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LIQUID ASSETS PORTFOLIO
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CASH MANAGEMENT CLASS
Liquid Assets Portfolio seeks to provide as high a level of current
income as is consistent with the preservation of capital and
liquidity.
PROSPECTUS
DECEMBER 17, 1999
This prospectus contains important information
about the Cash Management Class of the fund.
Please read it before investing and keep it for
future reference.
As with all other mutual fund securities, the
Securities and Exchange Commission has not
approved or disapproved these securities or
determined whether the information in this
prospectus is adequate or accurate. Anyone who
tells you otherwise is committing a crime.
There can be no assurance that the fund will be
able to maintain a stable net asset value of
$1.00 per share.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
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|LIQUID ASSETS PORTFOLIO|
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
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PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
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PERFORMANCE INFORMATION 2
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Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
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Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
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The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
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Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
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SHAREHOLDER INFORMATION A-1
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Distribution and Service (12b-1) Fees A-1
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
OBTAINING ADDITIONAL INFORMATION Back Cover
</TABLE>
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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, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
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|LIQUID ASSETS PORTFOLIO|
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INVESTMENT OBJECTIVE AND STRATEGIES
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The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund attempts to meet this objective by investing only in high-quality
U.S. dollar denominated short-term obligations, including:
. securities issued by the U.S. government or its agencies;
. bankers' acceptances, certificates of deposit and time deposits from banks;
. repurchase agreements;
. commercial paper;
. taxable municipal securities; and
. master notes.
The fund will maintain a weighted average maturity of 90 days or less. The
fund invests in compliance with Rule 2a-7 under the Investment Company Act of
1940. The fund may invest up to 50% of its assets in U.S. dollar-denominated
foreign securities.
The portfolio managers focus on securities they believe have favorable
prospects for current income consistent with the preservation of capital and
liquidity. The portfolio managers usually hold portfolio securities to
maturity, but may sell a particular security when they deem it advisable, such
as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash or shares of affiliated money market
funds. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
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An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
. sharply rising interest rates;
. downgrades of credit ratings or defaults of any of the fund's holdings; and
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in
selling the securities underlying the repurchase agreement. As a result, the
fund may incur losses arising from a decline in the value of those securities,
reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers
are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
1
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PERFORMANCE INFORMATION
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The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
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The following bar chart shows changes in the performance of the Cash Management
Class shares from year to year. The Cash Management Class shares are not
subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURN
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1997 5.59%
1998 5.53%
The Cash Management Class shares' year-to-date total return as of September
30, 1999 was 3.74%.
During the periods shown in the bar chart, the highest quarterly return was
1.41% (quarter ended December 31, 1997) and the lowest quarterly return was
1.29% (quarter ended December 31, 1998).
PERFORMANCE TABLE
The following performance table reflects the performance of Cash Management
Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
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<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Management Class 5.53% -- -- 5.51% 01/17/96
- ------------------------------------------------------------------
</TABLE>
Cash Management Class shares' seven-day yield on December 31, 1998 was 5.02%.
For the current seven-day yield, call (800) 877-7745.
2
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FEE TABLE AND EXPENSE EXAMPLE
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FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
SHAREHOLDER FEES
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<TABLE>
<CAPTION>
(fees paid directly from
your investment) CASH MANAGEMENT CLASS
- -----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
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(expenses that are deducted
from fund assets) CASH MANAGEMENT CLASS
- -----------------------------------------------------------
Management Fees(1) 0.15%
Distribution and/or Service
(12b-1) Fees 0.10
Other Expenses 0.03
Total Annual Fund
Operating Expenses 0.28
Fee Waiver(2) 0.02
Net Expenses 0.26
- -----------------------------------------------------------
</TABLE>
(1) The investment advisor has voluntarily agreed to limit Management Fees to
0.055%. This limitation can be terminated at any time. Total Annual Fund
Operating Expenses, net of this voluntary limitation, are 0.17%.
(2) The distributor has contractually agreed to waive 0.02% of the Rule 12b-1
distribution plan fee.
You should also consider the effect of any account fees charged by the
financial institution managing the account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Cash
Management Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the fund's gross operating expenses remain the same. To the extent fees are
waived or expenses are reimbursed, the expenses will be lower. Although your
actual returns and costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Management Class $29 $90 $157 $356
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</TABLE>
3
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|LIQUID ASSETS PORTFOLIO|
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FUND MANAGEMENT
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THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 125
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended August 31, 1999, the advisor received compensation
of 0.06% of average daily net assets.
OTHER INFORMATION
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SUITABILITY FOR INVESTORS
The Cash Management Class of the fund is intended for use primarily by
institutional customers of banks, certain broker-dealers and other financial
institutions (institutions). It is expected that the shares of the Cash
Management Class may be particularly suitable investments for corporate cash
managers, municipalities or other public entities. Except for participants in
the AMVESCAP Sharesave Plan (the sharesave plan), individuals, corporations,
partnerships and other businesses that maintain qualified accounts at an
institution may invest in shares of the Cash Management Class through the
institution, but may not purchase shares directly. Each institution will render
administrative support services to its customers who are the beneficial owners
of the shares of the Cash Management Class. Such services include, among other
things, establishment and maintenance of shareholder accounts and records;
assistance in processing purchase and redemption transactions in shares of the
Cash Management Class; providing periodic statements showing a client's account
balance in shares of the Cash Management Class; distribution of fund proxy
statements, annual reports and other communications to shareholders whose
accounts are serviced by the institution; and such other services as the fund
may reasonably request. Institutions will be required to certify to the fund
that they comply with applicable state law regarding registration as broker-
dealers, or that they are exempt from such registration.
The Cash Management Class is designed to be a convenient and economical way to
invest in an open-end diversified money market fund. It is anticipated that
most investors will perform their own subaccounting.
Investors in the Cash Management 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 Cash Management Class.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of ordinary
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays dividends
monthly. A business day is any day on which both the Federal Reserve Bank of
New York and The Bank of New York, the fund's custodian, are open for business.
Dividends are paid on settled shares of the fund as of 5:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 5:00 p.m. Eastern time and shareholders whose redemption proceeds have
not been wired to them on any business day are eligible to receive dividends on
that business day. The dividend declared on any day preceding a non-business
day of the fund will include the income accrued on such non-business day.
Dividends and distributions are paid in cash unless the shareholder has elected
to have such dividends and distributions reinvested in the form of additional
full and fractional shares at net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains (including net short-
term capital gains), if any, annually. The fund does not expect to realize any
long-term capital gains and losses.
4
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|LIQUID ASSETS PORTFOLIO|
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FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you understand the financial
performance of the Cash Management Class. Certain information reflects
financial results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CASH MANAGEMENT CLASS
--------------------------------------------------
FOR THE PERIOD
JANUARY 17, 1996
YEAR ENDED AUGUST 31, THROUGH
1999 1998 1997 AUGUST 31, 1996
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<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.05 0.06 0.05 0.03
Less distributions:
Dividends from net
investment income (0.05) (0.06) (0.05) (0.03)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 5.09% 5.66% 5.50% 3.32%
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Ratios/supplemental data:
- ------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $1,078,777 $655,975 $83,487 $53,209
Ratio of expenses to
average net assets(a) 0.17%(b) 0.16% 0.15% 0.10%(c)
Ratio of net investment
income to average net
assets(d) 4.94%(b) 5.51% 5.38% 5.27%(c)
- ------------------------------------------------------------------------------
</TABLE>
(a) 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%, 0.28%, and 0.34% (annualized) for the periods 1999-1996,
respectively.
(b) Ratios based on average net assets of $942,340,346.
(c) Annualized.
(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 4.83%, 5.39%, 5.25% and 5.03% (annualized) for the
periods 1999-1996, respectively.
5
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|LIQUID ASSETS PORTFOLIO|
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SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
The fund currently offers six classes of shares all of which share a common
investment objective and portfolio of investments. The six classes differ only
with respect to distribution arrangements for different categories of
investors.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Cash Management Class
that allows the fund to pay distribution fees to Fund Management Company (the
distributor) for the sale and distribution of its shares and fees for services
provided to shareholders. Because the fund pays these fees out of its assets on
an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
PURCHASING SHARES
Except for those individual participants in the sharesave plan (for whom there
is no minimum), the minimum initial investment in the Cash Management Class is
$1 million. No minimum amount is required for subsequent investments in the
fund, nor are minimum balances required.
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 fund. Purchase
orders received after such time will be processed at the next day's net asset
value. You may purchase shares by submitting an Account Application to the
fund's transfer agent, A I M Fund Services, Inc. (transfer agent) at P.O. Box
4497, Houston, Texas 77210-4497 prior to your initial purchase of shares. You
must open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds (member bank deposits with a
Federal Reserve Bank) for the order, provided the transfer agent has received
notice of the order. Subsequent purchases of shares of the funds may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
We may request that an institution maintain separate master accounts in the
fund for shares 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 may aggregate its master accounts and
subaccounts to satisfy the minimum investment requirement.
If you propose to open a fund account with an institution, you should consult
with a representative of such institution to obtain a description of the rules
governing such an account. A statement with regard to your investment in the
Cash Management Class is supplied periodically, and confirmations of all
transactions for your account are provided by the institution promptly upon
request. In addition, proxies, periodic reports and other information from the
institution with regard to your shares of the Cash Management Class will be
sent to you.
You may place an order for the purchase of shares of the Cash Management Class
with the institution. The institution is responsible for the prompt
transmission of the order to the transfer agent. The fund is normally required
to make immediate settlement in federal funds for portfolio securities
purchased. Accordingly, payment for shares of the Cash Management Class
purchased by institutions on behalf of their clients must be in federal funds.
If an order to purchase shares is paid for other than in federal funds, the
order may be delayed up to two business days while the institution completes
the conversion into federal funds.
REDEEMING SHARES
You may redeem any or all of your shares at the net asset value next determined
after receipt of a redemption request in proper form by the fund. There is no
charge for redemption. Redemption requests with respect to shares of the Cash
Management Class are normally made through a customer's institution.
You may request a redemption by calling the transfer agent at (800) 877-7745,
or by using AIM LINK --Registered Trademark-- Remote. Payment for redeemed
shares is normally made by Federal Reserve wire to the commercial bank account
designated in your Account Application. You may also request that payment be
made by check. We use reasonable procedures to confirm that instructions
communicated by telephone are genuine and are not liable for telephone
instructions that are reasonably believed to be genuine. Such reasonable
procedures may include recordings of telephone transactions maintained for a
reasonable period of time.
Payment for redemption orders received prior to 5:00 p.m. Eastern time will
normally be made on the same day. Payment for shares redeemed by mail and
payment for telephone redemptions in amounts of less than $1,000 may be made by
check mailed within seven days after receipt of the redemption request in
proper form. The fund may make payment for telephone redemptions in excess of
$1,000 by check when it is considered to be in the fund's best interest to do
so.
Dividends payable up to the date of redemption on redeemed shares will
normally be paid by wire transfer on the next dividend payment date. However,
if all of the shares in your account are redeemed, you will receive dividends
payable up to the date of redemption with the proceeds of the redemption.
REDEMPTIONS BY THE FUND
If your account has been open at least one year, you have not made an
additional purchase in the account during the past six calendar months, and the
value of your account falls below $500 for three consecutive months due to
redemptions or exchanges (excluding retirement accounts), the fund has the
right to redeem the account after giving you 60 days' prior written
A-1
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|LIQUID ASSETS PORTFOLIO|
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SHAREHOLDER INFORMATION (continued)
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notice. You may avoid having your account redeemed during the notice period by
bringing the account value up to $500.
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem the account and distribute the proceeds to you.
- ------------------------------------
|THE FUND AND ITS AGENTS RESERVES |
|THE RIGHT AT ANY TIME TO: |
|. REJECT OR CANCEL ANY PART OF ANY|
| PURCHASE ORDER; |
|. MODIFY ANY TERMS OR CONDITIONS |
| OF PURCHASE OF SHARES OF THE |
| FUND; OR |
|. WITHDRAW ALL OR ANY PART OF THE |
| OFFERING MADE BY THIS |
| PROSPECTUS. |
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PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each of the fund's shares is the fund's net asset value per share.
The fund determines the net asset value of its shares as of 5:00 p.m. Eastern
time on each day on which both the Federal Reserve Bank of New York and The
Bank of New York are open for business (business day). The fund values
portfolio securities on the basis of amortized cost, which approximates market
value.
TIMING OF ORDERS
The fund prices purchase and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form. If the
transfer agent receives a redemption request on a business day prior to 5:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 5:00 p.m. Eastern
time, the redemption will be processed at the net asset value next determined.
Shareholders will accrue dividends until the day the fund wires redemption
proceeds. The fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading. The fund
reserves the right to change the time for which purchase and redemption orders
must be submitted to and received by the transfer agent for execution on the
same day on any day when the primary government securities dealers are either
closed for business or close early, or trading in money market securities is
limited due to national holidays.
TAXES
Dividends and distributions received by shareholders are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether
reinvested in additional shares or taken in cash. Distributions are taxable at
different rates depending on the length of time the fund holds its assets.
Every year, information will be sent showing the amount of dividends and
distributions received from the fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of the
shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in the fund may
differ materially from the federal income tax consequences described above.
Shareholders should consult their tax advisor before investing.
A-2
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|LIQUID ASSETS PORTFOLIO|
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OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds --Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 4497
Houston, TX 77210-4497
BY TELEPHONE: (800) 877-7745
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual and
semiannual reports only)
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-------------------------------------
|Liquid Assets Portfolio |
|SEC 1940 Act file number: 811-7892 |
-------------------------------------
[AIM LOGO
APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
LIQUID ASSETS PORTFOLIO
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INSTITUTIONAL CLASS
Liquid Assets Portfolio seeks to provide as high a level of current
income as is consistent with the preservation of capital and
liquidity.
PROSPECTUS
DECEMBER 17, 1999
This prospectus contains important information
about the Institutional Class of the fund. Please
read it before investing and keep it for future
reference.
As with all other mutual fund securities, the
Securities and Exchange Commission has not
approved or disapproved these securities or
determined whether the information in this
prospectus is adequate or accurate. Anyone who
tells you otherwise is committing a crime.
There can be no assurance that the fund will be
able to maintain a stable net asset value of
$1.00 per share.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
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|LIQUID ASSETS PORTFOLIO|
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
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Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
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The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
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SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
STATEMENT OF ADDITIONAL INFORMATION B-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
OBTAINING ADDITIONAL INFORMATION Back Cover
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund attempts to meet this objective by investing only in high-quality
U.S. dollar denominated short-term obligations, including:
. securities issued by the U.S. government or its agencies;
. bankers' acceptances, certificates of deposit and time deposits from banks;
. repurchase agreements;
. commercial paper;
. taxable municipal securities; and
. master notes.
The fund will maintain a weighted average maturity of 90 days or less. The fund
invests in compliance with Rule 2a-7 under the Investment Company Act of 1940.
The fund may invest up to 50% of its assets in U.S. dollar-denominated foreign
securities.
The portfolio managers focus on securities they believe have favorable
prospects for current income consistent with the preservation of capital and
liquidity. The portfolio managers usually hold portfolio securities to
maturity, but may sell a particular security when they deem it advisable, such
as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash or shares of affiliated money market
funds. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
. sharply rising interest rates;
. downgrades of credit ratings or defaults of any of the fund's holdings; and
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in
selling the securities underlying the repurchase agreement. As a result, the
fund may incur losses arising from a decline in the value of those securities,
reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers
are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. The Institutional Class shares are not subject
to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURN
----------- ------
1994 4.37%
1995 6.08%
1996 5.52%
1997 5.67%
1998 5.61%
The Institutional Class shares' year-to-date total return as of September 30,
1999 was 3.79%.
During the periods shown in the bar chart, the highest quarterly return was
1.52% (quarter ended June 30, 1995) and the lowest quarterly return was 0.84%
(quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table reflects the performance of Institutional Class
shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.61% 5.45% -- 5.39% 11/04/93
- --------------------------------------------------------------------
</TABLE>
Institutional Class shares' seven-day yield on December 31, 1998 was 5.10%. For
the current seven-day yield of Institutional Class shares, call (800) 659-1005.
2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) INSTITUTIONAL CLASS
- -----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) INSTITUTIONAL CLASS
- -----------------------------------------------------------
Management Fees(1) 0.15%
Distribution and/or Service
(12b-1) Fees None
Other Expenses 0.03
Total Annual Fund
Operating Expenses 0.18
- -----------------------------------------------------------
</TABLE>
(1)The investment advisor has voluntarily agreed to limit Management Fees to
0.055%. This limitation can be terminated at any time. Total Annual Fund
Operating Expenses, net of this voluntary limitation, are 0.09%.
You should also consider the effect of any account fees charged by the
financial institution managing the account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Institutional Class of the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the fund's gross operating expenses remain the same. To the extent fees are
waived or expenses are reimbursed, the expenses will be lower. Although your
actual returns and costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Class $18 $58 $101 $230
- ----------------------------------------------------
</TABLE>
3
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 125
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended August 31, 1999, the advisor received compensation
of 0.06% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Institutional Class of the fund is intended for use primarily by
institutions, particularly banks. Individuals, corporations, partnerships and
other businesses that maintain qualified accounts at an institution may invest
in shares of the Institutional Class through the institution, but may not
purchase shares directly. Each institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Institutional Class. Such services include, among other things, establishment
and maintenance of shareholder accounts and records; assistance in processing
purchase and redemption transactions in shares of the Institutional Class;
providing periodic statements showing a client's account balance in shares of
the Institutional Class; distribution of fund proxy statements, annual reports
and other communications to shareholders whose accounts are serviced by the
institution; and such other services as the fund may reasonably request.
Institutions will be required to certify to the fund that they comply with
applicable state law regarding registration as broker-dealers, or that they are
exempt from such registration.
The Institutional Class is designed to be a convenient and economical way in
which to invest short-term cash reserves in an open-end diversified money
market fund. It is anticipated that most investors will perform their own
subaccounting.
Investors in the Institutional 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 Institutional Class.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of ordinary
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays dividends
monthly. A business day is any day on which both the Federal Reserve Bank of
New York and The Bank of New York, the fund's custodian, are open for business.
Dividends are paid on settled shares of the fund as of 5:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 5:00 p.m. Eastern time and shareholders whose redemption proceeds have
not been wired to them on any business day are eligible to receive dividends on
that business day. The dividend declared on any day preceding a non-business
day of the fund will include the income accrued on such non-business day.
Dividends and distributions are paid in cash unless the shareholder has elected
to have such dividends and distributions reinvested in the form of additional
full and fractional shares at net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains (including net short-
term capital gains), if any, annually. The fund does not expect to realize any
long-term capital gains and losses.
