<PAGE>
As filed with the Securities and Exchange Commission on May 23, 2000
1933 Act Registration No. 33-66240
1940 Act Registration No. 811-7892
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. _ _
Post-Effective Amendment No. 12 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 13
(Check appropriate box or boxes.)
SHORT-TERM INVESTMENTS CO.
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(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
---------------
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
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(Name and Address of Agent for Service)
Copy to:
Renee A. Friedli, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment
It is proposed that this filing will become effective (check appropriate box)
_ immediately upon filing pursuant to paragraph (b)
X on June 1, 2000 pursuant to paragraph (b)
_ 60 days after filing pursuant to paragraph (a)(1)
_ on (date) pursuant to paragraph (a)(1)
_ 75 days after filing pursuant to paragraph (a)(2)
_ on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
X This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Common Stock
<PAGE>
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
JUNE 1, 2000
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.
An investment in the fund:
.is not FDIC insured;
.may lose value; and
.is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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 investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its 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. Any percentage limitations with respect to assets of the
fund are applied at the time of purchase.
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 in 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 or are sold, 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 in enforcing its rights.
1
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| LIQUID ASSETS PORTFOLIO |
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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 RETURNS
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1997 5.59%
1998 5.53%
1999 5.17%
The Cash Management Class shares' year-to-date total return as of March 31,
2000 was 1.43%.
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
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<S> <C> <C> <C> <C> <C>
Cash Management Class 5.17% -- -- 5.43% 01/17/96
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</TABLE>
Cash Management Class shares' seven-day yield on December 31, 1999 was 5.34%.
For the current seven-day yield, call (800) 877-7745.
2
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| LIQUID ASSETS PORTFOLIO |
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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
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<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
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ANNUAL FUND OPERATING EXPENSES
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(expenses that are deducted
from fund assets) CASH MANAGEMENT CLASS
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Management Fees 0.15%
Distribution and/or Service
(12b-1) Fees 0.10
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.28
</TABLE>
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(1) The distributor has agreed to waive 0.02% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Management Fees to 0.055%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 0.17%.
You should also consider the effect of any account fees charged by the
financial institution managing your 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
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<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 120
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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997 and for the
period January 17, 1996 through August 31, 1996 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 FOR THE PERIOD
SEPTEMBER 1, 1999 JANUARY 17, 1996
THROUGH YEAR ENDED AUGUST 31, THROUGH
FEBRUARY 29, 2000 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 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.05 0.06 0.05 0.03
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.06) (0.05) (0.03)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.76% 5.09% 5.66% 5.50% 3.32%
- -------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- -------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $2,708,767 $1,078,777 $655,975 $83,487 $53,209
Including fee waivers
and/or expense
reimbursements 0.17%(b) 0.17% 0.16% 0.15% 0.10%(c)
Excluding fee waivers
and/or expense
reimbursements 0.28%(b) 0.28% 0.28% 0.28% 0.34%(c)
Ratio of net investment
income to average net
assets 5.53%(b) 4.94% 5.51% 5.38% 5.27%(c)
- -------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $2,314,780,004.
(c) Annualized.
5
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| LIQUID ASSETS PORTFOLIO |
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SHAREHOLDER INFORMATION
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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 0843,
Houston, Texas 77001-0843 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 fund 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
<PAGE>
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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 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. |
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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 0843
Houston, TX 77001-0843
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-- --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
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --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
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
STATEMENT OF ADDITIONAL INFORMATION B-1
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<S> <C>
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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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 investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its 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. Any percentage limitations with respect to assets of the
fund are applied at the time of purchase.
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 in 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 or are sold, 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 in enforcing its rights.
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 RETURNS
----------- -------
1994 4.37%
1995 6.08%
1996 5.52%
1997 5.67%
1998 5.61%
1999 5.24%
The Institutional Class shares' year-to-date total return as of March 31, 2000
was 1.45%.
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.24% 5.62% -- 5.36% 11/04/93
- ---------------------------------------------------------------------
</TABLE>
Institutional Class shares' seven-day yield on December 31, 1999 was 5.42%. For
the current seven-day yield, 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 agreed to limit Management Fees to 0.055%. The
expense limitation may be terminated at any time. Total Annual Fund
Operating Expenses, net of this agreement, are 0.09%.
You should also consider the effect of any account fees charged by the
financial institution managing your 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 120
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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997, 1996 and 1995
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
----------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 1, 1999
THROUGH YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.05 0.06 0.05 0.06 0.06
Less distributions:
Dividends from net
investment income (0.03) (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 $ 1.00
Total return(a) 2.80% 5.17% 5.74% 5.58% 5.68% 5.83%
- -------------------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- -------------------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $15,639,960 $4,541,935 $3,097,539 $3,787,357 $1,988,755 $1,287,463
Ratio of expenses to
average net assets
Including fee waivers
and/or expense
reimbursements 0.09%(b) 0.09% 0.08% 0.06% 0.03% 0.11%
Excluding fee waivers
and/or expense
reimbursements 0.18%(b) 0.18% 0.18% 0.18% 0.18% 0.18%
Ratio of net investment
income to average net
assets 5.61%(b) 5.02% 5.59% 5.46% 5.52% 5.69%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $12,021,004,659.
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
0843, Houston, Texas 77001-0843 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 fund 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>
---------------------------
| 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 0843
Houston, TX 77001-0841
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
- --Registered Trademark-- 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
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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 investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its 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. Any percentage limitations with respect to assets of the
fund are applied at the time of purchase.
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 in 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 or are sold, 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 in enforcing its rights.
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 RETURNS
----------- -------
1994 4.37%
1995 6.08%
1996 5.52%
1997 5.67%
1998 5.61%
1999 5.24%
The returns shown are those of the fund's Institutional Class shares, which
are not offered in this prospectus. Personal Investment Class shares would have
lower annual returns because, although the shares are invested in the same
portfolio of securities, the Personal Investment Class has higher expenses.
The Institutional Class and the Personal Investment Class shares' year-to-date
total return as of March 31, 2000 was 1.45% and 1.33%, respectively.
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.24% 5.62% -- 5.36% 11/04/93
- ----------------------------------------------------------------------
Personal Investment Class -- -- -- -- 01/04/99
- ----------------------------------------------------------------------
</TABLE>
Personal Investment Class shares' seven-day yield on December 31, 1999 was
4.92%. For the current seven-day yield, 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 0.15%
Distribution and/or Service
(12b-1) Fees 0.75
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.93
- -----------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.25% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Management Fees to 0.055%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 0.59%.
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 your 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 120
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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the period January 4, 1999 through August 31, 1999 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
FOR THE PERIOD
PERIOD JANUARY 4,
SEPTEMBER 1, 1999
1999 THROUGH THROUGH
FEBRUARY 29, AUGUST 31,
2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $1.00 $ 1.00
Income from investment operations:
Net investment income 0.03 0.01
Less distributions:
Dividends from net investment income (0.03) (0.01)
Net asset value, end of period $1.00 $ 1.00
Total return(a) 2.55% 2.94%
- -------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------
Net assets, end of period (000s
omitted) $5,276 $ 994
Ratio of expenses to average net assets
Including fee waivers and/or expense
reimbursements 0.58%(b) 0.59%(c)
Excluding fee waivers and/or expense
reimbursements 0.92%(b) 0.93%(c)
Ratio of net investment income to
average net assets 5.12%(b) 4.52%(c)
- -------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $2,717,394.
