SHORT TERM INVESTMENTS CO /TX/, 497, 1997-01-03

SHORT TERM INVESTMENTS CO /TX/
497, 1997-01-03

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<S> <C>

SHORT-TERM
INVESTMENTS CO.
Prospectus
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PRIME
PORTFOLIO The Prime Portfolio (the "Portfolio") is a money market fund whose investment
objective is the maximization of current income to the extent consistent with
PERSONAL the preservation of capital and the maintenance of liquidity. The Portfolio
INVESTMENT seeks to achieve its objective by investing in high grade money market
CLASS instruments such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
DECEMBER 30, 1996 Portfolio will have maturities of sixty days or less.

The Portfolio is a series portfolio of Short-Term Investments Co. (the
"Fund"), an open-end, diversified, series, management investment company. This
Prospectus relates solely to the Personal Investment Class of the Portfolio, a
class of shares designed to be a convenient vehicle in which customers of
banks, certain broker-dealers and other financial institutions can invest in a
diversified money market fund.

The Fund also offers shares of the following classes of the Portfolio
pursuant to separate prospectuses: the Institutional Class, the Private
Investment Class, the Cash Management Class and the Resource Class, as well as
shares of classes of another portfolio of the Fund, the Liquid Assets
Portfolio.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE PERSONAL INVESTMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION, DATED DECEMBER 30, 1996, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-4744.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.

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

11 Greenway Plaza
Suite 1919
Houston, TX 77046-1173
(800) 877-4744

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SUMMARY

THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE

The Fund is an open-end diversified series management investment company.
This Prospectus relates to the Personal Investment Class (the "Class") of the
Portfolio. The Portfolio is a money market fund which invests in money market
instruments, such as U.S. Government obligations, bank obligations, commercial
instruments and repurchase agreements. The instruments purchased by the
Portfolio will have maturities of sixty days or less. The investment objective
of the Portfolio is the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.

Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The Fund also offers shares of
classes of another portfolio, the Liquid Assets Portfolio, each pursuant to a
separate prospectus. Such classes have different distribution arrangements and
are designed for institutional and other categories of investors. The
portfolios of the Fund are referred to collectively as the "Portfolios."

All classes of the Portfolio share a common investment objective and
portfolio of investments. Shares of each class of the Portfolio have the same
net asset value (proportionate interest in the net assets of the Portfolio) and
bear equally those expenses, such as the advisory fee, that are allocated to
the Portfolio as a whole. However, different classes of the Portfolio have
different shareholder qualifications and are separately allocated certain class
expenses, such as those associated with the distribution of their shares.
Therefore, each class will have a different dividend payment and a different
yield.

INVESTORS IN THE CLASS

The Class is designed to be a convenient vehicle in which customers of banks,
certain broker-dealers and other financial institutions can invest in a
diversified open-end money market fund.

PURCHASE OF SHARES

Shares of the Class that are offered hereby are sold at net asset value. The
minimum initial investment in the Class is $1,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in funds immediately available to the Portfolio. See "Purchase of Shares."

REDEMPTION OF SHARES

Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders are received prior to
4:00 p.m. Eastern Time will normally be made on the same day. See "Redemption
of Shares."

DIVIDENDS

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

CONSTANT NET ASSET VALUE

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

2
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INVESTMENT ADVISOR

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

On November 4, 1996, A I M Management Group Inc. ("AIM Management") announced
that it had entered into an Agreement and Plan of Merger among INVESCO plc,
INVESCO Group Services Inc. and AIM Management, pursuant to which AIM
Management will be merged with INVESCO Group Services Inc. Subject to a number
of conditions being met, it is currently anticipated that the transaction will
occur in the early part of 1997. The Fund's investment advisor, AIM, is a
wholly-owned subsidiary of AIM Management.