4
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Institutional Class. Certain information reflects financial
results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
--------------------------------------------------------------
YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.05 0.06 0.05 0.06 0.06
Less distributions:
Dividends from net
investment income (0.05) (0.06) (0.05) (0.06) (0.06)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 5.17% 5.74% 5.58% 5.68% 5.83%
- ---------------------------------------------------------------------------------------
Ratios/supplemental
data:
- ---------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $4,541,935 $3,097,539 $3,787,357 $1,988,755 $1,287,463
Ratio of expenses to
average net assets(a) 0.09%(b) 0.08% 0.06% 0.03% 0.11%
Ratio of net investment
income to average net
assets(c) 5.02%(b) 5.59% 5.46% 5.52% 5.69%
- ---------------------------------------------------------------------------------------
</TABLE>
(a) 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% for the periods 1999-1995,
respectively.
(b) Ratios are based on average net assets of $5,274,113,513.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.92%, 5.49%, 5.34%, 5.37% and 5.62% for the periods
1999-1995, respectively.
5
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
The fund currently offers six classes of shares all of which share a common
investment objective and portfolio of investments. The six classes differ only
with respect to distribution arrangements for different categories of
investors.
PURCHASING SHARES
The minimum initial investment in the Institutional Class is $10 million. No
minimum amount is required for subsequent investments in the fund, nor are
minimum balances required.
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 fund. Purchase
orders received after such time will be processed at the next day's net asset
value. You may purchase shares by submitting an Account Application to the
fund's transfer agent, A I M Fund Services, Inc. (transfer agent) at P.O. Box
4497, Houston, Texas 77210-4497 prior to your initial purchase of shares. You
must open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds (member bank deposits with a
Federal Reserve Bank) for the order, provided the transfer agent has received
notice of the order. Subsequent purchases of shares of the funds may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
We may request that an institution maintain separate master accounts in the
fund for shares 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 may aggregate its master accounts and subaccounts to
satisfy the minimum investment requirement.
If you propose to open a fund account with an institution, you should consult
with a representative of such institution to obtain a description of the rules
governing such an account. A statement with regard to your investment in the
Institutional Class is supplied periodically, and confirmations of all
transactions for your account are provided by the institution promptly upon
request. In addition, proxies, periodic reports and other information from the
institution with regard to your shares of the Institutional Class will be sent
to you.
You may place an order for the purchase of shares of the Institutional Class
with the institution. The institution is responsible for the prompt
transmission of the order to the transfer agent. The fund is normally required
to make immediate settlement in federal funds for portfolio securities
purchased. Accordingly, payment for shares of the Institutional Class purchased
by institutions on behalf of their clients must be in federal funds. If an
order to purchase shares is paid for other than in federal funds, the order may
be delayed up to two business days while the institution completes the
conversion into federal funds.
REDEEMING SHARES
You may redeem any or all of your shares at the net asset value next determined
after receipt of a redemption request in proper form by the fund. There is no
charge for redemption. Redemption requests with respect to shares of the
Institutional Class are normally made through a customer's institution.
You may request a redemption by calling the transfer agent at (800) 659-1005,
or by using AIM LINK --Registered Trademark-- Remote. Payment for redeemed
shares is normally made by Federal Reserve wire to the commercial bank account
designated in your Account Application. You may also request that payment be
made by check. We use reasonable procedures to confirm that instructions
communicated by telephone are genuine and are not liable for telephone
instructions that are reasonably believed to be genuine. Such reasonable
procedures may include recordings of telephone transactions maintained for a
reasonable period of time.
Payment for redemption orders received prior to 5:00 p.m. Eastern time will
normally be made on the same day. Payment for shares redeemed by mail and
payment for telephone redemptions in amounts of less than $1,000 may be made by
check mailed within seven days after receipt of the redemption request in
proper form. The fund may make payment for telephone redemptions in excess of
$1,000 by check when it is considered to be in the fund's best interest to do
so.
Dividends payable up to the date of redemption on redeemed shares will
normally be paid by wire transfer on the next dividend payment date. However,
if all of the shares in your account are redeemed, you will receive dividends
payable up to the date of redemption with the proceeds of the redemption.
REDEMPTIONS BY THE FUND
If your account has been open at least one year, you have not made an
additional purchase in the account during the past six calendar months, and the
value of your account falls below $500 for three consecutive months due to
redemptions or exchanges (excluding retirement accounts), the fund has the
right to redeem the account after giving you 60 days' prior written notice. You
may avoid having your account redeemed during the notice period by bringing the
account value up to $500.
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem the account and distribute the proceeds to you.
- -------------------------------------
|THE FUND AND ITS AGENTS RESERVE |
|THE RIGHT AT ANY TIME TO: |
|. REJECT OR CANCEL ANY PART OF ANY |
| PURCHASE ORDER; |
|. MODIFY ANY TERMS OR CONDITIONS |
| OF PURCHASE OF SHARES OF THE |
| FUND; OR |
|. WITHDRAW ALL OR ANY PART OF THE |
| OFFERING MADE BY THIS |
| PROSPECTUS. |
- -------------------------------------
A-1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION (continued)
- --------------------------------------------------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each of the fund's shares is the fund's net asset value per share.
The fund determines the net asset value of its shares as of 5:00 p.m. Eastern
time on each day on which both the Federal Reserve Bank of New York and The
Bank of New York are open for business (business day). The fund values
portfolio securities on the basis of amortized cost, which approximates market
value.
TIMING OF ORDERS
The fund prices purchase and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form. If the
transfer agent receives a redemption request on a business day prior to 5:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 5:00 p.m. Eastern
time, the redemption will be processed at the net asset value next determined.
Shareholders will accrue dividends until the day the fund wires redemption
proceeds. The fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading. The fund
reserves the right to change the time for which purchase and redemption orders
must be submitted to and received by the transfer agent for execution on the
same day on any day when the primary government securities dealers are either
closed for business or close early, or trading in money market securities is
limited due to national holidays.
TAXES
Dividends and distributions received by shareholders are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether
reinvested in additional shares or taken in cash. Distributions are taxable at
different rates depending on the length of time the fund holds its assets.
Every year, information will be sent showing the amount of dividends and
distributions received from the fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of the
shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in the fund may
differ materially from the federal income tax consequences described above.
Shareholders should consult their tax advisor before investing.
A-2
<PAGE>
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 17, 1999
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE LIQUID
ASSETS PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED DECEMBER 17, 1999,
INSTITUTIONAL CLASS PROSPECTUS DATED DECEMBER 17, 1999, PERSONAL INVESTMENT
CLASS PROSPECTUS DATED DECEMBER 17, 1999, PRIVATE INVESTMENT CLASS PROSPECTUS
DATED DECEMBER 17, 1999, RESERVE CLASS PROSPECTUS DATED DECEMBER 17, 1999 AND
RESOURCE CLASS PROSPECTUS DATED DECEMBER 17, 1999
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction......................................................... B-3
General Information about the Fund................................... B-3
The Fund and Its Shares............................................ B-3
Directors and Officers............................................. B-5
Remuneration of Directors.......................................... B-7
AIM Funds Retirement Plan for Eligible Directors/Trustees.......... B-8
Deferred Compensation Agreements................................... B-8
Investment Advisor................................................. B-8
Administrator...................................................... B-9
Expenses........................................................... B-10
Transfer Agent and Custodian....................................... B-10
Legal Matters...................................................... B-10
Reports............................................................ B-10
Sub-Accounting..................................................... B-10
Principal Holders of Securities.................................... B-11
Prime Portfolio.................................................... B-11
Liquid Assets Portfolio............................................ B-13
Share Purchases and Redemptions...................................... B-15
Purchases and Redemptions.......................................... B-15
Redemptions by the Fund............................................ B-16
Net Asset Value Determination...................................... B-16
The Distribution Agreement......................................... B-16
Distribution Plan.................................................. B-17
Banking Regulations................................................ B-18
Performance Information............................................ B-18
Redemptions in Kind................................................ B-19
Investment Program and Restrictions.................................. B-20
Investment Program................................................. B-20
Descriptions of Money Market Obligations........................... B-21
Eligible Securities................................................ B-22
Commercial Paper Ratings........................................... B-22
Bond Ratings....................................................... B-23
Investment Restrictions............................................ B-24
Portfolio Transactions and Brokerage................................. B-25
General Brokerage Policy........................................... B-25
Allocation of Portfolio Transactions............................... B-26
Section 28(e) Standards............................................ B-26
Dividends, Distributions and Tax Matters............................. B-27
Dividends and Distributions........................................ B-27
Tax Matters........................................................ B-27
Qualification as a Regulated Investment Company.................... B-27
Excise Tax on Regulated Investment Companies....................... B-28
Portfolio Distributions............................................ B-28
Sale or Redemption of Shares....................................... B-29
Foreign Shareholders............................................... B-29
Effect of Future Legislation; Local Tax Considerations............. B-29
Financial Statements................................................. FS
</TABLE>
B-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 17, 1999, the Institutional Class Prospectus dated
December 17, 1999, the Personal Investment Class Prospectus dated December 17,
1999, the Private Investment Class Prospectus dated December 17, 1999, the
Reserve Class Prospectus dated December 17, 1999 and the Resource Class
Prospectus dated December 17, 1999 (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 the Fund and 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 caption
"Redeeming 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.
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.
Shares are fully assignable and subject to encumbrance by a shareholder. 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 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 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)
B-3
<PAGE>
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).
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.
The overall management of the business and affairs of the Fund is vested
with its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to
the Fund, including agreements with the Fund's investment advisor,
distributor; custodian and transfer agent. The day-to-day operations of the
Fund are delegated to the Fund's officers and to A I M Advisors, Inc. ("AIM"),
subject always to the objective and policies of the Fund and to the general
supervision of the Fund's Board of Directors. Certain directors and officers
of the Fund are affiliated with AIM and A I M Management Group Inc. ("AIM
Management"), the parent corporation of AIM.
B-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>
PRINCIPAL OCCUPATION
POSITIONS HELD DURING AT LEAST THE PAST
NAME, ADDRESS AND AGE WITH REGISTRANT 5 YEARS
=======================================================================================
<C> <C> <S>
*CHARLES T. BAUER (80) 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 Executive
Vice Chairman and
Director, AMVESCAP PLC.
- ---------------------------------------------------------------------------------------
BRUCE L. CROCKETT (55) 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 (75) Director Director, Cortland Trust
Six Blythewood Road Inc. (investment
Baltimore, MD 21210 company). 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, Jr. (64) Director Chairman of the Board of
2 Hopkins Plaza, 8th Floor, Suite 805 Directors, Mercantile
Baltimore, MD 21201 Mortgage Corp. Formerly,
Vice Chairman of the
Board of Directors,
President and Chief
Operating Officer,
Mercantile - Safe
Deposit & Trust Co.; and
President, Mercantile
Bankshares.
- ---------------------------------------------------------------------------------------
JACK M. FIELDS (47) Director Chief Executive Officer,
8810 Will Clayton Parkway Texana Global, Inc.
Jetero Plaza, Suite E (foreign trading
Humble, TX 77338 company) and Twenty
First Century Group,
Inc. (a governmental
affairs company).
Formerly, Member of the
U.S. House of
Representatives.
- ---------------------------------------------------------------------------------------
**CARL FRISCHLING (62) Director Partner, Kramer Levin
919 Third Avenue Naftalis & Frankel LLP
New York, NY 10022 (law firm).
- ---------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (53) 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 (49) Director Chief Executive Officer,
350 Fifth Avenue, Suite 301 YWCA of the U.S.A.
New York, NY 10118
- ---------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Director Partner, Pennock &
6363 Woodway, Suite 825 Cooper (law firm).
Houston, TX 77057
- ---------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Director Executive Vice
The Williams Tower, 50th Floor President, Development
2800 Post Oak Blvd. and Operations, Hines
Houston, TX 77056 Interests Limited
Partnership (real estate
development).
- ---------------------------------------------------------------------------------------
</TABLE>
- -------
* A director who is an "interested person" of the Fund and AIM as defined in
the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the 1940
Act.
B-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
===============================================================================
<C> <C> <S>
GARY T. CRUM (52) Senior Vice President Director and President, A I M
Capital Management, Inc.;
Director and Executive Vice
President, A I M Management
Group Inc.; Director and Senior
Vice President, A I M Advisors,
Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP
PLC.
- -------------------------------------------------------------------------------
CAROL F. RELIHAN (45) Senior Vice President Director, Senior Vice
and Secretary President, General Counsel and
Secretary, A I M Advisors,
Inc.; Senior 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 (40) Vice President Vice President and Fund
and Treasurer Controller, A I M Advisors,
Inc.; and Assistant Vice
President and Assistant
Treasurer, Fund Management
Company.
- ------------------------------------------------------------------------------
MELVILLE B. COX (56) 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.
- ------------------------------------------------------------------------------
KAREN DUNN KELLEY, (39) Vice President Senior Vice President, A I M
Capital Management, Inc. and
Vice President, A I M Advisors,
Inc.
- ------------------------------------------------------------------------------
J. ABBOTT SPRAGUE (44) 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>
B-6
<PAGE>
The Board of Directors has an Audit Committee, an Investments Committee, a
Nominating and Compensation Committee and a Capitalization Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock, Sklar and Dr. Mathai-Davis. 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, Sklar (Chairman) and Dr. Mathai-Davis. 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, Sklar and Dr. Mathai-Davis.
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.
The members of the Capitalization Committee are Messrs. Bauer, Graham and
Pennock. The Capitalization Committee has authority to classify and reclassify
authorized but unissued shares of Common Stock of the Fund and to issue such
classified or reclassified shares of Common Stock up to the number of shares
of Common Stock that the Fund has the authority to issue as determined by the
Board of Directors from time to time.
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 AIM. All 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.
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..................... $9,888 $ 37,485 $96,000
- --------------------------------------------------------------------------------
Owen Daly II.......................... 9,888 122,898 96,000
- --------------------------------------------------------------------------------
Edward K Dunn, Jr..................... 9,888 -0- 78,880
- --------------------------------------------------------------------------------
Jack M. Fields........................ 9,845 15,826 95,500
- --------------------------------------------------------------------------------
Carl Frischling(4).................... 9,844 97,791 95,500
- --------------------------------------------------------------------------------
Robert H. Graham...................... -0- -0- -0-
- --------------------------------------------------------------------------------
John F. Kroeger(5).................... 731 107,896 91,654
- --------------------------------------------------------------------------------
Prema Mathai-Davis.................... 9,337 -0- 32,636
- --------------------------------------------------------------------------------
Lewis F. Pennock...................... 9,844 45,766 95,500
- --------------------------------------------------------------------------------
Ian W. Robinson(6).................... 5,857 94,442 94,500
- --------------------------------------------------------------------------------
Louis S. Sklar........................ 9,844 90,232 95,500
================================================================================
</TABLE>
- -------
(1) The total amount of compensation deferred by all directors of the Fund
during the fiscal year ended August 31, 1999, including interest earned
thereon, was $61,406.
(2) During the fiscal year ended August 31, 1999, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $96,514.
Data reflects compensation earned for the calendar year ended December 31,
1998.
(3) Each director serves as a director or trustee of a total of 12 registered
investment companies advised by AIM as of December 31, 1998. Data reflects
compensation earned during the calendar year ended December 31, 1998.
(4) The Fund paid the law firm of Kramer Levin Naftalis & Frankel LLP $15,490
in legal fees for services provided to the Portfolio during the fiscal
year ended August 31, 1999. Mr. Frischling, a director of the Fund, is a
partner in such firm.
(5) Mr. Kroeger was a director of the Fund until June 11, 1998, when he
resigned. On that date he became a consultant to the Fund. Of the amount
listed above, $0 was for compensation for services as a director and the
remainder as a consultant. Mr. Kroeger passed away on November 26, 1998.
Mr. Kroeger's widow will receive his pension as described below under "AIM
Funds Retirement Plan for Eligible Directors/Trustees."
(6) Mr.Robinson was a director until March 12, 1999, when he retired.
B-7
<PAGE>
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any
of the AIM Funds, AIM Management 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 Applicable AIM Funds commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to a maximum
of 75% of the annual 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) and based on the number of
such director's years of service (not in excess of 10 years of service)
completed with respect to any of the Applicable AIM Funds. Such benefit is
payable to each eligible director in quarterly installments. If an eligible
director dies after attaining the normal retirement date but before receipt of
any benefits under the Plan commences, the director's surviving spouse (if
any) shall receive a quarterly survivor's benefit equal to 50% of the amount
payable to the deceased director, for no more than ten years beginning the
first day of the calendar quarter following the date of the director's death.
Payments under the Plan are not secured or funded by any Applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming a specified level of
compensation and years of service classifications. The estimated credited
years of service as of August 31, 1999 for Messrs. Crockett, Daly, Dunn,
Fields, Frischling, Kroeger, Pennock, Robinson, Sklar and Dr. Mathai-Davis are
12, 12, 1, 2, 22, 20, 18, 11, 10 and 1 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
ANNUAL RETIREMENT
NUMBER OF COMPENSATION
YEARS OF PAID BY ALL
SERVICE WITH APPLICABLE
APPLICABLE AIM FUNDS AIM FUNDS
-------------------- -----------------
<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, Dunn, Fields, Frischling, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors elected to defer receipt of 100% of their
compensation payable by the Fund, and such amounts are placed into a deferral
account. Currently, the deferring directors may select various AIM Funds in
which all or part of their deferral account shall be deemed to be invested.
Distributions from the deferring directors' deferral accounts will be paid in
cash, in generally equal quarterly installments over a period of five (5) or
ten (10) years (depending on the Agreement) beginning on the date the
deferring director's retirement benefits commence under the Plan. The Fund's
Board of Directors, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring director's
termination of service as a director of the Fund. If a deferring director dies
prior to the distribution of amounts in his deferral account, the balance of
the deferral account will be distributed to his designated beneficiary in a
single lump sum payment as soon as practicable after such deferring director's
death. The Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the deferring directors have the status
of unsecured creditors of the Fund and of each other AIM Fund from which they
are deferring compensation.
During the fiscal year ended August 31, 1999, $52,725 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 125 investment portfolios encompassing a broad
range of investment objectives. AIM is a wholly owned subsidiary of AIM
Management, a holding company that has been engaged in the financial services
business since 1976. The address of AIM is 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 and addresses are shown under "Directors and Officers."
B-8
<PAGE>
FMC is a registered broker-dealer and a wholly owned subsidiary of AIM. FMC
acts as distributor of the shares of the Portfolio.