(d) 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
0843, Houston, Texas 77001-0843 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 fund 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 0843
Houston, TX 77001-0843
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
- --Registered Trademark-- 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
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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 investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its 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. Any percentage limitations with respect to assets of the
fund are applied at the time of purchase.
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 in 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 or are sold, 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 in enforcing its rights.
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 RETURNS
----------- -------
1997 5.36%
1998 5.30%
1999 4.92%
The Private Investment Class shares' year-to-date total return as of March 31,
2000 was 1.38%.
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private Investment Class 4.92% -- -- 5.19% 02/16/96
- ---------------------------------------------------------------------
</TABLE>
Private Investment Class shares' seven-day yield on December 31, 1999 was
5.12%. 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 0.15%
Distribution and/or Service
(12b-1) Fees 0.50
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.68
- --------------------------------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.20% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Management Fees to 0.055%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 0.39%.
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 your 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 120
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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997 and for the
period February 16, 1996 through August 31, 1996 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 FOR THE PERIOD
SEPTEMBER 1, 1999 FEBRUARY 16,
THROUGH YEAR ENDED AUGUST 31, 1996 THROUGH
FEBRUARY 29, 2000 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 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.03
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.03)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.65 4.85% 5.43% 5.27% 2.74%
- -----------------------------------------------------------------------------------------
Ratios/supplemental
data:
- -----------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $472,346 $266,031 $70,058 $70,856 $44,981
Ratio of expenses to
average net assets
Including fee waivers
and/or expense
reimbursements 0.39%(b) 0.39% 0.38% 0.36% 0.32%(c)
Excluding fee waivers
and/or expense
reimbursements 0.68%(b) 0.68% 0.68% 0.68% 0.69%(c)
Ratio of net investment
income to average net
assets 5.31%(b) 4.72% 5.29% 5.16% 5.04%(c)
- --------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $408,036,637.
(c) 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 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
0843, Houston, Texas 77001-0843 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 fund 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 0843
Houston, TX 77001-0843
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
- --Registered Trademark-- 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
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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 Investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its 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. Any percentage limitations with respect to assets of the
fund are applied at the time of purchase.
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 in 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 or are sold, 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 in enforcing its rights.
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 RETURNS
----------- -------
1994 4.37%
1995 6.08%
1996 5.52%
1997 5.67%
1998 5.61%
1999 5.24%
The returns shown are those of the fund's Institutional Class shares, which
are not offered in this prospectus. Reserve Class shares would have lower
annual returns because, although the shares are invested in the same portfolio
of securities, the Reserve Class has higher expenses.
The Institutional Class and the Reserve Class shares' year-to-date total
return as of March 31, 2000 was 1.45% and 1.25%, respectively.
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.24% 5.62% -- 5.36% 11/04/93
- -------------------------------------------------------------------
Reserve Class -- -- -- -- 01/14/00
- -------------------------------------------------------------------
</TABLE>
For the current seven-day yield of Reserve Class, 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 0.15%
Distribution and/or Service
(12b-1) Fees 1.00
Other Expenses 0.03
Total Annual Fund
Operating Expenses 1.18
</TABLE>
- --------------------------------------------------------------------------------
(1) The fees and expenses are based on estimated net assets for the current
fiscal period.
(2) The distributor has agreed to waive 0.20% of the Rule 12b-1 distribution
fee. The investment advisor has agreed to limit Management Fees to 0.055%.
The waivers and/or expense limitations may be terminated at any time. Total
Annual Fund Operating Expenses, net of these agreements, are 0.89%.
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 your 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 120
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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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 Reserve 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).
The information for the period ended February 29, 2000 is unaudited.
<TABLE>
<CAPTION>
RESERVE CLASS
-----------------
FOR THE PERIOD
JANUARY 14,
THROUGH
FEBRUARY 29, 2000
- -----------------------------------------------------------------------
<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) 0.64%
- -----------------------------------------------------------------------
Ratios/supplemental data:
- -----------------------------------------------------------------------
Net assets, end of period (000s omitted) $108
Ratio of expenses to average net assets
Including fee waivers and/or expense reimbursements 0.89%(b)
Excluding fee waivers and/or expense reimbursements 1.18%(b)
Ratio of net investment income to average net assets 4.81%(b)
- -----------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $120,265.
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 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
0843 Houston, Texas 77001-0843 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 fund 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 0843
Houston, TX 77001-0843
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
- --Registered Trademark-- 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
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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 investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its 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. Any percentage limitations with respect to assets of the
fund are applied at the time of purchase.
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 in 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 or are sold, 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 in enforcing its rights.
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 RETURNS
----------- -------
1997 5.46%
1998 5.40%
1999 5.03%
The Resource Class shares' year-to-date total return as of March 31, 2000 was
1.40%.
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Resource Class 5.03% -- -- 5.30% 09/23/96
- -----------------------------------------------------------------------
</TABLE>
Resource Class shares' seven-day yield on December 31, 1999 was 5.22%. 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 0.15%
Distribution and/or Service
(12b-1) Fees 0.20
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.38
- -----------------------------------------------------------
</TABLE>
(1) The investment advisor has agreed to limit Management Fees to 0.055%. The
expense limitation may be terminated at any time. Total Annual Fund
Operating Expenses, net of this agreement, are 0.29%
You should also consider the effect of any account fees charged by the
financial institution managing your 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 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 120
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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998 and for the period
September 23, 1996 through August 31, 1997 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 FOR THE PERIOD
SEPTEMBER 1, 1999 YEAR ENDED SEPTEMBER 23, 1996
THROUGH AUGUST 31, THROUGH
FEBRUARY 29, 2000 1999 1998 AUGUST 31, 1997
- --------------------------------------------------------------------------------
<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 0.03 0.05 0.05 0.05
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.70% 4.96% 5.53% 5.04%
- ---------------------------------------------------------------------------------
Ratios/supplemental
data:
- ---------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $1,235,011 $306,758 $86,041 $80,510
Ratio of expenses to
average net assets
Including fee waivers
and/or expense
reimbursements 0.29%(b) 0.29% 0.28% 0.27%(c)
Excluding fee waivers
and/or expense
reimbursements 0.38%(b) 0.38% 0.38% 0.39%(c)
Ratio of net investment
income to average net
assets 5.41%(b) 4.82% 5.40% 5.34%(c)
- ---------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $380,923,463.
