SHORT TERM INVESTMENTS CO /TX/, 497, 1998-12-22

SHORT TERM INVESTMENTS CO /TX/
497, 1998-12-22

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SHORT-TERM
INVESTMENTS CO. PROSPECTUS
- ------------------------------------------------------------

LIQUID ASSETS The Liquid Assets Portfolio (the "Portfolio") is
PORTFOLIO a money market fund whose investment objective is
to provide as high a level of current income as
CASH MANAGEMENT is consistent with the preservation of capital
CLASS and liquidity. The Portfolio seeks to achieve its
objective by investing in high quality money
DECEMBER 18, 1998 market instruments such as U.S. Government
obligations, bank obligations, commercial
instruments and repurchase agreements.

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

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

THIS PROSPECTUS SETS FORTH BASIC INFORMATION
THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE
INVESTING IN SHARES OF THE CASH MANAGEMENT CLASS
OF THE PORTFOLIO AND SHOULD BE READ AND RETAINED
FOR FUTURE REFERENCE. A STATEMENT OF ADDITIONAL
INFORMATION DATED DECEMBER 18, 1998, HAS BEEN
FILED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION (THE"SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE
STATEMENT OF ADDITIONAL INFORMATION WITHOUT
CHARGE, WRITE TO THE ADDRESS BELOW OR CALL
(800) 877-7745. THE SEC MAINTAINS A WEB SITE AT
HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY
REFERENCE, AND OTHER INFORMATION REGARDING THE
FUND.

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

11 Greenway Plaza
Suite 100
Houston, TX 77046-1173
(800) 877-7745
<PAGE>

SUMMARY

THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE

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

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

INVESTORS IN THE CLASS

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

PURCHASE OF SHARES

Shares of the Class are sold at net asset value without a sales charge.
Except for those individual participants in the AMVESCAP International
Sharesave Plan (for whom there is no minimum), the minimum initial investment
in the Class is $1,000,000. There is no minimum amount for subsequent
investments. Except for those individual participants in the AMVESCAP
International Sharesave Plan (who make payments through payroll deductions),
payment for shares of the Class purchased must be in federal funds or other
funds immediately available to the Portfolio. See "Purchase of Shares."

REDEMPTION OF SHARES

Redemptions may be made without charge at net asset value. Payment for
redeemed shares of the Class for which redemption orders have been received
prior to 5:00 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 5:00 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 6:00 p.m. Eastern Time on that
day. See "Dividends."

CONSTANT NET ASSET VALUE

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

INVESTMENT ADVISOR

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

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owned subsidiary and a registered transfer agent, receives a fee for its
provision of transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund. See "General Information--Transfer Agent and
Custodian."

DISTRIBUTOR AND DISTRIBUTION PLAN

Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master Distribution Plan, the Fund may pay
up to 0.10% of the average daily net assets of the Portfolio attributable to
the shares of the Class to FMC as well as certain broker-dealers or other
financial institutions as compensation for distribution-related services. See
"Purchase of Shares" and "Management of the Fund--Distribution Plan."

SPECIAL CONSIDERATIONS

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

The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest With
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.

3
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TABLE OF FEES AND EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--CASH MANAGEMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)--CASH MANAGEMENT CLASS
Management Fees (after waivers)**....................................... 0.06%
12b-1 Fees (after waivers)**............................................ 0.08%
Other Expenses.......................................................... 0.03%
----
Total Operating Expenses--Cash Management Class**....................... 0.17%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** Had there been no waivers, Management Fees, 12b-1 Fees and Total Operating
Expenses would be 0.15%, 0.10% and 0.28%, respectively.

EXAMPLE

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

<TABLE>
<S> <C>
1 year........................................................... $ 2
3 years.......................................................... $ 5
5 years.......................................................... $10
10 years......................................................... $22
</TABLE>

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

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

4
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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 two-year period ended
August 31, 1998 and for the period January 17, 1996 (date operations commenced)
through August 31, 1996. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.

<TABLE>
<CAPTION>
JANUARY 17,
1996
(COMMENCEMENT
OF
OPERATIONS)
TO AUGUST 31,
1998 1997 1996
-------- ------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period...... $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................... 0.06 0.05 0.03
-------- ------- -------
Less distributions:
Dividends from net investment income.... (0.06) (0.05) (0.03)
-------- ------- -------
Net asset value, end of period............ $ 1.00 $ 1.00 $ 1.00
======== ======= =======
Total return.............................. 5.66% 5.50% 5.36%(a)
======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted).. $655,975 $83,487 $53,209
======== ======= =======
Ratio of expenses to average net
assets(b)................................ 0.16%(c) 0.15% 0.10%(a)
======== ======= =======
Ratio of net investment income to average
net assets(d)............................ 5.51%(c) 5.38% 5.27%(a)
======== ======= =======
</TABLE>
(a) Annualized.

(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.28%, 0.28% and 0.34% (annualized), for the periods 1998-1996,
respectively.

(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.39%, 5.25% and 5.03% (annualized), for the periods
1998-1996, respectively.

SUITABILITY FOR INVESTORS

The Class is intended for use primarily by customers of banks, certain
broker-dealers and other financial institutions who seek a convenient vehicle
in which to invest in an open-end diversified money market fund. Except for
those individual participants in the AMVESCAP International Sharesave Plan (for
whom there is no minimum), the minimum initial investment is $1,000,000.
Prospective investors should determine if an investment in the Class is
consistent with the objectives of an account and with applicable state and
federal laws and regulations. It is expected that the shares of the Class may
be particularly suitable investments for corporate cash managers,
municipalities or other public entities.

Investors in the shares of the Class have the opportunity to receive a
somewhat higher yield than might be obtainable through direct investment in
money market instruments, and enjoy the benefits of diversification, economies
of scale and same-day liquidity. Generally, higher interest rates can be
obtained on the purchase of very large blocks of money market instruments. Of
course, any such relative increase in interest rates may be offset to some
extent by the operating expenses of the shares of the Class. It is anticipated
that most investors will perform their own sub-accounting; however, sub-
accounting services may be arranged through the Fund for shareholders who
prefer not to perform such services.

INVESTMENT PROGRAM

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

5
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INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 ("1940 Act"), as such Rule may be amended from time to time.
Briefly, "First Tier" securities are securities that are rated in the highest
rating category for short-term debt obligations 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 the Portfolio's investment advisor (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, as well as securities issued by a registered investment company that
is a money market fund and U.S. government securities.

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

The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.

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

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

6
<PAGE>

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

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

DESCRIPTION OF MONEY MARKET OBLIGATIONS

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

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

U.S. GOVERNMENT AGENCIES SECURITIES--Certain federal agencies (such as the
Federal National Mortgage Association, the Small Business Administration and
the Resolution Trust Corporation) have been established as instrumentalities of
the U.S. Government to supervise and finance certain types of activities.
Issues of these agencies, while not direct obligations of the U.S. Government,
are (a) backed by the full faith and credit of the United States, (b)
guaranteed by the U.S. Treasury or (c) supported by the issuing agencies' right
to borrow from the U.S. Treasury.

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

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

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

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

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

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

7
<PAGE>

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

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

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

REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. Repurchase transactions are limited to a term not to exceed 365 days.
The Portfolio may enter into repurchase agreements only with institutions
believed by the Fund's Board of Directors to present minimal credit risk. With
regard to repurchase transactions, in the event of a bankruptcy or other
default of a seller of a repurchase agreement (such as the seller's failure to
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying securities
and losses, including: (a) a possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Portfolio under the 1940 Act.
Repurchase agreements will be secured by securities eligible under Rule 2a-7 of
the 1940 Act. For additional information on the use of repurchase agreements,
see the Statement of Additional Information.

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

INVESTMENT RESTRICTIONS

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

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

8
<PAGE>

Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.

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

In addition to the restrictions described herein, the Portfolio must also
comply with the requirements of Rule 2a-7 under the 1940 Act, which govern the
operations of money market funds, and which may be more restrictive than the
policies described herein. A description of further investment restrictions
applicable to the Portfolio is contained in the Statement of Additional
Information.

PURCHASE OF SHARES

Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As discussed
below, the Fund reserves the right to reject any purchase order. Although there
is no sales charge imposed on the purchase of shares of the Class, banks and
other institutions may charge a recordkeeping, account maintenance or other fee
to their customers. Beneficial holders of shares of the Class should consult
with the institutions maintaining their accounts to obtain a schedule of
applicable fees. To facilitate the investment of proceeds of purchase orders,
investors are urged to place their orders as early in the day as possible.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the Transfer
Agent prior to 5:00 p.m. Eastern Time on a business day of the Portfolio.
Purchase orders received after such time will be processed at the next day's
net asset value. Following the initial investment, subsequent purchases of
shares of the Class may also be made via AIM LINK--Registered Trademark--
Remote, a personal computer application software product. Shares of the Class
will earn the dividend declared on the effective date of purchase.

A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Cash Management Class must be submitted to and received by
the Transfer Agent for execution on the same day on any day when the U.S.
primary broker-dealer community is closed for business or trading is restricted
due to national holidays.

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

Any request for a correction to a transaction of Portfolio shares must be
submitted in writing to the Transfer Agent. The Transfer Agent reserves the
right to reject any such request. When a correction results in a dividend
adjustment, the institution must agree in writing to reimburse the Portfolio
for any loss resulting from the correction. Failure to deliver purchase
proceeds on the requested settlement date may result in a claim against the
institution for an amount equal to the overdraft charge incurred by the
Portfolio.

Except for those individual participants in the AMVESCAP International
Sharesave Plan, payment for shares of the Portfolio purchased must be in the
form of federal funds or other funds immediately available to the Portfolio.
Participants in the AMVESCAP International Sharesave Plan make their payments
through payroll deductions. Federal Reserve wires should be sent as early as
possible in order to facilitate crediting to the shareholder's account. Any
funds received with respect to an order which is not accepted by the Portfolio
and any funds received for which an order has not been received will be
returned to the sending institution. An order to purchase shares of the Class
must specify that the "Cash Management Class of the Liquid Assets Portfolio" is
being purchased; otherwise, any funds received will be returned to the sending
institution.

Except for those individual participants in the AMVESCAP International
Sharesave Plan, the minimum initial investment in the Class is $1,000,000.
Participants in the AMVESCAP International Sharesave Plan have no minimum
initial investment. Institutions may be requested to maintain separate master
accounts in the shares of the Class held by the institution (a) for its own
account, for the account of other institutions and for accounts for which the
institution acts as a fiduciary, and (b) for accounts for which the institution
acts in some other capacity. An institution's master account(s) and sub-
accounts with the Class may be aggregated for the purpose of the minimum
investment requirement. No minimum is required for subsequent investments in
the Portfolio nor are minimum balances required. Except for those individual
participants in the AMVESCAP International Sharesave Plan, an Account
Application must be completed and sent to the Transfer Agent at P.O. Box 4497,
Houston, Texas 77210-4497, prior to the initial purchase of shares of the
Class. Account Applications may be obtained from the Transfer Agent. Any
changes made to the information provided in the Account Application must be
made in writing or by completing a new form and providing it to the Transfer
Agent.

9
<PAGE>

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

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

REDEMPTION OF SHARES

A shareholder may redeem any or all of its shares of the Class at the net
asset value next determined after receipt of the redemption request in proper
form by the Portfolio. Redemption requests with respect to the Class may also
be made via AIM LINK--Registered Trademark-- Remote. Normally, the Fund intends
to maintain the net asset value per share of the Portfolio at $1.00 per share.
See "Net Asset Value." Redemption requests with respect to shares of the Class
for which certificates have not been issued are normally made by calling the
Fund.

Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by the Transfer Agent prior to 5:00 p.m. Eastern
Time on a business day of the Portfolio, the redemption will be effected at the
net asset value next determined on such day and the shares of the Portfolio to
be redeemed will not receive the dividend declared on the effective date of the
redemption. If a redemption request is received by the Transfer Agent after
5:00 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 5:00 p.m. Eastern Time on the next business day of the Portfolio, and the
proceeds of such redemption will normally be wired on the effective day of the
redemption. The Portfolio reserves the right to change the time for which
redemption requests must be submitted to and received by the Transfer Agent for
execution on the same day on any day when the U.S. primary broker-dealer
community is closed for business or trading is restricted due to national
holidays.

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

Shareholders may request a redemption by telephone. Neither the Transfer
Agent nor FMC will be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the account application if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), and mailings of confirmation promptly
after the transaction.

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

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

DIVIDENDS

Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 5:00 p.m. Eastern Time on
the day of declaration. Net income for dividend purposes is determined daily as
of 5:00 p.m. Eastern Time. The dividend accrued and paid for the Class will
consist of (a) income of the Portfolio, the allocation of which is based upon
the Class's pro rata share of the total outstanding shares representing an
interest in the Portfolio, less (b) Fund expenses, such as custodian fees,
directors' fees, accounting and legal expenses, based upon the Class's pro rata
share of the net assets of the Portfolio, less (c) expenses directly
attributable to the Class, such as distribution expenses, if any, and transfer
agency fees. Although realized gains and losses on the assets of the Portfolio
are reflected in the net asset value of the Portfolio, they are not expected to
be of an amount which would affect the Portfolio's net asset value of $1.00 per
share for purposes of purchases and redemptions. See "Net Asset Value."
Distributions from net realized short-term gains may be declared and paid
yearly or more frequently. See "Taxes." The Portfolio does not expect to
realize any long-term capital gains or losses.

10
<PAGE>

writing by the shareholder to the Transfer Agent at P.O. Box 4497, Houston,
Texas 77210-4497 and will become effective with dividends paid after its
receipt by the Transfer Agent. If a shareholder redeems all the shares in its
account at any time during the month, all dividends declared through the date
of redemption are paid to the shareholder along with the proceeds of the
redemption.

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

TAXES

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

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

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

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

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

NET ASSET VALUE

The net asset value per share of the Portfolio is determined daily as of 5:00
p.m. Eastern Time on each business day of the Portfolio. Net asset value per
share is determined by dividing the value of the Portfolio's securities, cash
and other assets (including interest accrued but not collected), less all its
liabilities (including accrued expenses and dividends payable), by the number
of shares outstanding of the Portfolio and rounding the resulting per share net
asset value to the nearest one cent.

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

11
<PAGE>

YIELD INFORMATION

Yield information for the Class can be obtained by calling FMC at (800) 877-
7745. Yields will fluctuate from time to time and are not necessarily
indicative of future results. Accordingly, the yield information may not
provide a basis for comparison with investments which pay a fixed rate of
interest for a stated period of time. Yield is a function of the type and
quality of the Portfolio's investments, the Portfolio's maturity and the
operating expense ratio of the Class. A SHAREHOLDER'S INVESTMENT IN THE
PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR BY ANY
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.

For the seven-day period ended August 31, 1998, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.53% and 5.68%, respectively. These yields are
quoted for illustration purposes only. The yields for any other seven-day
period may be substantially different from the yields quoted above.

To assist banks and other institutions performing their own sub-accounting,
same day information as to the daily dividend per share for the Class to eight
decimal places and current yield normally will be available by 6:00 p.m.
Eastern Time.

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

REPORTS TO SHAREHOLDERS

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

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

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Information concerning the Board of Directors may be
found in the Statement of Additional Information. Certain directors and
officers of the Fund are affiliated with AIM and A I M Management Group Inc.
("AIM Management"), the parent corporation of AIM.

For a discussion of AIM Management and its subsidiaries' Year 2000 Compliance
Project, see "General Information--Year 2000 Compliance Project."

INVESTMENT ADVISOR

A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement (the "Advisory Agreement"). AIM was organized in
1976 and, together with its subsidiaries, manages, advises or administers over
90 investment company portfolios. AIM is a wholly owned subsidiary of AIM
Management, a holding company engaged in the financial services business. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly-
traded holding company that, through its subsidiaries, engages in institutional
investment management and retail fund businesses in the United States, Europe
and the Pacific Region.

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

12
<PAGE>

fee to the extent required to satisfy any expense limitations imposed by the
securities laws or regulations thereunder of any state in which the Portfolio's
shares are qualified for sale.

For the fiscal year ended August 31, 1998, AIM received advisory fees with
respect to the Portfolio which represented 0.05% of the Portfolio's average
daily net assets. During such fiscal year, the expenses of the Class, including
AIM's fees, amounted to 0.16% of the Class's average daily net assets.

ADMINISTRATOR

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

FEE WAIVERS

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

DISTRIBUTOR

The Fund has entered into a Master Distribution Agreement (the "Distribution
Agreement") with FMC, a registered broker-dealer and a wholly owned subsidiary
of AIM, to act as the exclusive distributor of the shares of the Class. The
address of FMC is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
Certain directors and officers of the Fund are affiliated with FMC and AIM
Management. The Distribution Agreement provides that FMC has the exclusive
right to distribute shares of the Portfolio either directly or through other
broker-dealers, and receives no fees for its services with respect to the
Portfolio pursuant to the Distribution Agreement. FMC is the distributor of
several other mutual funds managed or advised by AIM.

FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of shares of the Class during a specific period of time. In some instances,
these incentives may be offered only to certain dealers or Institutions who
have sold or may sell significant amounts of shares. The total amount of such
additional bonus payments or other consideration shall not exceed 0.05% of the
net asset value of the shares of the Class sold. Any such bonus or incentive
programs will not change the price paid by investors for the purchase of shares
of the Class or the amount received as proceeds from such sales. Sales of
shares of the Class may not be used to qualify for any incentives to the extent
that such incentives may be prohibited by the laws of any jurisdiction.

DISTRIBUTION PLAN

The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. The Plan provides that the Fund may compensate FMC in
connection with the distribution of the shares of the Class in an amount equal
to 0.10% on an annualized basis of the average daily net assets of the
Portfolio attributable to the Class. Such amounts may be expended when and if
authorized by the Board of Directors of the Fund and may be used to finance
such distribution-related services as expenses of organizing and conducting
sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Plan.

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

13
<PAGE>

in any agreements related to the Plan ("Qualified Directors"). In approving the
Plan, the directors considered various factors and determined that there is a
reasonable likelihood that the Plan will benefit the Fund and the shareholders
of the Class.

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

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

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

GENERAL INFORMATION

ORGANIZATION AND DESCRIPTION OF SHARES

The Fund was incorporated in Maryland on May 3, 1993. Shares of common stock
of the Fund are divided into twelve classes, of which six represent interests
in the Portfolio and the remaining six represent interests in the Prime
Portfolio. Each class of shares has a par value of $.001 per share. The other
classes of the Fund may have different sales charges and other expenses which
may affect performance. An investor may obtain information concerning the
Fund's other classes by contacting FMC.

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

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

TRANSFER AGENT AND CUSTODIAN

The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, acts as custodian for the portfolio securities and cash of the
Portfolio. A I M Fund Services, Inc., P.O. Box 4497, Houston, Texas 77210-4497,
acts as transfer agent for shares of the Class.

14
<PAGE>

LEGAL COUNSEL

The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon certain legal
matters for the Fund.

SHAREHOLDER INQUIRIES

Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or may
be made by calling (800) 877-7745.

YEAR 2000 COMPLIANCE PROJECT

In providing services to the Fund, AIM Management and its subsidiaries rely
on both internal software systems as well as external software systems provided
by third parties. Many software systems in use today are unable to distinguish
the year 2000 from the year 1900. This defect if not cured will likely
adversely affect the services that AIM Management, its subsidiaries and other
service providers to the Fund provide the Fund and its shareholders.

To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases,
namely (i) inventorying every software application in use at AIM Management and
its subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter
of 1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000
compliance upon installation. No assurance can be given that the Project will
be successful or that the AIM Funds will not otherwise be adversely affected by
the year 2000 issue.

OTHER INFORMATION

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

15
<PAGE>

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

SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 December 18, 1998
(800) 877-7745
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO

DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 CASH MANAGEMENT CLASS
Houston, Texas 77046-1173
(800) 877-7745 TABLE OF CONTENTS

AUDITORS <TABLE>
KPMG PEAT MARWICK LLP <CAPTION>
700 Louisiana PAGE
Houston, Texas 77002 ----
<S> <C>
CUSTODIAN Summary....................... 2
THE BANK OF NEW YORK Table of Fees and Expenses.... 4
90 Washington Street Financial Highlights.......... 5
11th Floor Suitability For Investors..... 5
New York, New York 10286 Investment Program............ 5
Purchase of Shares............ 9
TRANSFER AGENT Redemption of Shares.......... 10
A I M FUND SERVICES, INC. Dividends..................... 10
P.O. Box 4497 Taxes......................... 11
Houston, Texas 77210-4497 Net Asset Value............... 11
Yield Information............. 12
Reports to Shareholders....... 12
Management of the Fund........ 12
General Information........... 14
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING MADE BY THIS
PROSPECTUS, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUND OR THE
DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER IN ANY
JURISDICTION TO ANY PERSON TO WHOM
SUCH OFFERING MAY NOT LAWFULLY BE MADE.

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

<PAGE>

SHORT-TERM
INVESTMENTS CO.

<TABLE> PROSPECTUS
- ------------------------------------------------------------------
<S> <C>

LIQUID ASSETS The Liquid Assets Portfolio (the "Portfolio") is
PORTFOLIO a money market fund whose investment objective is
to provide as high a level of current income as
INSTITUTIONAL is consistent with the preservation of capital
CLASS and liquidity. The Portfolio seeks to achieve its
objective by investing in high quality money
DECEMBER 18, 1998 market instruments such as U.S. Government
obligations, bank obligations, commercial
instruments and repurchase agreements.

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

THIS PROSPECTUS SETS FORTH BASIC INFORMATION
THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE
INVESTING IN SHARES OF THE INSTITUTIONAL CLASS OF
THE PORTFOLIO AND SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE. A STATEMENT OF ADDITIONAL
INFORMATION DATED DECEMBER 18, 1998, HAS BEEN
FILED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. A COPY OF THE
STATEMENT OF ADDITIONAL INFORMATION IS
ATTACHED HERETO. THE SEC MAINTAINS A WEB SITE AT
HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED
BY REFERENCE, AND OTHER INFORMATION REGARDING
THE FUND.

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

11 Greenway Plaza
Suite 100
Houston, TX 77046-1173
(800) 659-1005
</TABLE>
<PAGE>

SUMMARY

THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE

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

Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio:
the Cash Management Class, the Personal Investment Class, the Private
Investment Class, the Reserve Class and the Resource Class. Such classes have
different distribution arrangements and are designed for institutional and
other categories of investors. The Fund also offers shares of classes of
another portfolio, the Prime Portfolio, each pursuant to a separate prospectus.
Such classes have different distribution arrangements and are designed for
institutional and other categories of investors. The portfolios of the Fund are
referred to collectively as "Portfolios."

INVESTORS IN THE CLASS

PURCHASE OF SHARES

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

REDEMPTION OF SHARES

DIVIDENDS

CONSTANT NET ASSET VALUE

INVESTMENT ADVISOR

2
<PAGE>

DISTRIBUTOR

Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. FMC does not receive any fee for distribution services
from the Fund with respect to the shares of the Class. See "Management of the
Fund--Distributor."

SPECIAL CONSIDERATIONS

3
<PAGE>

TABLE OF FEES AND EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--INSTITUTIONAL CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)..... None
Exchange Fee............................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)--INSTITUTIONAL CLASS
Management Fees**....................................................... 0.06%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... 0.03%
----
Total Operating Expenses--Institutional Class **........................ 0.09%
====
</TABLE>
- ------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.

** Had there been no fee waivers, Management Fees and Total Operating Expenses
would have been 0.15% and 0.18%, respectively.

EXAMPLE

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

<TABLE>
<S> <C>
1 year.......................................................... $ 1
3 years......................................................... $ 3
5 years......................................................... $ 5
10 years......................................................... $12
</TABLE>

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

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

4
<PAGE>

FINANCIAL HIGHLIGHTS

Shown below are the per share data, ratios and supplemental data
(collectively, "data") for each of the years in the four-year period ended
August 31, 1998 and the period November 4, 1993 (date operations commenced)
through August 31, 1994. The data has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report on the financial statements and the related
notes appears in the Statement of Additional Information.

<TABLE>
<CAPTION>
NOVEMBER 4,1993
(COMMENCEMENT
OF OPERATIONS)
TO AUGUST 31,
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income. 0.06 0.05 0.06 0.06 0.03
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income.... (0.06) (0.05) (0.06) (0.06) (0.03)
---------- ---------- ---------- ---------- ----------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return............ 5.74% 5.58% 5.68% 5.83% 3.83%(a)
========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted).. $3,097,539 $3,787,357 $1,988,755 $1,287,463 $1,028,350
========== ========== ========== ========== ==========
Ratio of expenses to
average net assets(b).. 0.08%(c) 0.06% 0.03% 0.11% 0.05%(a)
========== ========== ========== ========== ==========
Ratio of net investment
income to average net
assets(d).............. 5.59%(c) 5.46% 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%, 0.18%, 0.18%, 0.18% and 0.18% (annualized) for the periods 1998-
1994, respectively.

(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.49%, 5.34%, 5.37%, 5.62% and 3.72% (annualized) for
the periods 1998-1994, respectively.

SUITABILITY FOR INVESTORS

The Class is intended for use primarily by institutions, particularly banks,
as a convenient and economical vehicle in which to invest short-term cash
reserves in an open-end diversified money market fund. The minimum initial
investment is $10,000,000. Prospective investors should determine if an
investment in the Class is consistent with the objectives of an account and
with applicable state and federal laws and regulations.

Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class. However, these expenses are expected to be
relatively small due primarily to the following factors: the Class will have a
small number of shareholders who do not need many of the services provided by
other money market investment companies, thereby resulting in lower transfer
agent fees and cost for printing reports and proxy statements; sales of the
shares of the Class to institutions acting for themselves or in a fiduciary
capacity are exempt from the registration requirements of most state securities
laws, thereby resulting in reduced state registration fees; and the relatively
low investment advisory fee paid to AIM. It is anticipated that most investors
will perform their own subaccounting; however, subaccounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.

5
<PAGE>

INVESTMENT PROGRAM

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 ("1940 Act"), as such Rule may be amended from time to time.
Briefly, "First Tier" securities are securities that are rated in the highest
rating category for short-term debt obligations 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 the Portfolio's investment advisor (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, as well as securities issued by a registered investment company that
is a money market fund and U.S. government securities.

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

The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.

6
<PAGE>

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

DESCRIPTION OF MONEY MARKET OBLIGATIONS

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

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

7
<PAGE>

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

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

REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. The Portfolio may enter into repurchase agreements only with
institutions believed by the Fund's Board of Directors to present minimal
credit risk. With regard to repurchase transactions, in the event of a
bankruptcy or other default of a seller of a repurchase agreement (such as the
seller's failure to repurchase the obligation in accordance with the terms of
the agreement), the Portfolio could experience both delays in liquidating the
underlying securities and losses, including: (a) a possible decline in the
value of the underlying security during the period while the Portfolio seeks to
enforce its rights thereto, (b) possible subnormal levels of income and lack of
access to income during this period, and (c) expenses of enforcing its rights.
Repurchase agreements are considered to be loans by the Portfolio under the
1940 Act. Repurchase agreements will be secured by securities eligible under
Rule 2a-7 of the 1940 Act. For additional information on the use of repurchase
agreements, see the Statement of Additional Information.

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

INVESTMENT RESTRICTIONS

8
<PAGE>

entering into reverse repurchase agreements, and (b) to the extent that
entering into commitments to purchase securities in accordance with the
Portfolio's investment program may be considered the issuance of senior
securities. The Portfolio will not purchase portfolio securities while
borrowings in an amount in excess of 5% of its total assets are outstanding.

PURCHASE OF SHARES

A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New York
and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. Further,
the Portfolio reserves the right to change the time for which purchase orders
for shares of the Institutional Class must be submitted to and received by the
Transfer Agent for execution on the same day on any day when the U.S. primary
broker-dealer community is closed for business or trading is restricted due to
national holidays.

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

The minimum initial investment in the Class is $10,000,000. Institutions may
be requested to maintain separate master accounts in the shares of the Class
held by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary,
and (b) for accounts for which the institution acts in some other capacity. An
institution's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to the Transfer Agent at P.O.
Box 4497, Houston, Texas 77210-4497. Account Applications may be obtained from
the Transfer Agent. Any changes made to the information provided in the Account
Application must be made in writing or by completing a new form and providing
it to the Transfer Agent.

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

9
<PAGE>

REDEMPTION OF SHARES

DIVIDENDS

All dividends declared during a month will normally be paid by wire transfer.
Payment will normally be made on the first business day of the following month.
A shareholder may elect to have all dividends automatically reinvested in
additional full and fractional shares of the Portfolio at the net asset value
of such shares as of 5:00 p.m. Eastern Time on the last business day of the
month. Such election, or any revocation thereof, must be made in writing by the
shareholder to the Transfer Agent at P.O. Box 4497, Houston, Texas 77210-4497
and will become effective with dividends paid after its receipt by the Transfer
Agent. If a shareholder redeems all the shares in its account at any time
during the month, all dividends declared through the date of redemption are
paid to the shareholder along with the proceeds of the redemption.

10
<PAGE>

TAXES

NET ASSET VALUE

11
<PAGE>

YIELD INFORMATION

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

For the seven-day period ended August 31, 1998, the current yield and the
effective yield of the Class (which assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the annualized current
yield for the period) were 5.61% and 5.77%, 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.

REPORTS TO SHAREHOLDERS

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Information concerning the Board of Directors may be
found in the Statement of Additional Information. Certain directors and
officers of the Fund are affiliated with AIM and A I M Management Group, Inc.
("AIM Management"), the parent corporation of AIM.

For a discussion of AIM Management and its subsidiaries' Year 2000 Compliance
Project, see "General Information -- Year 2000 Compliance Project."

INVESTMENT ADVISOR

12
<PAGE>

fee to the extent required to satisfy any expense limitations imposed by the
securities laws or regulations thereunder of any state in which the Portfolio's
shares are qualified for sale.

ADMINISTRATOR

FEE WAIVERS

DISTRIBUTOR

The Fund has entered into a Master Distribution Agreement (the "Distribution
Agreement") with FMC, a registered broker-dealer and a wholly owned subsidiary
of AIM, to act as the exclusive distributor of the shares of the Class. FMC
does not receive any fee for distribution services from the Fund with respect
to the shares of the Class. The address of FMC is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173. Certain directors and officers of the Fund are
affiliated with FMC and AIM Management. The Distribution Agreement provides
that FMC has the exclusive right to distribute shares of the Portfolio either
directly or through other broker-dealers, and receives no fees for its services
with respect to the Portfolio pursuant to the Distribution Agreement. FMC is
the distributor of several other mutual funds managed or advised by AIM.

PORTFOLIO TRANSACTIONS AND BROKERAGE

13
<PAGE>

GENERAL INFORMATION

ORGANIZATION AND DESCRIPTION OF SHARES

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 Fund Services, Inc., P.O. Box 4497, Suite 100, Houston, Texas
77210-4497, acts as transfer agent for shares of the Class.

LEGAL COUNSEL

The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon certain legal
matters for the Fund.

SHAREHOLDER INQUIRIES

Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or may
be made by calling (800) 659-1005.

YEAR 2000 COMPLIANCE PROJECT

To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases,
namely (i) inventorying every software application in use at AIM Management and
its subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter
of 1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000
compliance upon installation. No assurance can be given that the Project will
be successful or that the AIM Funds will not otherwise be adversely affected by
the year 2000 issue.

14
<PAGE>

OTHER INFORMATION

This Prospectus sets forth basic information that investors should know about
the Fund and the Portfolio prior to investing. A Statement of Additional
Information has been filed with the SEC. The Statement of Additional
Information is attached as Appendix A to this Prospectus. This Prospectus omits
certain information contained in the registration statement filed with the SEC.
Copies of the registration statement, including items omitted herein, may be
obtained from the SEC by paying the charges prescribed under its rules and
regulations.

15
<PAGE>

APPENDIX

STATEMENT OF
ADDITIONAL INFORMATION

SHORT-TERM INVESTMENTS CO.