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel (a) to pre-clear all personal securities transactions subject to the
Code of Ethics, (b) to file reports regarding such transactions, (c) to
refrain from personally engaging in (i) short-term trading of a security, (ii)
transactions involving a security within seven days of an AIM Fund transaction
involving the same security, and (iii) transactions involving securities being
considered for investment by an AIM Fund and (d) to abide by certain other
provisions under the Code of Ethics. The Code of Ethics also prohibits
investment personnel and all other AIM employees from purchasing securities in
an initial public offering. Personal trading reports are reviewed periodically
by AIM, and the Board of Directors reviews quarterly and annual reports
(including information on any substantial violations of the Code of Ethics).
Sanctions for violations of the Code of Ethics may include censure, monetary
penalties, suspension or termination of employment.
The Fund has entered into a Master Investment Advisory Agreement (the
"Advisory Agreement") with AIM. 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.
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, 1999, 1998
and 1997, with respect to the Portfolio, in the amounts of $3,598,269,
$1,927,994 and $1,024,843, respectively. During the fiscal years ended August
31, 1999, 1998 and 1997 AIM voluntarily waived fees with respect to the
Portfolio in the amounts of $6,215,196, $4,309,476 and $3,344,852,
respectively.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Portfolio's detriment
during the period stated in the agreement between AIM and the Fund.
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."
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.
B-9
<PAGE>
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, 1999, 1998 and 1997
in the amounts of $155,139, $85,337 and $68,372, respectively.
EXPENSES
Expenses of the Fund include, but are not limited to, fees paid to AIM under
the Advisory Agreement, the charges and expenses of any registrar, any
custodian or depositary appointed by the Fund for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund
and shares with the SEC and various states and other jurisdictions (including
filing and legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of prospectuses, proxy statements and reports
to shareholders; fees and travel expenses of directors and director members of
any advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not "interested persons" (as defined in the 1940
Act) of the Fund or AIM, and of independent accountants in connection with any
matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property
or personnel (including officers and directors) of the Fund which inure to its
benefit; and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto). FMC bears the expenses of printing and distributing prospectuses and
statements of additional information (other than those prospectuses and
statements of additional information distributed to existing shareholders of
the Fund) and any other promotional or sales literature used by FMC or
furnished by FMC to purchasers or dealers in connection with the public
offering of the Fund's shares.
Expenses of the Fund which are not directly attributable to the operations
of either of the Portfolios are prorated among all classes of the Fund.
Expenses of the Fund except those listed 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 pursuant to a
Transfer Agency and Service Agreement and receives an annual fee from the Fund
for its services in such capacity in the amount of 0.009% 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.
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania serves as counsel to the Fund.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Fund's independent auditors. The Board
of Directors has selected KPMG LLP, 700 Louisiana, Houston, Texas 77002, as
the independent auditors to audit the financial statements and review the tax
returns of the Portfolio.
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.
SUB-ACCOUNTING
The Fund and FMC have arranged for AFS or the Portfolio to offer sub-
accounting services to shareholders of the Portfolio and to maintain
information with respect to the underlying beneficial ownership of the shares
of each class of the Portfolio. Investors who purchase shares of the Portfolio
for the account of others can make arrangements through the Fund or FMC for
these sub-accounting services. In addition, shareholders utilizing certain
versions of AIM LINK--Registered Trademark--Remote, a personal computer
application software product, may receive sub-accounting services via such
software.
B-10
<PAGE>
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 November 1, 1999, and the percentage of the Prime Portfolio's outstanding
shares owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
CASH MANAGEMENT CLASS
---------------------
<S> <C> <C>
BANK OF NEW YORK............................ 30.14% --
One Wall Street 5th Floor
Stif/Master Note
New York, NY 10286
CIBC WORLD MARKETS.......................... 14.85% --
200 Liberty Street
World Financial Center
Attn: Lester Elson
New York, NY 10281
IGT......................................... 8.92% --
P.O. Box 10120
Reno, NV 89502
BOST & CO FBO THE KWELM PARTNERSHIP......... 7.13% --
P.O. Box 3198
Attn: Mutual Fund Operations
Pittsburgh, PA 15230-3198
BANK ONE, ILLINOIS, NA...................... 6.71% --
Attn: Tony Long
525 W. Monroe
Suite 0256, 6th Floor
Chicago, IL 60670
MELLON BANK NA.............................. 5.39% --
Attn: Cynthia Kieffer
P.O. Box 710
Pittsburgh, PA 15230-0710
INSTITUTIONAL CLASS
---------------------------------------------
AIM FUND OF FUNDS ACCOUNT................... 31.02%(b) --
Attn: Stacey Frakes
Money Market Portfolio Admin.
11 Greenway Plaza, Ste 100
Houston, TX 77046
COMERICA BANK............................... 6.33% --
P.O. Box 75000
Attn: Vicky Froehlich
Detroit, MI 48275-3455
TRULIN & CO. ............................... 5.76% --
P.O. Box 1412
Attn: Pat Whalen
Rochester, NY 14603
</TABLE>
- -------
(a) The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
(b) A shareholder who holds 25% or more of the outstanding shares of a
Portfolio may be presumed to be in "control" of such Portfolio as defined
in the 1940 Act.
B-11
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
<S> <C> <C>
FROST NATIONAL BANK TX...................... 5.08% --
Muir & Co.
C/O Frost
P.O. Box 2479
San Antonio, TX 78298-2479
</TABLE>
<TABLE>
<S> <C> <C>
PERSONAL INVESTMENT CLASS
-------------------------
CULLEN/FROST DISCOUNT BROKERS............... 84.50% --
Attn: Karen Banks
P.O. Box 2358
San Antonio, TX 78299
</TABLE>
<TABLE>
<S> <C> <C>
FIRST INTERSTATE - MONTANA.................. 5.86% --
Attn: Cheri Melvin
P.O. Box 30918
Billings, MT 59116
</TABLE>
<TABLE>
<S> <C> <C>
PRIVATE INVESTMENT CLASS
------------------------
HUNTINGTON CAPITAL CORP..................... 34.31% --
41 S. High St., Ninth Floor
Columbus, OH 43287
</TABLE>
<TABLE>
<S> <C> <C>
HARRIS TRUST & SAVINGS BANK................. 18.06% --
Attn: Rich Croll
111 West Monroe St.
Lower Level East
Chicago, IL 60690
</TABLE>
<TABLE>
<S> <C> <C>
CULLEN/FROST DISCOUNT BROKERS............... 9.46% --
Attn: Karen Banks
P.O. Box 2358
San Antonio, TX 78299
</TABLE>
<TABLE>
<S> <C> <C>
FROST NATIONAL BANK......................... 7.21% --
Muir & Co.
C/O Frost
P.O. Box 2479
San Antonio, TX 78298-2479
</TABLE>
<TABLE>
<S> <C> <C>
HAWS & COMPANY.............................. 6.54% --
Attn: Saundra L. Foe
P.O. Box 5847
Denver, CO 80217
</TABLE>
<TABLE>
<S> <C> <C>
RESERVE CLASS
-------------
BANK OF NEW YORK............................ 99.89% --
Attn: Sheryl Covelli
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
</TABLE>
<TABLE>
<S> <C> <C>
RESOURCE CLASS
--------------
FIRST UNION SECURITIES, INC. ............... 25.30% --
Attn: Money Funds
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
</TABLE>
- --------
(a) The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
B-12
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
<S> <C> <C>
HARRIS METHODIST HEALTH SYSTEM............... 18.95% --
Attn: Sandy Reeves
600 East Las Colinas Blvd., Ste. 1550
Irving, TX 75039
CIBC WORLD MARKETS........................... 11.99% --
200 Liberty Street
World Financial Center
Attn: Lester Elson
New York, NY 10281
HAMBRECHT & QUIST LLC........................ 11.85% --
Attn: Matt Dermer
230 Park Avenue, Floor 19
New York, NY 10169
MELLON BANK NA............................... 9.21% --
Attn: Cynthia Kieffer
P.O. Box 710
Pittsburgh, PA 15230-0710
NVIDIA CORPORATION CASH MGMT ACCOUNT......... 5.16% --
3535 Monroe Street
Santa Clara, CA 95051
</TABLE>
- -------
(a) The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
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 November 1, 1999, and the percentage of the Portfolio's outstanding
shares owned by such shareholders as of such date are as follows:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
CASH MANAGEMENT CLASS
---------------------
<S> <C> <C>
CIBC WORLD MARKETS.......................... 21.24% --
200 Liberty Street
World Financial Center
Attn: Lester Elson
New York, NY 10281
GATEWAY, INC. .............................. 16.65% --
Corp. Treasury/Y-15
610 Gateway Drive
N. Sioux City, SD 57049-2000
BANK OF NEW YORK............................ 10.70% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
FIRST UNION SUBACCOUNTS..................... 6.58% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
</TABLE>
- -------
(a) The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
B-13
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
<S> <C> <C>
HAMBRECHT & QUIST LLC........................ 6.47% --
Attn: Matt Dermer
230 Park Avenue, Floor 19
New York, NY 10169
HARRIS TRUST & SAVINGS BANK.................. 5.81% --
Attn: Rich Croll
111 West Monroe St.
Lower Level East
Chicago, IL 60690
SOUTHWEST BANK OF TEXAS, N.A. 498A1.......... 5.00% --
Attn: Kathy Jensen
4400 Post Oak Pkwy.
Houston, TX 77027
<CAPTION>
INSTITUTIONAL CLASS
-------------------
<S> <C> <C>
AIM FUND OF FUNDS ACCOUNT.................... 26.95% --
Attn: Stacey Frakes
Money Market Portfolio Admin.
11 Greenway Plaza, Ste. 100
Houston, TX 77046
PAINE WEBBER SSB............................. 8.50% --
1000 Harbor Blvd., 6th Floor
Mutual Fund Operations
State Street Custodial Accounts
Weehawken, NJ 07087-6790
TURTLE & CO. SWEEP........................... 7.53% --
Attn: Richard Ramer
P.O. Box 9427
Boston, MA 02209
BZW BARCLAYS GLOBAL INVESTORS, AS AGENT...... 7.45% --
Attn: Mike Futamase
980 9th St., Suite 600
Sacramento, CA 95814
<CAPTION>
PERSONAL INVESTMENT CLASS
-------------------------
<S> <C> <C>
HUNTINGTON INVESTMENT 112.................... 83.03% --
135 North Pennsylvania, Suite 800
Indianapolis, IN 46204
TEXAS CAPITAL BANK, N.A. .................... 9.61% --
Attn: Kitty Ramzy
2100 McKinney Ave., Ste. 900
Dallas, TX 75201
<CAPTION>
PRIVATE INVESTMENT CLASS
------------------------
<S> <C> <C>
BANK OF NEW YORK............................. 60.75% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
MELLON BANK N.A. ............................ 14.71% --
Attn: Cynthia Kieffer
P.O. Box 710
Pittsburgh, PA 15230-0710
</TABLE>
- --------
(a)The Fund has no knowledge as to whether all or any portion of the shares of
the class owned of record are also owned beneficially.
B-14
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
<S> <C> <C>
HUNTINGTON CAPITAL CORP...................... 13.74% --
41 S. High St., Ninth Floor
Columbus, OH 43287
<CAPTION>
RESOURCE CLASS
--------------
<S> <C> <C>
HAMBRECHT & QUIST LLC........................ 52.50% --
Attn: Matt Dermer
230 Park Avenue, Floor 19
New York, NY 10169
CIBC WORLD MARKETS........................... 42.77% --
200 Liberty Street
World Financial Center
Attn: Lester Elson
New York, NY 10281
</TABLE>
- -------
(a) The Fund has no knowledge as to whether all or any portion of the shares
of the class owned of record are also owned beneficially.
To the best of the knowledge of the Fund, as of November 1, 1999, the
directors and officers of the Fund as a group beneficially owned less than 1%
of each class of either Portfolio's outstanding shares.
SHARE PURCHASES AND REDEMPTIONS
PURCHASES AND REDEMPTIONS
A complete description of the manner by which shares of a particular class
may be purchased or redeemed appears in each Prospectus under the heading
"Purchasing Shares" and "Redeeming Shares."
Prior to the initial purchase of Portfolio shares, an investor must complete
and send an Account Application to AFS at P.O. Box 4497, Houston, Texas 77210-
4497. An Account Application may be obtained from the distributor. An investor
may make changes to the information provided in the Account Application by
submitting such changes in writing to the transfer agent or by completing and
submitting to the transfer agent a new Account Application.
The Fund reserves the right to reject any purchase order and to withdraw all
or any part of the offering made by a Prospectus. Any funds received with
respect to an order which is not accepted by the Fund and any funds received
for which an order has not been received will be promptly returned to an
investor. Any request for correction to a transaction of Portfolio shares must
be submitted in writing to AFS. AFS 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. 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.
An investor may terminate his relationship with an institution at any time,
in which case an account in the investor's name will be established directly
with the Portfolio and the investor will become a shareholder of record. In
such case, however, the investor will not be able to purchase additional
shares of the Cash Management Class, Personal Investment Class, Private
Investment Class, Reserve Class or the Resource Class directly, except through
reinvestment of dividends and distributions.
Payment for redeemed shares of the Portfolio is normally made by Federal
Reserve wire to the commercial bank account designated in the shareholder's
Account Application on the day specified below, but may be remitted by check
upon request by a shareholder. A shareholder may change the bank account
designated to receive redemption proceeds by written notice to the Fund. The
authorized signature on the notice must be guaranteed by a commercial bank or
trust company (which may include the shareholder). Additional documentation
may be required when deemed appropriate by the Portfolio or AFS.
The Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading.
B-15
<PAGE>
A "Business Day" of the Fund is any day on which member banks of the Federal
Reserve Bank of New York and The Bank of New York are open for business.
However, the Fund will be closed for business on December 24, 1999. If AFS
receives a redemption request on a Business Day prior to 5:00 p.m. Eastern
time, the redemption will be effected at the net asset value of the Portfolio
determined as of 5:00 p.m. Eastern time and the Fund will normally wire
redemption proceeds on that day. A redemption request received by AFS after
5:00 p.m. Eastern time 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 and
proceeds will normally be wired on the next Business Day. If proceeds are not
wired on the same day, shareholders will accrue dividends until the day the
proceeds are wired. The Fund, however, reserves the right to change the time
for which purchase and redemption orders must be submitted to and received by
the transfer agent for execution on the same day on any day when the primary
government securities dealers are either closed for business or close early,
or trading in money market securities is limited due to national holidays.
Any request for correction to a redemption transaction of Portfolio shares
must be submitted in writing to AFS.
REDEMPTIONS BY THE FUND
If the Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
Fund may, at its discretion, redeem the account and distribute the proceeds to
you.
The Board of Directors may redeem shares if it determines in its sole
discretion that failure to so redeem may have materially adverse consequences
to the shareholders of the Portfolio.
NET ASSET VALUE DETERMINATION
The net asset value per share of the Portfolio is determined as of 5:00 p.m.
Eastern time on each Business Day of the Fund. Shares of each class of the
Portfolio are sold at 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.
For the purpose of determining the price at which all shares of the
Portfolio are issued and redeemed, the net asset value per share is calculated
by: (a) valuing all securities and instruments of the Portfolio as set forth
below; (b) adding other assets of the Portfolio, if any; (c) deducting the
liabilities of the Portfolio; (d) dividing the resulting amount by the number
of shares outstanding of the Portfolio; and (e) rounding such per share net
asset value to the nearest whole cent. Among other items, the Portfolio's
liabilities include accrued expenses and dividends payable and its total
assets include portfolio securities valued at their market value as well as
income accrued but not yet received.
The debt instruments held in the Portfolio are valued on the basis of
amortized cost. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. 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 Fund would receive if it sold the entire
portfolio.
The valuation of the portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Portfolio is permitted in accordance with applicable rules and regulations
of the SEC, including Rule 2a-7 under the 1940 Act, which require the
Portfolio to adhere to certain conditions. These rules require that the
Portfolio maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 397 calendar
days or less and invest only in securities determined by the Board of
Directors to be "Eligible Securities" and to present minimal credit risk to
the Portfolio.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Portfolio's price per
share at $1.00 as computed for the purpose of sales and redemptions. Such
procedures include review of the Portfolio's holdings by the Board of
Directors, at such intervals as they may deem appropriate, to determine
whether the net asset value calculated by using available market quotations or
other reputable sources for the Portfolio deviates from $1.00 per share and,
if so, whether such deviation may result in material dilution or is otherwise
unfair to existing holders of the Portfolio's shares. In the event the Board
of Directors determines that such a deviation exists, it will take such
corrective action as the Board of Directors deems necessary and appropriate,
including the sales of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten the average portfolio maturity; the
withholding of dividends; redemption of shares in kind; or the establishment
of a net asset value per share by using available market quotations.
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.
B-16
<PAGE>
The Distribution Agreement provides that FMC has the exclusive right to
distribute shares either directly or through other broker-dealers. The
Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Portfolio and the
costs of preparing and distributing any other supplemental sales literature.
FMC has not undertaken to sell any specified number of shares in the
Portfolio.
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.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or institutions who sell a minimum
dollar amount of the shares of a particular 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 or 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 or the amount received as
proceeds from such sales. Dealers or institutions may not use sales of the
shares 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 with respect to the Cash Management Class,
Personal Investment Class, Private Investment Class, Reserve Class and
Resource Class. The Plan provides that the Fund may compensate FMC in
connection with the distribution of shares of the Portfolio. Such compensation
may be expended when and if authorized by the Board of Directors and may be
used to finance such distribution-related services as expenses of organizing
and conducting sales seminars, printing of prospectuses and statements of
additional information (and supplements thereto) and reports for other than
existing shareholders, preparation and distribution of advertising material
and sales literature and costs of administering the Plan.
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.
The Plan does not obligate the Fund to reimburse FMC for the actual expenses
FMC may incur in fulfilling its obligations under the Plan. Thus, 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.
FMC may from time to time waive or reduce any portion of its 12b-1 fee for
Cash Management Class, Personal Investment Class, Private Investment Class,
Reserve Class and Resource Class shares. Voluntary fee waivers or reductions
may be rescinded at any time without further notice to investors. During
periods of voluntary fee waivers or reductions, FMC will retain its ability to
be reimbursed for such fee prior to the end of each fiscal year. Contractual
fee waivers or reductions set forth in the Fee Table in a Prospectus may not
be terminated or amended to the Portfolio's detriment during the period stated
in the agreement between FMC and the Fund.
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.