(c) 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 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
0843, Houston, Texas 77001-0843 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 fund 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 0843
Houston, TX 77001-0843
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
- --Registered Trademark-- INVEST WITH DISCIPLINE --Registered Trademark--
<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 JUNE 1, 2000
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE LIQUID
ASSETS PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED JUNE 1, 2000,
INSTITUTIONAL CLASS PROSPECTUS DATED JUNE 1, 2000, PERSONAL INVESTMENT CLASS
PROSPECTUS DATED JUNE 1, 2000, PRIVATE INVESTMENT CLASS PROSPECTUS DATED JUNE
1, 2000, RESERVE CLASS PROSPECTUS DATED JUNE 1, 2000 AND RESOURCE CLASS
PROSPECTUS DATED JUNE 1, 2000
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction......................................................... B-3
General Information about the Company................................ B-3
The Company and Its Shares......................................... B-3
Directors and Officers............................................. B-5
Remuneration of Directors.......................................... B-7
AIM Funds Retirement Plan for Eligible Directors/Trustees.......... B-7
Deferred Compensation Agreements................................... B-8
Investment Advisor................................................. B-8
Administrator...................................................... B-9
Expenses........................................................... B-9
Transfer Agent and Custodian....................................... B-10
Legal Matters...................................................... B-10
Reports............................................................ B-10
Sub-Accounting..................................................... B-10
Principal Holders of Securities.................................... B-11
Liquid Assets Portfolio............................................ B-11
Prime Portfolio.................................................... B-13
Share Purchases and Redemptions...................................... B-15
Purchases and Redemptions.......................................... B-16
Redemptions by the Company......................................... B-16
Net Asset Value Determination...................................... B-16
The Distribution Agreement......................................... B-17
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-26
General Brokerage Policy........................................... B-26
Allocation of Portfolio Transactions............................... B-26
Section 28(e) Standards............................................ B-27
Dividends, Distributions and Tax Matters............................. B-28
Dividends and Distributions........................................ B-28
Tax Matters........................................................ B-28
Qualification as a Regulated Investment Company.................... B-28
Excise Tax on Regulated Investment Companies....................... B-29
Portfolio Distributions............................................ B-29
Sale or Redemption of Shares....................................... B-29
Foreign Shareholders............................................... B-30
Effect of Future Legislation; Local Tax Considerations............. B-30
Financial Statements................................................. FS
</TABLE>
B-2
<PAGE>
INTRODUCTION
The Liquid Assets Portfolio (the "Portfolio") is an investment portfolio of
Short-Term Investments Co. (the "Company"), 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 June 1, 2000, the Institutional Class Prospectus dated June
1, 2000, the Personal Investment Class Prospectus dated June 1, 2000, the
Private Investment Class Prospectus dated June 1, 2000, the Reserve Class
Prospectus dated June 1, 2000 and the Resource Class Prospectus dated June 1,
2000 (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 Company 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 COMPANY
THE COMPANY AND ITS SHARES
The Company 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 Company are redeemable at their net asset value at the
option of the shareholder or at the option of the Company 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 Company offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Prime Portfolio. 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. The Prime Portfolio consists of
six classes of shares, each having different shareholder qualifications and
bearing expenses differently. This Statement of Additional Information relates
to the six classes 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 Company, a particular portfolio or a particular class means, respectively,
the vote of the lesser of (i) 67% or more of the shares of the Company, such
portfolio or such class present at a meeting of the Company's shareholders, if
the holders of more than 50% of the outstanding shares of the Company, such
portfolio or such class are present or represented by proxy, or (ii) more than
50% of the outstanding shares of the Company, such portfolio or such class.
Shareholders of the Company do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the
Company voting together for election of directors can elect all of the members
of the Board of Directors of the Company. In such event, the remaining holders
cannot elect any members of the Board of Directors of the Company.
There are no preemptive or conversion rights applicable to any of the
Company's shares. The Company'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 Articles of Incorporation of the Company authorize the issuance of
253.98 billion shares with a par value of $.001 each, of which 108.46 billion
shares represent an interest in the Portfolio (or class thereof) and 97.12
billion shares represent an interest in the Prime Portfolio (or class
thereof).
B-3
<PAGE>
A share of a portfolio (or class) represents an equal proportionate interest
in such portfolio (or class) with each other share of that portfolio (or
class) and is entitled to a proportionate interest in the dividends and
distributions from that portfolio (or class).
The assets received by the Company 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 each of the portfolios are segregated and are charged
with the expenses with respect to that portfolio and with a share of the
general expenses of the Company. While the expenses of the Company 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 Company.
The Articles of Incorporation provide that no director or officer of the
Company shall be liable to the Company 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 Company against any liability to the
Company 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
Company shall indemnify and advance expenses to its currently acting and
former directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The Company 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 Company to the fullest
extent permitted by the Maryland General Corporation Law.
As described in each Prospectus, the Company 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 Company will provide a list of shareholders to the
requesting shareholders or 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 Company is vested
with its Board of Directors. The Board of Directors approves all significant
agreements between the Company and persons or companies furnishing services to
the Company, including agreements with the Company's investment advisor,
distributor; custodian and transfer agent. The day-to-day operations of the
Company are delegated to the Company's officers and to A I M Advisors, Inc.
("AIM"), subject always to the objective and policies of the Company and to
the general supervision of the Company's Board of Directors. Certain directors
and officers of the Company 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 Company 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
==============================================================================================
<S> <C> <C>
*CHARLES T. BAUER (81) Director and Chairman Director and Chairman,
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 (56) 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 Formerly, Director,
Six Blythewood Road Cortland Trust Inc.
Baltimore, MD 21210 (investment company),
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, Directors, Mercantile
Suite 805 Mortgage Corp. Formerly,
Baltimore, MD 21201 Vice Chairman of the Board of
Directors, President and Chief
Operating Officer, Mercantile -
Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
- ----------------------------------------------------------------------------------------------
JACK M. FIELDS (48) Director Chief Executive Officer,
Jetero Plaza, Suite E Texana Global, Inc.
8810 Will Clayton Parkway (foreign trading company)
Humble, TX 77338 and Twenty First Century Group,
Inc. (a governmental affairs
company). Formerly, Member of
the U.S. House of Representatives.
- ----------------------------------------------------------------------------------------------
**CARL FRISCHLING (63) 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 and CEO, Managed
Products AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Director Chief Executive Officer,
350 Fifth Avenue, Suite 301 YWCA of the USA
New York, NY 10118
- ----------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Director Partner, Pennock & Cooper
6363 Woodway, Suite 825 (law firm).
Houston, TX 77057
- ----------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Director Executive Vice President,
The Williams Tower, 50th Floor Development and Operations,
2800 Post Oak Blvd. Hines Interests Limited
Houston, TX 77056 Partnership (real estate
development).
==============================================================================================
</TABLE>
- -------
* A director who is an "interested person" of the Company and AIM as defined
in the 1940 Act.
** A director who is an "interested person" of the Company 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 President,
and Secretary 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 (41) 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 (40) Vice President Senior Vice President, A I M
Capital Management, Inc. and
Vice President, A I M Advisors,
Inc.
