<PAGE>
[AIM LOGO APPEARS HERE] Dear Shareholder:
[PHOTO of As the Portfolio's fiscal year end
Charles T. Bauer, approached, the U.S. economy was starting to
Chairman of the display the negative effects of spreading
LETTER Board of The Fund worldwide economic turmoil. What began as an
TO OUR APPEARS HERE] isolated currency devaluation in Thailand in
SHAREHOLDERS July 1997 eventually spread to most of Asia
and then to Russia and Latin America, but until this summer, the
European and U.S. economies had appeared immune to "Asian
contagion." As it became apparent that domestic banks and
corporations could suffer significantly from their overseas
exposure, a sharp sell-off in global equities began. The
uncertainty and turmoil could lead to deteriorating consumer
confidence and negatively affect economic growth for the
foreseeable future. The extent of the slowdown is still unknown,
but many forecasters are looking at the possibility of a
recession for the first time in eight years.
The U.S. gross domestic product grew at an annualized rate of
1.8% in the second quarter of 1998, the slowest rate since the
first quarter of 1995. While this was attributed to special
factors like the strike at General Motors, growth is not expected
to rebound much because of the ongoing world economic crises. As
the stock market dropped and the political crisis in Washington
continued to unfold, markets began to look to the Federal Reserve
Board (the Fed) to provide some calm by lowering interest rates.
The Fed had kept the federal funds rate target at 5.50% since
March of 1997. As concern over foreign economies grew, more
capital sought the safety and stability of the U.S. Treasury
markets, pushing interest rates lower across the yield curve.
This flight to quality drove yields of all Treasuries across the
maturity spectrum below the 5.50% federal funds target. Yields on
one-year Treasury bills dropped dramatically, to 4.62% from
almost 5.50% in March 1998.
For most of the fiscal year, the Fed was focused on the
strength of the domestic economy and hence was more apt to raise
rates to counteract incipient inflationary pressures. As it
became clear that world economic crises would be more serious
than originally thought, the Fed shifted its focus to providing
liquidity and supporting markets by considering lowering rates.
Fixed income markets expected the Fed to endorse the markets'
movements by lowering the federal funds target. After the close
of the fiscal year, the Fed did so twice, first at its regular
meeting on September 29 and then in an unusual inter-meeting move
on October 15, placing the short-term target at 5.00%.
YOUR INVESTMENT PORTFOLIO
Even as the Fed remained on hold, money markets remained volatile
and short-term rates fluctuated. Yields on one-year corporate
obligations dropped from close to 6% to near 5.25% at the end of
August. Through a combination of short-term cash management
vehicles and selective use of longer maturities, the Portfolio
continued to provide attractive returns. Weighted average
maturity (WAM) was relatively short for much of the fiscal year
due to concern that the Fed might raise interest rates. As it
became apparent that the Fed could not move rates up as many
foreign
<TABLE>
<CAPTION>
Yields as of 8/31/98
Average Seven-Day
Monthly Yield Yield
<S> <C> <C>
Liquid Assets Portfolio
MSTC Cash Reserves Class 5.39% 5.41 %
IBC Money Fund Averages(TM) -
First-Tier Institutions Only 5.28% 5.28%
IBC Money Fund Averages(TM) -
Total Institutions Only 5.18% 5.20%
- --------------------------------------------------------------------------------
</TABLE>
(continued)
<PAGE>
economies continued to deteriorate, the WAM was lengthened to the
25- to 35-day range. At the close of the fiscal year, the
weighted average maturity was 35 days.
Using this strategy, the MSTC Cash Reserves Class of the
Portfolio outperformed its comparative indexes as of August 31,
1998, as shown in Table 1.
The Liquid Assets Portfolio continues to hold the highest AAAm
credit quality rating given by Standard & Poor's Corporation.
During the fiscal year, it received the highest Aaa credit
quality rating given by Moody's Investors Service, Inc. The
ratings are historical and are based on an analysis of the
Portfolio's credit quality, composition, management, and weekly
portfolio reviews.
Net assets of the MSTC Cash Reserves Class stood at $86.04
million at the close of the fiscal year.
The Liquid Assets Portfolio invests solely in securities rated
"First Tier" as defined in Rule 2a-7 under the Investment Company
Act of 1940. Its objective is to provide as high a level of
current income as is consistent with the preservation of capital
and liquidity. Using a barbell maturity structure, portfolio
management emphasizes superior credit quality in purchasing money
market securities such as commercial paper and selected
repurchase agreement securities. As with any money market fund,
an investment in Liquid Assets Portfolio is neither insured nor
guaranteed by the U.S. government, the FDIC, or a bank, and there
can be no assurance the Portfolio will be able to maintain a
stable net asset value of $1.00 per share.
OUTLOOK FOR THE FUTURE
As the fiscal year ended, the economy was expected to slow
considerably as foreign economic turmoil and slower consumer
spending could push the annualized economic growth rate into the
1% to 2% range. Interest rates had dropped notably, and fixed
income markets expected the Fed to lower short-term rates. The
Portfolio will continue to maintain its relatively short maturity
structure, remaining flexible to take advantage of any sudden
market moves.
We are pleased to send you this annual report on your
investment. AIM is committed to the primary goals of safety,
liquidity and yield in institutional fund management. We are also
committed to customer service and are ready to respond to your
comments about this report. If you have any questions, please
contact one of our representatives at 800-659-1005 if we may be
of service.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
2
<PAGE>
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>
3
<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>
4
<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>
5
<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>
6
<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>
7
<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>
8
<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.
9
<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.
10
<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 -- net (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.
11
<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.
12
<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.
13
<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.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
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
15
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS
<S> <C>
Charles T. Bauer Carl Frischling
Bruce L. Crockett Robert H. Graham Short-Term
Owen Daly II Lewis F. Pennock Investments Co.
Edward K. Dunn, Jr. Ian W. Robinson (STIC)
Jack M. Fields Louis S. Sklar
OFFICERS
Charles T. Bauer Chairman
Robert H. Graham President
John J. Arthur Sr. Vice President & Treasurer
Gary T. Crum Sr. Vice President
Carol F. Relihan Sr. Vice President & Secretary
Dana R. Sutton Vice President & Assistant Treasurer Liquid Assets
Melville B. Cox Vice President Portfolio
Karen Dunn Kelley Vice President ----------------------------------------
J. Abbott Sprague Vice President MSTC ANNUAL
Renee A. Friedli Assistant Secretary Cash Reserves
P. Michelle Grace Assistant Secretary Class REPORT
Jeffrey H. Kupor Assistant Secretary
Nancy L. Martin Assistant Secretary
Ofelia M. Mayo Assistant Secretary
Lisa A. Moss Assistant Secretary AUGUST 31, 1998
Kathleen J. Pflueger Assistant Secretary
Samuel D. Sirko Assistant Secretary
Stephen I. Winer Assistant Secretary
Mary J. Benson Assistant Treasurer
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
(800) 347-1919
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza, Suite 100
Houston, TX 77046
(800) 659-1005
CUSTODIAN
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
LEGAL COUNSEL TO FUND
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
LEGAL COUNSEL TO DIRECTORS
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
TRANSFER AGENT
A I M Fund Services, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
AUDITORS
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
This report may be distributed only to current shareholders or [LOGO APPEARS HERE]
to persons who have received a current prospectus. FUND MANAGEMENT COMPANY
</TABLE>