For the fiscal year ended August 31, 1999, FMC received compensation
pursuant to the Plan in the amount of $753,887, or an amount equal to 0.08% of
the average net daily assets of the Cash Management Class, $407, or an amount
equal to 0.10% of the average net daily assets of the Personal Investment
Class, $600,673, or an amount equal to 0.30% of the average net daily assets
of the Private Investment Class and $251,117, or an amount equal to 0.20% of
the average net daily assets of the Resource Class. With respect to the Cash
Management Class, $752,963 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 $924 (or an amount equal to 0% of the average daily net asset
of the class) was retained by FMC. With respect to the Personal Investment
Class, $326 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
$81 (or an amount equal to 0.01% of the average
B-17
<PAGE>
daily net assets of the class) was retained by FMC. With respect to the
Private Investment Class, $582,747 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 $17,926 (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, $251,117 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.
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
in accordance with the requirements of Rule 12b-1, the directors considered
various factors and determined that there is a reasonable likelihood that the
Plan would benefit the Fund and the holders of shares of the applicable
classes of the Portfolio. Anticipated benefits that may result from the Plan
are: (i) FMC, brokerage firms and financial institutions will provide a
shareholder with rapid access to his account for the purpose of effecting
executions of purchase and redemption orders; (ii) FMC and shareholder service
agents will provide prompt, efficient and reliable responses to shareholder
inquiries concerning account status; (iii) a well-developed, dependable
network of shareholder service agents may help to curb sharp fluctuations in
rates of redemptions and sales, thereby reducing the chance that an
unanticipated increase in net redemptions could adversely affect the
performance of the Portfolio; and (iv) a successful distribution effort will
assist FMC in maintaining and increasing the organizational strength needed to
service the Portfolio.
The Plan, unless sooner terminated in accordance with its terms, shall
continue in effect as to each applicable class from year to year as long as
such continuance is specifically approved at least annually by the Board of
Directors, including a majority of the Qualified Directors.
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.
The Plan may be terminated as to a particular class of the Portfolio by vote
of a majority of the Qualified Directors, or by vote of a majority of the
holders of the outstanding voting securities of such class. Any change in the
Plan that would increase materially the distribution expenses paid by an
applicable class requires shareholder approval; otherwise, the Plan may be
amended by the directors, including a majority of the Qualified Directors, by
vote 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.
The Plan complies with the Conduct Rules of the National Association of
Securities Dealers, Inc. and provides for payment of a service fee to dealers
and other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own shares of each applicable
class of the Portfolio, in amounts of up to 0.25% of the average net assets of
such class of the Portfolio attributable to the customers of such dealers or
financial institutions. Payments to dealers and other financial institutions
in excess of such amount and payments to FMC would be characterized as an
asset-based sales charge pursuant to the amended 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 each applicable class.
BANKING REGULATIONS
The Glass-Steagall Act and other applicable laws or regulations among other
things, generally prohibit federally chartered or supervised banks from
engaging in the business of underwriting, selling or distributing securities,
but permit banks to make shares of mutual funds available to their customers
and to perform administrative and shareholder servicing functions. However,
judicial or administrative decisions or interpretations of such laws, as well
as changes in either federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, shareholder clients of
such bank would be permitted to remain shareholders of the Fund and alternate
means for continuing the servicing of such shareholders would be sought. In
such event, changes in the operation of the Fund might occur and shareholders
serviced by such bank might no longer be able to avail themselves of any
automatic investment or other services then being provided by such bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and certain banks and financial institutions may be required to register as
dealers pursuant to state law.
PERFORMANCE INFORMATION
As stated under the caption "Performance Information--Performance Table" in
each Prospectus, yield information for the shares of each class of the
Portfolio may be obtained by calling the Fund at the telephone number set
forth in the prospectus for that class. Performance will vary from time to
time and past results are not necessarily indicative of future results.
Investors should understand that performance is a function of the type and
quality of the Portfolio's investments as well as its operating expenses.
Performance information for the shares of the Portfolio may not provide a
basis for comparison with investments which pay fixed rates of interest for a
stated period of time, with other investments or with investment companies
which use a different method of calculating performance.
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Calculations of yield will take into account the total income received by
the Portfolio. To the extent that different classes of shares bear different
expenses, the yields of such classes will vary. To the extent that
institutions charge fees in connection with services provided in conjunction
with the Fund, the yield will be lower for those beneficial owners paying such
fees.
The current yields quoted will be the net average annualized yield for an
identified period, such as seven consecutive calendar days or a month. Yields
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 any realized gains and losses or
unrealized appreciation or depreciation and income other than investment
income) will be multiplied by 365 and then divided by the number of days in
the period, with the resulting figure carried to the nearest hundredth of one
percent. The Fund may also furnish a quotation of effective yields that
assumes the reinvestment of dividends for a 365 day year and a return for the
entire year equal to the average annualized yields for the period, which will
be computed by compounding the unannualized current yields for the period by
adding 1 to the unannualized current yields, 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.
From time to time, AIM or its affiliates may waive all or a portion of their
fees and/or assume certain expenses of the Portfolio. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers
or reductions or commitments to assume expenses, AIM will retain its ability
to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions or reimbursement of expenses set forth
in the Fee Table in a Prospectus may not be terminated or amended to the
Portfolio's detriment during the period stated in the agreement between AIM
and the Fund. Fee waivers or reductions or commitments to reduce expenses will
have the effect of increasing the Portfolio's yield and total return.
For the seven-day period ended August 31, 1999, the current and effective
yields for the Private Investment Class were 4.98% and 5.10%, respectively.
For the seven-day period ended August 31, 1999, the current and effective
yields for the Institutional Class were 5.28% and 5.42%, respectively. For the
seven-day period ended August 31, 1999, the current and effective yields for
the Cash Management Class were 5.20% and 5.33%, respectively. For the seven-
day period ended August 31, 1999, the current and effective yields for the
Personal Investment Class were 4.78% and 4.89%, respectively. For the seven-
day period ended August 31, 1999, the current and effective yields for the
Reserve Class were 4.48% and 4.58%, respectively. For the seven-day period
ended August 31, 1999, the current and effective yields for the Resource Class
were 5.08% and 5.21%, 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(R) of Holliston, Massachusetts or by Lipper, Inc., a widely
recognized independent service located in Summit, New Jersey, which monitors
the performance of mutual funds;
. yields on other money market securities or averages of other money
market securities as reported by the Federal Reserve Bulletin, by TeleRate,
a financial information network, or by Bloomberg, a financial information
firm; and
. other fixed-income investments such as Certificates of Deposit ("CDs").
The principal value and interest rate of CDs and money market securities are
fixed at the time of purchase whereas the 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).
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INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
Information concerning the Portfolio's investment objective and operating
policies is set forth in each Prospectus. The principal features of the
Portfolio's investment program and the primary risks associated with that
investment program are also discussed in each Prospectus. There can be no
assurance that the Portfolio will achieve its objective. The values of the
securities in which the Portfolio invests fluctuate based upon interest rates,
the financial stability of the issuer and market factors. The following is a
more detailed description of the portfolio instruments eligible for purchase
by the Portfolio, which augments the summary of the Portfolio's investment
program which appears under the heading "Investment Objective and Strategies"
in each Prospectus.
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 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 segregrated 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 50% 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 issued 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
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<PAGE>
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.
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
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<PAGE>
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.
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.
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
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. 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 IBCA, Inc.
("Fitch").
MOODY'S--The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is
rated P-1, P-2 or P-3.
S&P--Commercial paper rated A-1 by S&P has the following characteristics.
Liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality
of management is unquestioned. The relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
FITCH--Fitch's short-term rating has a time horizon of less than 12 months
for most obligations, or up to three years for U.S. public finance securities,
and thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner. Fitch short-term ratings are as follows:
F-1
Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
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F-2
Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
highest ratings.
PLUS(+) AND MINUS (-)
Plus and minus signs may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to the "AAA" long-
term rating category, to categories below "CCC", or to short-term ratings
other than "F-1"
LOC
The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
BOND RATINGS
The following is a description of the factors underlying the bond ratings of
Moody's, S&P and Fitch.
MOODY'S--The following are the two highest bond ratings of Moody's.
AAA
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
S&P--The following are the four highest bond ratings of S&P; the lower two
of which are referred to in the foregoing description of its commercial paper
ratings.
AAA
Bonds rated AAA are the highest grade obligations. They possess the ultimate
degree of protection as to principal and interest. Market values of bonds
rated AAA move with interest rates, and hence provide the maximum safety on
all counts.
AA
Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices
move with the long-term money market.
A
Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes
in economic and trade conditions. Interest and principal are regarded as safe.
They predominantly reflect money rates in their market behavior, but to some
extent, also economic conditions.
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BBB
The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate.
These bonds have adequate asset coverage and normally are protected by
satisfactory earnings. Their susceptibility to changing conditions,
particularly to depressions, necessitates constant watching. Market values of
these bonds are more responsive to business and trade conditions than to
interest rates. This group is the lowest which qualifies for commercial bank
investment.
Fitch--Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations
of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA
Highest credit quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely
to be adversely affected by foreseeable events.
AA
Very high credit quality. "AA" ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
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;
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(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 the 1940 Act, and rules and
regulations thereunder, and if applicable, exemptive orders granted by the
SEC. The Fund has obtained an exemptive order from the SEC allowing it to
invest in money market funds that have AIM or an affiliate of AIM as an
investment adviser (the "Affiliated Money Market Fund"), provided that
investments in Affiliated Money Market Funds do not exceed 25% of the total
assets of the Portfolio. If other funds advised by AIM invest in the
Portfolio, however, the Portfolio will be subject to the provisions of Section
12(d)(1) of the 1940 Act, which limits the ability of an investment company to
invest in another investment company. With respect to the Portfolio's purchase
of shares of the Affiliated Money Market Funds, the Portfolio will indirectly
pay the advisory fees and other operating expenses of the Affiliated Money
Market Funds.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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 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
B-25
<PAGE>
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.
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), and may include the following types of
information: statistical and background information on the U.S. and foreign
economies, industry groups and individual companies; forecasts and
interpretations with respect to 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, in written form or on computer software. 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. 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.
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<PAGE>
Under the 1940 Act, certain persons affiliated with the Fund are prohibited
from dealing with the Portfolios 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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Dividends with respect to each class of the Portfolio are declared to
shareholders of record immediately after 5:00 p.m. Eastern time on the date of
declaration. Accordingly, dividends accrue on the first day that a purchase
order for shares of a particular class is effective, provided that the
purchase order has been accepted prior to 5:00 p.m. Eastern time and payment
in the form of federal funds wired has been received by AFS. Dividends do not
accrue on the day that a redemption order is effective, unless the redemption
is effective after 5.00 p.m. Eastern time on that day and redemption proceeds
have not been wired to the shareholder on the same day. Thus, if a purchase
order is accepted prior to 5:00 p.m. Eastern time, the shareholder will
receive its pro rata share of dividends beginning with those declared on that
day.
Dividends and distributions are paid in cash unless the shareholder has
elected to have such dividends and distributions reinvested in the form of
additional full and fractional shares at the net asset value hereof. Such
election, or any revocation thereof, must be made in writing and sent by the
shareholder to the AFS at P.O. Box 4497, Houston, Texas 77210-4497. Such
election or revocation will be effective with dividends paid after it is
received by the transfer agent.
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. If a shareholder redeems all the shares in his 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.
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.
The dividend accrued and paid for each class of shares of the Portfolio will
consist of: (a) interest accrued and original issue discount earned less
amortization of premiums, if any, for the portfolio to which such class
relates, allocated based upon such class' pro rata share of the total shares
outstanding which relate to such portfolio, less (b) Fund expenses accrued for
the applicable dividend period attributable to such portfolio, such as
custodian fees and accounting expenses, allocated based upon each such class'
pro rata share of the net assets of such portfolio, less (c) expenses directly
attributable to each class which are accrued for the applicable dividend
period, such as distribution expenses, if any.
Should the Fund incur or anticipate any unusual expense, loss or
depreciation, which would adversely affect the net asset value per share of
the Portfolio or the net income per share of a class of the Portfolio for a
particular period, the 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 then prevailing circumstances. For example, if the net asset value
per share of the Portfolio were reduced, or were anticipated to be reduced,
below $1.00, the Board of Directors might suspend further dividend payments on
shares of the Portfolio until the net asset value returns to $1.00. Thus, such
expense or loss or depreciation might result in a shareholder receiving no
dividends for the period during which it held shares of the Portfolio and/or
in its receiving upon redemption a price per share lower than that which it
paid.
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.,
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<PAGE>
taxable interest, dividends and other taxable ordinary income, net of
expenses) and capital gain net income (i.e., the excess of capital gains over
capital losses) that it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net long-
term capital loss) for the taxable year (the "Distribution Requirement"), and
satisfies certain other requirements of the Code that are described below.
Distributions by the Portfolio made during the taxable year or, under
specified circumstances, within twelve months after the close of the taxable
year, will be considered distributions of income and gains for the taxable
year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company (1) must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "Income Requirement");
and (2) must satisfy an asset diversification test in order to qualify for tax
purposes as a regulated investment company (the "Asset Diversification Test").
Under the Asset Diversification Test, at the close of each quarter of a fund's
taxable year, at least 50% of the value of a fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which a fund has
not invested more than 5% of the value of a fund's total assets in securities
of such issuer and as to which a fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the
value of its total assets may be invested in the securities of any other
issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which a fund
controls and which are engaged in the same or similar trades or businesses.
If, for any taxable year the Portfolio does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Portfolio's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year). The balance of such income
must be distributed during the next calendar year. For the foregoing purposes,
a regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Portfolio may in certain circumstances
be required to liquidate portfolio investments to make sufficient
distributions to avoid excise tax liability.
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.
The Portfolio may either retain or distribute to shareholders its net
capital gain, if any, for each taxable year. The Portfolio currently intends
to distribute any such amounts. If net capital gain is distributed and
designated as a capital gain dividend, it will be taxable to shareholders as
long-term capital gain, regardless of the length of time the shareholder has
held his shares or whether such gain was recognized by the Portfolio prior to
the date on which the shareholder acquired his shares.
Distributions by the Portfolio that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares.
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
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<PAGE>
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 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 (taxable at a maximum rate of 20% for non-corporate
shareholders) or loss and will be long-term capital gain or loss if the shares
were held for longer than one year. However, any capital loss arising from the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital dividends
received on such shares. For this purpose, the special holding period rules of
Code Section 246(c)(3) and (4) generally will apply in determining the holding
period of shares.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on
by such shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and
distributions (other than capital gains dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross
amount of the dividend or distribution. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gains realized on the sale
of shares of a class, capital gain dividends and amounts retained by the
Portfolio that are designated as undistributed capital gains.
If the income from the Portfolio is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends and any gains realized upon the sale of
shares of the Portfolio will be subject to U.S. federal income tax at the
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.
Foreign persons who file a United States tax return 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 transfer agent.
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
November 1, 1999. 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.
B-29
<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 Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1999, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the three years in the 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, 1999 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
Liquid Assets Portfolio as of August 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
three years in the 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 LLP
October 1, 1999
Houston, Texas
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 Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1999, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1999 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
Liquid Assets Portfolio as of August 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
October 1, 1999
Houston, Texas
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 Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1999, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for the period June 22, 1999 (date sales commenced for the Personal
Investment Class) through August 31, 1999. 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, 1999 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
Liquid Assets Portfolio as of August 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for the period
June 22, 1999 (date sales commenced for the Personal Investment Class) through
August 31, 1999, in conformity with generally accepted accounting principles.
KPMG LLP
October 1, 1999
Houston, Texas
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 Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1999, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the three years in the 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, 1999 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
Liquid Assets Portfolio as of August 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
three years in the 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 LLP
October 1, 1999
Houston, Texas
FS-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Short-Term Investments Co.:
We have audited the accompanying statement of assets and liabilities of Liquid
Assets Portfolio (a series portfolio of Short-Term Investments Co.), including
the schedule of investments, as of August 31, 1999, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and financial highlights for
each of the two years in the period then ended and the period September 23,
1996 (date sales commenced for the Resource 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, 1999 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
Liquid Assets Portfolio as of August 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period ended and financial highlights for each of the two years in
the period then ended and the period September 23, 1996 (date sales commenced
for the Resource Class) through August 31, 1997, in conformity with generally
accepted accounting principles.
KPMG LLP
October 1, 1999
Houston, Texas
FS-5
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1999
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 38.93%(a)
BASIC INDUSTRIES - 0.42%
Chemicals - 0.42%
Henkel Corp.
4.88% 09/07/99 $ 13,000 $ 12,989,427
- -----------------------------------------------------------------------
4.80% 09/22/99 13,000 12,963,600
- -----------------------------------------------------------------------
Total Basic Industries 25,953,027
- -----------------------------------------------------------------------
CAPITAL GOODS - 1.00%
ELECTRICAL EQUIPMENT - 0.37%
Siemens Capital Corp.
4.78% 09/30/99 23,000 22,911,437
- -----------------------------------------------------------------------
MANUFACTURING - DIVERSIFIED - 0.63%
Cargill, Inc.
5.42% 01/21/00 40,000 39,144,844
- -----------------------------------------------------------------------
Total Capital Goods 62,056,281
- -----------------------------------------------------------------------
CONSUMER SERVICES - 0.29%
ENTERTAINMENT (MISCELLANEOUS) - 0.29%
Walt Disney Co. (The) 4.87% 09/16/99 18,000 17,963,475
- -----------------------------------------------------------------------
ENERGY - 0.76%
OIL & GAS (INTEGRATED) - 0.76%
Shell Oil Co.
5.15% 09/13/99 46,750 46,750,000
- -----------------------------------------------------------------------
FINANCIAL - 36.46%
ASSET BACKED SECURITIES-COMMERCIAL LOANS/LEASES - 2.21%
Centric Capital Corp.
4.86% 09/27/99 23,000 22,919,270
- -----------------------------------------------------------------------
5.14% 09/27/99 30,000 29,888,633
- -----------------------------------------------------------------------
5.14% 09/28/99 30,000 29,884,350
- -----------------------------------------------------------------------
4.81% 10/12/99 37,000 36,797,312
- -----------------------------------------------------------------------
4.82% 10/20/99 17,333 17,219,286
- -----------------------------------------------------------------------
136,708,851
- -----------------------------------------------------------------------
ASSET BACKED SECURITIES-CONSUMER
RECEIVABLES - 0.40%
Old Line Funding Corp.
5.20% 09/15/99 24,946 24,895,554
- -----------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET BACKED SECURITIES-MULTI-PURPOSE - 19.98%
Bavaria TRR Corp.
4.97% 11/22/99 $ 27,000 $ 26,694,345
- -------------------------------------------------------------------------
5.45% 01/19/00 25,200 24,665,900
- -------------------------------------------------------------------------
5.50% 01/27/00 25,000 24,434,722
- -------------------------------------------------------------------------
5.75% 02/15/00 21,759 21,178,609
- -------------------------------------------------------------------------
5.54% 02/22/00 45,000 45,000,000
- -------------------------------------------------------------------------
Corporate Receivables Corp.