- -------------------------------------------------------------------------------
J. ABBOTT SPRAGUE (45) 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>
The Board of Directors has an Audit Committee, a Capitalization Committee,
an Investments Committee and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's
recommendations of independent accountants for each portfolio and evaluating
such accountants' performance, costs and financial stability; (ii) with AIM,
reviewing and coordinating audit plans prepared by the portfolios' independent
accountants and management's internal audit staff; and (iii) reviewing
financial statements contained in periodic reports to shareholders with the
portfolios' independent accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for: (i)
increasing or decreasing the aggregate number of shares of any class of the
Company's common stock by classifying and reclassifying the Company's
authorized but unissued shares of common stock, up to the Company's authorized
capital; (ii) fixing the terms of such classified or reclassified shares of
common stock; and (iii) issuing such classified or reclassified shares of
common stock upon the terms set forth in the applicable portfolio's
prospectus, up to the Company's authorized capital.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly,
Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr. Mathai-Davis.
The Investments Committee is responsible for: (i) overseeing AIM's investment-
related compliance systems and procedures to ensure their continued adequacy;
and (ii) considering and acting, on an interim basis between meetings of the
full Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-
Davis. The Nominating and Compensation Committee is responsible for: (i)
considering and nominating individuals to stand for election as independent
directors as long as the Company maintains a distribution plan pursuant to
Rule 12b-1 under the 1940 Act; (ii) reviewing from time to time the
compensation payable to the independent directors; and (iii) making
recommendations to the Board regarding matters related to compensation,
including deferred compensation plans and retirement plans for the independent
directors.
The Nominating and Compensation Committee will consider nominees recommended
by a shareholder to serve as directors, provided (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which directors will be elected, and
(ii) that the Nominating and Compensation Committee or the Board, as
applicable, shall make the final determination of persons to be nominated.
B-6
<PAGE>
All of the Company'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
Company'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. The directors of
the Company who do not serve as officers of the Company are compensated for
their services according to a fee schedule which recognizes the fact that they
also serve as directors or trustees 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 Company:
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION RETIREMENT BENEFITS TOTAL COMPENSATION
DIRECTOR FROM COMPANY(1) ACCRUED BY ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
-------- ---------------------- ----------------------------- -----------------------
<S> <C> <C> <C>
Charles T. Bauer........ -0- -0- -0-
Bruce L. Crockett....... $9,888 $ 37,485 $103,500
Owen Daly II............ 9,888 122,898 103,500
Edward K Dunn, Jr....... 9,888 55,565 103,500
Jack M. Fields.......... 9,845 15,826 101,500
Carl Frischling(4)...... 9,844 97,791 103,500
Robert H. Graham........ -0- -0- -0-
John F. Kroeger(5)...... 731 40,461 -0-
Prema Mathai-Davis...... 9,337 11,870 101,500
Lewis F. Pennock........ 9,844 45,766 103,500
Ian W. Robinson(6)...... 5,857 94,442 25,000
Louis S. Sklar.......... 9,844 90,232 101,500
</TABLE>
- -------
(1) The total amount of compensation deferred by all directors of the Company
during the fiscal year ended August 31, 1999, including earnings thereon,
was $61,406.
(2) During the fiscal year ended August 31, 1999, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$96,514. Data reflects compensation earned for the calendar year ended
December 31, 1999.
(3) Each director serves as a director or trustee of at least 12 registered
investment companies advised by AIM as of December 31, 1999. Data reflects
compensation earned during the calendar year ended December 31, 1999.
(4) The Company paid the law firm of Kramer Levin Naftalis & Frankel LLP
$15,490 in legal fees for services provided to the independent directors
of the Company during the fiscal year ended August 31, 1999. Mr.
Frischling, a director of the Company, is a partner in such firm.
(5) Mr. Kroeger was a director of the Company until June 11, 1998. 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.
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, a director becomes eligible to retire and to receive full benefits
under the Plan when he or she 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 or her 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 all benefits under the Plan, 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.
B-7
<PAGE>
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming the retainer amount reflected
below and various years of service. The estimated credited years of service
for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18, 11, 10
and 1 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
ANNUAL RETIREMENT
COMPENSATION PAID
NUMBER OF YEARS BY ALL
OF 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, and Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Directors") have each executed
a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Directors
may elect to defer receipt of up to 100% of their compensation payable by the
Company, 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 accounts 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 Compensation Agreement) beginning on the date the Deferring
Director's retirement benefits commence under the Plan. The 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 Company. If a Deferring Director dies prior to
the distribution of amounts in his or her deferral account, the balance of the
deferral account will be distributed to his or her designated beneficiary in a
single lump sum payment as soon as practicable after such Deferring Director's
death. The Compensation 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 Company 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 120 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
Company, and their affiliations and addresses are shown under "Directors and
Officers."
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 Company have adopted a Code of Ethics which requires investment
personnel and certain other employees to (a) pre-clear all personal securities
transactions subject to the Code of Ethics; (b) file reports regarding such
transactions; (c) 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 (subject to a de minimis
exception), and (iii) transactions involving securities being considered for
investment by an AIM Fund (subject to the de minimis exception); and (d) abide
by certain other provisions of the Code of Ethics. The de minimis exception
under the Code of Ethics covers situations where there is no material conflict
of interest because of the large market capitalization of a security and the
relatively small number of shares involved in a personal transaction. The Code
of Ethics also generally prohibits AIM employees from purchasing securities in
initial public offerings. Personal trading reports are periodically reviewed
by AIM, and the Board of Directors reviews quarterly and annual reports (which
summarize any significant violations of the Code of Ethics). Sanctions for
violating the Code of Ethics may include censure, monetary penalties,
suspension or termination of employment.
B-8
<PAGE>
The Company has entered into a Master Investment Advisory Agreement (the
"Advisory Agreement") with AIM dated June 1, 2000. The Advisory Agreement will
continue from year to year, provided that it is specifically approved at least
annually by the Company'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 Company 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 at all times will be
subject to the policies and control of the Company's Board of Directors. AIM
shall not be liable to the Company or its shareholders for any act or omission
by AIM or for any loss sustained by the Company 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. 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 Company.
Pursuant to an investment advisory agreement in effect prior to June 1,
2000, which provided for the same level of compensation to AIM as is provided
for under the Advisory Agreement, AIM received fees from the Portfolio for the
fiscal years ended August 31, 1999, 1998 and 1997 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.
In addition, if the Portfolio engages in securities lending, AIM will
provide the Portfolio investment advisory services and related administrative
services. The Master Investment Advisory Agreement describes the
administrative services to be rendered by AIM if the Portfolio engages in
securities lending activities, as well as the compensation AIM may receive for
such administrative services. Services to be provided include: (a) overseeing
participation in the securities lending program to ensure compliance with all
applicable regulatory and investment guidelines; (b) assisting the securities
lending agent or principal (the agent) in determining which specific
securities are available for loan; (c) monitoring the agent to ensure that
securities loans are effected in accordance with AIM's instructions and with
procedures adopted by the Board; (d) preparing appropriate periodic reports
for, and seeking appropriate approvals from, the Board with respect to
securities lending activities; (e) responding to agent inquiries; and (f)
performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation
for the related administrative services AIM will provide, the Portfolio will
pay AIM a fee equal to 25% of the net monthly interest or fee income retained
or paid to the Portfolio from such activities. AIM currently intends to waive
such fee and has agreed to seek Board approval prior to its receipt of all or
a portion of such fee.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement between AIM and the Company (the
"Administrative Services Agreement").