The proposed transaction may be deemed to cause an "assignment" (as that term
is defined under the Investment Company Act of 1940, as amended (the "1940
Act")) of the investment advisory agreement between the Fund and AIM. Under the
1940 Act and the investment advisory agreement, an assignment results in the
automatic termination of the investment advisory agreement. On December 11,
1996, the Board of Directors of the Fund approved a new investment advisory
agreement, subject to shareholder approval, between AIM and the Fund with
respect to the Portfolio. Shareholders will be asked to approve the proposed
advisory agreement at an annual meeting of shareholders to be held on
February 7, 1997 (the "Annual Meeting"). The Board of Directors has also
approved a new administrative services agreement with AIM and a new distribution
agreement with Fund Management Company. There are no material changes to the
terms of the new agreements, including the fees payable by the Portfolio. No
change is anticipated in the investment advisory or other personnel responsible
for the Portfolio as a result of these new agreements.

The Board of Directors has approved these new agreements because the
Portfolio's corresponding existing agreements will terminate upon the
consummation of the proposed merger of AIM Management, the parent of AIM, into
a subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. It is contemplated that the merger will occur on
February 28, 1997. Provided that the Portfolio's shareholders approve the new
advisory agreement at the Annual Meeting and the merger is consummated, the new
advisory agreement with respect to the Portfolio, as well as the new
administrative services and distribution agreements, will automatically become
effective as of the closing of the merger.

DISTRIBUTOR AND DISTRIBUTION PLAN

Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Distribution Plan, the Fund may pay to FMC
as well as certain broker-dealers or other financial institutions up to 0.75%
of the average daily net assets of the Portfolio attributable to the shares of
the Class. Of this amount, up to 0.25% may be for continuing personal services
to shareholders provided by broker-dealers, banks or other financial
institutions and the balance would be deemed an asset-based sales charge. See
"Purchase of Shares" and "Management of the Fund--Distribution Plan."

SPECIAL CONSIDERATIONS

The Portfolio may borrow money and enter into reverse repurchase agreements.
The Portfolio may invest in certificates of deposit and time deposits of London
branches of major domestic banks and in repurchase agreements. The Portfolio
may purchase delayed delivery or when-issued securities. Accordingly, an
investment in the Portfolio may entail somewhat different risks from an
investment in an investment company that does not engage in such practices.
There can be no assurance that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Investment Program."

The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos and La Familia AIM de Fondos and
Design are service marks of A I M Management Group Inc.

3
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TABLE OF FEES AND EXPENSES

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SHAREHOLDER TRANSACTION EXPENSES -- PERSONAL INVESTMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).............................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage
of offering price).................................................. None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable).. None
Exchange Fee......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES -- PERSONAL INVESTMENT CLASS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees...................................................... 0.06%
12b-1 Fees (after fee waivers)**..................................... 0.50%***
Other Expenses (after expense reimbursements)**...................... 0.03%
----
Total Operating Expenses -- Personal Investment Class**.............. 0.59%
====
</TABLE>
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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 and no expense reimbursements, 12b-1 Fees,
Other Expenses and Total Operating Expenses would have been 0.75%, 0.08%
and 0.89% respectively.

*** It is possible that as a result of Rule 12b-1 fees, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted under rules of the National Association of Securities
Dealers, Inc. Given the Rule 12b-1 fee of the Class, however, it is
estimated that it would take a substantial number of years for a
shareholder to exceed such maximum front-end sales charges.

EXAMPLE

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

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1 year............................................................. $ 6
3 years............................................................ $19
5 years............................................................ $33
10 years........................................................... $74
</TABLE>

The Table of Fees and Expenses is designed to assist an investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The expense figures
are based upon actual costs and fees charged to the Class for the fiscal year
ended August 31, 1996. There can be no assurance that future waivers of fees
(if any) will not vary from the figures reflected in the Table of Fees and
Expenses. To the extent any service providers assume additional expenses of the
Class, such assumption of additional expenses will have the effect of lowering
the Class' overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Class should also consider the effect of any
charges imposed by the institution maintaining their accounts.

The example in the Table of Fees and Expenses assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual
Portfolio Operating Expenses -- Personal Investment Class" remain the same in
the years shown.

THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE AN ACCURATE REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

4
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FINANCIAL HIGHLIGHTS

Shown below are the per share data, ratios and supplemental data
(collectively "data") for each of the years in the five year period ended
August 31, 1996 and the period August 8, 1991 (date operations commenced)
through August 31, 1991. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.