5.13% 09/14/99 25,000 24,953,688
- -------------------------------------------------------------------------
5.12% 09/15/99 50,000 49,900,444
- -------------------------------------------------------------------------
5.37% 02/16/00 41,000 40,998,148
- -------------------------------------------------------------------------
5.77% 02/28/00 35,000 33,990,250
- -------------------------------------------------------------------------
Edison Asset Securitization, L.L.C.
5.16% 09/03/99 30,000 29,991,400
- -------------------------------------------------------------------------
4.84% 09/10/99 30,000 29,963,700
- -------------------------------------------------------------------------
4.85% 09/13/99 25,000 24,959,583
- -------------------------------------------------------------------------
5.13% 09/13/99 17,185 17,155,613
- -------------------------------------------------------------------------
4.84% 09/29/99 38,010 37,866,913
- -------------------------------------------------------------------------
4.82% 09/30/99 25,000 24,902,931
- -------------------------------------------------------------------------
4.82% 10/15/99 30,000 29,823,267
- -------------------------------------------------------------------------
5.43% 01/14/00 25,000 24,490,938
- -------------------------------------------------------------------------
5.48% 01/25/00 33,400 32,657,704
- -------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.14% 09/14/99 29,295 29,240,625
- -------------------------------------------------------------------------
4.81% 09/20/99 50,000 49,873,069
- -------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.18% 09/08/99 49,000 48,950,646
- -------------------------------------------------------------------------
Park Avenue Receivables Corp.
5.13% 09/13/99 31,593 31,538,976
- -------------------------------------------------------------------------
5.20% 09/17/99 40,000 39,907,556
- -------------------------------------------------------------------------
5.15% 09/24/99 30,000 29,901,292
- -------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.20% 09/27/99 50,000 49,812,222
- -------------------------------------------------------------------------
Quincy Capital Corp.
5.13% 09/07/99 33,000 32,971,785
- -------------------------------------------------------------------------
Receivables Capital Corp.
5.13% 09/10/99 25,606 25,573,160
- -------------------------------------------------------------------------
Sheffield Receivables Corp.
5.17% 09/03/99 35,350 35,339,846
- -------------------------------------------------------------------------
5.18% 09/07/99 50,000 49,956,833
- -------------------------------------------------------------------------
5.15% 09/10/99 41,500 41,446,569
- -------------------------------------------------------------------------
5.30% 09/20/99 100,000 99,720,278
- -------------------------------------------------------------------------
5.30% 09/21/99 100,000 99,705,556
- -------------------------------------------------------------------------
5.22% 09/28/99 30,000 29,882,550
- -------------------------------------------------------------------------
1,237,449,118
- -------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET BACKED SECURITIES-TRADE RECEIVABLES - 1.91%
Asset Securitization Cooperative Corp.
5.17% 09/30/99 $ 35,000 $ 34,854,235
- -----------------------------------------------------------------------------
5.39% 03/27/00 25,000 24,998,556
- -----------------------------------------------------------------------------
Variable Funding Capital
5.76% 01/10/00 30,000 29,371,200
- -----------------------------------------------------------------------------
5.68% 01/21/00 30,000 29,327,867
- -----------------------------------------------------------------------------
118,551,858
- -----------------------------------------------------------------------------
BANKS (DOMESTIC) - 2.58%
Bank of America
4.87% 09/08/99 25,000 24,976,326
- -----------------------------------------------------------------------------
4.81% 09/09/99 25,000 24,973,278
- -----------------------------------------------------------------------------
Banc One Financial Corp.
4.85% 09/13/99 15,000 14,975,750
- -----------------------------------------------------------------------------
4.85% 09/20/99 20,000 19,948,806
- -----------------------------------------------------------------------------
5.12% 09/24/99 25,000 24,918,222
- -----------------------------------------------------------------------------
4.80% 09/28/99 50,000 49,820,000
- -----------------------------------------------------------------------------
159,612,382
- -----------------------------------------------------------------------------
BROKER DEALER - 1.83%
Credit Suisse First Boston Inc.
5.68% 02/14/00 30,000 29,214,267
- -----------------------------------------------------------------------------
5.74% 02/18/00 35,000 34,051,306
- -----------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.
5.62% 02/07/00 50,000 50,000,000
- -----------------------------------------------------------------------------
113,265,573
- -----------------------------------------------------------------------------
FINANCIAL - MULTIPLE INDUSTRY - 6.69%
Associates First Capital Corp.
4.81% 09/10/99 30,000 29,963,925
- -----------------------------------------------------------------------------
4.80% 11/03/99 30,000 29,748,000
- -----------------------------------------------------------------------------
5.60% 02/09/00 25,000 24,373,889
- -----------------------------------------------------------------------------
5.74% 02/14/00 35,000 34,073,628
- -----------------------------------------------------------------------------
General Electric Capital Corp.
4.81% 09/02/99 50,000 49,993,319
- -----------------------------------------------------------------------------
4.82% 09/08/99 25,000 24,976,569
- -----------------------------------------------------------------------------
4.81% 09/08/99 25,000 24,976,618
- -----------------------------------------------------------------------------
4.81% 09/09/99 25,000 24,973,278
- -----------------------------------------------------------------------------
4.84% 09/29/99 25,000 24,905,889
- -----------------------------------------------------------------------------
4.81% 11/03/99 25,000 24,789,563
- -----------------------------------------------------------------------------
</TABLE>
FS-8
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL - MULTIPLE INDUSTRY - (CONTINUED)
5.43% 01/28/00 $ 25,000 $ 24,438,146
- -------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
5.14% 09/20/99 33,000 32,910,478
- -------------------------------------------------------------------------------
UBS Finance ( Delaware) Inc.
4.82% 12/23/99 25,000 24,621,764
- -------------------------------------------------------------------------------
4.79% 12/27/99 40,000 39,377,300
- -------------------------------------------------------------------------------
414,122,366
- -------------------------------------------------------------------------------
INSURANCE - LIFE/HEALTH - 0.87%
Prudential Funding Corp.
4.85% 11/09/99 30,000 29,721,125
- -------------------------------------------------------------------------------
5.72% 01/28/00 25,000 24,408,139
- -------------------------------------------------------------------------------
54,129,264
- -------------------------------------------------------------------------------
Total Financial 2,258,734,966
- -------------------------------------------------------------------------------
Total Commercial Paper (Cost $2,710,784,869) 2,411,457,749
- -------------------------------------------------------------------------------
BANK NOTES - 1.05%
First Union National Bank
5.49% 11/23/99 40,000 40,000,000
- -------------------------------------------------------------------------------
National City Bank Cleveland
5.51%(b) 04/03/00 25,000 24,994,257
- -------------------------------------------------------------------------------
Total Bank Notes (Cost $64,994,257) 64,994,257
- -------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 4.03%
ABN-Amro Bank
5.71% 07/03/00 25,000 24,991,972
- -------------------------------------------------------------------------------
Bank Austria
5.65% 07/06/00 25,000 24,989,858
- -------------------------------------------------------------------------------
Barclays Bank PLC
5.61% 06/14/00 25,000 24,990,577
- -------------------------------------------------------------------------------
Chase-USA-Delaware
5.37% 05/22/00 25,000 24,993,931
- -------------------------------------------------------------------------------
Deutsche Bank AG
5.29% 05/19/00 25,000 24,990,545
- -------------------------------------------------------------------------------
National Westminster Bank
5.67% 07/03/00 25,000 24,993,976
- -------------------------------------------------------------------------------
UBS AG
5.24% 03/01/00 25,000 24,992,804
- -------------------------------------------------------------------------------
5.35% 05/30/00 25,000 24,991,051
- -------------------------------------------------------------------------------
5.60% 06/14/00 25,000 24,990,576
- -------------------------------------------------------------------------------
U.S. Bank NA Minneapolis
5.68% 06/12/00 25,000 25,000,000
- -------------------------------------------------------------------------------
Total Certificates of Deposit (Cost $249,925,290) 249,925,290
- -------------------------------------------------------------------------------
</TABLE>
FS-9
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER TRUST CERTIFICATES - 4.04%
Citibank Securities, Inc. 5.60%(c)
(Cost $250,000,000) 12/28/99 $250,000 $ 250,000,000
- ------------------------------------------------------------------------------
NOTE AGREEMENTS - 28.02%
General Motors Acceptance Corp.
5.17%(d) 09/01/99 50,000 50,000,000
- ------------------------------------------------------------------------------
5.21%(d) 09/01/99 100,000 100,000,000
- ------------------------------------------------------------------------------
5.36%(d) 10/01/99 50,000 49,776,808
- ------------------------------------------------------------------------------
5.40%(d) 10/01/99 100,000 99,550,312
- ------------------------------------------------------------------------------
Goldman Sachs Group, L.P.
5.18%(e) 10/18/99 300,000 300,000,000
- ------------------------------------------------------------------------------
Goldman Sachs Mortgage Corp.
5.44% (f) 09/20/99 100,000 100,000,000
- ------------------------------------------------------------------------------
Liquid Asset Backed Securities Trust
5.35%(g) 11/26/99 246,337 246,336,676
- ------------------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.
5.82%(h) 08/17/00 357,000 357,000,000
- ------------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.
5.69%(i) 11/01/99 245,000 245,000,000
- ------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.
5.66%(j) 11/22/99 188,000 188,000,000
- ------------------------------------------------------------------------------
Total Note Agreements (Cost $1,735,663,796) 1,735,663,796
- ------------------------------------------------------------------------------
MEDIUM TERM NOTES - 1.14%
Asset Securitization Cooperative Corp.
5.38%(k) 02/01/00 35,000 34,992,615
- ------------------------------------------------------------------------------
AT&T Corp.
5.27%(l) 07/13/00 25,000 24,991,366
- ------------------------------------------------------------------------------
SMM Trust 1999-E
5.322%(l) 04/05/00 10,750 10,750,000
- ------------------------------------------------------------------------------
Total Medium Term Notes (Cost $70,733,981) 70,733,981
- ------------------------------------------------------------------------------
REVENUE BONDS - 2.30%
Belk, Inc.
5.4%(m)(n) 07/01/08 63,200 63,200,000
- ------------------------------------------------------------------------------
BMC Special Care Facilities
5.3%(m)(n) 11/15/29 20,000 20,000,000
- ------------------------------------------------------------------------------
Brosis Finance, LLC
5.35%(m)(n) 09/01/19 20,000 20,000,000
- ------------------------------------------------------------------------------
Connecticut State Housing Financing
Authority
5.35%(m)(n) 11/15/16 19,205 19,205,000
- ------------------------------------------------------------------------------
Southeastern Retirement Associates, LLC
5.4%(m)(n) 08/01/19 20,000 20,000,000
- ------------------------------------------------------------------------------
Total Revenue Bonds (Cost $142,405,000) 142,405,000
- ------------------------------------------------------------------------------
</TABLE>
FS-10
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
TIME DEPOSITS - 16.83%
Amsouth Bank of Birmingham AL Cayman
5.69% 09/01/99 $165,000 $ 165,000,000
- -------------------------------------------------------------------------------
Bank Austria Cayman
5.56% 09/01/99 224,000 224,000,000
- -------------------------------------------------------------------------------
Chase Bank USA Cayman
5.56% 09/01/99 240,000 240,000,000
- -------------------------------------------------------------------------------
Credit Suisse First Boston Cayman
5.63% 09/01/99 48,871 48,870,824
- -------------------------------------------------------------------------------
Norwest Bank, Minnesota Cayman
5.63% 09/01/99 165,000 165,000,000
- -------------------------------------------------------------------------------
Suntrust Bank Atlanta Cayman
5.63% 09/01/99 200,000 200,000,000
- -------------------------------------------------------------------------------
Total Time Deposits (Cost $1,042,870,824) 1,042,870,824
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS(o) - 6.35%
Bear, Stearns & Co. Inc.
5.51%(p) -- 200,000 200,000,000
- -------------------------------------------------------------------------------
Deutsche Bank Securities, Inc.
5.51%(q) -- 150,000 150,000,000
- -------------------------------------------------------------------------------
Warburg Dillon Read LLC
5.55%(r) 09/01/99 43,378 43,378,483
- -------------------------------------------------------------------------------
Total Repurchase Agreements (Cost
$393,378,483) 393,378,483
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 102.69% 6,361,429,380(s)
- -------------------------------------------------------------------------------
OTHER LIABILITIES LESS ASSETS - (2.69)% (166,934,029)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $6,194,495,351
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Portfolio.
(b) Interest rates are redetermined daily. Rate shown is the rate in effect on
08/31/99.
(c) 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 08/31/99.
(d) The portfolio may demand prepayment of notes purchased under the Note
Purchase Agreement upon seven business days' notice.
(e) 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 08/31/99.
(f) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon one business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 08/31/99.
(g) 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 08/31/99.
(h) 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 08/31/99.
(i) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon one business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 08/31/99.
(j) 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 08/31/99.
(k) Interest rates are redetermined monthly. Rate shown is the rate in effect
on 08/31/99.
(l) Interest rates are redetermined quarterly. Rate shown is the rate in effect
on 08/31/99.
(m) 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 in effect on 08/31/99.
(n) Secured by a letter of credit.
(o) 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.
(p) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $272,695,821 U.S. Government obligations, 0% to 9.50% due
04/01/01 to 08/01/33 with an aggregate market value at 08/31/99 of
$274,569,940.
(q) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $256,125,337 U.S. Government obligations, 6.00% to 7.50%
due 05/01/12 to 11/01/28 with an aggregate market value at 08/31/99 of
$204,000,000.
(r) Joint repurchase agreement entered into 08/31/99 with a maturing value of
$100,015,417. Collateralized by $102,040,000 U.S. Government obligations,
0% to 6.73% due 11/02/99 to 06/22/09 with an aggregate market value at
08/31/99 of $102,002,704.
(s) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-11
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $6,361,429,380
- ------------------------------------------------------------------------
Interest receivable 13,446,695
- ------------------------------------------------------------------------
Investment for deferred compensation plan 68,320
- ------------------------------------------------------------------------
Other assets 1,066,900
- ------------------------------------------------------------------------
Total assets 6,376,011,295
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 149,327,120
- ------------------------------------------------------------------------
Dividends 31,089,809
- ------------------------------------------------------------------------
Deferred compensation 68,320
- ------------------------------------------------------------------------
Accrued administrative services fees 17,721
- ------------------------------------------------------------------------
Accrued advisory fees 355,513
- ------------------------------------------------------------------------
Accrued distribution fees 209,284
- ------------------------------------------------------------------------
Accrued transfer agent fees 84,825
- ------------------------------------------------------------------------
Accrued operating expenses 363,352
- ------------------------------------------------------------------------
Total liabilities 181,515,944
- ------------------------------------------------------------------------
Net assets $6,194,495,351
========================================================================
NET ASSETS:
Institutional Class $4,541,935,494
========================================================================
Private Investment Class $ 266,030,885
========================================================================
Personal Investment Class $ 993,991
========================================================================
Cash Management Class $1,078,777,407
========================================================================
Resource Class $ 306,757,574
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 4,541,904,502
========================================================================
Private Investment Class 266,032,341
========================================================================
Personal Investment Class 993,991
========================================================================
Cash Management Class 1,078,751,891
========================================================================
Resource Class 306,769,839
========================================================================
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, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $333,976,773
- -------------------------------------------------------------------
EXPENSES:
Advisory
fees 9,813,465
- -------------------------------------------------------------------
Custodian fees 290,863
- -------------------------------------------------------------------
Administrative services fees 155,139
- -------------------------------------------------------------------
Distribution fees (Note 2) 2,195,209
- -------------------------------------------------------------------
Directors' fees and expenses 52,725
- -------------------------------------------------------------------
Transfer agent fees 720,090
- -------------------------------------------------------------------
Other 788,169
- -------------------------------------------------------------------
Total expenses 14,015,660
- -------------------------------------------------------------------
Less: Fee waivers (6,804,321)
- -------------------------------------------------------------------
Net expenses 7,211,339
- -------------------------------------------------------------------
Net investment income 326,765,434
- -------------------------------------------------------------------
Net realized gain on sales of investments 672,252
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $327,437,686
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended August 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 326,765,434 $231,962,632
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 672,252 750,940
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 327,437,686 232,713,572
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (264,791,600) (207,681,074)
- ----------------------------------------------------------------------------
Private Investment Class (9,376,339) (3,506,724)
- ----------------------------------------------------------------------------
Personal Class (3,765) --
- ----------------------------------------------------------------------------
Cash Management Class (46,551,990) (16,114,306)
- ----------------------------------------------------------------------------
Resource Class (6,041,740) (4,660,528)
- ----------------------------------------------------------------------------
Capital stock transactions -- net (See
Note 4) 2,284,209,435 (113,347,634)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets 2,284,881,687 (112,596,694)
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,909,613,664 4,022,210,358
- ----------------------------------------------------------------------------
End of period $6,194,495,351 $3,909,613,664
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $6,194,452,564 $3,910,243,129
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investment securities 42,787 (629,465)
- ----------------------------------------------------------------------------
$6,194,495,351 $3,909,613,664
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
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 currently offers six different classes
of shares: the Institutional Class, the Cash Management Class, the Private
Investment Class, the Personal Investment Class, the Reserve Class, and the
Resource Class. Sales of the Reserve Class have not yet commenced. 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.
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, 1999, AIM waived fees of $6,215,196.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended August 31, 1999, AIM was
paid $155,139 for such services.
The Fund, 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 Fund. During the year ended August 31, 1999, AFS
was paid $720,090 for such services.
FS-15
<PAGE>
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund has adopted a master distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Private
Investment Class, the Personal Investment Class, the Cash Management Class, the
Reserve Class, and the Resource Class of the Portfolio. The Plan provides that
the Private Investment Class, the Personal Investment Class, the Cash
Management Class, the Reserve Class, and the Resource Class pay up to a 0.50%,
0.75%, 0.10%, 1.00%, and 0.20%, respectively, maximum annual rate of the
average daily net assets attributable to such class. Of this amount, the Fund
may pay an asset-based sales charge to FMC and the Fund may pay a service fee
of (a) 0.25% of the average daily net assets of each of the Private Investment
Class, Personal Investment Class, and the Reserve Class, (b) 0.10% of the
average daily net assets of the Cash Management Class and (c) 0.20% of the
average daily net assets of the Resource Class, to selected banks, broker-
dealers and other financial institutions who offer continuing personal
shareholder services to their customers who purchase and own shares of the
Private Investment Class, the Personal Investment Class, the Cash Management
Class, the Reserve Class, or the Resource Class. Any amounts not paid as a
service fee under such Plan would constitute an asset-based sales charge. The
Plan also imposes a cap on the total amount of sales charges, including asset-
based sales charges, that may be paid by the Portfolio with respect to each
class. During the year ended August 31, 1999, the Private Investment Class, the
Personal Investment Class, the Cash Management Class and the Resource Class
paid $600,673, $407, $753,887, and $251,117, respectively, as compensation
under the Plan. FMC waived fees of $589,125 for the same period. Certain
officers and directors of the Fund are officers of AIM, FMC and AFS.