Under the Administrative Services Agreement, AIM performs or arranges for
the performance of accounting services for the Portfolio. 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 Company and of
persons working under her supervision for maintaining the financial accounts
and books and records of the Company, 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 Company's
Board of Directors.
Under a prior administrative services agreement which provided for the same
level of reimbursement to AIM is provided for under the current Administrative
Services Agreement, 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, for fund accounting services to the Portfolio.
EXPENSES
Expenses of the Company 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 Company for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
B-9
<PAGE>
accounting agent or agents appointed by the Company; brokers' commissions
chargeable to the Company in connection with portfolio securities transactions
to which the Company is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Company to federal, state or other
governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Company; all costs and expenses in
connection with the registration and maintenance of registration of the
Company 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 Company and supplements thereto to
the Company'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 Company's shares; charges and expenses of legal counsel,
including counsel to the directors of the Company who are not "interested
persons" (as defined in the 1940 Act) of the Company or AIM, and of
independent accountants in connection with any matter relating to the Company;
membership dues of industry associations; interest payable on Company
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Company 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 Company)
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
Company's shares.
Expenses of the Company which are not directly attributable to the
operations of either of the portfolios are prorated among all classes of the
Company. Expenses of the Company 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 0843, Houston, Texas 77001-0843, 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
Company 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 Company. As transfer
agent, AFS processes orders for purchases redemptions and exchanges of shares;
prepares and transmits payments for dividends and distributions declared by
the Portfolio; maintains shareholder accounts; and provides shareholders with
information regarding the Portfolio and its accounts.
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 Company for its services
in such capacity as is agreed to from time to time by BONY and the Company.
BONY maintains the portfolio securities owned by the Portfolio, administers
the purchases and sales of portfolio securities, collects interest and other
distributions made on securities held by the Portfolio and performs other
ministerial duties.
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania serves as counsel to the Company.
REPORTS
The Company furnishes shareholders with semi-annual reports containing
information about the Company and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Portfolio'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 Company 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 Company 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
LIQUID ASSET PORTFOLIO
To the best knowledge of the Company, the names and addresses of the holders
of 5% or more of the outstanding shares of each class of the Portfolio as of
May 19, 2000, 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>
MELLON GLOBAL CASH MANAGEMENT ACCOUNTS...... 14.97% --
Three Mellon Bank Center - Room 2501
Pittsburgh, PA 15259-0001
CIBC WORLD MARKETS.......................... 14.50% --
200 Liberty Street
World Financial Center
New York, NY 10281
BANK OF NEW YORK............................ 13.19% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
WELLER, ANDERSON, CHENEVIERE & CO. LTD...... 10.35% --
811 Rusk, Suite 715
Houston, TX 77002
HAMBRECHT & QUIST LLC....................... 9.52% --
230 Park Avenue, 19th Floor
New York, NY 10169
FIRST UNION SECURITIES, INC................. 5.73% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
</TABLE>
- -------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
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>
INSTITUTIONAL CLASS
-------------------
AIM ADVISORS, INC........................... 25.84%* 25.84%*
AIM FUND OF FUNDS ACCOUNT
Money Market Portfolio Admin.
11 Greenway Plaza, Ste 100
Houston, TX 77046
TURTLE & CO SWEEP........................... 17.12% --
P.O. Box 9427
Boston, MA 02209
PAINE WEBBER SSB............................ 7.42% --
1000 Harbor Blvd 6th Floor
Mutual Fund Operations
State Street Custodial Accounts
Weehawken, NJ 07087-6790
MID ATLANTIC INSTITUTIONAL SHARES, INC. .... 6.36% --
Times Bldg.
336 Fourth Ave.
Pittsburgh, PA 15222
PERSONAL INVESTMENT CLASS
-------------------------
HUNTINGTON INVESTMENT 112................... 78.85% --
135 North Pennsylvania Suite 800
Indianapolis, IN 46204
TEXAS CAPITAL BANK, N.A..................... 9.01% --
2100 McKinney Ave., Ste 900
Dallas, TX 75201
HUNTINGTON CAPITAL CORP..................... 7.81% --
41 S. High St., Ninth Floor
Columbus, OH 43287
PRIVATE INVESTMENT CLASS
------------------------
BANK OF NEW YORK............................ 81.14% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
MELLON BANK NA.............................. 5.01% --
P.O. Box 710
Pittsburgh, PA 15230-0710
</TABLE>
- -------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
* Represents shares held in a cash management account for the benefit of
certain AIM Funds. AIM has the power to direct the disposition of such
shares, and thus is deemed to be a beneficial owner of the shares. Shares
have been acquired in accordance with an exemptive order issued by the SEC.
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>
RESERVE CLASS
-------------
FIRST NATIONAL BANKER'S BANK................. 100.00% --
PO Drawer 80579
Baton Rouge, LA 70898
RESOURCE CLASS
--------------
CIBC WORLD MARKETS........................... 66.75% --
200 Liberty Street
World Financial Center
Attn: Lester Elson
New York, NY 10281
HAMBRECHT & QUIST LLC........................ 21.12% --
230 Park Avenue, 19th Floor
New York, NY 10169
</TABLE>
PRIME PORTFOLIO
To the best of the knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Prime
Portfolio as of May 19, 2000, 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............................. 30.49% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
IGT.......................................... 9.03% --
P.O. Box 10120
Reno, NV 89502
CIBC WORLD MARKETS........................... 8.95% --
200 Liberty Street
World Financial Center
New York, NY 10281
BOST & CO FBO THE KWELM PARTNERSHIP.......... 8.47% --
P.O. Box 3198
Pittsburgh, PA 15230-3198
MELLON BANK NA .............................. 6.26% --
P.O. Box 710
Pittsburgh, PA 15230-0710
AmSOUTH CAPITAL MARKETS...................... 5.74% --
315 Deaderick St., 4th Floor
Nashville, TN 37237
</TABLE>
- -------
(a) The Company 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)
---------------- -------------- ---------------
INSTITUTIONAL CLASS
-------------------
<S> <C> <C>
AIM ADVISORS, INC........................... 33.98%* 33.98%*
AIM FUND OF FUNDS ACCOUNT
Money Market Portfolio Admin.