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<CAPTION>
1996 1995 1994 1993 1992 1991
-------- ------- ------ ----- ----- -------
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Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
-------- ------- ------ ----- ----- -------
Income from investment
operations:
Net investment income.. 0.05 0.05 0.03 0.03 0.04 0.002
-------- ------- ------ ----- ----- -------
Less distributions:
Dividends from net
investment income..... (0.05) (0.05) (0.03) (0.03) (0.04) (0.002)
-------- ------- ------ ----- ----- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $ 1.00
======== ======= ====== ===== ===== =======
Total return............ 5.11% 5.27% 3.12% 2.74% 3.94% 5.02%(a)
======== ======= ====== ===== ===== =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted). $112,645 $99,630 $3,065 $ 904 $ 727 $ 270
======== ======= ====== ===== ===== =======
Ratio of expenses to
average net assets(b). 0.59%(d) 0.59% 0.58% 0.52% 0.54% 0.80%(a)
======== ======= ====== ===== ===== =======
Ratio of net investment
income to average net
assets(c)............. 4.99%(d) 5.23% 3.34% 2.71% 3.75% 5.03%(a)
======== ======= ====== ===== ===== =======
</TABLE>
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(a) Annualized.
(b) Ratios of expenses to average net assets prior to waiver of distribution
fees and/or expense reimbursements were 0.89%, 0.86%, 2.39%, 2.33%, 7.21%
and 15.40% for the periods 1996-1991, respectively.
(c) Ratios of net investment income to average net assets prior to waiver of
distribution fees and/or expense reimbursements were 4.69%, 4.96%, 1.53%,
0.90%, (2.93%) and (9.57%) for the periods 1996-1991, respectively.
(d) Ratios are based on average net assets of $111,204,901.

SUITABILITY FOR INVESTORS

The Class is intended for use primarily by customers of banks, certain
broker-dealers and other financial institutions who seek a convenient vehicle
in which to invest in an open-end diversified money market fund. The minimum
initial investment is $1,000.

Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments, and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class.

INVESTMENT PROGRAM

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

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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.

GOVERNMENT OBLIGATIONS. The Portfolio intends to invest in securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of the
agency or instrumentality itself (as in the case of obligations of the Student
Loan Marketing Association). No assurance can be given that the U.S. Government
will provide financial support to such U.S. Government sponsored agencies or
instrumentalities in the future and it is not obligated to do so by law.

BANK INSTRUMENTS. The Portfolio intends to invest in certificates of deposit
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $1.5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance Corporation.
CDs represent short-term interest-bearing deposits of commercial banks against
which negotiable certificates bearing stated rates of interest are issued.
Bankers' acceptances are short-term negotiable drafts endorsed by commercial
banks which arise primarily from international commercial transactions.

The Portfolio intends to invest in certificates of deposit ("Eurodollar CDs")
and time deposits ("Eurodollar time deposits") of London branches of domestic
banks having total assets in excess of $1.5 billion as of the date of their
most recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate. The Portfolio will not make any time or savings deposit
if, immediately after making such deposits, over 5% of the Portfolio's total
assets would be invested in the time and savings deposits.

6
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COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time. Generally, "First
Tier" securities are securities that are rated in the highest rating category
by two nationally recognized statistical rating organizations ("NRSROs") or, if
only rated by one NRSRO, are rated in the highest rating category by that NRSRO
or, if unrated, are determined by A I M Advisors, Inc. ("AIM") (under the
supervision of and pursuant to guidelines established by the Board of
Directors) to be of comparable quality to a rated security that meets the
foregoing quality standards. Commercial paper consists of short-term promissory
notes issued by corporations. Commercial paper may be traded in the secondary
market after its issuance. Master notes are unsecured demand notes that permit
the investment of fluctuating amounts of money at varying rates of interest
pursuant to arrangements with issuers who meet the quality criteria of the
Portfolio. The interest rate on a master note may fluctuate based upon changes
in specified interest rates or be reset periodically according to a prescribed
formula or may be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of the
principal amount of the note upon relatively short notice.

REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities described
above. A repurchase agreement is an instrument under which the Portfolio
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed-upon time and price,
thereby determining the yield during the Portfolio's holding period. Repurchase
transactions are limited to a term not to exceed 365 days. The Portfolio may
enter into repurchase agreements only with institutions believed by the Fund's
Board of Directors to present minimal credit risk. With regard to repurchase
transactions, in the event of a bankruptcy or other default of a seller of a
repurchase agreement (such as the seller's failure to repurchase the obligation
in accordance with the terms of the agreement), the Portfolio could experience
both delays in liquidating the underlying securities and losses, including: (a)
a possible decline in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible subnormal
levels of income and lack of access to income during this period and (c) the
expense of enforcing its rights. Repurchase agreements are considered to be
loans by the Portfolio under the 1940 Act. Repurchase agreements will be
secured by U.S. Treasury securities. For additional information, see the
Statement of Additional Information.

Investment Practices

BORROWING MONEY/REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
and enter into reverse repurchase agreements with respect to its portfolio
securities in amounts up to 10% of the value of its total assets at the time of
borrowing or entering into a reverse repurchase agreement. Reverse repurchase
agreements involve the sale by the Portfolio of a portfolio security at an
agreed-upon price, date and interest payment. The Portfolio will borrow money
or enter into reverse repurchase agreements solely for temporary or defensive
purposes, such as to facilitate the orderly sale of portfolio securities or to
accommodate abnormally heavy redemption requests should they occur. Reverse
repurchase transactions are limited to a term not to exceed 92 days. The
Portfolio will use reverse repurchase agreements when the interest income to be
earned from the securities that would otherwise have to be liquidated to meet
redemption requests is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio
which it is obligated to repurchase. The risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.

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

PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed delivery agreements and may purchase securities on a "when-
issued" basis.

7
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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
cash or other high grade securities (including Money Market Obligations) in an
amount equal to its delayed delivery agreement obligations or when-issued
commitments. If the market value of such securities declines, additional cash
or securities will be segregated on a daily basis so that the market value of
the account will equal the amount of the Portfolio's delayed delivery agreement
obligations and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investments in securities on a when-issued basis and use of
delayed delivery agreements may increase the Portfolio's exposure to market
fluctuation, or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in
order to honor a when-issued commitment or accept delivery of a security under
a delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks. No additional delayed delivery agreements or when-issued
commitments will be made by the Portfolio if, as a result, more than 25% of the
Portfolio's net assets would become so committed.

ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.

PORTFOLIO TRANSACTIONS. The Portfolio does not seek profits through short-
term trading and will generally hold portfolio securities to maturity, but AIM
may seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. Securities held by the Portfolio will be disposed of prior to
maturity if an earlier disposition is deemed desirable by AIM to meet
redemption requests. In addition, AIM will continually monitor the
creditworthiness of issuers whose securities are held by the Portfolio, and
securities held by the Portfolio may be disposed of prior to maturity as a
result of a revised credit evaluation of the issuer or other circumstances or
considerations. The Portfolio's policy of investing in securities with
maturities of sixty days or less will result in high portfolio turnover. Since
brokerage commissions are not normally paid on investments of the type made by
the Portfolio, the high turnover rate should not adversely affect the
Portfolio's net income.

INVESTMENT RESTRICTIONS

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

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

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

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

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

The Board of Directors has unanimously approved the elimination of and
changes to certain fundamental investment policies of the Portfolio, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, they will become effective on March 1, 1997.

The Portfolio is currently generally prohibited from investing in other
investment companies. The Board of Directors has approved the elimination of
this prohibition, and the amendment to another fundamental investment policy
that corresponds to the proposed elimination. The elimination of the
fundamental investment policy that prohibits the Portfolio from investing in
other investment companies and the proposed amendment to the corresponding
fundamental investment policy would permit investment in other investment
companies to the extent permitted by the 1940 Act, and rules and regulations
thereunder, and, if applicable, exemptive orders granted by the SEC.

Reference is made to Investment Restriction No. 2, listed above, which will
read as follows:

In addition to the restrictions described above, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time, which govern the operations of money market
funds, and may be more restrictive than the policies described herein. The SEC
has proposed certain changes to Rule 2a-7. While such proposed changes may have
a prospective impact on the investments of the Portfolio, the Portfolio
anticipates no difficulty in complying with any proposed change if adopted by
the SEC. A description of further investment restrictions applicable to the
Portfolio is contained in the Statement of Additional Information.