During the year ended August 31, 1999, the Fund paid legal fees of $15,490 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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 to directors who are 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 - SHARE INFORMATION
Changes in shares outstanding during the years ended August 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 153,902,899,999 $ 153,902,899,999 93,828,246,640 $ 93,828,246,640
- --------------------------------------------------------------------------------------------------------
Private Investment Class 4,203,510,271 4,203,510,271 427,983,177 427,983,177
- --------------------------------------------------------------------------------------------------------
Personal Investment Class* 1,117,987 1,117,987 -- --
- --------------------------------------------------------------------------------------------------------
Cash Management Class 14,321,528,231 14,321,528,231 4,263,088,877 4,263,088,877
- --------------------------------------------------------------------------------------------------------
Resource Class** 2,669,302,439 2,669,302,439 1,649,842,930 1,649,842,930
- --------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Institutional Class 32,251,894 32,251,894 38,210,037 38,210,037
- --------------------------------------------------------------------------------------------------------
Private Investment Class 3,157,926 3,157,926 3,283,004 3,283,004
- --------------------------------------------------------------------------------------------------------
Personal Investment Class* 255 255 -- --
- --------------------------------------------------------------------------------------------------------
Cash Management Class 34,021,495 34,021,495 10,309,246 10,309,246
- --------------------------------------------------------------------------------------------------------
Resource Class** 5,318,298 5,318,298 4,593,118 4,593,118
- --------------------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (152,491,320,126) (152,491,320,126) (94,557,041,875) (94,557,041,875)
- --------------------------------------------------------------------------------------------------------
Private Investment Class (4,010,706,089) (4,010,706,089) (432,076,106) (432,076,106)
- --------------------------------------------------------------------------------------------------------
Personal Investment Class* (124,251) (124,251) -- --
- --------------------------------------------------------------------------------------------------------
Cash Management Class (13,932,834,793) (13,932,834,793) (3,700,876,338) (3,700,876,338)
- --------------------------------------------------------------------------------------------------------
Resource Class** (2,453,914,101) (2,453,914,101) (1,648,910,344) (1,648,910,344)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) 2,284,209,435 $ 2,284,209,435 (113,347,634) $ (113,347,634)
========================================================================================================
</TABLE>
* The Personal Investment Class commenced sales on June 22, 1999.
** The MSTC Cash Reserve Class was renamed to the Resource Class on
October 1, 1998.
FS-16
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Cash Management Class
capital stock outstanding for each of the years in the three year period ended
August 31, 1999 and the period January 17, 1996 (date sales commenced) through
August 31, 1996.
<TABLE>
<CAPTION>
1999 1998 1997 1996
---------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------- ---------- -------- ------- -------
Income from investment
operations:
Net investment income 0.05 0.06 0.05 0.03
- -------------------------------- ---------- -------- ------- -------
Less distributions:
Dividends from net investment
income (0.05) (0.06) (0.05) (0.03)
- -------------------------------- ---------- -------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================ ========== ======== ======= =======
Total return 5.09% 5.66% 5.50% 3.32%
================================ ========== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,078,777 $655,975 $83,487 $53,209
================================ ========== ======== ======= =======
Ratio of expenses to average net
assets(a) 0.17%(b) 0.16% 0.15% 0.10%(c)
================================ ========== ======== ======= =======
Ratio of net investment income
to average net assets(d) 4.94%(b) 5.51% 5.38% 5.27%(c)
================================ ========== ======== ======= =======
</TABLE>
(a) 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%, 0.28% and 0.34% (annualized) for the periods 1999-1996,
respectively.
(b) Ratios based on average net assets of $942,340,346.
(c) Annualized.
(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 4.83%, 5.39%, 5.25% and 5.03% (annualized) for the
periods 1999-1996, respectively.
FS-17
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Institutional Class
capital stock outstanding for each of the years in the five-year period ended
August 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income 0.05 0.06 0.05 0.06 0.06
- ----------------------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.05) (0.06) (0.05) (0.06) (0.06)
- ----------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ========== ========== ========== ========== ==========
Total return 5.17% 5.74% 5.58% 5.68% 5.83%
======================= ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $4,541,935 $3,097,539 $3,787,357 $1,988,755 $1,287,463
======================= ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets(a) 0.09%(b) 0.08% 0.06% 0.03% 0.11%
======================= ========== ========== ========== ========== ==========
Ratio of net investment
income to average net
assets(c) 5.02%(b) 5.59% 5.46% 5.52% 5.69%
======================= ========== ========== ========== ========== ==========
</TABLE>
(a) 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% for the periods 1999-1995,
respectively.
(b) Ratios based on average net assets of $5,274,113,513.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.92%, 5.49%, 5.34%, 5.37% and 5.62% for the periods
1999-1995, respectively.
FS-18
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Personal Investment
Class capital stock outstanding during the period June 22, 1999 (date sales
commenced) through August 31, 1999.
<TABLE>
<CAPTION>
1999
-----
<S> <C>
Net asset value, beginning of period $1.00
- ------------------------------------------------------- -----
Income from investment operations:
Net investment income 0.01
- ------------------------------------------------------- -----
Less distributions:
Dividends from net investment income (0.01)
- ------------------------------------------------------- -----
Net asset value, end of period $1.00
======================================================= =====
Total return(a) 1.15%
======================================================= =====
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 994
======================================================= =====
Ratio of expenses to average net assets(b) 0.59%(c)
======================================================= =====
Ratio of net investment income to average net assets(d) 4.52%(c)
======================================================= =====
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.93% (annualized).
(c) Ratios are annualized and based on average net assets of $418,310.
(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 4.17% (annualized).
FS-19
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Private Investment
Class capital stock outstanding for each of the years in the three-year period
ended August 31, 1999 and the period February 16, 1996 (date sales commenced)
through August 31, 1996.
<TABLE>
<CAPTION>
1999 1998 1997 1996
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------- -------- ------- ------- -------
Income from investment operations:
Net investment income 0.05 0.05 0.05 0.03
- ---------------------------------- -------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.05) (0.05) (0.05) (0.03)
- ---------------------------------- -------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================== ======== ======= ======= =======
Total return 4.85% 5.43% 5.27% 2.74%
================================== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $266,031 $70,058 $70,856 $44,981
================================== ======== ======= ======= =======
Ratio of expenses to average net
assets(a) 0.39%(b) 0.38% 0.36% 0.32%(c)
================================== ======== ======= ======= =======
Ratio of net investment income to
average net assets(d) 4.72%(b) 5.29% 5.16% 5.04%(c)
================================== ======== ======= ======= =======
</TABLE>
(a) 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%, 0.68% and 0.69% (annualized) for the periods 1999-1996,
respectively.
(b) Ratios based on average net assets of $200,227,919.
(c) Annualized.
(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 4.42%, 4.99%, 4.84% and 4.67% (annualized) for the
periods 1999-1996, respectively.
FS-20
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Resource Class capital
stock outstanding for each of the years in the two-year period ended August 31,
1999 and the period September 23, 1996 (date sales commenced) through August
31, 1997.
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<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 0.05
- ------------------------------------------ -------- ------- -------
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.05)
- ------------------------------------------ -------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
========================================== ======== ======= =======
Total return 4.96% 5.53% 5.04%
========================================== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $306,758 $86,041 $80,510
========================================== ======== ======= =======
Ratio of expenses to average net assets(a) 0.29%(b) 0.28% 0.27%(c)
========================================== ======== ======= =======
Ratio of net investment income to average
net assets(d) 4.82%(b) 5.40% 5.34%(c)
========================================== ======== ======= =======
</TABLE>
(a) 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%, 0.38% and 0.39% (annualized) for the periods 1999-1997,
respectively.
(b) Ratios based on average net assets of $125,571,582.
(c) Annualized.
(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 4.72%, 5.30% and 5.22% (annualized) for the periods
1999-1997, respectively.
FS-21
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds --Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 4497
Houston, TX 77210-4497
BY TELEPHONE: (800) 659-1005
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual and semiannual reports only)
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-------------------------------------
|Liquid Assets Portfolio |
|SEC 1940 Act file number: 811-7892 |
-------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
LIQUID ASSETS PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERSONAL INVESTMENT CLASS
Liquid Assets Portfolio seeks to provide as high a level of current
income as is consistent with the preservation of capital and
liquidity.
PROSPECTUS
DECEMBER 17, 1999
This prospectus contains important information
about the Personal Investment Class of the fund.
Please read it before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and Exchange
Commission has not approved or disapproved these
securities or determined whether the information
in this prospectus is adequate or accurate.
Anyone who tells you otherwise is committing a
crime.
There can be no assurance that the fund
will be able to maintain a stable net asset value
of $1.00 per share.
[AIM LOGO INVEST WITH DISCIPLINE --Registered Trademark--
APPEARS HERE]
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service (12b-1) Fees A-1
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
OBTAINING ADDITIONAL INFORMATION Back Cover
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund attempts to meet this objective by investing only in high-quality
U.S. dollar denominated short-term obligations, including:
. securities issued by the U.S. government or its agencies;
. bankers' acceptances, certificates of deposit and time deposits from banks;
. repurchase agreements;
. commercial paper;
. taxable municipal securities; and
. master notes.
The fund will maintain a weighted average maturity of 90 days or less. The
fund invests in compliance with Rule 2a-7 under the Investment Company Act of
1940. The fund may invest up to 50% of its assets in U.S. dollar-denominated
foreign securities.
The portfolio managers focus on securities they believe have favorable
prospects for current income consistent with the preservation of capital and
liquidity. The portfolio managers usually hold portfolio securities to
maturity, but may sell a particular security when they deem it advisable, such
as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash or shares of affiliated money market
funds. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
. sharply rising interest rates;
. downgrades of credit ratings or defaults of any of the fund's holdings; and
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in
selling the securities underlying the repurchase agreement. As a result, the
fund may incur losses arising from a decline in the value of those securities,
reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers
are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. Neither the Personal Investment Class shares
nor the Institutional Class shares are subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURN
----------- ------
1994 4.37%
1995 6.08%
1996 5.52%
1997 5.67%
1998 5.61%
The returns are those of the fund's Institutional Class shares, which are not
offered in this prospectus. Personal Investment Class shares would have
substantially similar annual returns because the shares are invested in the
same portfolio of securities, but would be lower to the extent that the classes
have different expenses.
The Institutional Class shares' year-to-date total return as of September 30,
1999 was 3.79%.
During the periods shown in the bar chart, Institutional Class' highest
quarterly return was 1.52% (quarter ended June 30, 1995) and the lowest
quarterly return was 0.84% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table reflects the performance of the Institutional
Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.61% 5.45% -- 5.39% 11/04/93
- ----------------------------------------------------------------------
Personal Investment Class -- -- -- -- 01/04/99
- ----------------------------------------------------------------------
</TABLE>
For the current seven-day yield of Personal Investment Class shares, call (800)
877-4744.
2
<PAGE>
------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) PERSONAL INVESTMENT CLASS
- -----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) PERSONAL INVESTMENT CLASS
- -----------------------------------------------------------
Management Fees(1) 0.15%
Distribution and/or Service
(12b-1) Fees 0.75
Other Expenses 0.03
Total Annual Fund
Operating Expenses 0.93
Fee Waiver(2) 0.25
Net Expenses 0.68%
- -----------------------------------------------------------
</TABLE>
(1) The investment advisor has voluntarily agreed to limit Management Fees to
0.055%. This limitation can be terminated at any time. Total Annual Fund
Operating Expenses, net of this voluntary limitation, are 0.59%.
(2) The distributor has contractually agreed to waive 0.25% of the Rule 12b-1
distribution plan fee.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
You should also consider the effect of any account fees charged by the
financial institution managing the account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Personal Investment Class of the fund with the cost of investing in other
mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the fund's gross operating expenses remain the same. To the extent fees are
waived or expenses are reimbursed, the expenses will be lower. Although your
actual returns and costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- -----------------------------------------
<S> <C> <C>
Personal Investment Class $95 $296
- -----------------------------------------
</TABLE>
3
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 125
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended August 31, 1999, the advisor received compensation
of 0.06% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Personal Investment Class of the fund is intended for use primarily by
institutional customers of banks, certain broker-dealers and other financial
institutions (institutions). Individuals, corporations, partnerships and other
businesses that maintain qualified accounts at an institution may invest in
shares of the Personal Investment Class through the institution, but may not
purchase shares directly. Each institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Personal Investment Class. Such services include, among other things,
establishment and maintenance of shareholder accounts and records; assistance
in processing purchase and redemption transactions in shares of the Personal
Investment Class; providing periodic statements showing a client's account
balance in shares of the Personal Investment Class; distribution of fund proxy
statements, annual reports and other communications to shareholders whose
accounts are serviced by the institution; and such other services as the fund
may reasonably request. Institutions will be required to certify to the fund
that they comply with applicable state law regarding registration as broker-
dealers, or that they are exempt from such registration.
The Personal Investment Class is designed to be a convenient and economical
way to invest in an open-end diversified money market fund. It is anticipated
that most investors will perform their own subaccounting.
Investors in the Personal Investment 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 Personal Investment Class.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of ordinary
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays dividends
monthly. A business day is any day on which both the Federal Reserve Bank of
New York and The Bank of New York, the fund's custodian, are open for business.
Dividends are paid on settled shares of the fund as of 5:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 5:00 p.m. Eastern time and shareholders whose redemption proceeds have
not been wired to them on any business day are eligible to receive dividends on
that business day. The dividend declared on any day preceding a non-business
day of the fund will include the income accrued on such non-business day.
Dividends and distributions are paid in cash unless the shareholder has elected
to have such dividends and distributions reinvested in the form of additional
full and fractional shares at net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains (including net short-
term capital gains), if any, annually. The fund does not expect to realize any
long-term capital gains and losses.
4
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Personal Investment Class. Certain information reflects
financial results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
PERSONAL INVESTMENT CLASS
----------------------------
FOR THE PERIOD
JUNE 22, 1999
THROUGH
AUGUST 31, 1999
- -------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.01
Less distributions:
Dividends from net investment income (0.01)
Net asset value, end of period $ 1.00
Total return(a) 1.15%
- -------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------
Net assets, end of period (000s
omitted) $ 994
Ratio of expenses to average net
assets(b) 0.59%(c)
Ratio of net investment income to
average net assets(d) 4.52%(c)
- -------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
0.93% (annualized).
(c) Ratios are annualized and based on average net assets of $418,310.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement was 4.17% (annualized).
5
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
The fund currently offers six classes of shares all of which share a common
investment objective and portfolio of investments. The six classes differ only
with respect to distribution arrangements for different categories of
investors.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Personal Investment Class
that allows the fund to pay distribution fees to Fund Management Company (the
distributor) for the sale and distribution of its shares and fees for services
provided to shareholders. Because the fund pays these fees out of its assets on
an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
PURCHASING SHARES
The minimum initial investment in the Personal Investment Class is $1,000. No
minimum amount is required for subsequent investments in the fund, nor are
minimum balances required.
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 fund. Purchase
orders received after such time will be processed at the next day's net asset
value. You may purchase shares by submitting an Account Application to the
fund's transfer agent, A I M Fund Services, Inc. (transfer agent) at P.O. Box
4497, Houston, Texas 77210-4497 prior to your initial purchase of shares. You
must open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds (member bank deposits with a
Federal Reserve Bank) for the order, provided the transfer agent has received
notice of the order. Subsequent purchases of shares of the funds may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
We may request that an institution maintain separate master accounts in the
fund for shares 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 may aggregate its master accounts and
subaccounts to satisfy the minimum investment requirement.
If you propose to open a fund account with an institution, you should consult
with a representative of such institution to obtain a description of the rules
governing such an account. A statement with regard to your investment in the
Personal Investment Class is supplied periodically, and confirmations of all
transactions for your account are provided by the institution promptly upon
request. In addition, proxies, periodic reports and other information from the
institution with regard to your shares of the Personal Investment Class will be
sent to you.
You may place an order for the purchase of shares of the Personal Investment
Class with the institution. The institution is responsible for the prompt
transmission of the order to the transfer agent. The fund is normally required
to make immediate settlement in federal funds for portfolio securities
purchased. Accordingly, payment for shares of the Personal Investment Class
purchased by institutions on behalf of their clients must be in federal funds.
If an order to purchase shares is paid for other than in federal funds, the
order may be delayed up to two business days while the institution completes
the conversion into federal funds.
REDEEMING SHARES
You may redeem any or all of your shares at the net asset value next determined
after receipt of a redemption request in proper form by the fund. There is no
charge for redemption. Redemption requests with respect to shares of the
Personal Investment Class are normally made through a customer's institution.
You may request a redemption by calling the transfer agent at (800) 877-4744,
or by using AIM LINK --Registered Trademark-- Remote. Payment for redeemed
shares is normally made by Federal Reserve wire to the commercial bank account
designated in your Account Application. You may also request that payment be
made by check. We use reasonable procedures to confirm that instructions
communicated by telephone are genuine and are not liable for telephone
instructions that are reasonably believed to be genuine. Such reasonable
procedures may include recordings of telephone transactions maintained for a
reasonable period of time. Payment for redemption orders received prior to 5:00
p.m. Eastern time will normally be made on the same day. Payment for shares
redeemed by mail and payment for telephone redemptions in amounts of less than
$1,000 may be made by check mailed within seven days after receipt of the
redemption request in proper form. The fund may make payment for telephone
redemptions in excess of $1,000 by check when it is considered to be in the
fund's best interest to do so.
A-1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION (continued)
- --------------------------------------------------------------------------------
Dividends payable up to the date of redemption on redeemed shares will
normally be paid by wire transfer on the next dividend payment date. However,
if all of the shares in your account are redeemed, you will receive dividends
payable up to the date of redemption with the proceeds of the redemption.
REDEMPTIONS BY THE FUND
If your account has been open at least one year, you have not made an
additional purchase in the account during the past six calendar months, and the
value of your account falls below $500 for three consecutive months due to
redemptions or exchanges (excluding retirement accounts), the fund has the
right to redeem the account after giving you 60 days' prior written notice. You
may avoid having your account redeemed during the notice period by bringing the
account value up to $500.
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem the account and distribute the proceeds to you.