11 Greenway Plaza, Ste. 100
Houston, TX 77046
TURTLE & CO SWEEP........................... 6.33% --
P.O. Box 9427
Boston, MA 02209
TURLIN & CO................................. 6.24% --
P.O. Box 1412
Rochester, NY 14603
FIRST NATIONAL BANK TX...................... 6.20% --
Muir & Co
C/O Frost
San Antonio, TX 78298-2479
FIRST TRUST / VAR & CO...................... 5.53% --
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
PERSONAL INVESTMENT CLASS
-------------------------
<S> <C> <C>
CULLEN/FROST DISCOUNT BROKERS............... 79.29% --
P.O. Box 2358
San Antonio, TX 78299
FIRST AMERICAN BANK SSB..................... 7.05% --
P.O. Box 1033
Bryan, TX 77805
<CAPTION>
PRIVATE INVESTMENT CLASS
------------------------
<S> <C> <C>
HUNTINGTON CAPITAL CORP..................... 29.53% --
41 S High St., Ninth Floor
Columbus, OH 43287
FROST NATIONAL BANK TX...................... 14.93% --
Muir & Co
C/O Frost
P.O. Box 2479
San Antonio, TX 78298-2479
CULLEN/FROST DISCOUNT BROKERS............... 12.73% --
P.O. Box 2358
San Antonio, TX 78299
BANK OF NEW YORK............................ 11.76% --
One Wall Street 5th Floor
New York, NY 10286
BANK OF OKLAHOMA, N.A. INSTITUTIONAL INVEST-
MENTS...................................... 8.10% --
P.O. Box 2300
Tulsa, OK 74192
FIRST TRUST/VAR & CO........................ 6.61% --
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
</TABLE>
- -------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
* Represents shares held in a cash management account for the benefit of
certain AIM Funds. AIM has the power to direct the disposition of such
shares, and thus is deemed to be a beneficial owner of the shares. Shares
have been acquired in accordance with an exemptive order issued by the SEC.
B-14
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
RESERVE CLASS
-------------
<S> <C> <C>
BANK OF NEW YORK............................ 98.27% --
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
<CAPTION>
RESOURCE CLASS
--------------
<S> <C> <C>
FIRST UNION SECURITIES, INC................. 35.34% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
NVIDIA CORPORATION CASH MANAGEMENT ACCOUNT.. 17.89% --
3535 Monroe Street
Santa Clara, CA 95051
HARRIS METHODIST HEALTH SYSTEM.............. 13.49% --
600 East Las Colinas Blvd Ste 1550
Irving, TX 75039
CIBC WORLD MARKETS.......................... 12.56% --
200 Liberty Street
World Financial Center
New York, NY 10281
MELLON BANK NA.............................. 6.15% --
P.O. Box 710
Pittsburgh, PA 15230-0710
FIRST UNION SUBACCOUNTS..................... 5.20% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
</TABLE>
- -------
(a) The Company 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 Company, as of May 19, 2000, the
directors and officers of the Company as a group beneficially owned less than
1% of the outstanding shares of each class of each portfolio.
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 0843, Houston, Texas 77001-
0843. 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 Company 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 Company 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 Company. Certificates (in
full shares only) will be issued without charge and may be redeposited at any
time.
An investor may terminate his or her 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
B-15
<PAGE>
the bank account designated to receive redemption proceeds by written notice
to the Company. 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 Company 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.
A "Business Day" of the Company is any day on which member banks of the
Federal Reserve Bank of New York and BONY are open for business. 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 Company 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 Company, 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 COMPANY
If the Company determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
Company may, at its discretion, redeem the account and distribute the proceeds
to you.
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 Company. 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 Portfolio 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 requires 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 has established 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 it 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;
the redemption of shares in kind; or the establishment of a net asset value
per share by using available market quotations.
B-16
<PAGE>
THE DISTRIBUTION AGREEMENT
The Company 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 Company--
Directors and Officers" and "General Information about the Company--Investment
Advisor" for information as to the affiliation of certain directors and
officers of the Company with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right to
distribute the shares of each class of the Portfolio 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 of the Portfolio.
The Distribution Agreement will continue from year to year, provided that it
is specifically approved at least annually by the Company'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 Company 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 Company has adopted a Master Distribution Plan (the "Distribution Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Portfolio's Cash
Management Class, Personal Investment Class, Private Investment Class, Reserve
Class and Resource Class. The Distribution Plan provides that the Company 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
Distribution Plan.
Pursuant to the Distribution Plan, the Company 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
Company 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 Distribution Plan may only be used for the purposes specified
above and as stated in the Distribution Plan. Expenses may not be carried over
from year to year.
The Distribution Plan does not obligate the Company to reimburse FMC for the
actual expenses FMC may incur in fulfilling its obligations under the
Distribution Plan. Thus, even if FMC's actual expenses exceed the fee payable
to FMC thereunder at any given time, the Company 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 Company.
The Distribution Plan requires the officers of the Company to provide the
Board of Directors at least quarterly with a written report of the amounts
expended pursuant to the Distribution 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 Distribution Plan.
B-17
<PAGE>
For the fiscal year ended August 31, 1999, FMC received compensation
pursuant to the Distribution 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
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 Distribution 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 Company and
who have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreements related to the Distribution Plan
("Qualified Directors"). In approving the Distribution 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 Distribution Plan
would benefit the Company and the holders of shares of the applicable classes
of the Portfolio. Anticipated benefits that may result from the Distribution
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 Distribution 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 Company, and
Robert H. Graham, a Director and President of the Company, own shares of
AMVESCAP PLC.
The Distribution 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 Distribution Plan that would increase materially the
distribution expenses paid by an applicable class requires shareholder
approval; otherwise, the Distribution 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
Distribution Plan is in effect, the selection or nomination of the Qualified
Directors is committed to the discretion of the Qualified Directors.
The Distribution 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
Distribution Plan. The Distribution 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
On November 12, 1999, the Gramm-Leach-Bliley Act of 1999 was signed into
law. This Act removed the regulatory barriers previously established between
banks and bank holding companies, and insurance companies and broker-dealers.
Various provisions of this Act became effective immediately, and others will
become effective through November 2000. While the ultimate effect of such
legislation is unclear, financial holding companies and their affiliated bank
and financial subsidiaries will be able to participate in the distribution of
mutual fund shares.
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 Company 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.
B-18
<PAGE>
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 Company, 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 Company 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 Company. 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 February 29, 2000, the current and effective
yields for the Private Investment Class were 5.83% and 6.10%, respectively.
For the seven-day period ended February 29, 2000, the current and effective
yields for the Institutional Class were 5.54% and 5.69%, respectively. For the
seven-day period ended February 29, 2000, the current and effective yields for
the Cash Management Class were 5.95% and 5.92%, respectively. For the seven-
day period ended February 29, 2000, the current and effective yields for the
Personal Investment Class were 5.34% and 5.48%, respectively. For the seven-
day period ended February 29, 2000, the current and effective yields for the
Reserve Class were 5.04% and 5.16%, respectively. For the seven-day period
ended February 29, 2000, the current and effective yields for the Resource
Class were 5.63% and 5.79%, respectively. These yields are quoted for
illustration purposes only. The yields for any other seven-day period may be
substantially different from the yields quoted above.
The Portfolio may compare the performance of a particular class or the
performance of securities in which it may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of various
types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money
Fund Report--Registered Trademark-- of Holliston, Massachusetts or by Lipper,
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 Portfolio will not redeem shares representing an interest in the
Portfolio in kind (i.e., by distributing its portfolio securities).
B-19
<PAGE>
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
Information concerning the Portfolio's investment objective is set forth in
each Prospectus under the heading, "Investment Objective and Strategies." 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.
