<PAGE>
[AIM LOGO APPEARS HERE] Dear Shareholder:
[PHOTO of Mixed signals from a vigorous economy were the
Charles T. Bauer, chief focus for fixed-income markets during most
Chairman of the of the past year. Although the Federal Reserve
LETTER Board of the Fund Board (the Fed) raised interest rates only once
TO OUR APPEARS HERE] during the fiscal year covered by this report,
SHAREHOLDERS the period was marked by considerable
fluctuation in the money markets.
In March 1997, the Fed raised the key short-term target, namely
the federal funds rate, from 5.25% to 5.50%. That action was in
response to concern about the inflationary potential of strong
economic growth during the last quarter of 1996 and the first
quarter of 1997. Short-term yields rose as markets anticipated
another increase in interest rates at the Fed's next meeting in May.
But when signs of a slowing economy appeared, the Fed decided not
to raise rates further in May. Money market yields fell
significantly, reflecting changed expectations of near-term interest
rate stability. In fact, the federal funds rate remained unchanged
from March through Short-Term Investments Co. Liquid Assets
Portfolio's August 31 fiscal year-end.
The economy continued to display considerable resilience, growing
at a 3.3% annual rate during the second quarter of 1997. Though
there were no outward signs of inflation, the extension of a strong
growth pattern heightened uncertainty about Fed policy, and that led
to increased volatility in the money markets.
YOUR INVESTMENT PORTFOLIO
Through a combination of short-term cash management vehicles and
selective use of longer maturities to add yield, the Portfolio
continued to provide attractive returns despite the recent drop in
money market yields. Weighted average maturity was relatively short
for much of the fiscal year in light of generally heightened market
volatility and the potential for a rise in interest rates. But as
rate increases became less likely, portfolio management extended
maturities to the 25-day range. At the close of the reporting
period, the weighted average maturity of the Portfolio was 16 days
due to an influx of cash into the Fund.
<TABLE>
<CAPTION>
TABLE 1: YIELDS AS OF 8/31/97
Average Seven-Day
Monthly Yield Yield
<S> <C> <C>
Liquid Assets Portfolio
Institutional Class 5.61% 5.67%
IBC Money Fund Averages(TM)-
First-Tier Institutions Only 5.32% 5.33%
IBC Money Fund Averages(TM)-
Total Institutions Only 5.23% 5.25%
</TABLE>
<TABLE>
<CAPTION>
TABLE 2: LIPPER RANKINGS AS OF 8/31/97
# of Funds in
Liquid Assets Portfolio Institutional Money Percentile
Period Rank Market Category Rank
<S> <C> <C> <C>
1 Year 4 169 2%
3 Years 2 133 2%
</TABLE>
Fund percentage rankings are based on total returns and are vs. all
institutional money market funds tracked by Lipper Analytical
Services, Inc., excluding sales charges and including fees and
expenses. Lipper Analytical Services, Inc. is an independent mutual
fund performance monitor. Past performance cannot guarantee
comparable future results.
(continued)
<PAGE>
As of August 31, 1997, performance of Institutional Class of
the Portfolio compared very favorably with performance reported
for comparative indexes, as shown in Table 1.
As shown in Table 2, the Institutional Class of Liquid Assets
Portfolio ranked in the top 2% of its Lipper Category of
comparable institutional money market funds for the one-year
period ended August 31, 1997.
Net assets of the Institutional Class stood at $3.79 billion
as of August 31, 1997, up from $1.99 billion as of August 31,
1996.
The Liquid Assets Portfolio invests solely in securities rated
"First Tier" as defined in Rule 2a-7 under the Investment
Company Act of 1940. Its objective is to provide as high a level
of current income as is consistent with the preservation of
capital and liquidity. Using a barbell maturity structure,
portfolio management emphasizes superior credit quality in
purchasing money market securities such as commercial paper and
selected repurchase agreement securities. As with any money
market fund, your investment in Liquid Assets Portfolio is
neither insured nor guaranteed by the U.S. government, the FDIC,
or a bank, and there can be no assurance that the Portfolio will
be able to maintain a stable net asset value of $1.00 per share.
OUTLOOK FOR THE FUTURE
As the reporting period closed, expectations were that the
economy would continue to grow at a sustainable annual pace of
2% to 3% and that inflation would remain under control. However,
underlying strength in various economic indicators, including
consumer spending and capital expenditures by companies, signals
the potential for faster growth, which could trigger higher
short-term rates later this year. This uncertainty could cause
interest rates to remain volatile through the close of 1997.
The Portfolio will continue to maintain a relatively short
maturity structure, remaining flexible to take advantage of any
sudden rise in market yields or further rate increases by the
Fed.
We are pleased to send you this report concerning your
investment. AIM remains committed to the primary goals of
safety, liquidity and yield in institutional fund management. We
also are committed to customer service and are ready to respond
to your comments about this report and to any questions you may
have. Please contact one of our representatives at 800-659-1005
if we may be of service.