------------------------------------
|THE FUND AND ITS AGENTS RESERVE |
|THE RIGHT AT ANY TIME TO: |
|. REJECT OR CANCEL ANY PART OF ANY|
| PURCHASE ORDER; |
|. MODIFY ANY TERMS OR CONDITIONS |
| OF PURCHASE OF SHARES OF THE |
| FUND; OR |
|. WITHDRAW ALL OR ANY PART OF THE |
| OFFERING MADE BY THIS |
| PROSPECTUS. |
------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each of the fund's shares is the fund's net asset value per share.
The fund determines the net asset value of its shares as of 5:00 p.m. Eastern
time on each day on which both the Federal Reserve Bank of New York and The
Bank of New York are open for business (business day). The fund values
portfolio securities on the basis of amortized cost, which approximates market
value.
TIMING OF ORDERS
The fund prices purchase and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form. If the
transfer agent receives a redemption request on a business day prior to 5:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 5:00 p.m. Eastern
time, the redemption will be processed at the net asset value next determined.
Shareholders will accrue dividends until the day the fund wires redemption
proceeds. The fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading. The fund
reserves the right to change the time for which purchase and redemption orders
must be submitted to and received by the transfer agent for execution on the
same day on any day when the primary government securities dealers are either
closed for business or close early, or trading in money market securities is
limited due to national holidays.
TAXES
Dividends and distributions received are taxable as ordinary income or long-
term capital gains for federal income tax purposes, whether reinvested in
additional shares or taken in cash. Distributions are taxable at different
rates depending on the length of time the fund holds its assets. Every year,
information will be sent showing the amount of dividends and distributions
received from the fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of the
shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in the fund may
differ materially from the federal income tax consequences described above.
Shareholders should consult their tax advisor before investing.
A-2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds --Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 4497
Houston, TX 77210-4497
BY TELEPHONE: (800) 877-4744
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual and semiannual reports only)
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
------------------------------------
|Liquid Assets Portfolio |
|SEC 1940 Act file number: 811-7892|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
LIQUID ASSETS PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRIVATE INVESTMENT CLASS
Liquid Assets Portfolio seeks to provide as high a level of current
income as is consistent with the preservation of capital and
liquidity.
PROSPECTUS
DECEMBER 17, 1999
This prospectus contains important information
about the Private Investment Class of the fund.
Please read it before investing and keep it for
future reference.
As with all other mutual fund securities, the
Securities and Exchange Commission has not
approved or disapproved these securities or
determined whether the information in this
prospectus is adequate or accurate. Anyone who
tells you otherwise is committing a crime.
There can be no assurance that the fund will be
able to maintain a stable net asset value of
$1.00 per share.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service (12b-1) Fees A-1
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
OBTAINING ADDITIONAL INFORMATION Back Cover
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund attempts to meet this objective by investing only in high-quality
U.S. dollar denominated short-term obligations, including:
. securities issued by the U.S. government or its agencies;
. bankers' acceptances, certificates of deposit and time deposits from banks;
. repurchase agreements;
. commercial paper;
. taxable municipal securities; and
. master notes.
The fund will maintain a weighted average maturity of 90 days or less. The
fund invests in compliance with Rule 2a-7 under the Investment Company Act of
1940. The fund may invest up to 50% of its assets in U.S. dollar-denominated
foreign securities.
The portfolio managers focus on securities they believe have favorable
prospects for current income consistent with the preservation of capital and
liquidity. The portfolio managers usually hold portfolio securities to
maturity, but may sell a particular security when they deem it advisable, such
as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash or shares of affiliated money market
funds. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
. sharply rising interest rates;
. downgrades of credit ratings or defaults of any of the fund's holdings; and
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in
selling the securities underlying the repurchase agreement. As a result, the
fund may incur losses arising from a decline in the value of those securities,
reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers
are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Private
Investment Class shares from year to year. The Private Investment Class shares
are not subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURN
----------- ------
1997 5.36%
1998 5.30%
The Private Investment Class shares' year-to-date total return as of September
30, 1999 was 3.56%.
During the periods shown in the bar chart, the highest quarterly return was
1.35% (quarter ended December 31, 1997) and the lowest quarterly return was
1.23% (quarter ended December 31, 1998).
PERFORMANCE TABLE
The following performance table reflects the performance of Private Investment
Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private Investment Class 5.30% -- -- 5.28% 02/16/96
- ------------------------------------------------------------------------
</TABLE>
Private Investment Class shares' seven-day yield on December 31, 1998 was
4.80%. For the current seven-day yield, call (800) 877-7748.
2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) PRIVATE INVESTMENT CLASS
- -----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) PRIVATE INVESTMENT CLASS
- -----------------------------------------------------------
Management Fees(1) 0.15%
Distribution and/or Service
(12b-1) Fees 0.50
Other Expenses 0.03
Total Annual Fund
Operating Expenses 0.68
Fee Waiver(2) 0.20
Net Expenses 0.48%
- -----------------------------------------------------------
</TABLE>
(1) The investment advisor has voluntarily agreed to limit Management Fees to
0.055%. This limitation can be terminated at any time. Total Annual Fund
Operating Expenses, net of this voluntary limitation, are 0.39%.
(2) The distributor has contractually agreed to waive 0.20% of the Rule 12b-1
distribution plan fee.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
You should also consider the effect of any account fees charged by the
financial institution managing the account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Private Investment Class of the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the fund's gross operating expenses remain the same. To the extent fees are
waived or expenses are reimbursed, the expenses will be lower. Although your
actual returns and costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
Private Investment Class $69 $218 $379 $847
- ---------------------------------------------------------
</TABLE>
3
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 125
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended August 31, 1999, the advisor received compensation
of 0.06% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Private Investment Class of the fund is intended for use primarily by
institutional customers of banks, certain broker-dealers and other financial
institutions (institutions). Individuals, corporations, partnerships and other
businesses that maintain qualified accounts at an institution may invest in
shares of the Private Investment Class through the institution, but may not
purchase shares directly. Each institution will render administrative support
services to its customers who are the beneficial owners of the shares of the
Private Investment Class. Such services include, among other things,
establishment and maintenance of shareholder accounts and records; assistance
in processing purchase and redemption transactions in shares of the Private
Investment Class; providing periodic statements showing a client's account
balance in shares of the Private Investment Class; distribution of fund proxy
statements, annual reports and other communications to shareholders whose
accounts are serviced by the institution; and such other services as the fund
may reasonably request. Institutions will be required to certify to the fund
that they comply with applicable state law regarding registration as broker-
dealers, or that they are exempt from such registration.
The Private Investment Class is designed to be a convenient and economical way
to invest in an open-end diversified money market fund. It is anticipated that
most investors will perform their own subaccounting.
Investors in the Private Investment 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 Private Investment Class.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of ordinary
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays dividends
monthly. A business day is any day on which both the Federal Reserve Bank of
New York and The Bank of New York, the fund's custodian, are open for business.
Dividends are paid on settled shares of the fund as of 5:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 5:00 p.m. Eastern time and shareholders whose redemption proceeds have
not been wired to them on any business day are eligible to receive dividends on
that business day. The dividend declared on any day preceding a non-business
day of the fund will include the income accrued on such non-business day.
Dividends and distributions are paid in cash unless the shareholder has elected
to have such dividends and distributions reinvested in the form of additional
full and fractional shares at net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains (including net short-
term capital gains), if any, annually. The fund does not expect to realize any
long-term capital gains and losses.
4
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Private Investment Class. Certain information reflects
financial results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
PRIVATE INVESTMENT CLASS
--------------------------------------------
FOR THE PERIOD
FEBRUARY 16,
YEAR ENDED AUGUST 31, 1996 THROUGH
1999 1998 1997 AUGUST 31, 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.03
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.03)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 4.85% 5.43% 5.27% 2.74%
- ------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $266,031 $70,058 $70,856 $44,981
Ratio of expenses to
average net assets(a) 0.39%(b) 0.38% 0.36% 0.32%(c)
Ratio of net investment
income to average net
assets(d) 4.72%(b) 5.29% 5.16% 5.04%(c)
- ------------------------------------------------------------------------------
</TABLE>
(a) 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%, 0.68% and 0.69% (annualized) for the periods 1999-1996,
respectively.
(b) Ratios based on average net assets of $200,227,919.
(c) Annualized.
(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 4.42%, 4.99%, 4.84% and 4.67% (annualized) for the
periods 1999-1996, respectively.
5
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
The fund currently offers six classes of shares all of which share a common
investment objective and portfolio of investments. The six classes differ only
with respect to distribution arrangements for different categories of
investors.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Private Investment Class
that allows the fund to pay distribution fees to Fund Management Company (the
distributor) for the sale and distribution of its shares and fees for services
provided to shareholders. Because the fund pays these fees out of its assets on
an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
PURCHASING SHARES
The minimum initial investment in the Private Investment Class is $10,000. No
minimum amount is required for subsequent investments in the fund, nor are
minimum balances required.
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 fund. Purchase
orders received after such time will be processed at the next day's net asset
value. You may purchase shares by submitting an Account Application to the
fund's transfer agent, A I M Fund Services, Inc. (transfer agent) at P.O. Box
4497, Houston, Texas 77210-4497 prior to your initial purchase of shares. You
must open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds (member bank deposits with a
Federal Reserve Bank) for the order, provided the transfer agent has received
notice of the order. Subsequent purchases of shares of the funds may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
We may request that an institution maintain separate master accounts in the
fund for shares 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 may aggregate its master accounts and
subaccounts to satisfy the minimum investment requirement.
If you propose to open a fund account with an institution, you should consult
with a representative of such institution to obtain a description of the rules
governing such an account. A statement with regard to your investment in the
Private Investment Class is supplied periodically, and confirmations of all
transactions for your account are provided by the institution promptly upon
request. In addition, proxies, periodic reports and other information from the
institution with regard to your shares of the Private Investment Class will be
sent to you.
You may place an order for the purchase of shares of the Private Investment
Class with the institution. The institution is responsible for the prompt
transmission of the order to the transfer agent. The fund is normally required
to make immediate settlement in federal funds for portfolio securities
purchased. Accordingly, payment for shares of the Private Investment Class
purchased by institutions on behalf of their clients must be in federal funds.
If an order to purchase shares is paid for other than in federal funds, the
order may be delayed up to two business days while the institution completes
the conversion into federal funds.
REDEEMING SHARES
You may redeem any or all of your shares at the net asset value next
determined after receipt of a redemption request in proper form by the fund.
There is no charge for redemption. Redemption requests with respect to shares
of the Private Investment Class are normally made through a customer's
institution.
You may request a redemption by calling the transfer agent at (800) 877-7748,
or by using AIM LINK --Registered Trademark-- Remote. Payment for redeemed
shares is normally made by Federal Reserve wire to the commercial bank account
designated in your Account Application. You may also request that payment be
made by check. We use reasonable procedures to confirm that instructions
communicated by telephone are genuine and are not liable for telephone
instructions that are reasonably believed to be genuine. Such reasonable
procedures may include recordings of telephone transactions maintained for a
reasonable period of time.
Payment for redemption orders received prior to 5:00 p.m. Eastern time will
normally be made on the same day. Payment for shares redeemed by mail and
payment for telephone redemptions in amounts of less than $1,000 may be made by
check mailed within seven days after receipt of the redemption request in
proper form. The fund may make payment for telephone redemptions in excess of
$1,000 by check when it is considered to be in the fund's best interest to do
so.
Dividends payable up to the date of redemption on redeemed shares will
normally be paid by wire transfer on the next dividend payment date. However,
if all of the shares in your account are redeemed, you will receive dividends
payable up to the date of redemption with the proceeds of the redemption.
REDEMPTIONS BY THE FUND
If your account has been open at least one year, you have not made an
additional purchase in the account during the past six calendar months, and the
value of your account falls below $500 for three consecutive months due to
redemptions or exchanges (excluding retirement accounts), the fund has the
right to redeem the account after giving you 60 days' prior written notice. You
may avoid having your account redeemed during the notice period by bringing the
account value up to $500.
A-1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION (continued)
- --------------------------------------------------------------------------------
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem the account and distribute the proceeds to you.
------------------------------------
|THE FUND AND ITS AGENTS RESERVE |
|THE RIGHT AT ANY TIME TO: |
|. REJECT OR CANCEL ANY PART OF ANY|
| PURCHASE ORDER; |
|. MODIFY ANY TERMS OR CONDITIONS |
| OF PURCHASE OF SHARES OF THE |
| FUND; OR |
|. WITHDRAW ALL OR ANY PART OF THE |
| OFFERING MADE BY THIS |
| PROSPECTUS. |
------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each of the fund's shares is the fund's net asset value per share.
The fund determines the net asset value of its shares as of 5:00 p.m. Eastern
time on each day on which both the Federal Reserve Bank of New York and The
Bank of New York are open for business (business day). The fund values
portfolio securities on the basis of amortized cost, which approximates market
value.
TIMING OF ORDERS
The fund prices purchase and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form. If the
transfer agent receives a redemption request on a business day prior to 5:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 5:00 p.m. Eastern
time, the redemption will be processed at the net asset value next determined.
Shareholders will accrue dividends until the day the fund wires redemption
proceeds. The fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading. The fund
reserves the right to change the time for which purchase and redemption orders
must be submitted to and received by the transfer agent for execution on the
same day on any day when the primary government securities dealers are either
closed for business or close early, or trading in money market securities is
limited due to national holidays.
TAXES
Dividends and distributions received by shareholders are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether
reinvested in additional shares or taken in cash. Distributions are taxable at
different rates depending on the length of time the fund holds its assets.
Every year, information will be sent showing the amount of dividends and
distributions received from the fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of the
shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in the fund may
differ materially from the federal income tax consequences described above.
Shareholders should consult their tax advisor before investing.
A-2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds --Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 4497
Houston, TX 77210-4497
BY TELEPHONE: (800) 877-7748
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual and semiannual reports only)
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
|Liquid Assets Portfolio |
|SEC 1940 Act file number: 811-7892|
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
LIQUID ASSETS PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
RESERVE CLASS
Liquid Assets Portfolio seeks to provide as high a level of current
income as is consistent with the preservation of capital and
liquidity.
PROSPECTUS
DECEMBER 17, 1999
This prospectus contains important information
about the Reserve Class of the fund. Please read
it before investing and keep it for future
reference.
As with all other mutual fund securities, the
Securities and Exchange Commission has not
approved or disapproved these securities or
determined whether the information in this
prospectus is adequate or accurate. Anyone who
tells you otherwise is committing a crime.
There can be no assurance that the fund will be
able to maintain a stable net asset value of
$1.00 per share.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service (12b-1) Fees A-1
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
OBTAINING ADDITIONAL INFORMATION Back Cover
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund attempts to meet this objective by investing only in high-quality
U.S. dollar denominated short-term obligations, including:
. securities issued by the U.S. government or its agencies;
. bankers' acceptances, certificates of deposit and time deposits from banks;
. repurchase agreements;
. commercial paper;
. taxable municipal securities; and
. master notes.
The fund will maintain a weighted average maturity of 90 days or less. The
fund invests in compliance with Rule 2a-7 under the Investment Company Act of
1940. The fund may invest up to 50% of its assets in U.S. dollar-denominated
foreign securities.
The portfolio managers focus on securities they believe have favorable
prospects for current income consistent with the preservation of capital and
liquidity. The portfolio managers usually hold portfolio securities to
maturity, but may sell a particular security when they deem it advisable, such
as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash or shares of affiliated money market
funds. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
. sharply rising interest rates;
. downgrades of credit ratings or defaults of any of the fund's holdings; and
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in
selling the securities underlying the repurchase agreement. As a result, the
fund may incur losses arising from a decline in the value of those securities,
reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers
are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Institutional
Class shares from year to year. Neither the Reserve Class shares nor the
Institutional Class shares are subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURN
----------- ------
1994 4.37%
1995 6.08%
1996 5.52%
1997 5.67%
1998 5.61%
The returns are those of the fund's Institutional Class shares, which are not
offered in this prospectus. Reserve Class shares would have substantially
similar annual returns because the shares are invested in the same portfolio of
securities, but would be lower to the extent that the classes have different
expenses.
The Institutional Class shares' year-to-date total return as of September 30,
1999 was 3.79%.
During the periods shown in the bar chart, Institutional Class' highest
quarterly return was 1.52% (quarter ended June 30, 1995) and the lowest
quarterly return was 0.84% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table reflects the performance of Institutional Class
shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.61% 5.45% -- 5.39% 11/04/93
Reserve Class -- -- -- -- 01/04/99
- -------------------------------------------------------------------
</TABLE>
For the current seven-day yield of Reserve Class shares, call (800) 417-8837.
2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) RESERVE CLASS
- -----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(1) RESERVE CLASS
- -----------------------------------------------------------
Management Fees(2) 0.15%
Distribution and/or Service
(12b-1) Fees 1.00
Other Expenses 0.03
Total Annual Fund
Operating Expenses 1.18
Fee Waiver(3) 0.20
Net Expenses 0.98%
- -----------------------------------------------------------
</TABLE>
(1) The fees and expenses are based on estimated net assets for the current
fiscal period.
(2) The investment advisor has voluntarily agreed to limit Management Fees to
0.055%. This limitation can be terminated at any time. Total Annual Fund
Operating Expenses, net of this voluntary limitation, are 0.89%.
(3) The distributor has contractually agreed to waive 0.20% of the Rule 12b-1
distribution plan fee.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
You should also consider the effect of any account fees charged by the
financial institution managing the account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Reserve Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the fund's gross operating expenses remain the same. To the extent fees are
waived or expenses are reimbursed, the expenses will be lower. Although your
actual returns and costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- -----------------------------
<S> <C> <C>
Reserve Class $120 $375
- -----------------------------
</TABLE>
3
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 125
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended August 31, 1999, the advisor received compensation
of 0.06% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Reserve Class of the fund is intended for use primarily by institutional
customers of banks, certain broker-dealers and other financial institutions
(institutions). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an institution may invest in shares of the
Reserve Class through the institution, but may not purchase shares directly.
Each institution will render administrative support services to its customers
who are the beneficial owners of the shares of the Reserve Class. Such services
include, among other things, establishment and maintenance of shareholder
accounts and records; assistance in processing purchase and redemption
transactions in shares of the Reserve Class; providing periodic statements
showing a client's account balance in shares of the Reserve Class; distribution
of fund proxy statements, annual reports and other communications to
shareholders whose accounts are serviced by the institution; and such other
services as the fund may reasonably request. Institutions will be required to
certify to the fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.
The Reserve Class is designed to be a convenient and economical way to invest
in an open-end diversified money market fund. It is anticipated that most
investors will perform their own subaccounting.
Investors in the Reserve 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 Reserve Class.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of ordinary
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays dividends
monthly. A business day is any day on which both the Federal Reserve Bank of
New York and The Bank of New York, the fund's custodian, are open for business.