LIQUID ASSETS PORTFOLIO
(CASH MANAGEMENT CLASS)
(INSTITUTIONAL CLASS)
(PERSONAL INVESTMENT CLASS)
(PRIVATE INVESTMENT CLASS)
(RESERVE CLASS)
(RESOURCE CLASS)

11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(800) 659-1005

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

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF EACH
OF THE ABOVE-NAMED CLASSES OF THE LIQUID ASSETS PORTFOLIO, COPIES
OF WHICH MAY BE OBTAINED BY WRITING
FUND MANAGEMENT COMPANY, 11 GREENWAY PLAZA,
SUITE 100, HOUSTON, TEXAS 77046-1173
OR CALLING (800) 659-1005

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

STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 18, 1998
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE LIQUID
ASSETS PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED DECEMBER 18, 1998,
INSTITUTIONAL CLASS PROSPECTUS DATED DECEMBER 18, 1998, PERSONAL INVESTMENT
CLASS PROSPECTUS DATED DECEMBER 18, 1998, PRIVATE INVESTMENT CLASS PROSPECTUS
DATED DECEMBER 18, 1998, RESERVE CLASS PROSPECTUS DATED DECEMBER 18, 1998 AND
RESOURCE CLASS PROSPECTUS DATED DECEMBER 18, 1998

A-1
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.................................................... A-3
General Information about the Fund.............................. A-3
The Fund and Its Shares....................................... A-3
Directors and Officers........................................ A-5
Remuneration of Directors..................................... A-8
AIM Funds Retirement Plan for Eligible Directors/Trustees..... A-10
Deferred Compensation Agreements.............................. A-10
Investment Advisor............................................ A-11
Administrator................................................. A-12
Expenses...................................................... A-12
Transfer Agent and Custodian.................................. A-13
Reports....................................................... A-13
Fee Waivers................................................... A-13
Principal Holders of Securities............................... A-13
Purchases and Redemptions....................................... A-18
Net Asset Value Determination................................. A-19
The Distribution Agreement.................................... A-19
Distribution Plan............................................. A-20
Banking Regulations........................................... A-20
Performance Information....................................... A-21
Redemptions in Kind........................................... A-22
Investment Program and Restrictions............................. A-22
Eligible Securities........................................... A-22
Commercial Paper Ratings...................................... A-22
Bond Ratings.................................................. A-23
Repurchase Agreements......................................... A-25
Investment Restrictions....................................... A-25
Portfolio Transactions.......................................... A-26
General Brokerage Policy...................................... A-26
Allocation of Portfolio Transactions.......................... A-28
Section 28(e) Standards....................................... A-28
Tax Matters..................................................... A-29
Qualification as a Regulated Investment Company............... A-29
Excise Tax on Regulated Investment Companies.................. A-30
Portfolio Distributions....................................... A-30
Sale or Redemption of Shares.................................. A-30
Foreign Shareholders.......................................... A-31
Effect of Future Legislation; Local Tax Considerations........ A-31
Financial Statements............................................ FS
</TABLE>

A-2
<PAGE>

INTRODUCTION

The Liquid Assets Portfolio (the "Portfolio") is an investment portfolio of
Short-Term Investments Co. (the "Fund"), a mutual fund. The rules and
regulations of the United States Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information is included in the Cash Management Class Prospectus dated December
18, 1998, the Institutional Class Prospectus dated December 18, 1998, the
Personal Investment Class Prospectus dated December 18, 1998, the Private
Investment Class Prospectus dated December 18, 1998, the Reserve Class
Prospectus dated December 18, 1998 and the Resource Class Prospectus dated
December 18, 1998 (each a "Prospectus"). Copies of each Prospectus and
additional copies of this Statement of Additional Information may be obtained
without charge by writing the distributor of the Portfolio's shares, Fund
Management Company ("FMC"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173 or by calling (800) 659-1005. Investors must receive a Prospectus before
they invest.

This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning each class of the Portfolio.
Some of the information required to be in this Statement of Additional
Information is also included in each Prospectus; thus, in order to avoid
repetition, reference will be made to sections of the applicable Prospectus.
Additionally, each Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the SEC.
Copies of the registration statement, including items omitted from each
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.

GENERAL INFORMATION ABOUT THE FUND

THE FUND AND ITS SHARES

The Fund is an open-end, diversified series management investment company
which was organized as a corporation under the laws of the State of Maryland on
May 3, 1993, and had no operations prior to November 4, 1993. Shares of common
stock of the Fund are redeemable at their net asset value at the option of the
shareholder or at the option of the Fund in certain circumstances. For
information concerning the methods of redemption and the rights of share
ownership, investors should consult each Prospectus under the captions "General
Information" and "Redemption of Shares."

The Fund offers on a continuous basis shares representing an interest in one
of two portfolios: the Portfolio and the Prime Portfolio (together, the
"Portfolios"). The Prime Portfolio consists of six classes of shares, each
having different shareholder qualifications and bearing expenses differently.
The Portfolio consists of the following six classes of shares: Cash Management
Class, Institutional Class, Personal Investment Class, Private Investment
Class, Reserve Class and Resource Class. Each such class has different
shareholder qualifications and bears expenses differently. This Statement of
Additional Information and the associated Prospectuses relate to each class of
the Portfolio. The classes of the Prime Portfolio are offered pursuant to
separate prospectuses and a separate statement of additional information.

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

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

A-3
<PAGE>

The Board of Directors may classify or reclassify any unissued shares of any
class or classes in addition to those already authorized by setting or changing
in any one or more respects, from time to time, prior to the issuance of such
shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act").

The Charter of the Fund authorizes the issuance of 60 billion shares with a
par value of $.001 each, of which 25 billion shares represent an interest in
the Portfolio (or class thereof) and 25 billion shares represent an interest in
the Prime Portfolio (or class thereof). A share of a portfolio (or class)
represents an equal proportionate interest in such Portfolio (or class) with
each other share of that Portfolio (or class) and is entitled to a
proportionate interest in the dividends and distributions from that Portfolio
(or class). Additional information concerning the rights of share ownership is
set forth in each Prospectus.

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

The Charter provides that no director or officer of the Fund shall be liable
to the Fund or its shareholders for money damages, except (i) to the extent
that it is proved that such director or officer actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received, or (ii) to the
extent that a judgment or other final adjudication adverse to such director or
officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. The foregoing shall not be construed to protect
or purport to protect any director or officer of the Fund against any liability
to the Fund or its shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
office. The Fund shall indemnify and advance expenses to its currently acting
and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Fund shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents of the Fund to the
fullest extent permitted by the Maryland General Corporation Law.

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

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

A-4
<PAGE>

DIRECTORS AND OFFICERS

The directors and officers of the Fund and their principal occupations during
at least the last five years are set forth below. Unless otherwise indicated,
the address of each director and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046.

<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE WITH REGISTRANT AT LEAST THE PAST 5 YEARS
================================================================================
<C> <C> <S>
*CHARLES T. BAUER (79) Director and Chairman Chairman of the Board of
Directors, A I M Management
Group Inc., A I M Advisors,
Inc., A I M Capital
Management, Inc., A I M
Distributors, Inc., A I M
Fund Services, Inc. and
Fund Management Company;
and Vice Chairman and
Director, AMVESCAP PLC.
- --------------------------------------------------------------------------------
BRUCE L. CROCKETT (54) Director Director, ACE Limited
906 Frome Lane (insurance company).
McLean, VA 22102 Formerly, Director,
President and Chief
Executive Officer, COMSAT
Corporation; and Chairman,
Board of Governors of
INTELSAT (international
communications company).
- -------------------------------------------------------------------------------
OWEN DALY II (74) Director Director, Cortland Trust
Six Blythewood Road Inc. (investment company).
Baltimore, MD 21210 Formerly, Director, CF & I
Steel Corp., Monumental
Life Insurance Company and
Monumental General
Insurance Company; and
Chairman of the Board of
Equitable Bancorporation.
- --------------------------------------------------------------------------------
EDWARD K. DUNN (63) Director Chairman of the Board of
2 Hopkins Plaza, 20th Floor Directors, Mercantile
Baltimore, MD 21201 Mortgage Corp. Formerly,
Vice Chairman of the Board
of Directors and President,
Mercantile - Safe Deposit &
Trust Co.; and President,
Mercantile Bankshares.
- --------------------------------------------------------------------------------
JACK M. FIELDS (46) Director Chief Executive Officer,
8810 Will Clayton Parkway Texana Global, Inc.
Jetero Plaza, Suite E (foreign trading company)
Humble, TX 77338 and Twenty First Century
Group, Inc. (a governmental
affairs company). Formerly,
Member of the U.S. House of
Representatives.
- --------------------------------------------------------------------------------
</TABLE>
- -----------------------
* A director who is an "interested person" of the Fund and A I M Advisors, Inc.
as defined in the 1940 Act.

A-5
<PAGE>

===============================================================================
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITIONS HELD DURING AT LEAST THE PAST 5
NAME, ADDRESS AND AGE WITH REGISTRANT YEARS
- -------------------------------------------------------------------------------
<C> <C> <S>
**CARL FRISCHLING (61) Director Partner, Kramer, Levin,
919 Third Avenue Naftalis & Frankel (law
New York, NY 10022 firm). Formerly, Partner,
Reid & Priest (law firm).
- -------------------------------------------------------------------------------
*ROBERT H. GRAHAM (51) Director and President Director, President and
Chief Executive Officer,
A I M Management Group
Inc.; Director and
President, A I M Advisors,
Inc.; Director and Senior
Vice President, A I M
Capital Management, Inc.,
A I M Distributors, Inc.,
A I M Fund Services, Inc.
and Fund Management
Company; and Director,
AMVESCAP PLC.
- -------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (48) Director Chief Executive Officer,
350 Fifth Avenue, Suite 301 YWCA of the U.S.A.;
New York, NY 10118 Commissioner, New York
City Department for the
Aging; and Member of the
Board of Directors,
Metropolitan
Transportation Authority
of New York State.
- -------------------------------------------------------------------------------
LEWIS F. PENNOCK (56) Director Attorney in private
6363 Woodway, Suite 825 practice in Houston,
Houston, TX 77057 Texas.
- -------------------------------------------------------------------------------
IAN W. ROBINSON (75) Director Formerly, Executive Vice
183 River Drive President and Chief
Tequesta, FL 33469 Financial Officer, Bell
Atlantic Management
Services, Inc. (provider
of centralized management
services to telephone
companies); Executive Vice
President, Bell Atlantic
Corporation (parent of
seven telephone
companies); and Vice
President and Chief
Financial Officer, Bell
Telephone Company of
Pennsylvania and Diamond
State Telephone Company.
- -------------------------------------------------------------------------------
LOUIS S. SKLAR (59) Director Executive Vice President,
Transco Tower, 50th Floor Development and
2800 Post Oak Blvd. Operations, Hines
Houston, TX 77056 Interests Limited
Partnership (real estate
development).
- -------------------------------------------------------------------------------
</TABLE>
- ------------------------
** A director who is an "interested person" of the Fund as defined in the 1940
Act.
* A director who is an "interested person" of the Fund and AIM Advisor, Inc. as
defined in the 1940 Act.

A-6
<PAGE>

<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE WITH REGISTRANT AT LEAST THE PAST 5 YEARS
================================================================================
<C> <C> <S>
***JOHN J. ARTHUR (54) Senior Vice President Director, Senior Vice
and Treasurer President and Treasurer,
A I M Advisors, Inc.; and
Vice President and
Treasurer, A I M Management
Group Inc., A I M Capital
Management, Inc., A I M
Distributors, Inc., A I M
Fund Services, Inc. and Fund
Management Company.
- --------------------------------------------------------------------------------
GARY T. CRUM (51) Senior Vice President Director and President,
A I M Capital Management,
Inc.; Director and Senior
Vice President, A I M
Management Group Inc. and
A I M Advisors, Inc.; and
Director, A I M
Distributors, Inc. and
AMVESCAP PLC.
- --------------------------------------------------------------------------------
***CAROL F. RELIHAN (44) Senior Vice President Director, Senior Vice
and Secretary President, General Counsel
and Secretary, A I M
Advisors, Inc.; Vice
President, General Counsel
and Secretary, A I M
Management Group Inc.;
Director, Vice President and
General Counsel, Fund
Management Company; General
Counsel and Vice President,
A I M Fund Services, Inc.;
and Vice President, A I M
Capital Management, Inc.,
and A I M Distributors, Inc.
- --------------------------------------------------------------------------------
DANA R. SUTTON (39) Vice President Vice President and Fund
and Assistant Treasurer Controller, A I M Advisors,
Inc.; and Assistant Vice
President and Assistant
Treasurer, Fund Management
Company.
- --------------------------------------------------------------------------------
MELVILLE B. COX (55) Vice President Vice President and Chief
Compliance Officer, A I M
Advisors, Inc., A I M
Capital Management, Inc.,
A I M Distributors, Inc.,
A I M Fund Services, Inc.
and Fund Management Company.
- --------------------------------------------------------------------------------
J. ABBOTT SPRAGUE (43) Vice President Director and President, Fund
Management Company;
Director, A I M Fund
Services, Inc.; and Senior
Vice President, A I M
Advisors, Inc. and A I M
Management Group Inc.
- --------------------------------------------------------------------------------
</TABLE>
- ----------------
*** Mr. Arthur and Ms. Relihan are married to each other.

A-7
<PAGE>

<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- --------------------------------------------------------------------------------
<C> <C> <S>
KAREN DUNN KELLEY, (38) Vice President Senior Vice President, A I M Capital
Management, Inc. and Vice President,
A I M Advisors, Inc.
================================================================================
</TABLE>

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

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

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

The members of the Nominating and Compensation Committee are Messrs. Crockett
(Chairman), Daly, Dunn, Fields, Pennock, Robinson and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating
individuals to stand for election as directors who are not interested persons
as long as the Fund maintains a distribution plan pursuant to rule 12b-1 under
the 1940 Act, reviewing from time to time the compensation payable to the
disinterested directors, or considering such matters as may from time to time
be set forth in a charter adopted by the board and such Committee.

All of the Fund's directors also serve as directors or trustees of some or
all of the other investment companies managed or advised by A I M Advisors,
Inc. ("AIM") or distributed and administered by FMC. Most of the Fund's
executive officers hold similar offices with some or all of such investment
companies.

REMUNERATION OF DIRECTORS

Each director is reimbursed for expenses incurred in connection with each
meeting of the Board of Directors or any committee thereof. Each director who
is not also an officer of the Fund is compensated for his or her services
according to a fee schedule which recognizes the fact that such director also
serves as director or trustee of certain other regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM
Funds"). Each such director receives a fee, allocated among the AIM Funds for
which he or she serves as a director or trustee, which consists of an annual
retainer component and a meeting fee component.

A-8
<PAGE>

Set forth below is information regarding compensation paid or accrued for
each director of the Fund:

<TABLE>
<CAPTION>
RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED BY FROM ALL
FROM ALL AIM
DIRECTOR FUND(1) AIM FUNDS(2) FUNDS(3)
================================================================================
<S> <C> <C> <C>
Charles T. Bauer....................... -0- -0- -0-
- --------------------------------------------------------------------------------
Bruce L. Crockett...................... $8,165 $ 67,774 $84,000
- --------------------------------------------------------------------------------
Owen Daly II........................... 8,165 103,542 84,000
- --------------------------------------------------------------------------------
Edward K Dunn, Jr.(4).................. 3,816 -0- -0-
- --------------------------------------------------------------------------------
Jack M. Fields......................... 8,165 -0- 70,500
- --------------------------------------------------------------------------------
Carl Frischling(5)..................... 8,165 96,520 84,000
- --------------------------------------------------------------------------------
Robert H. Graham....................... -0- -0- -0-
- --------------------------------------------------------------------------------
John F. Kroeger(6)..................... 7,820 94,132 82,500
- --------------------------------------------------------------------------------
Prema Mathai-Davis(4).................. -0- -0- -0-
- --------------------------------------------------------------------------------
Lewis F. Pennock....................... 8,165 55,777 84,000
- --------------------------------------------------------------------------------
Ian W. Robinson........................ 8,029 85,912 84,000
- --------------------------------------------------------------------------------
Louis S. Sklar......................... 8,076 84,370 83,500
================================================================================
</TABLE>
- ------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended August 31, 1998, including interest earned
thereon, was $42,336.
(2) During the fiscal year ended August 31, 1998, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $77,780.
Data reflects compensation earned for the calendar year ended December 31,
1997.
(3) Each Director serves as a director or trustee of a total of 12 registered
investment companies advised by AIM as of December 31, 1997 (comprised of
over 50 portfolios). Data reflects compensation earned for the calendar
year ended December 31, 1997.
(4) Mr. Dunn and Ms. Mathai-Davis were not serving as Directors during the
calendar year ended December 31, 1997.
(5) The Fund paid the law firm of Kramer, Levin, Naftalis & Frankel $12,156 in
legal fees for services provided to the Fund during the fiscal year ended
August 31, 1998. Mr. Frischling, a Director of the Fund, is a partner in
such firm.
(6) Mr. Kroeger resigned as a Director of the Fund on June 11, 1998 and on
that date became a consultant to the Fund.

A-9
<PAGE>

AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES

Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any
of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may
be entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the AIM Funds commencing on the first day of the calendar quarter
coincident with or following his date of retirement equal to 75% of the
retainer paid or accrued by the Applicable AIM Funds for such director during
the twelve-month period immediately preceding the director's retirement
(including amounts deferred under a separate agreement between the Applicable
AIM Funds and the director), for the number of such Director's years of service
(not in excess of 10 years of service) completed with respect to any of the AIM
Funds. Such benefit is payable to each eligible director in quarterly
installments for a period of no more than five years. If an eligible director
dies after attaining the normal retirement date but before receipt of any
benefits under the Plan commences, the director's surviving spouse (if any)
shall receive a quarterly survivor's benefit equal to 50% of the amount payable
to the deceased director, for no more than ten years beginning the first day of
the calendar quarter following the date of the director's death. Payments under
the Plan are not secured or funded by any AIM Fund.

Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming a specified level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger,
Pennock, Robinson, Sklar and Ms. Mathai-Davis are 11, 11, 0, 1, 21, 20, 16, 11,
8 and 0 years, respectively.

ESTIMATED BENEFITS UPON RETIREMENT

<TABLE>
<CAPTION>
NUMBER OF ANNUAL RETAINER
YEARS OF PAID BY ALL
SERVICE WITH AIM FUNDS
THE AIM FUNDS $90,000
------------- ---------------
<S> <C>
10................................................. $67,500
9................................................. $60,750
8................................................. $54,000
7................................................. $47,250
6................................................. $40,500
5................................................. $33,750
</TABLE>

DEFERRED COMPENSATION AGREEMENTS

Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, and such amounts are placed into a deferral
account. Currently, the deferring directors may select various AIM Funds in
which all or part of their deferral account shall be deemed to be invested.
Distributions from the deferring directors' deferral accounts will be paid in
cash, in generally equal quarterly installments over a period of five (5) or
ten (10) years (depending on the Agreement) beginning on the date

A-10
<PAGE>

the deferring director's retirement benefits commence under the Plan. The
Fund's Board of Directors, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring director's
termination of service as a director of the Fund. If a deferring director dies
prior to the distribution of amounts in his deferral account, the balance of
the deferral account will be distributed to his designated beneficiary in a
single lump sum payment as soon as practicable after such deferring director's
death. The Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the deferring directors have the status
of unsecured creditors of the Fund and of each other AIM Fund from which they
are deferring compensation.