Respectfully submitted
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
2
<PAGE>
AVERAGE MONTHLY YIELD COMPARISON
12 months ended 8/31/97 (Yields are average monthly yields
for the month-ends shown)
Short-Term
Investments Co. IBC IBC
Liquid Money Fund Money Fund
Assets Averages(TM)- Averages(TM)-
Portfolio First-Tier Total
Institutional Institutions Institutions
Class Only Only
9/96 5.34 5.10 5.01
5.30 5.09 5.00
11/96 5.40 5.10 5.04
5.42 5.12 5.04
1/97 5.42 5.12 5.12
5.31 5.10 5.01
3/97 5.39 5.11 5.04
5.49 5.22 5.14
5/97 5.52 5.28 5.17
5.57 5.32 5.20
7/97 5.58 5.32 5.20
8/97 5.61 5.32 5.23
WEIGHTED AVERAGE MATURITY COMPARISON
12 months ended 8/31/97
Short-Term
Investments Co. IBC IBC
Liquid Money Fund Money Fund
Assets Averages(TM)- Averages(TM)-
Portfolio First-Tier Total
Institutional Institutions Institutions
Class Only Only
9/96 28 45 45
20 47 47
11/96 18 48 46
19 47 46
1/97 20 47 45
28 49 44
3/97 24 49 45
19 48 46
5/97 22 48 47
28 48 47
7/97 30 50 48
8/97 16 49 48
Source: IBC Financial Data, Inc. IBC Money Fund Report--Registered
Trademark--for weighted average maturities; IBC Money Fund Insight--Registered
Trademark--for average monthly yields.
3
<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>
4
<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>
5
<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>
6
<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.
7
<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.
8
<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.
9
<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>
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.
10
<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
11
<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.
12
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
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.
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.
KPMG Peat Marwick LLP
Houston, Texas
October 3, 1997
14
<PAGE>
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Fund was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Fund and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Fund's fiscal year ending August 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
VOTES WITHHOLD/
DIRECTOR/MATTER VOTES FOR AGAINST ABSTENTIONS
--------------- ------------- ------- -----------
<C> <S> <C> <C> <C>
(1) Charles T. Bauer....................... 7,945,747,161 N/A 623,551
Bruce L. Crockett...................... 7,945,747,161 N/A 623,551
Owen Daly II........................... 7,945,747,161 N/A 623,551
Carl Frischling........................ 7,945,747,161 N/A 623,551
Robert H. Graham....................... 7,945,747,161 N/A 623,551
John F. Kroeger........................ 7,945,747,161 N/A 623,551
Lewis F. Pennock....................... 7,945,747,161 N/A 623,551
Ian W. Robinson........................ 7,945,747,161 N/A 623,551
Louis S. Sklar......................... 7,945,747,161 N/A 623,551
Approval of new Investment Advisory
(2) Agreement (Portfolio only)............. 1,590,748,383 N/A N/A
Elimination of policy restricting in-
vestments in other investment companies
(3) (Portfolio only)....................... 1,565,896,805 105,264 N/A
(4) KPMG Peat Marwick LLP.................. 7,944,484,460 691,022 1,195,229
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
TRUSTEES
Charles T. Bauer Robert H. Graham Short-Term
Bruce L. Crockett John F. Kroeger Investments Co.
Owen Daly II Lewis F. Pennock (STIC)
Jack Fields Ian W. Robinson
Carl Frischling Louis S. Sklar
OFFICERS
Charles T. Bauer Chairman
Robert H. Graham President
John J. Arthur Sr. Vice President & Treasurer Liquid Assets
Gary T. Crum Sr. Vice President Portfolio
Carol F. Relihan Sr. Vice President & Secretary ----------------------------------------
Dana R. Sutton Vice President & Assistant Treasurer Institutional ANNUAL
Melville B. Cox Vice President Class REPORT
Karen Dunn Kelley Vice President
J. Abbott Sprague Vice President
P. Michelle Grace Assistant Secretary AUGUST 31, 1997
Nancy L. Martin Assistant Secretary
Ofelia M. Mayo Assistant Secretary
Kathleen J. Pflueger Assistant Secretary
Samuel D. Sirko Assistant Secretary
Stephen I. Winer Assistant Secretary
Mary J. Benson Assistant Treasurer
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
(800) 347-1919
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza, Suite 100
Houston, TX 77046
(800) 659-1005
CUSTODIAN
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
LEGAL COUNSEL TO FUND
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
LEGAL COUNSEL TO DIRECTORS
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
TRANSFER AGENT
A I M Institutional Fund Services, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
AUDITORS
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
This report may be distributed only to current shareholders or [LOGO APPEARS HERE]
to persons who have received a current prospectus. FUND MANAGEMENT COMPANY
</TABLE>