PURCHASE OF SHARES

Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Portfolio
prior to 4:00 p.m. Eastern Time on a business day of the Portfolio. Purchase
orders received after such time will be processed at the next day's net asset
value. Following the initial investment, subsequent purchases of shares of the
Class may also be made via AIM LINK(Registered Trademark), 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.

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Shares of the Class are sold to customers of banks, certain broker-dealers
and other financial institutions (each, an "Institution" and, collectively,
"Institutions"). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an Institution may invest in the shares of
the Class. Each Institution will render administrative support services to its
customers who are the beneficial owners of the shares of the Class. Such
services may include, among other things, establishment and maintenance of
shareholder accounts and records; assistance in processing purchase and
redemption transactions in shares of the Class; providing periodic statements
to customers showing a client's account balance in shares of the Class;
distribution of Fund proxy statements, annual reports and other communications
to shareholders whose accounts are serviced by the Institution; and such other
services as the Fund may reasonably request. Institutions will be required to
certify to the Fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.

Prior to the initial purchase of shares of the Class, an Account Application,
which can be obtained from A I M Institutional Fund Services, Inc. ("Transfer
Agent" or "AIFS"), must be completed and sent to AIFS at 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173. Any changes made to the information
provided in the Account Application must be made in writing or by completing a
new form and providing it to AIFS. An investor must open an account in the
Class through an Institution in accordance with the procedures established by
such Institution. Each Institution separately determines the rules applicable
to accounts in the Class opened with it, including minimum initial and
subsequent investment requirements and the procedures to be followed by
investors to effect purchases of shares of the Class. The minimum initial
investment is $1,000, and there is no minimum amount for subsequent purchases
of shares of the Class by an Institution on behalf of its customers. An
investor who proposes to open a Portfolio account with an Institution should
consult with a representative of such Institution to obtain a description of
the rules governing such an account. The Institution holds shares of the Class
registered in its name, as agent for the customer, on the books of the
Institution. A statement with regard to the customer's shares of the Class is
supplied to the customer periodically, and confirmations of all transactions
for the account of the customer are provided by the Institution to the customer
promptly upon request. In addition, the Institution sends each customer
proxies, periodic reports and other information with regard to the customer's
shares of the Class. The customer's shares of the Class are fully assignable
and subject to encumbrance by the customer.

All agreements which relate to a customer's account with an Institution are
with the Institution. An investor may terminate his relationship with an
Institution at any time, in which case an account in the investor's name will
be established directly with the Portfolio and the investor will become a
shareholder of record. In such case, however, the investor will not be able to
purchase additional shares of the Class directly, except through reinvestment
of dividends and distributions.

Orders for the purchase of shares of the Class are placed by the investor
with the Institution. The Institution is responsible for the prompt
transmission of the order to the Fund. The Portfolio will normally be required
to make immediate settlement in federal funds (member bank deposits with a
Federal Reserve Bank) for portfolio securities purchased. Accordingly, payment
for shares of the Class purchased by Institutions on behalf of their customers
must be in federal funds. If an investor's order to purchase shares of the
Class is paid for other than in federal funds, the Institution, acting on
behalf of the investor, completes the conversion into federal funds (which may
take two business days), or itself advances federal funds prior to conversion,
and promptly transmits the order and payment in the form of federal funds to
AIFS.

Subject to the conditions stated above and to the Portfolio's right to reject
any purchase order, orders will be accepted (a) when payment for the shares of
the Class purchased is received by the Portfolio in the form described above
and notice of such order is provided to AIFS or (b) at the time the order is
placed, if the Portfolio is assured of payment.

Federal Reserve wires should be sent as early as possible in order to
facilitate crediting to the shareholder's account. Any funds received with
respect to an order which is not accepted by the Portfolio and any funds
received for which an order has not been received will be returned to the
sending Institution. An order must specify that it is for the purchase of
shares of the "Personal Investment Class of the Prime Portfolio," otherwise any
funds received will be returned to the sending Institution.