Set forth in this section is a description of the Portfolio's investment
policies, strategies and practices. The investment objective of the Portfolio
is non-fundamental and may be changed by the Board of Directors without
shareholder approval. The Portfolio's investment policies, strategies and
practices are also non-fundamental. The Board of Directors of the Company
reserves the right to change any of these non-fundamental investment policies,
strategies or practices without shareholder approval. However, shareholders
will be notified before any material change in the investment policies becomes
effective. The Portfolio has adopted certain investment restrictions, some of
which are fundamental and cannot be changed without shareholder approval. See
"Investment Program and Restrictions--Investment Restrictions" in this
Statement of Additional Information.
Any percentage limitations with respect to assets of a Portfolio will be
applied at the time of purchase. A later change in percentage resulting from
changes in asset values will not be considered a violation of the percentage
limitations. The percentage limitations applicable to borrowings and reverse
repurchase agreements will be applied in accordance with applicable provisions
of the 1940 Act and the rules and regulations promulgated thereunder which
specifically limit each Portfolio's borrowing abilities.
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, CDs, 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,
CDs 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.
In managing the Portfolio's investments, AIM may indicate to dealers or
issuers its interest in acquiring certain securities for the Portfolio for
settlement beyond a customary settlement date thereafter. In some cases, the
Portfolio may agree to purchase such securities at stated prices and yields
(in such cases, these securities are considered "delayed delivery" securities
when traded in the secondary market or "when-issued" securities if they are an
initial issuance of securities). Since this is done to facilitate the
acquisition of portfolio securities and is not for the purpose of investment
leverage, the amount of delayed delivery or when-issued securities involved
may not exceed the estimated amount of funds available for investment on the
settlement date. Until the settlement date, liquid assets of the Portfolio
with a dollar value sufficient at all times to make payment for the delayed
delivery or when-issued securities will be set aside in a segregated account
(the total amount of liquid assets in the segregated account may not exceed
25% of the Portfolio's total assets). The delayed delivery securities, which
will not begin to accrue interest until the settlement date, and the when-
issued securities will be recorded as an asset of the Portfolio and will be
subject to the risks of market value fluctuations. The purchase price of the
delayed delivery or when-issued securities will be recorded as a liability of
the Portfolio until settlement. AIM may also transact sales of securities on a
"forward commitment" basis. In such a transaction, AIM agrees to sell
portfolio securities at a future date at specified prices and yields.
Securities subject to sale on a forward commitment basis will continue to
accrue interest until sold and will be subject to the risks of market value
fluctuations. Absent extraordinary circumstances, the Portfolio's right to
acquire delayed delivery and when-issued securities or its obligation to sell
securities on a forward-commitment basis will not be divested prior to the
settlement date.
The Portfolio may invest up to 50% of its total assets in U.S. dollar-
denominated securities of foreign issuers. 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 may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets of $5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio
may involve risks that are different in some respects from those incurred by
an investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
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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.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Portfolio may lend its portfolio securities (principally to
broker-dealers) to the extent of 33 1/3% of its total assets. Such loans would
be callable at any time and will be continuously secured by collateral equal
to no less than the market value, determined daily, of the loaned securities.
Such collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or its agencies. The Portfolio would continue to receive the
income on loaned securities and would, at the same time, earn interest on the
loan collateral or on the investment of the loan collateral if it were cash.
Any cash collateral pursuant to these loans would be invested in short-term
money market instruments. Where voting or consent rights with respect to
loaned securities pass to the borrower, the Portfolio will follow the policy
of calling the loan, in whole or in part as may be appropriate, to permit the
exercise of such voting or consent rights if the matters involved are expected
to have a material effect on the Portfolio's investment in the loaned
securities. Lending securities entails a risk of loss to the Portfolio if and
to the extent that the market value of the securities loaned were to increase
and the lender did not increase the collateral accordingly.
INTERFUND LOANS. The Portfolio may lend up to 33 1/3% of its total assets to
another AIM Fund, on such terms and conditions as the SEC may require in an
exemptive order. An application for exemptive relief has been filed with the
SEC on behalf of the Portfolio and others. The Portfolio may also borrow from
another AIM Fund to satisfy redemption requests or to cover unanticipated cash
shortfalls due to a delay in the delivery of cash to the Portfolio's custodian
or improper delivery instructions by a broker effectuating a transaction. It
is anticipated that the Portfolio would not participate as a borrower in the
interfund lending facility because it would rarely need to borrow cash to meet
redemptions; however, it is anticipated that the Portfolio will be a lender to
other AIM Funds under the interfund lending facility.
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.
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SHORT AND MEDIUM TERM NOTES--Short and medium term notes are obligations
that have fixed coupons and maturities that can be targeted to meet investor
requirements. They are issued in the capital markets either publicly under a
shelf registration pursuant to Rule 415 promulgated by the SEC, or privately
without such a registration.
MASTER NOTES--Master notes are demand notes that permit investment of
fluctuating amounts of money at varying rates of interest pursuant to
arrangements with issuers who meet the quality criteria of the Portfolio. The
interest rate on a master note may (a) fluctuate based upon changes in
specified interest rates, (b) be reset periodically according to a prescribed
formula or (c) be a set rate. Although there is no secondary market in master
notes, if such notes have a demand feature, the payee may demand payment of
the principal amount of the note on relatively short notice.
REPURCHASE AGREEMENTS--A repurchase agreement is an instrument under which
the Portfolio acquires ownership of a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed-upon
time and price, thereby determining the yield during the Portfolio's holding
period. Repurchase transactions are limited to a term not to exceed 365 days.
The Portfolio may enter into repurchase agreements only with institutions
believed by the Company'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.
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 enter into reverse repurchase
agreements solely for temporary or defensive purposes to facilitate the
orderly sale of portfolio securities to accommodate abnormally heavy
redemption requests should they occur. Reverse repurchase transactions are
limited to a term not to exceed 92 days. The Portfolio will use reverse
repurchase agreements when the interest income to be earned from the
securities that would otherwise have to be liquidated to meet redemption
requests is greater than the interest expense of the reverse repurchase
transaction. The Portfolio may enter into reverse repurchase agreements in
amounts not exceeding 10% of the value of its total assets. Reverse repurchase
agreements involve the risk that the market value of securities retained by
the Portfolio in lieu of liquidation may decline below the repurchase price of
the securities sold by the Portfolio which it is obligated to repurchase. The
risk, if encountered, could cause a reduction in the net asset value of the
Portfolio's shares. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act.
INVESTMENT IN OTHER INVESTMENT COMPANIES--The Portfolio may invest in other
investment companies to the extent permitted by the 1940 Act, the rules and
regulations thereunder, and, if applicable, exemptive orders granted by the
SEC. The following restrictions apply to investments in other investment
companies: (i) the Portfolio may not purchase more than 3% of the total
outstanding voting stock of another investment company; (ii) the Portfolio may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) the Portfolio may not invest more than 10% of
its total assets in securities issued by other investment companies. With
respect to the Portfolio's purchase of shares of another investment company,
the Portfolio will indirectly bear its proportionate share of the advisory
fees and other operating expenses of such investment company.
ELIGIBLE SECURITIES
The Portfolio will invest in "Eligible Securities" as defined in Rule 2a-7
under the 1940 Act, which the Company'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
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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.
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.
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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.