During the fiscal year ended August 31, 1998, $33,432 in directors' fees and
expenses were allocated to the Portfolio.

INVESTMENT ADVISOR

AIM was organized in 1976 and, together with its subsidiaries, advises,
manages or administers over 90 investment company portfolios. AIM is a wholly
owned subsidiary of A I M Management Group Inc. ("AIM Management"), a holding
company that has been engaged in the financial services business since 1976, 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM Management is an
indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London
EC2M 4YR, United Kingdom. AMVESCAP PLC and its subsidiaries are an independent
investment management group engaged in institutional investment management and
retail fund businesses in the United States, Europe and the Pacific Region.
Certain of the directors and officers of AIM are also executive officers of the
Fund and their affiliations are shown under "Directors and Officers."

AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions, (b) to file
reports regarding such transactions, and (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and (iii) transactions involving securities being considered for
investment by an AIM Fund. The Code also prohibits investment personnel from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Directors reviews annually
such reports (including information on any substantial violations of the Code).
Violations of the Code may result in censure, monetary penalties, suspension or
termination of employment.

Pursuant to the terms of the Advisory Agreement, AIM manages the investment
of the Portfolio's assets. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for the
Portfolio. Any investment program undertaken by AIM will at all times be
subject to the policies and control of the Fund's Board of Directors. AIM shall
not be liable to the Fund or its shareholders for any act or omission by AIM or
for any loss sustained by the Fund or its shareholders except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

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

Pursuant to the Advisory Agreement between the Fund and AIM currently in
effect and under an investment advisory agreement in effect prior to February
28, 1997 which provided for the same level of compensation to AIM, AIM received
fees from the Fund for the fiscal years ended August 31,

A-11
<PAGE>

1998, 1997 and 1996, with respect to the Portfolio, in the amounts of
$1,927,994, $1,024,843 and $125,264, respectively. During the fiscal years
ended August 31, 1998, 1997 and 1996 AIM voluntarily waived fees with respect
to the Portfolio in the amounts of $4,309,476, $3,344,852 and $2,562,094,
respectively.

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

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

ADMINISTRATOR

AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement between AIM and the Fund (the "Administrative
Services Agreement").

Under the Administrative Services Agreement, AIM performs, or arranges for
the performance of, accounting and other administrative services for the
Portfolio, which are not required to be performed by AIM under the Advisory
Agreement. As full compensation for the performance of such services, AIM is
reimbursed for any personnel and other costs (including applicable office
space, facilities and equipment) of furnishing the services of a principal
financial officer of the Fund and of persons working under his supervision for
maintaining the financial accounts and books and records of the Fund, including
calculation of the Portfolio's daily net asset value, and preparing tax returns
and financial statements for the Portfolio. The method of calculating such
reimbursements must be annually approved, and the amounts paid will be
periodically reviewed, by the Fund's Board of Directors.

Under the Administrative Services Agreement and under a prior administrative
services agreement which provided for the same level of reimbursement to AIM,
AIM was reimbursed for the fiscal years ended August 31, 1998, 1997 and 1996 in
the amounts of $85,337, $68,372 and $52,710, respectively.

EXPENSES

Expenses of the Fund include, but are not limited to, fees paid to AIM under
the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund
and shares with the SEC and various states and other jurisdictions (including
filing and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and

A-12
<PAGE>

mailing of prospectuses, proxy statements and reports to shareholders; fees and
travel expenses of directors and director members of any advisory board or
committee; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's shares; charges and expenses
of legal counsel, including counsel to the directors of the Fund who are not
"interested persons" (as defined in the 1940 Act) of the Fund or AIM, and of
independent accountants in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; and extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto). FMC bears the expenses of
printing and distributing prospectuses and statements of additional information
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund) and any other promotional or
sales literature used by FMC or furnished by FMC to purchasers or dealers in
connection with the public offering of the Fund's shares.

Expenses of the Fund which are not directly attributable to the operations of
either of the Portfolios are prorated among all classes of the Fund. Expenses
of the Fund except those listed below 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.

TRANSFER AGENT AND CUSTODIAN

A I M Fund Services, Inc. ("AFS"), a wholly owned subsidiary of AIM, P. O.
Box 4497, Houston, Texas 77210-4497, serves as a transfer agent and dividend
disbursing agent for the shares of all classes of the Portfolio and receives an
annual fee from the Fund for its services in such capacity in the amount of
.009% of average daily net assets of the Portfolio, payable monthly. Such
compensation may be changed from time to time as is agreed to by AFS and the
Fund.

The Bank of New York ("BONY"), 90 Washington Street, 11th Floor, New York,
New York 10286, acts as custodian for the portfolio securities and cash of the
Portfolio. BONY receives such compensation from the Fund for its services in
such capacity as is agreed to from time to time by BONY and the Fund.

REPORTS

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

FEE WAIVERS

AIM or its affiliates may, from time to time, agree to waive voluntarily all
or any portion of its fees or reimburse the Portfolio for certain of its
expenses. Such waivers or reimbursements may be discontinued at any time.

PRINCIPAL HOLDERS OF SECURITIES

PRIME PORTFOLIO

To the best knowledge of the Fund, the names and addresses of the holders of
5% or more of the outstanding shares of each class of the Prime Portfolio as of
October 30, 1998, and the percentage of the Prime Portfolio's outstanding
shares owned by such shareholders as of such date are as follows:

A-13
<PAGE>

<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
CASH MANAGEMENT CLASS
---------------------
<S> <C>
THE BANK OF NEW YORK.......................................... 23.08%
One Wall Street 5th Floor
New York, NY 10286

BOST & CO FBO THE KWELM PARTNERSHIP........................... 17.38%
P.O. Box 3198
Pittsburgh, PA 15230

CULLEN/FROST DISCOUNT BROKERS................................. 11.20%
P.O. Box 2358
San Antonio, TX 78299

OPPENHEIMER & CO.............................................. 8.98%
Oppenheimer Tower
World Financial Center
New York, NY 10281

IGT........................................................... 8.54%
P.O. Box 10120
Reno, NV 89502

MELLON BANK NA................................................ 5.47%
P.O. Box 710
Pittsburgh, PA 15230

FUND SERVICES ASSOCIATES...................................... 5.31%
1815 Century Park East
Los Angeles, CA 90067

INSTITUTIONAL CLASS
-------------------

COMERICA BANK................................................. 9.00%
P.O. Box 75000
Detroit, MI 48275-3455

FIRST TRUST/VAR & CO.......................................... 8.45%
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
</TABLE>
- ------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.

A-14
<PAGE>

<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C>
WACHOVIA BANK AND TRUST NA TRUST OPERATIONS.................... 7.13%
P.O. Box 3075 MC 31051
Winston-Salem, NC 27150

FROST NATIONAL BANK TX......................................... 7.01%
P.O. Box 2479
San Antonio, TX 78298-2479

TRUST COMPANY BANK............................................. 6.07%
Center 3139
P.O. Box 105504
Atlanta, GA 30348

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

THE BANK OF NEW YORK........................................... 58.93%
4 Fisher Lane
White Plains, NY 10603

CULLEN/FROST DISCOUNT BROKERS.................................. 27.66%
P.O. Box 2358
San Antonio, TX 78299

PRIVATE INVESTMENT CLASS
------------------------

HUNTINGTON CAPITAL CORP........................................ 33.03%
41 S. High Street 9th Floor
Columbus, OH 43287

HARRIS TRUST & SAVINGS BANK.................................... 18.27%
111 West Monroe St.
Lower Level East
Chicago, IL 60690

WORLD OMNI MASTER TRUST........................................ 10.22%
111 NW 12th Avenue
Deerfield Beach, FL 33442

FROST NATIONAL BANK............................................ 9.65%
P.O. Box 2479
San Antonio, TX 78298-2479
</TABLE>
- ------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.

A-15
<PAGE>

<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OWNED OF
OF RECORD OWNER RECORD ONLY*
---------------- ------------
<S> <C>
FIRST TRUST................................................... 7.39%
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101

RESOURCE CLASS
--------------

FIRST UNION CAPITAL MARKETS................................... 41.26%
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675

HARRIS METHODIST HEALTH SYSTEM................................ 12.47%
600 East Las Colinas Blvd., Ste. 1550
Irving, TX 75039

MELLON BANK................................................... 12.46%
P.O. Box 710
Pittsburgh, PA 15230-0710

HAMBRECHT & QUIST LLC......................................... 9.26%
One Bush Street, 10th Floor
San Francisco, CA 94104

HAMBRECHT & QUIST LLC......................................... 8.12%
230 Park Avenue, Floor 19
New York, NY 10169

HARRIS METHODIST (TEXAS HEALTH RESOURCES)..................... 7.40%
600 East Las Colinas Blvd., Ste. 1550
Irving, TX 75039
</TABLE>
- ------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.

AIM provided the initial capitalization for the Reserve Class of the Prime
Portfolio and, accordingly, as of the date of this Statement of Additional
Information, owned all the outstanding shares of such class. The Fund expects
that the sale of shares of such class to the public pursuant to its Prospectus
will promptly reduce the percentage of such shares owned by AIM to less than 1%
of the total shares outstanding of such class.

A-16
<PAGE>

LIQUID ASSETS PORTFOLIO

To the best of the knowledge of the Fund, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of October 30, 1998, and the percentage of the Portfolio's outstanding
shares owned by such shareholders as of such date are as follows:

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

CASH MANAGEMENT CLASS
---------------------
<S> <C>
OPPENHEIMER & CO. ............................................ 29.32%
Oppenheimer Tower
World Financial Center
New York, NY 10281

HAMBRECHT & QUIST LLC......................................... 11.24%
1100 Newport Center Drive, 2nd Floor
Newport Beach, CA 92660

THE BANK OF NEW YORK.......................................... 9.49%
One Wall Street, 5th Floor
New York, NY 10286

FUND SERVICES ASSOCIATES, INC................................. 8.79%
1875 Century Park East - Suite 1345
Los Angeles, CA 90067

EVEREN CLEARING CORP.......................................... 8.27%
111 East Kilbourn Ave.
Milwaukee, WI 53202

SOUTHWEST BANK OF TEXAS, N.A. 498A1........................... 7.35%
4400 Post Oak Pkwy.
Houston, TX 77027

INSTITUTIONAL CLASS
-------------------

STATE STREET BANK AND TRUST................................... 17.22%
108 Myrtle Street
North Quincy, MA 02171

BZW BARCLAYS GLOBAL INVESTORS, AS AGENT....................... 8.05%
980 9th St., Suite 600
Sacramento, CA 95814
</TABLE>
- ------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.

A-17
<PAGE>

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

<S> <C>
COMERICA BANK.................................................. 6.96%
P.O. Box 75000
Detroit, MI 48275

TRUST COMPANY BANK............................................. 5.40%
P.O. Box 105504
Atlanta, GA 30348

PORTICO FUNDS.................................................. 5.35%
777 E. Wisc. Ave.
Milwaukee, WI 53202

PRIVATE INVESTMENT CLASS
------------------------

MELLON BANK.................................................... 66.97%
P.O. Box 710
Pittsburgh, PA 15230-0710

CENTRAL CAROLINA BANK AND TRUST CO............................. 14.99%
111 Corcoran Street
Durham, NC 27702

RESOURCE CLASS
--------------

MORGAN STANLEY TRUST COMPANY................................... 98.55%
1 Pierrepont Plaza
Brooklyn, NY 11201
</TABLE>
- ------
* The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.

AIM provided the initial capitalization for the Personal Investment Class and
the Reserve Class of the Portfolio and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of each
such class. The Fund expects that the sale of shares of each such class to the
public pursuant to its Prospectus will promptly reduce the percentage of such
shares owned by AIM to less than 1% of the total shares outstanding of each
such class.

To the best of the knowledge of the Fund, as of October 30, 1998, the
directors and officers of the Fund as a group beneficially owned less than 1%
of each class of either Portfolio's outstanding shares.

PURCHASES AND REDEMPTIONS

A complete description of the manner by which shares of a particular class
may be purchased, redeemed or exchanged appears in each Prospectus under the
heading "Purchase of Shares."

A-18
<PAGE>

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

A "business day" of the Portfolio is any day on which commercial banks in the
New York Federal Reserve district are open for business. The Portfolio,
however, reserves the right to change the time for which purchase and
redemption requests must be submitted to the Portfolio for execution on the
same day on any day when the U.S. primary broker-dealer community is closed for
business or trading is restricted due to national holidays.

NET ASSET VALUE DETERMINATION

Shares of each class of the Portfolio are sold at the net asset value of such
shares. Shareholders may at any time redeem all or a portion of their shares at
net asset value. The investor's price for purchases and redemptions will be the
net asset value next determined following the receipt of an order to purchase
or a request to redeem shares.

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

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

THE DISTRIBUTION AGREEMENT

The Fund has entered into a Master Distribution Agreement (the "Distribution
Agreement") with FMC, a registered broker-dealer and a wholly owned subsidiary
of AIM, to act as the exclusive distributor of the shares of each class of the
Portfolio. The address of FMC is 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173. See "General Information about the Fund--Directors and Officers"
and "General Information about the Fund--Investment Advisor" for information as
to the affiliation of certain directors and officers of the Fund with FMC, AIM
and AIM Management.

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

A-19
<PAGE>

FMC has not undertaken to sell any specified number of shares of each class of
the Portfolio. FMC does not receive any fees with respect to the shares of the
class of the Portfolio pursuant to the Distribution Agreement.

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

DISTRIBUTION PLAN

The Fund has adopted a Master Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. Pursuant to the Plan, the Fund may enter into
Shareholder Service Agreements ("Service Agreements") with selected broker-
dealers, banks, other financial institutions or their affiliates. Such firms
may receive compensation from the Portfolio for servicing investors as
beneficial owners of the shares of the Cash Management Class, Personal
Investment Class, Private Investment Class, Reserve Class and Resource Class of
the Portfolio. These services may include among other things: (i) answering
customer inquiries regarding shares of these classes and the Portfolio; (ii)
assisting customers in changing dividend options, account designations and
addresses; (iii) performing sub-accounting; (iv) establishing and maintaining
shareholder accounts and records; (v) processing purchase and redemption
transactions; (vi) automatic investment of customer cash accounting balances in
shares of these classes; (vii) providing periodic statements showing a
customer's account balance and integrating such statements with those of other
transactions and balances in the customer's other accounts serviced by such
firm; (viii) arranging for bank wires; and (ix) such other services as the Fund
may request on behalf of shares of these classes, to the extent such firms are
permitted to engage in such services by applicable statute, rule or regulation.
The Plan may only be used for the purposes specified above and as stated in the
Plan. Expenses may not be carried over from year to year.

For the fiscal year ended August 31, 1998, FMC received compensation pursuant
to the Plan in the amount of $233,941, or an amount equal to 0.08% of the
average net daily assets of the Cash Management Class, $198,764, or an amount
equal to 0.30% of the average net daily assets of the Private Investment Class
and $172,704, or an amount equal to 0.20% of the average net daily assets of
the Resource Class. With respect to the Cash Management Class, $233,941 of such
amount (or an amount equal to 0.08% of the average daily net assets of the
class) was paid to dealers and financial institutions and $0 (or an amount
equal to 0% of the average daily net asset of the class) was retained by FMC.
With respect to the Private Investment Class, $194,578 of such amount (or an
amount equal to 0.29% of the average daily net assets of the class) was paid to
dealers and financial institutions and $4,246 (or an amount equal to 0.01% of
the average daily net assets of the class) was retained by FMC. With respect to
the Resource Class, $172,904 of such amount (or an amount equal to 0.20% of the
average daily net assets of the class) was paid to dealers and financial
institutions and 0 (or an amount equal to 0% of the average daily net assets of
the class) was retained by FMC.

FMC is a wholly owned subsidiary of AIM, an indirect, wholly owned subsidiary
of AMVESCAP PLC. Charles T. Bauer, a Director and Chairman of the Fund, and
Robert H. Graham, a Director and President of the Fund, own shares of AMVESCAP
PLC.

BANKING REGULATIONS

The Glass-Steagall Act and other applicable laws or regulations among other
things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers
and to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well
as changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a

A-20
<PAGE>

bank from continuing to perform all or a part of its servicing activities. If a
bank were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the Fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the Fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or
other services then being provided by such bank. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.

In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to register as dealers pursuant to state law.