Dividends are paid on settled shares of the fund as of 5:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 5:00 p.m. Eastern time and shareholders whose redemption proceeds have
not been wired to them on any business day are eligible to receive dividends on
that business day. The dividend declared on any day preceding a non-business
day of the fund will include the income accrued on such non-business day.
Dividends and distributions are paid in cash unless the shareholder has elected
to have such dividends and distributions reinvested in the form of additional
full and fractional shares at net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains (including net short-
term capital gains), if any, annually. The fund does not expect to realize any
long-term capital gains and losses.
4
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
The fund currently offers six classes of shares all of which share a common
investment objective and portfolio of investments. The six classes differ only
with respect to distribution arrangements for different categories of
investors.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Reserve Class that allows
the fund to pay distribution fees to Fund Management Company (the distributor)
for the sale and distribution of its shares and fees for services provided to
shareholders. Because the fund pays these fees out of its assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
PURCHASING SHARES
The minimum initial investment in the Reserve Class is $1,000. No minimum
amount is required for subsequent investments in the fund, nor are minimum
balances required.
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 fund. Purchase
orders received after such time will be processed at the next day's net asset
value. You may purchase shares by submitting an Account Application to the
fund's transfer agent, A I M Fund Services, Inc. (transfer agent) at P.O. Box
4497, Houston, Texas 77210-4497 prior to your initial purchase of shares. You
must open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds (member bank deposits with a
Federal Reserve Bank) for the order, provided the transfer agent has received
notice of the order. Subsequent purchases of shares of the funds may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
We may request that an institution maintain separate master accounts in the
fund for shares 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 may aggregate its master accounts and
subaccounts to satisfy the minimum investment requirement.
If you propose to open a fund account with an institution, you should consult
with a representative of such institution to obtain a description of the rules
governing such an account. A statement with regard to your investment in the
Reserve Class is supplied periodically, and confirmations of all transactions
for your account are provided by the institution promptly upon request. In
addition, proxies, periodic reports and other information from the institution
with regard to your shares of the Reserve Class will be sent to you.
You may place an order for the purchase of shares of the Reserve Class with
the institution. The institution is responsible for the prompt transmission of
the order to the transfer agent. The fund is normally required to make
immediate settlement in federal funds for portfolio securities purchased.
Accordingly, payment for shares of the Reserve Class purchased by institutions
on behalf of their clients must be in federal funds. If an order to purchase
shares is paid for other than in federal funds, the order may be delayed up to
two business days while the institution completes the conversion into federal
funds.
REDEEMING SHARES
You may redeem any or all of your shares at the net asset value next determined
after receipt of a redemption request in proper form by the fund. There is no
charge for redemption. Redemption requests with respect to shares of the
Reserve Class are normally made through a customer's institution.
You may request a redemption by calling the transfer agent at (800) 417-8837,
or by using AIM LINK --Registered Trademark-- Remote. Payment for redeemed
shares is normally made by Federal Reserve wire to the commercial bank account
designated in your Account Application. You may also request that payment be
made by check. We use reasonable procedures to confirm that instructions
communicated by telephone are genuine and are not liable for telephone
instructions that are reasonably believed to be genuine. Such reasonable
procedures may include recordings of telephone transactions maintained for a
reasonable period of time.
Payment for redemption orders received prior to 5:00 p.m. Eastern time will
normally be made on the same day. Payment for shares redeemed by mail and
payment for telephone redemptions in amounts of less than $1,000 may be made by
check mailed within seven days after receipt of the redemption request in
proper form. The fund may make payment for telephone redemptions in excess of
$1,000 by check when it is considered to be in the fund's best interest to do
so.
Dividends payable up to the date of redemption on redeemed shares will
normally be paid by wire transfer on the next dividend payment date. However,
if all of the shares in your account are redeemed, you will receive dividends
payable up to the date of redemption with the proceeds of the redemption.
A-1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION (continued)
- --------------------------------------------------------------------------------
REDEMPTIONS BY THE FUND
If your account has been open at least one year, you have not made an
additional purchase in the account during the past six calendar months, and the
value of your account falls below $500 for three consecutive months due to
redemptions or exchanges (excluding retirement accounts), the fund has the
right to redeem the account after giving you 60 days' prior written notice. You
may avoid having your account redeemed during the notice period by bringing the
account value up to $500.
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem the account and distribute the proceeds to you.
- -------------------------------------
|THE FUND AND ITS AGENTS RESERVE |
|THE RIGHT AT ANY TIME TO: |
|. REJECT OR CANCEL ANY PART OF ANY |
| PURCHASE ORDER; |
|. MODIFY ANY TERMS OR CONDITIONS |
| OF PURCHASE OF SHARES OF THE |
| FUND; OR |
|. WITHDRAW ALL OR ANY PART OF THE |
| OFFERING MADE BY THIS |
| PROSPECTUS. |
- -------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each of the fund's shares is the fund's net asset value per share.
The fund determines the net asset value of its shares as of 5:00 p.m. Eastern
time on each day on which both the Federal Reserve Bank of New York and The
Bank of New York are open for business (business day). The fund values
portfolio securities on the basis of amortized cost, which approximates market
value.
TIMING OF ORDERS
The fund prices purchase and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form. If the
transfer agent receives a redemption request on a business day prior to 5:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 5:00 p.m. Eastern
time, the redemption will be processed at the net asset value next determined.
Shareholders will accrue dividends until the day the fund wires redemption
proceeds. The fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading. The fund
reserves the right to change the time for which purchase and redemption orders
must be submitted to and received by the transfer agent for execution on the
same day on any day when the primary government securities dealers are either
closed for business or close early, or trading in money market securities is
limited due to national holidays.
TAXES
Dividends and distributions received by shareholders are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether
reinvested in additional shares or taken in cash. Distributions are taxable at
different rates depending on the length of time the fund holds its assets.
Every year, information will be sent showing the amount of dividends and
distributions received from the fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of the
shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in the fund may
differ materially from the federal income tax consequences described above.
Shareholders should consult their tax advisor before investing.
A-2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds --Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 4497
Houston, TX 77210-4497
BY TELEPHONE: (800) 417-8837
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual and semiannual reports only)
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
------------------------------------
|Liquid Assets Portfolio |
|SEC 1940 Act file number: 811-7892|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
LIQUID ASSETS PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
RESOURCE CLASS
Liquid Assets Portfolio seeks to provide as high a level of current
income as is consistent with the preservation of capital and
liquidity.
PROSPECTUS
DECEMBER 17, 1999
This prospectus contains important information
about the Resource Class of the fund. Please read
it before investing and keep it for future
reference.
As with all other mutual fund securities, the
Securities and Exchange Commission has not
approved or disapproved these securities or
determined whether the information in this
prospectus is adequate or accurate. Anyone who
tells you otherwise is committing a crime.
There can be no assurance that the fund will be
able to maintain a stable net asset value of
$1.00 per share.
[AIM LOGO INVEST WITH DISCIPLINE --Registered Trademark--
APPEARS HERE]
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Suitability for Investors 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Distribution and Service (12b-1) Fees A-1
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
OBTAINING ADDITIONAL INFORMATION Back Cover
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund attempts to meet this objective by investing only in high-quality
U.S. dollar denominated short-term obligations, including:
. securities issued by the U.S. government or its agencies;
. bankers' acceptances, certificates of deposit and time deposits from banks;
. repurchase agreements;
. commercial paper;
. taxable municipal securities; and
. master notes.
The fund will maintain a weighted average maturity of 90 days or less. The
fund invests in compliance with Rule 2a-7 under the Investment Company Act of
1940. The fund may invest up to 50% of its assets in U.S. dollar-denominated
foreign securities.
The portfolio managers focus on securities they believe have favorable
prospects for current income consistent with the preservation of capital and
liquidity. The portfolio managers usually hold portfolio securities to
maturity, but may sell a particular security when they deem it advisable, such
as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash or shares of affiliated money market
funds. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
. sharply rising interest rates;
. downgrades of credit ratings or defaults of any of the fund's holdings; and
. the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in
selling the securities underlying the repurchase agreement. As a result, the
fund may incur losses arising from a decline in the value of those securities,
reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers
are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the Resource Class
shares from year to year. The Resource Class shares are not subject to sales
loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURN
----------- ------
1997 5.46%
1998 5.40%
The Resource Class shares' year-to-date total return as of September 30, 1999
was 3.64%.
During the periods shown in the bar chart, the highest quarterly return was
1.37% (quarter ended December 31, 1997) and the lowest quarterly return was
1.26% (quarter ended December 31, 1998).
PERFORMANCE TABLE
The following performance table reflects the performance of Resource Class
shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Resource Class 5.40% -- -- 5.43% 09/23/96
- --------------------------------------------------------------------------------
</TABLE>
Resource Class shares' seven-day yield on December 31, 1998 was 4.90%. For the
current seven-day yield, call (800) 246-3426.
2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(fees paid directly from
your investment) RESOURCE CLASS
- -----------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None
- -----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) RESOURCE CLASS
- -----------------------------------------------------------
Management Fees(1) 0.15%
Distribution and/or Service
(12b-1) Fees 0.20
Other Expenses 0.03
Total Annual Fund
Operating Expenses 0.38%
- -----------------------------------------------------------
</TABLE>
(1)The investment advisor has voluntarily agreed to limit Management Fees to
0.055%. This limitation can be terminated at any time. Total Annual Fund
Operating Expenses, net of this voluntary limitation, are 0.29%.
You should also consider the effect of any account fees charged by the
financial institution managing the account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Resource Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the fund's gross operating expenses remain the same. To the extent fees are
waived or expenses are reimbursed, the expenses will be lower. Although your
actual returns and costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------
<S> <C> <C> <C> <C>
Resource Class $39 $122 $213 $480
- -----------------------------------------------
</TABLE>
3
<PAGE>
------------------------
|LIQUID ASSETS PORFOLIO|
------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 125
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended August 31, 1999, the advisor received compensation
of 0.06% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SUITABILITY FOR INVESTORS
The Resource Class of the fund is intended for use primarily by institutional
customers of banks, certain broker-dealers and other financial institutions
(institutions). Individuals, corporations, partnerships and other businesses
that maintain qualified accounts at an institution may invest in shares of the
Resource Class through the institution, but may not purchase shares directly.
Each institution will render administrative support services to its customers
who are the beneficial owners of the shares of the Resource Class. Such
services include, among other things, establishment and maintenance of
shareholder accounts and records; assistance in processing purchase and
redemption transactions in shares of the Resource Class; providing periodic
statements showing a client's account balance in shares of the Resource Class;
distribution of fund proxy statements, annual reports and other communications
to shareholders whose accounts are serviced by the institution; and such other
services as the fund may reasonably request. Institutions will be required to
certify to the fund that they comply with applicable state law regarding
registration as broker-dealers, or that they are exempt from such registration.
The Resource Class is designed to be a convenient and economical way to invest
in an open-end diversified money market fund. It is anticipated that most
investors will perform their own subaccounting.
Investors in the Resource 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 Resource Class.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of ordinary
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays dividends
monthly. A business day is any day on which both the Federal Reserve Bank of
New York and The Bank of New York, the fund's custodian, are open for business.
Dividends are paid on settled shares of the fund as of 5:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 5:00 p.m. Eastern time and shareholders whose redemption proceeds have
not been wired to them on any business day are eligible to receive dividends on
that business day. The dividend declared on any day preceding a non-business
day of the fund will include the income accrued on such non-business day.
Dividends and distributions are paid in cash unless the shareholder has elected
to have such dividends and distributions reinvested in the form of additional
full and fractional shares at net asset value.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes net realized capital gains (including net short-
term capital gains), if any, annually. The fund does not expect to realize any
long-term capital gains and losses.
4
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Resource Class. Certain information reflects financial
results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
RESOURCE CLASS
--------------------------
FOR THE
PERIOD
SEPTEMBER 23,
YEAR ENDED 1996 THROUGH
AUGUST 31, AUGUST 31,
1999 1998 1997
- -------------------------------------------------------------------------------
<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 0.05
Less distributions:
Dividends from net investment
income (0.05) (0.05) (0.05)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
Total return 4.96% 5.53% 5.04%
- -------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $306,758 $86,041 $80,510
Ratio of expenses to average net
assets(a) 0.29%(b) 0.28% 0.27%(c)
Ratio of net investment income to
average net assets(d) 4.82%(b) 5.40% 5.34%(c)
- -------------------------------------------------------------------------------
</TABLE>
(a) 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%, 0.38% and 0.39% (annualized) for the periods 1999-1997,
respectively.
(b) Ratios are based on average net assets of $125,571,582.
(c) Annualized.
(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 4.72%, 5.30% and 5.22% (annualized) for the periods
1999-1997, respectively.
5
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
The fund currently offers six classes of shares all of which share a common
investment objective and portfolio of investments. The six classes differ only
with respect to distribution arrangements for different categories of
investors.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund has adopted a 12b-1 plan with respect to the Resource Class that
allows the fund to pay distribution fees to Fund Management Company (the
distributor) for the sale and distribution of its shares and fees for services
provided to shareholders. Because the fund pays these fees out of its assets on
an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
PURCHASING SHARES
The minimum initial investment in the Resource Class is $10,000. No minimum
amount is required for subsequent investments in the fund, nor are minimum
balances required.
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 fund. Purchase
orders received after such time will be processed at the next day's net asset
value. You may purchase shares by submitting an Account Application to the
fund's transfer agent, A I M Fund Services, Inc. (transfer agent) at P.O. Box
4497, Houston, Texas 77210-4497 prior to your initial purchase of shares. You
must open a fund account through an institution in accordance with procedures
established by such institution. A purchase order is considered received at the
time The Bank of New York receives federal funds (member bank deposits with a
Federal Reserve Bank) for the order, provided the transfer agent has received
notice of the order. Subsequent purchases of shares of the funds may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
We may request that an institution maintain separate master accounts in the
fund for shares 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 may aggregate its master accounts and
subaccounts to satisfy the minimum investment requirement.
If you propose to open a fund account with an institution, you should consult
with a representative of such institution to obtain a description of the rules
governing such an account. A statement with regard to your investment in the
Resource Class is supplied periodically, and confirmations of all transactions
for your account are provided by the institution promptly upon request. In
addition, proxies, periodic reports and other information from the institution
with regard to your shares of the Resource Class will be sent to you.
You may place an order for the purchase of shares of the Resource Class with
the institution. The institution is responsible for the prompt transmission of
the order to the transfer agent. The fund is normally required to make
immediate settlement in federal funds for portfolio securities purchased.
Accordingly, payment for shares of the Resource Class purchased by institutions
on behalf of their clients must be in federal funds. If an order to purchase
shares is paid for other than in federal funds, the order may be delayed up to
two business days while the institution completes the conversion into federal
funds.
REDEEMING SHARES
You may redeem any or all of your shares at the net asset value next determined
after receipt of a redemption request in proper form by the fund. There is no
charge for redemption. Redemption requests with respect to shares of the
Resource Class are normally made through a customer's institution.
You may request a redemption by calling the transfer agent at (800) 246-3426,
or by using AIM LINK --Registered Trademark-- Remote. Payment for redeemed
shares is normally made by Federal Reserve wire to the commercial bank account
designated in your Account Application. You may also request that payment be
made by check. We use reasonable procedures to confirm that instructions
communicated by telephone are genuine and are not liable for telephone
instructions that are reasonably believed to be genuine. Such reasonable
procedures may include recordings of telephone transactions maintained for a
reasonable period of time.
Payment for redemption orders received prior to 5:00 p.m. Eastern time will
normally be made on the same day. Payment for shares redeemed by mail and
payment for telephone redemptions in amounts of less than $1,000 may be made by
check mailed within seven days after receipt of the redemption request in
proper form. The fund may make payment for telephone redemptions in excess of
$1,000 by check when it is considered to be in the fund's best interest to do
so.
Dividends payable up to the date of redemption on redeemed shares will
normally be paid by wire transfer on the next dividend payment date. However,
if all of the shares in your account are redeemed, you will receive dividends
payable up to the date of redemption with the proceeds of the redemption.
REDEMPTIONS BY THE FUND
If your account has been open at least one year, you have not made an
additional purchase in the account during the past six calendar months, and the
value of your account falls below $500 for three consecutive months due to
redemptions or exchanges (excluding retirement accounts), the fund has the
right to redeem the account after giving you 60 days' prior written
A-1
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
SHAREHOLDER INFORMATION (continued)
- --------------------------------------------------------------------------------
notice. You may avoid having your account redeemed during the notice period by
bringing the account value up to $500.
If the fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem the account and distribute the proceeds to you.
- ------------------------------------
|THE FUND AND ITS AGENTS RESERVES |
|THE RIGHT AT ANY TIME TO: |
|. REJECT OR CANCEL ANY PART OF ANY|
| PURCHASE ORDER; |
|. MODIFY ANY TERMS OR CONDITIONS |
| OF PURCHASE OF SHARES OF THE |
| FUND; OR |
|. WITHDRAW ALL OR ANY PART OF THE |
| OFFERING MADE BY THIS |
| PROSPECTUS. |
- ------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each of the fund's shares is the fund's net asset value per share.
The fund determines the net asset value of its shares as of 5:00 p.m. Eastern
time on each day on which both the Federal Reserve Bank of New York and The
Bank of New York are open for business (business day). The fund values
portfolio securities on the basis of amortized cost, which approximates market
value.
TIMING OF ORDERS
The fund prices purchase and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form. If the
transfer agent receives a redemption request on a business day prior to 5:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 5:00 p.m. Eastern
time, the redemption will be processed at the net asset value next determined.
Shareholders will accrue dividends until the day the fund wires redemption
proceeds. The fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the New York Stock Exchange restricts or suspends trading. The fund
reserves the right to change the time for which purchase and redemption orders
must be submitted to and received by the transfer agent for execution on the
same day on any day when the primary government securities dealers are either
closed for business or close early, or trading in money market securities is
limited due to national holidays.
TAXES
Dividends and distributions received by shareholders are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether
reinvested in additional shares or taken in cash. Distributions are taxable at
different rates depending on the length of time the fund holds its assets.
Every year, information will be sent showing the amount of dividends and
distributions received from the fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of the
shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in the fund may
differ materially from the federal income tax consequences described above.
Shareholders should consult their tax advisor before investing.
A-2
<PAGE>
-------------------------
|LIQUID ASSETS PORTFOLIO|
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds --Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 4497
Houston, TX 77210-4497
BY TELEPHONE: (800) 246-3426
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual and semiannual reports only)
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
------------------------------------
|Liquid Assets Portfolio |
|SEC 1940 Act file number: 811-7892|
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
INVEST WITH DISCIPLINE --Registered Trademark--