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

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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). Normally, the net asset value per
share of the Portfolio will remain constant at $1.00. See "Net Asset Value."
Redemption requests with respect to shares of the Class for which certificates
have not been issued are normally made through a customer's Institution.

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

A shareholder may change the bank account designated to receive redemption
proceeds by written notice to the Fund. The authorized signature on the notice
must be guaranteed by a commercial bank or a trust company. Additional
documentation may be required when deemed appropriate by the Fund or the
Transfer Agent.

Shareholders may request a redemption by telephone. The Transfer Agent and
FMC will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmations
promptly after the transaction.

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

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

DIVIDENDS

Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 4:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 4:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
such Class' pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses,
such as custodian fees, directors' fees, accounting and legal expenses, based
upon the Class' pro rata share of the net assets of the Portfolio, less (c)
expenses directly attributable to the Class, such as distribution expenses, if
any, and transfer agency fees. Although realized gains and losses on the assets
of the Portfolio are reflected in its net asset value, they are not expected to
be of an amount which would affect its $1.00 per share net asset value for
purposes of purchases and redemptions. See "Net Asset Value." Distributions
from net realized short-term gains may be declared and paid yearly or more
frequently. See "Taxes." The Portfolio does not expect to realize any long-term
capital gains or losses.

All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full

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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 AIFS at 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173 and will become effective
with dividends paid after its receipt by AIFS. If a shareholder redeems all the
shares of the Class in its account at any time during the month, all dividends
declared through the date of redemption are paid to the shareholder along with
the proceeds of the redemption.

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

TAXES

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

Dividends paid by the Portfolio are subject to taxation as of the date of
payment, whether received by shareholders in cash or in additional shares of
the Class. The Code provides an exception to this general rule: if the
Portfolio declares a dividend in October, November or December to shareholders
of record in such months and pays the dividend during January of the next year,
a shareholder will be treated for tax purposes as having received the dividend
on December 31 of the year in which it is declared rather than in January when
it is paid. It is anticipated that no portion of distributions will be eligible
for the dividends received deduction for corporations. Dividends paid by the
Portfolio from its net investment income and short-term capital gains are
taxable to shareholders at ordinary income tax rates.

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

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

Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number must apply to the Internal Revenue Service ("IRS") for an individual
taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form
W-7 and accompanying instructions, please contact your tax advisor or AIFS.

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<PAGE>

NET ASSET VALUE

The net asset value per share of the Portfolio is determined daily as of 4:00
p.m. Eastern Time on each business day of the Fund. Net asset value per share
is determined by dividing the value of the Portfolio's securities, cash and
other assets (including interest accrued but not collected) less all its
liabilities (including accrued expenses and dividends payable) by the number of
shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.

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

YIELD INFORMATION

Yield information for the Class can be obtained by calling the Fund at (800)
877-4744. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY OTHER
INSTITUTION. These factors should be carefully considered by the investor
before investing in the Portfolio.

For the seven-day period ended August 31, 1996, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 4.83% and 4.95%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.

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

From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of its advisory fees and/or assume certain expenses of the
Portfolio. Such a practice will have the effect of increasing the Portfolio's
yield and total return.

REPORTS TO SHAREHOLDERS

The Fund furnishes shareholders with semi-annual reports containing
information about the Portfolio and its operations, including a list of the
investments held by the Portfolio and financial statements. The annual
financial statements are audited by the Fund's independent auditors.

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

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MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Fund's investment advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's officers and to AIM, subject always to the objective
and policies of the Fund and to the general supervision of the Fund's Board of
Directors. Certain directors and officers of the Fund are affiliated with AIM
and AIM Management, a holding company engaged in the financial services
business. Information concerning the Board of Directors may be found in the
Statement of Additional Information.

INVESTMENT ADVISOR

A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-
1173, acts as the investment advisor for the Portfolio pursuant to a Master
Investment Advisory Agreement dated as of October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 41 investment company portfolios. As of December 9, 1996,
the total assets of the investment company portfolios managed or advised by AIM
and its affiliates were approximately $63.6 billion. AIM is a wholly-owned
subsidiary of AIM Management.

Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. The Advisory Agreement also provides that, upon the request of the
Fund's Board of Directors, AIM may perform (or arrange for the performance of)
certain accounting, shareholder servicing and other administrative services for
the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Advisory Agreement requires AIM to reduce its fee to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Portfolio's shares are
qualified for sale.

For the fiscal year ended August 31, 1996, AIM received fees pursuant to the
Advisory Agreement with respect to the Portfolio which represented 0.06% of the
Portfolio's average daily net assets. During such fiscal year, the expenses of
the Class, including AIM's fees, amounted to 0.59% of the Class' average daily
net assets.

ADMINISTRATOR

The Fund has entered into a Master Administrative Services Agreement dated as
of October 18, 1993 with AIM (the "Administrative Services Agreement"),
pursuant to which AIM has agreed to provide or arrange for the provision of
certain accounting and other administrative services to the Portfolio,
including the services of a principal financial officer of the Fund and related
staff. Under the Administrative Services Agreement, the Portfolio reimburses
AIM for expenses incurred by AIM in connection with such services.

FEE WAIVERS

AIM or its affiliates may in its discretion from time to time agree to waive
voluntarily all or any portion of its advisory fee and/or assume certain
expenses of the Portfolio but will retain its ability to be reimbursed for such
fee or expenses prior to the end of each fiscal year. FMC may in its discretion
from time to time voluntarily agree to waive its 12b-1 fee, but will retain its
ability to be reimbursed prior to the end of the fiscal year.

DISTRIBUTOR

The Fund has entered into a Master Distribution Agreement dated as of October
18, 1993 (the "Distribution Agreement") with FMC, a registered broker-dealer
and a wholly-owned subsidiary of AIM, to act as the exclusive distributor of
shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM. The Distribution Agreement provides that FMC has
the exclusive right to distribute shares of the Class either directly or
through other broker-dealers. FMC is the distributor of several of the mutual
funds managed or advised by AIM.

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<PAGE>

FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or Institutions who
have sold or may sell significant amounts of shares. The total amount of such
additional bonus payments or other consideration shall not exceed .05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.

DISTRIBUTION PLAN

The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.75% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund and may be used to finance
such distribution-related services as expenses of organizing and conducting
sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Plan.

Of the compensation paid to FMC under the Plan, a service fee may be paid to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class. Payments to dealers and other financial institutions in excess of 0.25%
of the average daily net assets of the Portfolio attributable to the Class
which are attributable to the customers of such dealers or financial
institutions and payments retained by FMC would be characterized as an asset-
based sales charge pursuant to the Plan. The Plan also imposes a cap on the
total amount of sales charges, including asset-based sales charges, that may be
paid by the Portfolio with respect to the Class. The Plan does not obligate the
Fund to reimburse FMC for the actual expenses FMC may incur in fulfilling its
obligations under the Plan on behalf of the Class. Thus, under the Plan, even
if FMC's actual expenses exceed the fee payable to FMC thereunder at any given
time, the Fund will not be obligated to pay more than that fee. If FMC's
expenses are less than the fee it receives, FMC will retain the full amount of
the fee.

As required by Rule 12b-1 under the 1940 Act, the Plan was initially approved
by the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 19, 1993. In
approving the Plan, the directors considered various factors and determined
that there is a reasonable likelihood that the Plan will benefit the Fund and
the shareholders of the Class.

The Plan requires the officers of the Fund to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made. The Board of
Directors shall review these reports in connection with their decisions with
respect to the Plan.

The Plan may be terminated by a vote of a majority of the Qualified
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the Class. Any change in the Plan that would increase materially
the distribution expenses paid by the Class requires shareholder approval;
otherwise the Plan may be amended by the Board of Directors, including a
majority of the Qualified Directors, by votes cast in person at a meeting
called for the purpose of voting upon such amendment. As long as the Plan is in
effect, the selection or nomination of the Qualified Directors is committed to
the discretion of the Qualified Directors.

EXPENSES

Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund except those listed in the next sentence are prorated among all
classes of such Portfolios. Distribution and service fees, transfer agency fees
and shareholder recordkeeping fees which are directly attributable to a
specific class of shares are charged against the income available for
distribution as dividends to the holders of such shares.