PERFORMANCE INFORMATION

As stated under the caption "Yield Information" in each Prospectus, yield
information for the shares of each class of the Portfolio may be obtained by
calling the Fund at (800) 659-1005. The current yield quoted will be the net
average annualized yield for an identified period, such as seven days or a
month. Current yield will be computed by assuming that an account was
established with a single share (the "Single Share Account") on the first day
of the period. To arrive at the quoted yield, the net change in the value of
that Single Share Account for the period (which would include dividends accrued
with respect to the share, and dividends declared on shares purchased with
dividends accrued and paid, if any, but would not include realized gains and
losses or unrealized appreciation or depreciation) will be multiplied by 365
and then divided by the number of days in the period, with the resulting figure
carried to the nearest hundredth of one percent. The Portfolio may also furnish
a quotation of effective yield that assumes the reinvestment of dividends for a
365-day year and a return for the entire year equal to the average annualized
yield for the period, which will be computed by compounding the unannualized
current yield for the period by adding 1 to the unannualized current yield,
raising the sum to a power equal to 365 divided by the number of days in the
period, and then subtracting 1 from the result.

For the seven-day period ended August 31, 1998, the current yield and the
effective yield (which assumes the reinvestment of dividends for a 365-day year
and a return for the entire year equal to the annualized current yield for the
period) were 5.53% and 5.68% for the Cash Management Class, 5.61% and 5.77% for
the Institutional Class, 5.31% and 5.45% for the Private Investment Class and
5.41% and 5.56% for the Resource Class, respectively. These yields are quoted
for illustration purposes only. The yields for any other seven-day period may
be substantially different from the yields quoted above.

The Portfolio may compare the performance of a particular class or the
performance of securities in which it may invest to:

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

. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money
Fund Report--Registered Trademark-- of Holliston, Massachusetts or by Lipper
Analytical Services, Inc., a widely recognized independent service located in
Summit, New Jersey, which monitors the performance of mutual funds;

. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate,
a financial information network, or by Bloomberg, a financial information
firm; and

. other fixed-income investments such as Certificates of Deposit ("CDs").

A-21
<PAGE>

The principal value and interest rate of CDs and money market securities are
fixed at the time of purchase whereas the yield of a class will fluctuate.
Unlike some CDs and certain other money market securities, money market mutual
funds are not insured by the FDIC. Investors should give consideration to the
quality and maturity of the portfolio securities of the respective investment
companies when comparing investment alternatives.

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

REDEMPTIONS IN KIND

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

INVESTMENT PROGRAM AND RESTRICTIONS

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

ELIGIBLE SECURITIES

The Fund will invest in "Eligible Securities" as defined in Rule 2a-7 under
the 1940 Act, which the Fund's Board of Directors has determined to present
minimal credit risk.

COMMERCIAL PAPER RATINGS

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

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

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

A-22
<PAGE>

FITCH--Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. The short-term rating places greater emphasis than a long-
term rating on the existence of liquidity necessary to meet the issuer's
obligations in a timely manner. Fitch short-term ratings are as follows:

F-1

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

F-2

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

PLUS(+) AND MINUS (-)

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

LOC

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

BOND RATINGS

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

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

Aaa

Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

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

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

A-23
<PAGE>

AAA

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

Bonds rated AA also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in small degree. Here, too, prices move
with the long-term money market.

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

BBB

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

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

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

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

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

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

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

A-24
<PAGE>

AAA

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

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

REPURCHASE AGREEMENTS

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

INVESTMENT RESTRICTIONS

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

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

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

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

A-25
<PAGE>

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

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

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

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

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

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

The following investment policy is not fundamental and may be changed by the
Board of Directors of the Fund without shareholder approval. The Portfolio does
not intend to invest in companies for the purpose of exercising control or
management, except that the Portfolio may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order.

PORTFOLIO TRANSACTIONS

GENERAL BROKERAGE POLICY

AIM makes decisions to buy and sell securities for the Portfolio, selects
broker-dealers, effects the Portfolio's investment portfolio transactions,
allocates brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. Since purchases and sales of portfolio
securities by the Portfolio are usually principal transactions, the Portfolio
incurs little or no brokerage commissions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate (as applicable). While AIM seeks reasonable competitive commission rates,
the Portfolio may not pay the lowest commission or spread available. See
"Section 28(e) Standards" below.

In the event the Portfolio purchases securities traded in over-the-counter
markets, the Portfolio deals directly with dealers who make markets in the
securities involved, except when better prices are available elsewhere.
Portfolio transactions placed through dealers who are primary market makers are
effected at net prices without commissions, but which include compensation in
the form of a mark up or mark down.

AIM may determine target levels of commission business with various brokers
on behalf of its clients (including the Portfolio) over a certain time period.
The target levels will be based upon the following factors, among others: (1)
the execution services provided by the broker; (2) the research services
provided by the broker; and (3) the broker's interest in mutual funds in
general and in the Portfolio and other mutual funds advised by AIM or

A-26
<PAGE>

A I M Capital Management, Inc. (collectively, the "AIM Funds") in particular,
including sales of the Portfolio and of the other AIM Funds. In connection with
(3) above, the Portfolio's trades may be executed directly by dealers which
sell shares of the AIM Funds or by other broker-dealers with which such dealers
have clearing arrangements. AIM will not use a specific formula in connection
with any of these considerations to determine the target levels.

AIM will seek, whenever possible, to recapture for the benefit of a Portfolio
any commissions, fees, brokerage or similar payments paid by the Portfolio on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of the Portfolio's securities in a tender
or exchange offer.

The Portfolio may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of the Portfolio provided the conditions of an exemptive order
received by the Portfolio from the SEC are met. In addition, the Portfolio may
purchase or sell a security from or to another AIM Fund provided the Portfolio
follows procedures adopted by the Board of Directors/Trustees of the various
AIM Funds, including the Fund. These inter-fund transactions do not generate
brokerage commissions but may result in custodial fees or taxes or other
related expenses.

The Portfolio does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if such
disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio. The Portfolio's
policy of investing in securities with maturities of 397 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.

Under the 1940 Act, certain persons affiliated with the Fund are prohibited
from dealing with the Fund as principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
Furthermore, the 1940 Act prohibits the Fund from purchasing a security being
publicly underwritten by a syndicate of which certain persons affiliated with
the Fund are members except in accordance with certain conditions. These
conditions may restrict the ability of the Portfolio to purchase money market
obligations being publicly underwritten by such a syndicate, and the Portfolio
may be required to wait until the syndicate has been terminated before buying
such securities. At such time, the market price of the securities may be higher
or lower than the original offering price. A person affiliated with the Fund
may, from time to time, serve as placement agent or financial advisor to an
issuer of money market obligations and be paid a fee by such issuer. The
Portfolio may purchase such money market obligations directly from the issuer,
provided that the purchase is made in accordance with procedures adopted by the
Fund's Board of Directors and any such purchases are reviewed at least
quarterly by the Fund's Board of Directors and a determination is made that all
such purchases were effected in compliance with such procedures, including a
determination that the placement fee or other remuneration paid by the issuer
to the person affiliated with the Fund was fair and reasonable in relation to
the fees charged by others performing similar services. During the fiscal year
ended August 31, 1998, no securities or instruments were purchased by the
Portfolio from issuers who paid placement fees or other compensation to a
broker affiliated with the Portfolio.

A-27
<PAGE>

ALLOCATION OF PORTFOLIO TRANSACTIONS

AIM and its affiliates manage several other investment accounts. Some of
these accounts may have investment objectives similar to the Portfolio.
Occasionally, identical securities will be appropriate for investment by the
Portfolio and by another fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by
its cash position. If the purchase or sale of securities is consistent with the
investment policies of the Portfolio and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Portfolio and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect the Portfolio's ability to obtain or dispose of the full amount of a
security which it seeks to purchase or sell.

Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to the Portfolio. In making such
allocations, AIM considers the investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the judgments of the persons
responsible for recommending the investment.

SECTION 28(e) STANDARDS

Section 28(e) of the Securities Exchange Act of 1934 provides that AIM, under
certain circumstances, lawfully may cause an account to pay a higher commission
than the lowest available. Under Section 28(e), AIM must make a good faith
determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided . . . viewed in terms of
either that particular transaction of [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, the Portfolio
may pay a broker higher commissions than those available from another broker.

Research services received from broker-dealers supplement AIM's own research
(and the research of its affiliates), any may include the following types of
information: statistical and background information on the U.S. and foreign
economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Fund's directors with respect to the
performance, investment activities, and fees and expenses of other mutual
funds. Broker-dealers may communicate such information electronically, orally
or in written form. Research services may also include the providing of custody
services, as well as the providing of equipment used to communicate research
information, the providing of specialized consultations with AIM personnel with
respect to computerized systems and data furnished to AIM as a component of
other research services, the arranging of meetings with management of
companies, and the providing of access to consultants who supply research
information.

The outside research assistance is useful to AIM since the broker-dealers
used by AIM tend to follow a broader universe of securities and other matters
than AIM's staff can follow. In addition, the research provides AIM with a
diverse perspective on financial markets. Research services provided to AIM by
broker-dealers are available for the benefit of all accounts managed or advised
by AIM or by its affiliates. Some broker-dealers may indicate that the
provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Portfolio.

A-28
<PAGE>

However, the Portfolio is not under any obligation to deal with any broker-
dealer in the execution of transactions in portfolio securities.

In some cases, the research services are available only from the broker-
dealer providing them. In other cases, the research services may be obtainable
from alternative sources in return for cash payments. AIM believes that the
research services are beneficial in supplementing AIM's research and analysis
and that they improve the quality of AIM's investment advice. The advisory fee
paid by the Portfolio is not reduced because AIM receives such services.
However, to the extent that AIM would have purchased research services had they
not been provided by broker-dealers, the expenses to AIM could be considered to
have been reduced accordingly.

TAX MATTERS

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

QUALIFICATION AS A REGULATED INVESTMENT COMPANY

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

In addition to satisfying the Distribution Requirement, a regulated
investment company (1) must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities)
and other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) must
satisfy an asset diversification test in order to qualify for tax purposes as a
regulated investment company (the "Asset Diversification Test"). Under the
Asset Diversification Test, at the close of each quarter of a fund's taxable
year, at least 50% of the value of a fund's assets must consist of cash and
cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which a fund has
not invested more than 5% of the value of a fund's total assets in securities
of such issuer and as to which a fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the
value of its total assets may be invested in the securities of any other issuer
(other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which a fund controls and
which are engaged in the same or similar trades or businesses.

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

A-29
<PAGE>

EXCISE TAX ON REGULATED INVESTMENT COMPANIES

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

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

PORTFOLIO DISTRIBUTIONS

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

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

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

The Portfolio will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of the ordinary income dividends and capital gain dividends
and, in certain cases, the proceeds of redemption of shares, paid to any
shareholder (1) who has provided either an incorrect tax identification number
or no number at all, (2) who is subject to backup withholding by the Internal
Revenue Service for failure to report the receipt of interest or dividend
income properly, or (3) who has failed to certify to the Fund that it is not
subject to backup withholding or that it is a corporation or other "exempt
recipient."

SALE OR REDEMPTION OF SHARES

A shareholder will recognize gain or loss on the sale or redemption of shares
of a class in an amount equal to the difference between the proceeds of the
sale or redemption and the shareholder's adjusted tax basis in the shares. All
or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the class within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a class will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital dividends received on such
shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares.

A-30
<PAGE>

FOREIGN SHAREHOLDERS

Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on
by such shareholder.

If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and
distributions (other than capital gains dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the dividend or distribution. Such a foreign shareholder would generally be
exempt from U.S. federal income tax on gains realized on the sale of shares of
a class, capital gain dividends and amounts retained by the Portfolio that are
designated as undistributed capital gains.

If the income from the Portfolio is effectively connected with a U.S. or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Portfolio will be subject to U.S. federal income tax at the rated applicable to
U.S. citizens or domestic corporations.

In the case of foreign noncorporate shareholders, the Portfolio may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax unless such shareholders furnish
the Portfolio with proper notification of their foreign status.

The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Portfolio,
including the applicability of foreign taxes.

EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS

The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on
December 18, 1998. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.

Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Portfolio.

A-31
<PAGE>

FINANCIAL STATEMENTS

FS
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Short-Term Investments Co.:

We have audited the accompanying statement of assets and liabilities of the
Liquid Assets Portfolio (a series portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1998, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period then ended
and the period January 17, 1996 (date sales commenced for the Cash Management
Class) through August 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1998 by correspondence with the custodian and brokers. 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, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the two-year period then ended and the period January 17, 1996 (date
sales commenced for the Cash Management Class) through August 31, 1996, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Houston, Texas
October 2, 1998

FS-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Short-Term Investments Co.:

We have audited the accompanying statement of assets and liabilities of the
Liquid Assets Portfolio (a series portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1998, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period then ended
and the period November 4, 1993 (date sales commenced for the Institutional
Class) 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, 1998 by correspondence with the custodian and brokers. 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, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the four-year period then ended and the period November 4, 1993 (date
sales commenced for the Institutional Class) through August 31, 1994, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Houston, Texas
October 2, 1998

FS-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Short-Term Investments Co.:

We have audited the accompanying statement of assets and liabilities of the
Liquid Assets Portfolio (a series portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1998, and the related
statement of operations for the year then ended, the statement of changes in
net assets and financial highlights for the year then ended and the period
September 23, 1996 (date sales commenced for the MSTC Cash Reserves Class)
through August 31, 1997. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1998 by correspondence with the custodian and brokers. 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, 1998, the results of its operations
for the year then ended, the changes in its net assets and financial highlights
for the year then ended and the period September 23, 1996 (date sales commenced
for the MSTC Cash Reserves Class) through August 31, 1997, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

Houston, Texas
October 2, 1998

FS-3
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Short-Term Investments Co.:

We have audited the accompanying statement of assets and liabilities of the
Liquid Assets Portfolio (a series portfolio of Short-Term Investments Co.),
including the schedule of investments, as of August 31, 1998, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period then ended
and the period February 16, 1996 (date sales commenced for the Private
Investment Class) through August 31, 1996. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1998 by correspondence with the custodian and brokers. 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, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the two-year period then ended and the period February 16, 1996 (date
sales commenced for the Private Investment Class) through August 31, 1996, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Houston, Texas
October 2, 1998

FS-4
<PAGE>

SCHEDULE OF INVESTMENTS
August 31, 1998

<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 61.85%(a)

BASIC INDUSTRIES - 6.15%

CHEMICALS - 1.85%

Bayer Corp.
5.49% 11/24/98 $ 15,000 $ 14,807,850
- -----------------------------------------------------------------------
Henkel Corp.
5.52% 09/02/98 6,500 6,499,004
- -----------------------------------------------------------------------
5.52% 09/18/98 8,485 8,462,882
- -----------------------------------------------------------------------
5.46% 09/25/98 16,000 15,941,760
- -----------------------------------------------------------------------
5.51% 11/13/98 13,000 12,854,750
- -----------------------------------------------------------------------
5.50% 12/14/98 14,000 13,777,556
- -----------------------------------------------------------------------
72,343,802
- -----------------------------------------------------------------------

METAL MINING - 4.30%

Rio Tinto America, Inc.
5.45% 09/02/98 20,600 20,596,881
- -----------------------------------------------------------------------
5.52% 10/07/98 35,000 34,806,800
- -----------------------------------------------------------------------
5.50% 11/04/98 30,000 29,706,666
- -----------------------------------------------------------------------
5.53% 11/05/98 25,000 24,750,382
- -----------------------------------------------------------------------
5.41% 02/24/99 20,000 19,471,022
- -----------------------------------------------------------------------
5.45% 02/24/99 30,000 29,200,667
- -----------------------------------------------------------------------
U.S. Borax, Inc.
5.51% 11/06/98 9,600 9,503,024
- -----------------------------------------------------------------------
168,035,442
- -----------------------------------------------------------------------
Total Basic Industries 240,379,244
- -----------------------------------------------------------------------

BUSINESS SERVICES - 0.63%

COMPUTER SOFTWARE & SERVICES - 0.63%

First Data Corp.
5.52% 09/08/98 24,676 24,649,514
- -----------------------------------------------------------------------

CAPITAL GOODS - 3.22%

ELECTRICAL EQUIPMENT - 1.96%

Hitachi America, Ltd.
5.53% 09/18/98 25,000 24,934,716
- -----------------------------------------------------------------------
5.46% 09/21/98 22,050 21,983,115
- -----------------------------------------------------------------------
5.53% 10/23/98 30,000 29,760,366
- -----------------------------------------------------------------------
76,678,197
- -----------------------------------------------------------------------

MACHINERY - 0.63%

Deere & Co.
5.49% 11/24/98 25,000 24,679,750
- -----------------------------------------------------------------------
</TABLE>

FS-5
<PAGE>

<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
CAPITAL GOODS - (continued)

TELECOMMUNICATIONS EQUIPMENT - 0.63%

Motorola, Inc.
5.49% 12/03/98 $ 25,000 $ 24,645,438
- -------------------------------------------------------------------------
Total Capital Goods 126,003,385
- -------------------------------------------------------------------------

