AIM Tax-
Free Intermediate Shares and shares of AIM Tax-Exempt Bond Fund of
Connecticut and AIM Tax Exempt Cash Fund 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 (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in Section
5(b), (iii) 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 (iv) 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 (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in Section
5(c), and (iii) subject to ongoing Service Fees and Distribution Fees
approved from time to time by the Directors and set forth in the
Fund's prospectus.
d. Institutional Shares. Institutional Shares shall be (i) offered at net
asset value, (ii) 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 (iii) 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 and Class C 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.
3
<PAGE>
c. Class C Shares. The CDSC Period for the Class C Shares shall be one
year. The CDSC Rate for the Class C Shares shall be as set forth in
the Fund's prospectus, the relevant portions of which are incorporated
herein by reference.
d. 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
subject to a CDSC shall be determined by the Distributor in accordance
with the provisions of Rule 6c-10 under the Act.
e. 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 C Shares of any other
Portfolio at their relative net asset value.
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,
Class B Shares and Class C 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.
4
<PAGE>
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.
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
<PAGE>
EXHIBIT 18(c)
SECOND AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS
1. This Second Amended and Restated 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 fees and expenses and other
shareholder recordkeeping fees and expenses specifically attributable
to that Class; provided, however, that where two or more Classes of a
Portfolio pay such fees and/or expenses at the same rate or in the
same amount, those Classes shall bear proportionately such fees and
expenses based on the relative net assets attributable to each such
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 - Except to the extent provided
in the following sentence, each Portfolio will allocate income and
realized and unrealized capital gains and losses to a Class based on
the relative net assets of each Class. Notwithstanding the foregoing,
each Portfolio that declares dividends on a daily basis will allocate
income on the basis of settled shares.
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.
2
<PAGE>
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 right of 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 AIM
Cash Reserve Shares, AIM Limited Maturity Treasury Shares, AIM Tax-
Free Intermediate Shares and shares of AIM Tax-Exempt Bond Fund of
Connecticut and AIM Tax Exempt Cash Fund 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 (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in Section
5(b), (iii) 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 (iv) 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 (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in Section
5(c), and (iii) subject to ongoing Service Fees and Distribution Fees
approved from time to time by the Directors and set forth in the
Fund's prospectus.
d. Institutional Shares. Institutional Shares shall be (i) offered at net
asset value, (ii) 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 (iii) 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 and Class
C 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.
3
<PAGE>
c. Class C Shares. The CDSC Period for the Class C Shares shall be one
year. The CDSC Rate for the Class C Shares shall be as set forth in
the Fund's prospectus, the relevant portions of which are incorporated
herein by reference.
d. 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
subject to a CDSC shall be determined by the Distributor in accordance
with the provisions of Rule 6c-10 under the Act.
e. 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 C Shares of any other
Portfolio at their relative net asset value.
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,
Class B Shares and Class C 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.
4
<PAGE>
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.
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 INSTITUTIONAL CLASS FOR THE ANNUAL PERIOD ENDED
AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
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<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO PRIVATE INVESTMENT CLASS FOR THE ANNUAL PERIOD
ENDED AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
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<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO PERSONAL INVESTMENT CLASS FOR THE ANNUAL PERIOD
ENDED AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
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<SERIES>
<NUMBER> 003
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<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. PRIME PORTFOLIO CASH MANAGEMENT CLASS FOR THE ANNUAL PERIOD
ENDED AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
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<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. LIQUID ASSETS PORTFOLIO INSTITUTIONAL CLASS FOR THE ANNUAL
PERIOD ENDED AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. LIQUID ASSETS PORTFOLIO PRIVATE INVESTMENT CLASS FOR THE ANNUAL
PERIOD ENDED AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. LIQUID ASSETS PORTFOLIO CASH MANAGEMENT CLASS FOR THE ANNUAL
PERIOD ENDED AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
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INVESTMENTS CO. PRIME PORTFOLIO RESOURCE CLASS FOR THE ANNUAL PERIOD ENDED
AUGUST 31, 1997.
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<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
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<NUMBER> 008
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<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SHORT-TERM
INVESTMENTS CO. LIQUID ASSETS PORTFOLIO MSTC CASH RESERVES CLASS FOR THE ANNUAL
PERIOD ENDED AUGUST 31, 1997.
</LEGEND>
<CIK> 0000914638
<NAME> SHORT-TERM INVESTMENTS CO.
<SERIES>
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<NAME> LIQUID ASSETS PORTFOLIO MSTC CASH RESERVES CLASS
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