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<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

GENERAL INFORMATION

ORGANIZATION AND DESCRIPTION OF SHARES

The Fund was incorporated in Maryland on May 3, 1993. On October 15, 1993,
the Portfolio succeeded to the assets and assumed the liabilities of the Prime
Portfolio (the "Predecessor Portfolio") of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization between the Fund and STIC. All historical financial and other
information contained in this Prospectus for periods prior to October 15, 1993
relating to the Portfolio (or class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Fund are divided into nine classes. Five classes, including the Class,
represent interests in the Portfolio and four classes represent interests in
the Liquid Assets Portfolio. Each class of shares has a par value of $.001 per
share. The other classes of the Fund may have different sales charges and other
expenses which may affect performance. An investor may obtain information
concerning the Fund's other classes by contacting FMC.

All shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular portfolio or class will have the
exclusive right to vote on matters pertaining solely to that portfolio or
class. For example, holders of shares of a particular portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such portfolio. In addition, holders of shares
of a particular class will have the exclusive right to vote on any matter, such
as distribution arrangements, which relates solely to such class. The holders
of shares of each portfolio have distinctive rights with respect to dividends
and redemptions which are more fully described in this Prospectus. In the event
of liquidation or termination of the Fund, holders of shares of each portfolio
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective portfolio to which such shares
relate, less (b) the liabilities of the Fund attributable or allocated to the
respective portfolio based on the respective liquidation value of each
portfolio. Fractional shares of each portfolio have the same rights as full
shares to the extent of their proportionate interest.

The Fund will not normally hold annual shareholders' meetings. Shareholders
may remove directors from office by votes cast at a meeting of shareholders or
by written consent, and a meeting of shareholders may be called at the request
of the holders of 10% or more of the Fund's outstanding shares. As of December
1, 1996, The Bank of New York was the owner of record of 60.84% of the
outstanding shares of the Class. As long as The Bank of New York owns over 25%
of such shares, it may be presumed to be in "control" of the Personal
Investment Class of the Prime Portfolio, as defined in the 1940 Act.

There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional portfolios and classes of the Fund
without shareholder approval.

16
<PAGE>

TRANSFER AGENT AND CUSTODIAN

The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Institutional Fund Services, Inc., 11 Greenway Plaza, Suite
1919 Houston, Texas 77046-1173, acts as transfer agent for the shares of the
Class.

LEGAL COUNSEL

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

SHAREHOLDER INQUIRIES

Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173, or may
be made by calling (800) 877-4744.

OTHER INFORMATION

This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. Copies of the Statement of Additional
Information are available upon request and without charge by writing or calling
the Fund or FMC. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration
statement, including items omitted herein, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.

17
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SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173 December 30, 1996
(800) 877-4744
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 1919 ------------
Houston, Texas 77046-1173
(713) 626-1919 PRIME PORTFOLIO

DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 1919 PERSONAL INVESTMENT CLASS
Houston, Texas 77046-1173
(800) 877-4744 TABLE OF CONTENTS

AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
NationsBank Building PAGE
700 Louisiana ----
Houston, Texas 77002 <S> <C>
SUMMARY......................... 2
CUSTODIAN
THE BANK OF NEW YORK TABLE OF FEES AND EXPENSES...... 4
90 Washington Street, 11th Floor
New York, New York 10286 FINANCIAL HIGHLIGHTS............ 5

TRANSFER AGENT SUITABILITY FOR INVESTORS....... 5
A I M INSTITUTIONAL FUND SERVICES, INC.
11 Greenway Plaza, Suite 1919 INVESTMENT PROGRAM.............. 5
Houston, Texas 77046-1173
PURCHASE OF SHARES.............. 9

REDEMPTION OF SHARES............ 11

DIVIDENDS....................... 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY TAXES........................... 12
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE NET ASSET VALUE................. 13
OFFERING MADE BY THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR YIELD INFORMATION............... 13
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE REPORTS TO SHAREHOLDERS......... 13
FUND OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY MANAGEMENT OF THE FUND.......... 14
JURISDICTION TO ANY PERSON TO WHOM SUCH
OFFERING MAY NOT LAWFULLY BE MADE. GENERAL INFORMATION............. 16
</TABLE>
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