CONSUMER DURABLES - 6.56%

AUTOMOBILE - 6.56%

Daimler-Benz North America Corp.
5.47% 10/20/98 25,000 24,814,039
- -------------------------------------------------------------------------
5.50% 10/22/98 13,000 12,898,708
- -------------------------------------------------------------------------
5.48% 12/09/98 20,000 19,698,600
- -------------------------------------------------------------------------
General Motors Acceptance Corp.
5.64% 09/01/98 50,000 50,000,000
- -------------------------------------------------------------------------
5.64% 10/01/98 50,000 49,765,015
- -------------------------------------------------------------------------
5.51% 10/14/98 25,000 24,835,466
- -------------------------------------------------------------------------
5.52% 10/21/98 25,000 24,808,333
- -------------------------------------------------------------------------
5.52% 11/04/98 25,000 24,754,667
- -------------------------------------------------------------------------
5.51% 11/09/98 25,000 24,735,979
- -------------------------------------------------------------------------
Total Consumer Durables 256,310,807
- -------------------------------------------------------------------------

CONSUMER NONDURABLES - 1.45%

BEVERAGES - 1.45%

Diageo Capital plc
5.50% 11/16/98 32,500 32,122,639
- -------------------------------------------------------------------------
5.49% 12/04/98 25,000 24,641,625
- -------------------------------------------------------------------------
Total Consumer Nondurables 56,764,264
- -------------------------------------------------------------------------

ENERGY - 1.47%

OIL & GAS (INTEGRATED) - 1.47%

Shell 96
5.59% 09/09/98 45,355 45,355,000
- -------------------------------------------------------------------------
5.62% 12/01/98 12,000 12,000,000
- -------------------------------------------------------------------------
Total Energy 57,355,000
- -------------------------------------------------------------------------

FINANCIAL - 41.75%

ASSET-BACKED SECURITIES - 32.36%

Asset Securitization Cooperative Corp.
5.50% 12/01/98 25,000 24,652,430
- -------------------------------------------------------------------------
5.50% 12/11/98 20,000 19,691,389
- -------------------------------------------------------------------------
Bavaria TRR Corp.
5.57% 09/10/98 40,000 39,944,300
- -------------------------------------------------------------------------
5.60% 09/10/98 50,000 49,930,000
- -------------------------------------------------------------------------
</TABLE>

FS-6
<PAGE>

<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)

ASSET-BACKED SECURITIES - (CONTINUED)

Bavaria TRR Corp. - (continued)
5.55% 09/29/98 $ 25,400 $ 25,290,357
- ------------------------------------------------------------------------
5.54% 11/17/98 9,935 9,817,276
- ------------------------------------------------------------------------
5.53% 11/18/98 12,965 12,809,658
- ------------------------------------------------------------------------
Centric Capital Corp.
5.52% 09/01/98 34,300 34,300,000
- ------------------------------------------------------------------------
5.52% 09/08/98 25,000 24,973,166
- ------------------------------------------------------------------------
5.45% 10/05/98 20,000 19,897,056
- ------------------------------------------------------------------------
5.43% 10/06/98 20,000 19,894,417
- ------------------------------------------------------------------------
5.51% 10/13/98 25,000 24,839,292
- ------------------------------------------------------------------------
5.51% 10/30/98 25,000 24,774,243
- ------------------------------------------------------------------------
5.51% 02/01/99 15,000 14,648,737
- ------------------------------------------------------------------------
Corporate Asset Funding Co.
5.52% 09/16/98 20,000 19,954,000
- ------------------------------------------------------------------------
5.53% 09/18/98 40,000 39,895,544
- ------------------------------------------------------------------------
Delaware Funding Corp.
5.53% 09/29/98 10,088 10,044,610
- ------------------------------------------------------------------------
5.52% 10/30/98 25,232 25,003,735
- ------------------------------------------------------------------------
Edison Asset Securitization, L.L.C.
5.54% 09/17/98 17,341 17,298,303
- ------------------------------------------------------------------------
5.52% 10/15/98 10,463 10,392,410
- ------------------------------------------------------------------------
5.54% 10/16/98 25,000 24,826,875
- ------------------------------------------------------------------------
5.52% 11/18/98 75,325 74,424,113
- ------------------------------------------------------------------------
5.51% 11/25/98 20,000 19,739,806
- ------------------------------------------------------------------------
5.50% 02/02/99 25,000 24,411,805
- ------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.58% 09/01/98 34,753 34,753,000
- ------------------------------------------------------------------------
Fleet Funding Corp.
5.56% 09/09/98 42,617 42,564,344
- ------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.56% 09/21/98 27,000 26,916,600
- ------------------------------------------------------------------------
5.55% 10/08/98 30,000 29,828,875
- ------------------------------------------------------------------------
5.53% 10/15/98 33,818 33,589,428
- ------------------------------------------------------------------------
5.54% 10/19/98 25,000 24,815,333
- ------------------------------------------------------------------------
5.53% 11/19/98 25,000 24,696,618
- ------------------------------------------------------------------------
5.52% 11/20/98 28,000 27,656,533
- ------------------------------------------------------------------------
</TABLE>

FS-7
<PAGE>

<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)

ASSET-BACKED SECURITIES - (CONTINUED)

Preferred Receivable Funding Corp.
5.45% 09/09/98 $ 16,275 $ 16,255,289
- ------------------------------------------------------------------------
5.53% 09/09/98 14,725 14,706,904
- ------------------------------------------------------------------------
5.52% 09/11/98 15,635 15,611,027
- ------------------------------------------------------------------------
5.50% 11/10/98 8,500 8,409,097
- ------------------------------------------------------------------------
5.50% 11/12/98 13,000 12,857,000
- ------------------------------------------------------------------------
5.47% 12/15/98 14,435 14,204,702
- ------------------------------------------------------------------------
Quincy Capital Corp.
5.53% 09/18/98 24,185 24,121,843
- ------------------------------------------------------------------------
5.57% 09/18/98 27,576 27,503,467
- ------------------------------------------------------------------------
Receivables Capital Corp.
5.52% 10/14/98 25,000 24,835,167
- ------------------------------------------------------------------------
Sheffield Receivables Funding Corp.
5.55% 09/09/98 40,000 39,950,667
- ------------------------------------------------------------------------
5.56% 09/15/98 33,000 32,928,647
- ------------------------------------------------------------------------
5.52% 09/16/98 20,000 19,954,000
- ------------------------------------------------------------------------
5.56% 09/16/98 20,287 20,240,001
- ------------------------------------------------------------------------
5.57% 09/28/98 30,000 29,874,787
- ------------------------------------------------------------------------
5.52% 11/18/98 25,000 24,701,000
- ------------------------------------------------------------------------
Variable Funding Capital
5.67% 09/08/98 33,000 32,963,618
- ------------------------------------------------------------------------
5.54% 10/23/98 50,000 49,599,889
- ------------------------------------------------------------------------
1,264,991,358
- ------------------------------------------------------------------------

BANKS (DOMESTIC) - 0.62%

Commerce Bank U.S. Finance, Inc.
5.45% 02/12/99 25,000 24,379,306
- ------------------------------------------------------------------------

BANKS (FOREIGN) - 0.46%

Demir Funding Corp. II
5.54% 10/13/98 18,000 17,883,660
- ------------------------------------------------------------------------

BROKER DEALER - 1.41%

Merrill Lynch & Co. Inc.
5.52% 11/30/98 16,000 15,779,200
- ------------------------------------------------------------------------
Morgan (J.P.) & Co. Inc.
5.48% 12/11/98 40,000 39,385,022
- ------------------------------------------------------------------------
55,164,222
- ------------------------------------------------------------------------

INSURANCE (LIFE) - 0.64%

MetLife Funding, Inc.
5.53% 09/24/98 25,000 24,911,674
- ------------------------------------------------------------------------
</TABLE>

FS-8
<PAGE>

<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL - (continued)

INSURANCE (OTHER) - 1.83%

Marsh & McLennan Companies, Inc.
5.53% 09/08/98 $ 39,000 $ 38,958,064
- ------------------------------------------------------------------------------
5.45% 09/22/98 7,500 7,476,158
- ------------------------------------------------------------------------------
5.53% 09/22/98 25,000 24,919,354
- ------------------------------------------------------------------------------
71,353,576
- ------------------------------------------------------------------------------

LEASING COMPANIES - 1.05%

International Lease Finance Corp.
5.48% 10/06/98 25,000 24,866,806
- ------------------------------------------------------------------------------
5.47% 11/05/98 16,500 16,337,039
- ------------------------------------------------------------------------------
41,203,845
- ------------------------------------------------------------------------------

MULTIPLE INDUSTRY - 3.38%

General Electric Capital Corp.
5.50% 09/30/98 35,000 34,844,930
- ------------------------------------------------------------------------------
5.49% 01/29/99 25,000 24,428,125
- ------------------------------------------------------------------------------
5.43% 02/23/99 25,000 24,340,104
- ------------------------------------------------------------------------------
5.44% 02/24/99 50,000 48,670,222
- ------------------------------------------------------------------------------
132,283,381
- ------------------------------------------------------------------------------
Total Financial 1,632,171,022
- ------------------------------------------------------------------------------

UTILITIES - 0.62%

TELEPHONE - 0.62%

BellSouth Capital Funding Corp.
5.41% 02/19/99 25,000 24,357,562
- ------------------------------------------------------------------------------
Total Commercial Paper (Cost
$2,417,990,798) 2,417,990,798
- ------------------------------------------------------------------------------

BANK NOTES - 0.64%

First Union National Bank
5.63% (Cost $25,000,000) 02/10/99 25,000 25,000,000
- ------------------------------------------------------------------------------

COMMERCIAL PAPER TRUST CERTIFICATES - 5.12%

Citibank, N.A.
5.685%(b) (Cost $200,000,000) 12/28/98 200,000 200,000,000
- ------------------------------------------------------------------------------

MASTER NOTE AGREEMENTS - 20.08%

Goldman Sachs Group (The), L.P.
5.656%(c) 10/19/98 205,000 205,000,000
- ------------------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.
6.093%(d) 08/16/99 239,000 239,000,000
- ------------------------------------------------------------------------------
Morgan (J.P.) Securities Inc.
5.883%(c) 10/05/98 194,000 194,000,000
- ------------------------------------------------------------------------------
</TABLE>

FS-9
<PAGE>

<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
MASTER NOTE AGREEMENTS - (continued)

Morgan Stanley, Dean Witter, Discover & Co.
5.9125%(e) 11/23/98 $147,000 $ 147,000,000
- --------------------------------------------------------------------------------
Total Master Note Agreements (Cost
$785,000,000) 785,000,000
- --------------------------------------------------------------------------------

MEDIUM TERM NOTES - 1.08%

Associates Corp. of North America
5.25%(f) 09/01/98 5,000 5,000,000
- --------------------------------------------------------------------------------
6.50%(f) 09/09/98 12,200 12,201,947
- --------------------------------------------------------------------------------

IBM Credit Corp.
5.80%(f) 11/06/98 25,000 25,003,255
- --------------------------------------------------------------------------------
Total Medium Term Notes (Cost $42,205,202) 42,205,202
- --------------------------------------------------------------------------------

REVENUE BONDS - 1.14%

Belk, Inc.; Variable Rate Demand Revenue
Bond Series 1998(g)(h)
5.65% 07/01/08 20,000 20,000,000
- --------------------------------------------------------------------------------
Jacksonville Health Facilities Authority
(Charity Obligations Group);
Refunding Hospital Series C Revenue
Bond(g)(h)
5.65% 08/15/19 24,700 24,700,000
- --------------------------------------------------------------------------------
Total Revenue Bonds (Cost $44,700,000) 44,700,000
- --------------------------------------------------------------------------------

TIME DEPOSITS - 7.98%

Republic National Bank Of New York
6.00% 09/01/98 162,129 162,128,575
- --------------------------------------------------------------------------------
Societe Generale
6.00% 09/01/98 150,000 150,000,000
- --------------------------------------------------------------------------------
Total Time Deposits (Cost $312,128,575) 312,128,575
- --------------------------------------------------------------------------------

REPURCHASE AGREEMENT - 3.71%(i)

Goldman, Sachs & Co.
6.05%(j) (Cost $145,000,000) 09/01/98 145,000 145,000,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.60% 3,972,024,575(k)
================================================================================
OTHER ASSETS LESS LIABILITIES - (1.60)% (62,410,911)
================================================================================
NET ASSETS - 100.00% $3,909,613,664
================================================================================
</TABLE>
FS-10
<PAGE>

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 08/31/98.
(c) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon seven business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 08/31/98.
(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 08/31/98.
(e) 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 08/31/98.
(f) Interest rates are redetermined daily. Rate shown is the rate in effect on
08/31/98.
(g) Demand security; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined periodically.
Rate shown is the rate in effect on 08/31/98.
(h) Secured by a letter of credit.
(i) 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 is at least 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.
(j) Repurchase agreement entered into 08/31/98 with a maturing value of
$145,024,368. Collateralized by $134,022,000 U.S. Government obligations,
5.125% to 7.50% due 02/29/00 to 11/15/16 with an aggregate market value at
08/31/98 of $148,046,190.
(k) Also represents cost for federal income tax purposes.

See Notes to Financial Statements.

FS-11
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998

<TABLE>
<S> <C>
ASSETS:

Investments, at value (amortized cost) $3,972,024,575
- ------------------------------------------------------------------------
Receivables for:
Investments sold 47,707,111
- ------------------------------------------------------------------------
Interest 7,786,932
- ------------------------------------------------------------------------
Investment for deferred compensation plan 48,639
- ------------------------------------------------------------------------
Other assets 320,952
- ------------------------------------------------------------------------
Total assets 4,027,888,209
- ------------------------------------------------------------------------

LIABILITIES:

Payables for:
Investments purchased 97,467,238
- ------------------------------------------------------------------------
Dividends 20,259,500
- ------------------------------------------------------------------------
Deferred compensation 48,639
- ------------------------------------------------------------------------
Accrued administrative services fees 7,945
- ------------------------------------------------------------------------
Accrued advisory fees 166,145
- ------------------------------------------------------------------------
Accrued distribution fees 62,593
- ------------------------------------------------------------------------
Accrued transfer agent fees 49,192
- ------------------------------------------------------------------------
Accrued operating expenses 213,293
- ------------------------------------------------------------------------
Total liabilities 118,274,545
- ------------------------------------------------------------------------
NET ASSETS $3,909,613,664
========================================================================

NET ASSETS:

Institutional Class $3,097,539,154
========================================================================
Cash Management Class $ 655,975,137
========================================================================
Private Investment Class $ 70,058,256
========================================================================
MSTC Cash Reserves Class $ 86,041,117
========================================================================

CAPITAL STOCK, $.001 PAR VALUE PER SHARE:

Institutional Class 3,098,072,735
========================================================================
Cash Management Class 656,036,958
========================================================================
Private Investment Class 70,070,233
========================================================================
MSTC Cash Reserves Class 86,063,203
========================================================================

NET ASSET VALUE PER SHARE:

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

See Notes to Financial Statements.

FS-12
<PAGE>

STATEMENT OF OPERATIONS
For the year ended August 31, 1998

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $235,786,553
- -------------------------------------------------------------------

EXPENSES:
Advisory fees 6,237,470
- -------------------------------------------------------------------
Custodian fees 221,530
- -------------------------------------------------------------------
Administrative services fees 85,337
- -------------------------------------------------------------------
Distribution fees (Note 2) 796,404
- -------------------------------------------------------------------
Directors' fees and expenses 33,432
- -------------------------------------------------------------------
Transfer agent fees 422,887
- -------------------------------------------------------------------
Other 527,332
- -------------------------------------------------------------------
Total expenses 8,324,392
- -------------------------------------------------------------------
Less: Fee waivers (4,500,471)
- -------------------------------------------------------------------
Net expenses 3,823,921
- -------------------------------------------------------------------
Net investment income 231,962,632
- -------------------------------------------------------------------
Net realized gain on sales of investments 750,940
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $232,713,572
===================================================================
</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $231,962,632 $ 158,747,907
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 750,940 352,792
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 232,713,572 159,100,699
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (207,681,074) (149,604,986)
- ----------------------------------------------------------------------------
Cash Management Class (16,114,306) (4,717,164)
- ----------------------------------------------------------------------------
Private Investment Class (3,506,724) (2,931,782)
- ----------------------------------------------------------------------------
MSTC Cash Reserves Class (4,660,528) (1,493,975)
- ----------------------------------------------------------------------------
Capital stock transactions --
(See Note 4) (113,347,634) 1,934,913,244
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets (112,596,694) 1,935,266,036
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,022,210,358 2,086,944,322
- ----------------------------------------------------------------------------
End of period $3,909,613,664 $4,022,210,358
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,910,243,129 $4,023,590,763
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities (629,465) (1,380,405)
- ----------------------------------------------------------------------------
$3,909,613,664 $4,022,210,358
============================================================================
</TABLE>

See Notes to Financial Statements.

FS-13
<PAGE>

NOTES TO FINANCIAL STATEMENTS
August 31, 1998

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 the 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 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. The
following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements.
A. Security Valuations - The Portfolio's 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 $629,465 (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 expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class 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 investment 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, 1998, AIM voluntarily waived fees of $4,309,476.
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, 1998,
the Portfolio reimbursed AIM $85,337 for such services.
The Portfolio, pursuant to a transfer agency and service agreement, has agreed
to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agent and
shareholder services to the Portfolio. On September 20, 1997, the Board of
Directors of the Fund approved the appointment of AFS as transfer agent of the
Fund effective December 29, 1997. During the year ended August 31, 1998, the
Portfolio paid AFS $283,289 for such services. Prior to the effective date of
the agreement with AFS, the Portfolio paid A I M Institutional Fund Services,
Inc. $139,598 pursuant to a transfer agency and shareholder services agreement
for the period September 1, 1997 through December 28, 1997.

FS-14
<PAGE>

Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Cash Management Class and the MSTC Cash 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,
1998, the Private Investment Class, the Cash Management Class and the MSTC Cash
Reserves Class paid $198,764, $233,941 and $172,704, respectively, as
compensation under the Plan. FMC waived fees of $190,995 for the same period.
Certain officers and directors of the Fund are officers of AIM, FMC and AFS.
During the year ended August 31, 1998, the Portfolio paid legal fees of
$12,156 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, 1998 and 1997 were
as follows:

<TABLE>
<CAPTION>
1998 1997
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 93,828,246,640 $93,828,246,640 78,261,661,500 $78,261,661,500
- ---------------------------------------------------------------------------------------------
Cash Management Class 4,263,088,877 4,263,088,877 1,034,402,514 1,034,402,514
- ---------------------------------------------------------------------------------------------
Private Investment
Class 427,983,177 427,983,177 342,644,258 342,644,258
- ---------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class* 1,649,842,930 1,649,842,930 408,898,275 408,898,275
- ---------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 38,210,037 38,210,037 20,480,836 20,480,836
- ---------------------------------------------------------------------------------------------
Cash Management Class 10,309,246 10,309,246 2,312,729 2,312,729
- ---------------------------------------------------------------------------------------------
Private Investment
Class 3,283,004 3,283,004 2,744,701 2,744,701
- ---------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class* 4,593,118 4,593,118 1,184,333 1,184,333
- ---------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (94,557,041,875) (94,557,041,875) (76,483,889,456) (76,483,889,456)
- ---------------------------------------------------------------------------------------------
Cash Management Class (3,700,876,338) (3,700,876,338) (1,006,454,600) (1,006,454,600)
- ---------------------------------------------------------------------------------------------
Private Investment
Class (432,076,106) (432,076,106) (319,526,727) (319,526,727)
- ---------------------------------------------------------------------------------------------
MSTC Cash Reserves
Class* (1,648,910,344) (1,648,910,344) (329,545,119) (329,545,119)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (113,347,634) $ (113,347,634) 1,934,913,244 $ 1,934,913,244
=============================================================================================
</TABLE>
* The MSTC Cash Reserves Class commenced sales on September 23, 1996.

FS-15
<PAGE>

NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Cash Management Class
capital stock outstanding during each of the years in the two year period ended
August 31, 1998 and the period January 17, 1996 (date sales commenced) through
August 31, 1996.

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------ -------- ------- -------
Income from investment operations:
Net investment income 0.06 0.05 0.03
- ------------------------------------------ -------- ------- -------
Less distributions:
Dividends from net investment income (0.06) (0.05) (0.03)
- ------------------------------------------ -------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
========================================== ======== ======= =======
Total return 5.66% 5.50% 5.36%(a)
========================================== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $655,975 $83,487 $53,209
========================================== ======== ======= =======
Ratio of expenses to average net assets(b) 0.16%(c) 0.15% 0.10%(a)
========================================== ======== ======= =======
Ratio of net investment income to average
net assets(d) 5.51%(c) 5.38% 5.27%(a)
========================================== ======== ======= =======
</TABLE>

(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.28%, 0.28% and 0.34% (annualized) for the periods 1998-1996,
respectively.
(c) Ratios are based on average net assets of $292,425,889.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.39%, 5.25% and 5.03% (annualized) for the periods
1998-1996, respectively.

FS-16
<PAGE>

NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Institutional Class
capital stock outstanding during each of the years in the four-year period
ended August 31, 1998 and the period November 4, 1993 (date sales commenced)
through August 31, 1994.

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income 0.06 0.05 0.06 0.06 0.03
- ----------------------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.06) (0.05) (0.06) (0.06) (0.03)
- ----------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ========== ========== ========== ========== ==========
Total return 5.74% 5.58% 5.68% 5.83% 3.83%(a)
======================= ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $3,097,539 $3,787,357 $1,988,755 $1,287,463 $1,028,350
======================= ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets(b) 0.08%(c) 0.06% 0.03% 0.11% 0.05%(a)
======================= ========== ========== ========== ========== ==========
Ratio of net investment
income to average net
assets(d) 5.59%(c) 5.46% 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%, 0.18%, 0.18%, 0.18% and 0.18% (annualized) for the periods 1998-
1994, respectively.
(c) Ratios are based on average net assets of $3,713,280,577.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.49%, 5.34%, 5.37%, 5.62% and 3.72% (annualized) for
the periods 1998-1994, respectively.

FS-17
<PAGE>

NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of MSTC Cash Reserves
Class capital stock outstanding during the year ended August 31, 1998 and the
period September 23, 1996 (date sales commenced) through August 31, 1997.

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- ------------------------------------------------------- ------- -------
Income from investment operations:
Net investment income 0.05 0.05
- ------------------------------------------------------- ------- -------
Less distributions:
Dividends from net investment income (0.05) (0.05)
- ------------------------------------------------------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00
======================================================= ======= =======
Total return 5.53% 5.37%(a)
======================================================= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $86,041 $80,510
======================================================= ======= =======
Ratio of expenses to average net assets(b) 0.28%(c) 0.27%(a)
======================================================= ======= =======
Ratio of net investment income to average net assets(d) 5.40%(c) 5.34%(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
0.38% and 0.39% (annualized) for the periods 1998 and 1997, respectively.
(c) Ratios are based on average net assets of $86,352,258.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.30% and 5.22% (annualized) for the periods 1998 and
1997, respectively.

FS-18
<PAGE>

NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Private Investment
Class capital stock outstanding during each of the years in the two-year period
ended August 31, 1998 and the period February 16, 1996 (date sales commenced)
through August 31, 1996.

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.05 0.05 0.03
- --------------------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.03)
- --------------------------------------------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
============================================= ======= ======= =======
Total return 5.43% 5.27% 5.10%(a)
============================================= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,058 $70,856 $44,981
============================================= ======= ======= =======
Ratio of expenses to average net assets(b) 0.38%(c) 0.36% 0.32%(a)
============================================= ======= ======= =======
Ratio of net investment income to average net
assets(d) 5.29%(c) 5.16% 5.04%(a)
============================================= ======= ======= =======
</TABLE>

(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68%, 0.68% and 0.69% (annualized) for the periods 1998-1996,
respectively.
(c) Ratios are based on average net assets of $66,254,739.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.99%, 4.84% and 4.67% (annualized) for the periods
1998-1996, respectively.

FS-19
<PAGE>
- -------------------------------- --------------------------------------------
- -------------------------------- --------------------------------------------

SHORT-TERM INVESTMENTS CO. PROSPECTUS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 December 18, 1998
(800) 659-1005
SHORT-TERM
INVESTMENT ADVISOR INVESTMENTS CO.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 ------------
Houston, Texas 77046-1173
(713) 626-1919 LIQUID ASSETS PORTFOLIO

DISTRIBUTOR ------------
FUND MANAGEMENT COMPANY
11 Greenway Plaza, Suite 100 INSTITUTIONAL CLASS
Houston, Texas 77046-1173
(800) 659-1005 TABLE OF CONTENTS

AUDITORS PAGE
KPMG PEAT MARWICK LLP ----
700 Louisiana
Houston, Texas 77002 Summary.............................. 2
Table of Fees and Expenses........... 4
CUSTODIAN Financial Highlights................. 5
THE BANK OF NEW YORK Suitability For Investors............ 5
90 Washington Street Investment Program................... 6
11th Floor Purchase of Shares................... 9
New York, New York 10286 Redemption of Shares................. 10
Dividends............................ 10
TRANSFER AGENT Taxes................................ 11
A I M FUND SERVICES, INC. Net Asset Value...................... 11
P.O. Box 4497 Yield Information.................... 12
Houston, Texas 77210-4497 Reports to Shareholders.............. 12
Management of the Fund............... 12
General Information.................. 14
NO PERSON HAS BEEN AUTHORIZED Appendix.............................A-1
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS, AND IF
GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND OR THE
DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN
ANY JURISDICTION TO ANY PERSON
TO WHOM SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

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

<PAGE>

PROSPECTUS

PERSONAL INVESTMENT CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
(800) 887-4744

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

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

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

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

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

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

THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE PERSONAL INVESTMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 18, 1998, 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
LOSS OF PRINCIPAL.

PROSPECTUS DATED: DECEMBER 18, 1998
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY..................... 2 TAXES....................... 12
TABLE OF FEES AND EXPENSES.. 4 NET ASSET VALUE............. 13
SUITABILITY FOR INVESTORS... 5 YIELD INFORMATION........... 14
INVESTMENT PROGRAM.......... 5 REPORTS TO SHAREHOLDERS..... 14
PURCHASE OF SHARES.......... 10 MANAGEMENT OF THE FUND...... 14
REDEMPTION OF SHARES........ 11 GENERAL INFORMATION......... 17
DIVIDENDS................... 12
</TABLE>

SUMMARY

THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE

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

Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio:
the Cash Management Class, the Institutional Class, the Private Investment
Class, the Reserve Class and the Resource Class. Such classes have different
distribution arrangements designed for institutional and other categories of
investors. The Fund also offers shares of classes of another portfolio, the
Prime Portfolio, each pursuant to a separate prospectus. Such classes have
different distribution arrangements and are designed for institutional and
other categories of investors. The portfolios of the Fund are referred to
collectively as "Portfolios."

INVESTORS IN THE CLASS

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

PURCHASE OF SHARES

Shares of the Class are sold at net asset value without a sales charge. The
minimum initial investment in the Class is $1,000. There is no minimum amount
for subsequent investments. Payment for shares of the Class purchased must be
in federal funds or other funds immediately available to the Portfolio. See
"Purchase of Shares."

REDEMPTION OF SHARES

2
<PAGE>

DIVIDENDS

The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 5:00 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 6:00 p.m. Eastern Time on
that day. See "Dividends."

CONSTANT NET ASSET VALUE

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

INVESTMENT ADVISOR

A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor
and receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to
investment companies. Under a Master Administrative Services Agreement, AIM
may be reimbursed by the Fund for its costs of performing certain accounting
and other administrative services for the Fund. See "Management of the Fund--
Investment Advisor" and "--Administrator." Under a Transfer Agency and Service
Agreement, A I M Fund Services, Inc. ("Transfer Agent"), AIM's wholly owned
subsidiary and a registered transfer agent, receives a fee for its provision
of transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund. See "General Information--Transfer Agent and Custodian."

DISTRIBUTOR AND DISTRIBUTION PLAN

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

SPECIAL CONSIDERATIONS

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

The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com,
La Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest With
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.

3
<PAGE>

TABLE OF FEES AND EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--PERSONAL INVESTMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).............................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage
of offering price).................................................. None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable).. None
Exchange Fee......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)--PERSONAL
INVESTMENT CLASS
Management Fees (after waivers)**.................................... 0.06%
12b-1 Fees (after waivers)**......................................... 0.50%***
Other Expenses....................................................... 0.03%
----
Total Operating Expenses--Personal Investment Class**................ 0.59
====
</TABLE>
- --------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** Had there been no waivers, Management Fees, 12b-1 Fees and Total Operating
Expenses would be 0.15%, 0.75% and 0.93%, respectively.
*** It is possible that as a result of Rule 12b-1 fees, a long-term
shareholder of the Class may pay more than the economic equivalent of the
maximum front-end sales charges permitted 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 would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period.

<TABLE>
<S> <C>
1 year................................................................ $ 6
3 years............................................................... $19
</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 "Total
Operating Expenses--Personal Investment Class" figure is based upon costs and
the estimated size of the Class and fees to be charged for the current fiscal
period. The "Other expenses" and "12b-1 fees" figures are based upon estimated
costs and the estimated size of the Class and the Portfolio and estimated fees
to be charged for the current fiscal period. Thus, actual expenses may be
greater or less than such estimates. The Table of Fees and Expenses reflects a
voluntary waiver of management fees and 12b-1 fees for the Class. Future
waivers of fees (if any) may vary from the figures reflected in the Table of
Fees and Expenses. To the extent any service providers assume expenses of the
Class, such assumption of expenses will have the effect of lowering the
Class's overall expense ratio and increasing its yield to investors.
Beneficial owners of shares of the Class should also consider the effect of
any charges imposed by the institution maintaining their accounts.

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

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

4
<PAGE>

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. Prospective investors should determine if an
investment in the Class is consistent with the objectives of an account and
with applicable state and federal laws and regulations.

INVESTMENT PROGRAM

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

5
<PAGE>

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 the Portfolio's investment advisor (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, as well as securities issued by a registered
investment company that is a money market fund and U.S. government securities.

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

The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.

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

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

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nationalization of foreign deposits, the possible imposition of foreign
country withholding taxes on interest income payable on Eurodollar CDs or
Eurodollar time deposits, and the possible establishment of exchange controls
or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on Eurodollar CDs and
Eurodollar time deposits.

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

DESCRIPTION OF MONEY MARKET OBLIGATIONS

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

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

U.S. GOVERNMENT AGENCIES SECURITIES--Certain federal agencies (such as the
Federal National Mortgage Association, the Small Business Administration and
the Resolution Trust Corporation) have been established as instrumentalities
of the U.S. Government to supervise and finance certain types of activities.
Issues of these agencies, while not direct obligations of the U.S. Government,
are (a) backed by the full faith and credit of the United States, (b)
guaranteed by the U.S. Treasury or (c) supported by the issuing agencies'
right to borrow from the U.S. Treasury.

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

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

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

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

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

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

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

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

REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. Repurchase transactions are limited to a term not to exceed 365 days.
The Portfolio may enter into repurchase agreements only with institutions
believed by the Fund's Board of Directors to present minimal credit risk. With
regard to repurchase transactions, in the event of a bankruptcy or other
default of a seller of a repurchase agreement (such as the seller's failure to
repurchase the obligation in accordance with the terms of the agreement), the
Portfolio could experience both delays in liquidating the underlying
securities and losses, including: (a) a possible decline in the value of the
underlying security during the period while the Portfolio seeks to enforce its
rights thereto, (b) possible subnormal levels of income and lack of access to
income during this period, and (c) expenses of enforcing its rights.
Repurchase agreements are considered to be loans by the Portfolio under the
1940 Act. Repurchase agreements will be secured by securities eligible under
Rule 2a-7 of the 1940 Act. For additional information on the use of repurchase
agreements, see the Statement of Additional Information.

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<PAGE>

transaction. The Portfolio may enter into reverse repurchase agreements in
amounts not exceeding 10% of the value of its total assets. Reverse repurchase
agreements involve the risk that the market value of securities retained by
the Portfolio in lieu of liquidation may decline below the repurchase price of
the securities sold by the Portfolio which it is obligated to repurchase. The
risk, if encountered, could cause a reduction in the net asset value of the
Portfolio's shares. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act.

INVESTMENT RESTRICTIONS

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

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

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PURCHASE OF SHARES

Shares of the Class are sold on a continuing basis at their net asset value
next determined after an order has been received by the Portfolio. As
discussed below, the Fund reserves the right to reject any purchase order.
Although there is no sales charge imposed on the purchase of shares of the
Class, banks and other institutions may charge a recordkeeping, account
maintenance or other fee to their customers. Beneficial holders of shares of
the Class should consult with the institutions maintaining their accounts to
obtain a schedule of applicable fees. To facilitate the investment of proceeds
of purchase orders, investors are urged to place their orders as early in the
day as possible. Purchase orders will be accepted for execution on the day the
order is placed, provided that the order is properly submitted and received by
the Transfer Agent prior to 5:00 p.m. Eastern Time on a business day of the
Portfolio. Purchase orders received after such time will be processed at the
next day's net asset value. Following the initial investment, subsequent
purchases of shares of the Class may also be made via AIM LINK--Registered
Trademark-- Remote, a personal computer application software product. Shares of
the Class will earn the dividend declared on the effective date of purchase.

A "business day of the Portfolio" is any day on which both the Federal
Reserve Bank of New York and The Bank of New York, the Fund's custodian bank,
are open for business. It is expected that the Federal Reserve Bank of New
York and The Bank of New York will be closed during the next twelve months on
Saturdays and Sundays and on observed holidays of New Year's Day, Martin
Luther King, Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
Further, the Portfolio reserves the right to change the time for which
purchase orders for shares of the Personal Investment Class must be submitted
to and received by the Transfer Agent for execution on the same day on any day
when the U.S. primary broker-dealer community is closed for business or
trading is restricted due to national holidays.

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

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

The minimum initial investment in the Class is $1,000. Institutions may be
requested to maintain separate master accounts in the shares of the Class held
by the institution (a) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary,
and (b) for accounts for which the institution acts in some other capacity. An
institution's master account(s) and sub-accounts with the Class may be
aggregated for the purpose of the minimum investment requirement. No minimum
amount is required for subsequent investments in the Portfolio nor are minimum
balances required. Prior to the initial purchase of shares of the Class, an
Account Application must be completed and sent to the Transfer Agent at P.O.
Box 4497, Houston, Texas 77210-4497. Account Applications may be obtained from
the Transfer Agent. Any changes made to the information provided in the
Account Application must be made in writing or by completing a new form and
providing it to the Transfer Agent.

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<PAGE>

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

REDEMPTION OF SHARES

Payment for redeemed shares of the Class is normally made by Federal Reserve
wire to the commercial bank account designated in the shareholder's Account
Application, but may be remitted by check upon request by a shareholder. If a
redemption request is received by the Transfer Agent prior to 5:00 p.m.
Eastern Time on a business day of the Portfolio, the redemption will be
effected at the net asset value next determined on such day and the shares of
the Portfolio to be redeemed will not receive the dividend declared on the
effective date of the redemption. If a redemption request is received by the
Transfer Agent after 5:00 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 5:00 p.m. Eastern Time on the next business day of
the Portfolio, and the proceeds of such redemption will normally be wired on
the effective day of the redemption. The Portfolio reserves the right to
change the time for which redemption requests must be submitted to and
received by the Transfer Agent for execution on the same day on any day when
the U.S. primary broker-dealer community is closed for business or trading is
restricted due to national holidays.

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<PAGE>

DIVIDENDS

Dividends from the net income of the Portfolio are declared daily to
shareholders of record of the Class immediately after 5:00 p.m. Eastern Time
on the day of declaration. Net income for dividend purposes is determined
daily as of 5:00 p.m. Eastern Time. The dividend accrued and paid for the
Class will consist of (a) income of the Portfolio, the allocation of which is
based upon the Class's pro rata share of the total outstanding shares
representing an interest in the Portfolio, less (b) Fund expenses, such as
custodian fees, directors' fees, accounting and legal expenses, based upon the
Class's pro rata share of the net assets of the Portfolio, less (c) expenses
directly attributable to the Class, such as distribution expenses, if any, and
transfer agency fees. Although realized gains and losses on the assets of the
Portfolio are reflected in the net asset value of the Portfolio, they are not
expected to be of an amount which would affect the Portfolio's net asset value
of $1.00 per share for purposes of purchases and redemptions. See "Net Asset
Value." Distributions from net realized short-term gains may be declared and
paid yearly or more frequently. See "Taxes." The Portfolio does not expect to
realize any long-term capital gains or losses.

All dividends declared during a month will normally be paid by wire
transfer. Payment will normally be made on the first business day of the
following month. A shareholder may elect to have all dividends automatically
reinvested in additional full and fractional shares of the Portfolio at the
net asset value of such shares as of 5:00 p.m. Eastern Time on the last
business day of the month. Such election, or any revocation thereof, must be
made in writing by the shareholder to the Transfer Agent at P.O. Box 4497,
Houston, Texas 77210-4497 and will become effective with dividends paid after
its receipt by the Transfer Agent. If a shareholder redeems all the shares in
its account at any time during the month, all dividends declared through the
date of redemption are paid to the shareholder along with the proceeds of the
redemption.

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

TAXES

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

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<PAGE>

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

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

NET ASSET VALUE

The net asset value per share of the Portfolio is determined daily as of
5:00 p.m. Eastern Time on each business day of the Portfolio. Net asset value
per share is determined by dividing the value of the Portfolio's securities,
cash and other assets (including interest accrued but not collected), less all
its liabilities (including accrued expenses and dividends payable), by the
number of shares outstanding of the Portfolio and rounding the resulting per
share net asset value to the nearest one cent.

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

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<PAGE>

YIELD INFORMATION

Yield information for the Class can be obtained by calling FMC 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
INSTITUTION. These factors should be carefully considered by the investor
before making an investment in the Portfolio.

REPORTS TO SHAREHOLDERS

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

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The overall management of the business and affairs of the Fund is vested
with the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to
the Fund, including agreements with the Portfolio's investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to AIM, subject always to the
objective and policies of the Portfolio and to the general supervision of the
Fund's Board of Directors. Information concerning the Board of Directors may
be found in the Statement of Additional Information. Certain directors and
officers of the Fund are affiliated with AIM and A I M Management Group Inc.
("AIM Management"), the parent corporation of AIM.

For a discussion of AIM Management and its subsidiaries' Year 2000
Compliance Project, see "General Information--Year 2000 Compliance Project."

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<PAGE>

INVESTMENT ADVISOR

A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, acts as the Portfolio's investment advisor pursuant to a Master
Investment Advisory Agreement (the "Advisory Agreement"). AIM was organized in
1976 and, together with its subsidiaries, manages, advises or administers over
90 investment company portfolios. AIM is a wholly owned subsidiary of AIM
Management, a holding company engaged in the financial services business. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly-
traded holding company that, through its subsidiaries, engages in
institutional investment management and retail fund businesses in the United
States, Europe and the Pacific Region.

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

For the fiscal year ended August 31, 1997, AIM received advisory fees with
respect to the Portfolio which represented 0.05% of the Portfolio's average
daily net assets.

ADMINISTRATOR

FEE WAIVERS

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

DISTRIBUTOR

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<PAGE>

instances, these incentives may be offered only to certain dealers or
Institutions who have sold or may sell significant amounts of shares. The
total amount of such additional bonus payments or other consideration shall
not exceed 0.05% of the net asset value of the shares of the Class sold. Any
such bonus or incentive programs will not change the price paid by investors
for the purchase of shares of the Class or the amount received as proceeds
from such sales. Sales of 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 has been 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"). 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 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.

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<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

GENERAL INFORMATION

ORGANIZATION AND DESCRIPTION OF SHARES

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

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 Fund Services, Inc., P.O. Box 4497, Houston, Texas 77210-
4497, acts as transfer agent for shares of the Class.

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<PAGE>

LEGAL COUNSEL

The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania, serves as counsel to the Fund and passes upon certain legal
matters for the Fund.

SHAREHOLDER INQUIRIES

Shareholder inquiries concerning the status of an account should be directed
to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or may
be made by calling (800) 877-4744.

YEAR 2000 COMPLIANCE PROJECT

In providing services to the Fund, AIM Management and its subsidiaries rely
on both internal software systems as well as external software systems
provided by third parties. Many software systems in use today are unable to
distinguish the year 2000 from the year 1900. This defect if not cured will
likely adversely affect the services that AIM Management, its subsidiaries and
other service providers to the Fund provide the Fund and its shareholders.

To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases,
namely (i) inventorying every software application in use at AIM Management
and its subsidiaries, as well as remote, third party software systems on which
AIM Management and its subsidiaries rely, (ii) identifying those applications
that may not function properly after December 31, 1999, and (iii) correcting
and subsequently testing those applications that may not function properly
after December 31, 1999. Phases (i) and (ii) are complete and phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter
of 1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000
compliance upon installation. No assurance can be given that the Project will
be successful or that the AIM Funds will not otherwise be adversely affected
by the year 2000 issue.

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.

18
<PAGE>

INVESTMENT ADVISOR
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100 SHORT-TERM
Houston, Texas 77046-1173 INVESTMENTS CO.
(713) 626-1919

DISTRIBUTOR PERSONAL
FUND MANAGEMENT COMPANY INVESTMENT CLASS
11 Greenway Plaza, Suite 100 OF THE
Houston, Texas 77046-1173 -------------------------------------
(800) 877-4744 LIQUID ASSETS PROSPECTUS
PORTFOLIO
AUDITORS
KPMG PEAT MARWICK LLP DECEMBER 18, 1998
700 Louisiana
Houston, Texas 77002

CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street, 11th Floor
New York, New York 10286

TRANSFER AGENT
A I M FUND SERVICES, INC.
P.O. Box 4497
Houston, Texas 77210-4497

NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUND OR THE
DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER IN ANY
JURISDICTION TO ANY PERSON TO WHOM
SUCH OFFERING MAY NOT LAWFULLY BE [LOGO APPEARS HERE]
MADE. FUND MANAGEMENT COMPANY
<PAGE>

PROSPECTUS

PRIVATE INVESTMENT CLASS
OF THE
LIQUID ASSETS PORTFOLIO
OF
SHORT-TERM INVESTMENTS CO.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
(800) 877-7748

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

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

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

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

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

THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN SHARES OF THE PRIVATE INVESTMENT CLASS OF THE
PORTFOLIO AND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION DATED DECEMBER 18, 1998, HAS BEEN FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND IS HEREBY
INCORPORATED BY REFERENCE. FOR A COPY OF THE STATEMENT OF ADDITIONAL
INFORMATION WITHOUT CHARGE, WRITE TO THE ADDRESS BELOW OR CALL (800) 877-7748.
THE SEC MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS THE STATEMENT
OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND.

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

PROSPECTUS DATED: DECEMBER 18, 1998
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY..................... 2 DIVIDENDS................ 12
TABLE OF FEES AND EXPENSES.. 4 TAXES.................... 13
FINANCIAL HIGHLIGHTS........ 5 NET ASSET VALUE.......... 14
SUITABILITY FOR INVESTORS... 5 YIELD INFORMATION........ 14
INVESTMENT PROGRAM.......... 6 REPORTS TO SHAREHOLDERS.. 15
PURCHASE OF SHARES.......... 10 MANAGEMENT OF THE FUND... 15
REDEMPTION OF SHARES........ 11 GENERAL INFORMATION...... 18
</TABLE>

SUMMARY

THE PORTFOLIO AND ITS INVESTMENT OBJECTIVE

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

Pursuant to separate prospectuses, the Fund also offers shares of other
classes of common stock of the Fund representing interests in the Portfolio:
the Cash Management Class, the Institutional Class, the Personal Investment
Class, the Reserve Class and the Resource Class. Such classes have different
distribution arrangements and are designed for institutional and other
categories of investors. The Fund also offers shares of classes of another
portfolio, the Prime Portfolio, each pursuant to a separate prospectus. Such
classes have different distribution arrangements and are designed for
institutional and other categories of investors. The portfolios of the Fund
are referred to collectively as "Portfolios."

INVESTORS IN THE CLASS

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

PURCHASE OF SHARES

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

REDEMPTION OF SHARES

2
<PAGE>

DIVIDENDS

The net income of the Portfolio is declared as a dividend daily to
shareholders of record immediately after 5:00 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 6:00 p.m. Eastern Time on
that day. See "Dividends."

CONSTANT NET ASSET VALUE

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

INVESTMENT ADVISOR

A I M Advisors, Inc. ("AIM") serves as the Portfolio's investment advisor
and receives a fee based on the Portfolio's average daily net assets. AIM is
primarily engaged in the business of acting as manager or advisor to
investment companies. Under a Master Administrative Services Agreement, AIM
may be reimbursed by the Fund for its costs of performing certain accounting
and other administrative services for the Fund. See "Management of the Fund--
Investment Advisor" and "--Administrator." Under a Transfer Agency and Service
Agreement, A I M Fund Services, Inc. ("Transfer Agent"), AIM's wholly owned
subsidiary and a registered transfer agent, receives a fee for its provision
of transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund. See "General Information--Transfer Agent and Custodian."

DISTRIBUTOR AND DISTRIBUTION PLAN

Fund Management Company ("FMC") acts as the exclusive distributor of the
shares of the Class. Pursuant to the Master Distribution Plan, the Fund may
pay up to 0.50% of the average daily net assets of the Portfolio attributable
to the shares of the Class to FMC as well as certain broker-dealers or other
financial institutions as compensation for distribution-related services. Of
this amount, up to 0.25% may be for continuing personal services to
shareholders provided by broker-dealers or institutions and the balance would
be deemed an asset-based sales charge. See "Purchase of Shares" and
"Management of the Fund--Distribution Plan."

SPECIAL CONSIDERATIONS

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

The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com,
La Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest With
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.

3
<PAGE>

TABLE OF FEES AND EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--PRIVATE INVESTMENT CLASS*
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).............................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage
of offering price).................................................. None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable).. None
Exchange Fee......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)--PRIVATE INVESTMENT CLASS
Management Fees (after waivers)**.................................... 0.06%
12b-1 Fees (after waivers)**......................................... 0.30%***
Other Expenses....................................................... 0.03%
----
Total Operating Expenses--Private Investment Class**................. 0.39%
====
</TABLE>
- --------
* Beneficial owners of shares of the Class should consider the effect of any
charges imposed by their bank or other financial institution for various
services.
** The fees and expenses set forth in the tables are based on average net
assets of the Class' and current fee waivers. Had there been no waivers,
Management Fees, 12b-1 Fees and Total Operating Expenses would be 0.15%,
0.50% and 0.68% respectively.
*** It is possible that as a result of 12b-1 fees, a long-term shareholder of
the Class may pay more than the economic equivalent of the maximum front-
end sales charges permitted 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 would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period.

<TABLE>
<S> <C>
1 year................................................................ $ 4
3 years............................................................... $13
5 years............................................................... $22
10 years.............................................................. $49
</TABLE>

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

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

4
<PAGE>

FINANCIAL HIGHLIGHTS

Shown below are the per share data, ratios and supplemental data
(collectively, "data") for each of the years in the two-year period ended
August 31, 1998 and for the period February 16, 1996 (date operations
commenced) through August 31, 1996. The data has been audited by KPMG Peat
Marwick LLP, independent auditors, whose report on the financial statements
and the related notes appears in the Statement of Additional Information.

<TABLE>
<CAPTION>
FEBRUARY 16, 1996
(COMMENCEMENT
OF OPERATIONS) TO
1998 1997 AUGUST 31, 1996
------- ------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.05 0.05 0.03
------- ------- -------
Less distributions:
Dividends from net investment income.. (0.05) (0.05) (0.03)
------- ------- -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total return............................ 5.43% 5.27% 5.10%(a)
======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................... $70,058 $70,856 $44,981
======= ======= =======
Ratio of expenses to average net
assets(b) ............................. 0.38%(c) 0.36% 0.32%(a)
======= ======= =======
Ratio of net investment income to
average net assets(d) ................. 5.29%(c) 5.16% 5.04%(a)
======= ======= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68%, 0.68% and 0.69% (annualized), for the periods 1998-1996,
respectively.
(c) Ratios are based on average net assets of $66,254,739
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.99%, 4.84% and 4.67% (annualized), for the periods
1998-1996, respectively.

SUITABILITY FOR INVESTORS

The Class is intended for use primarily by customers of banks, certain
broker-dealers and other financial institutions who seek a convenient vehicle
in which to invest in an open-end diversified money market fund. The minimum
initial investment is $10,000. Prospective investors should determine if an
investment in the Class is consistent with the objectives of an account and
with applicable state and federal laws and regulations.

Investors in the Class have the opportunity to receive a somewhat higher
yield than might be obtainable through direct investment in money market
instruments, and enjoy the benefits of diversification, economies of scale and
same-day liquidity. Generally, higher interest rates can be obtained on the
purchase of very large blocks of money market instruments. Of course, any such
relative increase in interest rates may be offset to some extent by the
operating expenses of the Class. It is anticipated that most investors will
perform their own sub-accounting; however, sub-accounting services may be
arranged through the Fund for shareholders who prefer not to perform such
services.

5
<PAGE>

INVESTMENT PROGRAM

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

The Portfolio will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the Investment Company
Act of 1940 ("1940 Act"), as such Rule may be amended from time to time.
Briefly, "First Tier" securities are securities that are rated in the highest
rating category for short-term debt obligations 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 the Portfolio's investment advisor (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, as well as securities issued by a registered investment company
that is a money market fund and U.S. government securities.

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

The Portfolio may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC.

6
<PAGE>

is not for the purpose of investment leverage, the amount of delayed delivery
or when-issued securities involved may not exceed the estimated amount of
funds available for investment on the settlement date. Until the settlement
date, liquid assets of the Portfolio with a dollar value sufficient at all
times to make payment for the delayed delivery or when-issued securities will
be set aside in a segregated account. (The total amount of liquid assets in
the segregated account may not exceed 25% of the Portfolio's total assets.)
The delayed delivery securities, which will not begin to accrue interest until
the settlement date, and the when-issued securities will be recorded as an
asset of the Portfolio and will be subject to the risks of market value
fluctuations. The purchase price of the delayed delivery or when-issued
securities will be recorded as a liability of the Portfolio until settlement.
AIM may also transact sales of securities on a "forward commitment" basis. In
such a transaction, AIM agrees to sell portfolio securities at a future date
at specified prices and yields. Securities subject to sale on a forward
commitment basis will continue to accrue interest until sold and will be
subject to the risks of market value fluctuations. Absent extraordinary
circumstances, the Portfolio's right to acquire delayed delivery and when-
issued securities or its obligation to sell securities on a forward-commitment
basis will not be divested prior to the settlement date.

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

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