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
The Portfolio is subject to the following investment restrictions, which may
be changed only by a vote of a majority of the Portfolio's outstanding shares.
Fundamental restrictions may be changed only by a vote of the lesser of (i)
67% or more of the Portfolio's shares present at a meeting if the holders of
more than 50% of the outstanding shares are present in person or represented
by proxy, or (ii) more than 50% of the Portfolio's outstanding shares. Any
investment restriction that involves a maximum or minimum percentage of
securities or assets shall not be considered to be violated unless an excess
over or a deficiency under the percentage occurs immediately after and is
caused by an acquisition or disposition of securities or utilization of assets
by the Portfolio.
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Fundamental Restrictions
(1) The Portfolio is a "diversified company" as defined in the 1940 Act.
The Portfolio will not purchase the securities of any issuer if, as a
result, the Portfolio would fail to be a diversified company within the
meaning of the 1940 Act, and the rules and regulations promulgated
thereunder, as such statute, rules and regulations are amended from time to
time or are interpreted from time to time by the SEC staff (collectively,
the "1940 Act Laws and Interpretations") or except to the extent that the
Portfolio may be permitted to do so by exemptive order or similar relief
(collectively, with the 1940 Act Laws and Interpretations, the "1940 Act
Laws, Interpretations and Exemptions"). In complying with this restriction,
however, the Portfolio may purchase securities of other investment companies
to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(2) The Portfolio may not borrow money or issue senior securities, except
as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Portfolio may not underwrite the securities of other issuers. The
restriction does not prevent the Portfolio from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Portfolio may be considered to be an
underwriter under the Securities Act of 1933.
(4) The Portfolio will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act
Laws, Interpretations and Exemptions) of its investments in the securities
of issuers primarily engaged in the same industry. This restriction does not
limit the Portfolio's investments in (i) obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt
obligations issued by governments or political subdivisions of governments,
or (iii) bank instruments. In complying with this restriction, the Portfolio
will not consider a bank-issued guaranty or financial guaranty insurance as
a separate security.
(5) The Portfolio may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Portfolio from investing in issuers that
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein.
(6) The Portfolio may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Portfolio from engaging
in transactions involving futures contracts and options thereon or investing
in securities that are secured by physical commodities.
(7) The Portfolio may not make personal loans or loans of its assets to
persons who control or are under common control with the Portfolio, except
to the extent permitted by 1940 Act Laws, Interpretations and Exemptions.
This restriction does not prevent the Portfolio from, among other things,
purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker-dealers or institutional investors, or investing in
loans, including assignments and participation interests.
(8) The Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies and restrictions as the
Portfolio.
The investment restrictions set forth above provide the Portfolio with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Portfolio has this flexibility, the Board of
Directors of the Company has adopted non-fundamental restrictions for the
Portfolio relating to certain of these restrictions which the advisor must
follow in managing the Portfolio. Any changes to these non-fundamental
restrictions, which are set forth below, require the approval of the Board of
Directors.
Non-Fundamental Restrictions
The following non-fundamental investment restrictions apply to the
Portfolio. They may be changed without approval of the Portfolio's voting
securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Portfolio will not, with respect to 100% of its total
assets, purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Portfolio's
total assets would be invested in the securities of the issuer, except as
permitted by Rule 2a-7 under the 1940 Act, or (ii) the Portfolio would hold
more than 10% of the outstanding voting securities of that issuer. The
Portfolio may (i) purchase securities of other investment companies as
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in
securities of other money market funds and lend money to other investment
companies or their series portfolios that have AIM or an affiliate of AIM as
an investment advisor (an "AIM Advised Fund"), subject to the terms and
conditions of any exemptive orders issued by the SEC.
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(2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Portfolio may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The Portfolio may borrow
from banks, broker-dealers or an AIM Advised Fund. The Portfolio may not
borrow for leveraging but may borrow for temporary or emergency purposes, in
anticipation of or in response to adverse market conditions or for cash
management purposes. The Portfolio may not purchase additional securities
when any borrowings from banks exceed 5% of the Portfolio's total assets.
(3) In complying with the fundamental restriction regarding industry
concentration, the Portfolio may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry.
(4) In complying with the fundamental restriction with regard to making
loans, the Portfolio may lend up to 33 1/3% of its total assets and may lend
money to another AIM Advised Fund, on such terms and conditions as the SEC
may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to investing
all assets in an open-end fund, the Portfolio may not invest all of its
assets in the securities of a single open-end management investment company
with the same fundamental investment objectives, policies and restrictions
as the Portfolio.
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 or spread (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 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, in the Portfolio and in 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.
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 or account (including
affiliated money market funds) provided the Portfolio follows procedures
adopted by the Board of Directors/Trustees of the various AIM Funds, including
the Company. These inter-fund transactions do not generate brokerage
commissions but may result in custodial fees or taxes or other related
expenses.
The Portfolio does not seek to profit from short-term trading and will
generally (but not always) hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if
such disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio. The
Portfolio's policy of investing in securities with maturities of 397 days or
less will result in high portfolio turnover. Since brokerage commissions are
not normally paid on investments of the type made by the Portfolio, the high
turnover rate should not adversely affect the Portfolio's net income.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous 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
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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, as amended, 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, a fund 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 Company'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.
Under the 1940 Act, certain persons affiliated with the Company are
prohibited from dealing with the Portfolio 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 Portfolio from
purchasing a security being publicly underwritten by a syndicate of which
certain persons affiliated with the Company 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 Company 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 Company's Board of
Directors and any such purchases are reviewed at least quarterly by the
Company'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 Company was fair and reasonable in relation
to the fees charged by others performing similar services. During the fiscal
year ended August 31, 1999, 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.
B-27
<PAGE>
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 thereof. Such
election, or any revocation thereof, must be made in writing and sent by the
shareholder to AFS at P.O. Box 0843, Houston, Texas 77001-0843. 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 dividends 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) Portfolio 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 Company 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, 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., 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,
B-28
<PAGE>
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 (net long-term capital gain over net short-term capital loss), 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 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 distributions 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 Company 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 the Portfolio 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 Portfolio 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.
B-29
<PAGE>
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on
by such shareholder.
If the income from the Portfolio is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and
distributions (other than capital gains dividends) will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross
amount of the dividend or distribution. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gains realized on the sale
of shares of a class, capital gain dividends and amounts retained by the
Portfolio that are designated as undistributed capital gains.
If the income from the Portfolio is effectively connected with a U.S. 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 May 23,
2000. 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 Company.
B-30
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
SCHEDULE OF INVESTMENTS
February 29, 2000
(Unaudited)
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 25.93%(a)
CONSUMER DURABLES - 0.36%
AUTOMOBILE - 0.36%
Daimler-Chrysler North America Holding
5.87% 03/22/00 $ 23,000 $ 22,921,244
- ----------------------------------------------------------------------------
5.82% 03/31/00 50,000 49,757,500
- ----------------------------------------------------------------------------
Total Consumer Durables 72,678,744
- ----------------------------------------------------------------------------
FINANCIAL - 25.57%
ASSET BACKED SECURITIES-COMMERCIAL
LOANS/LEASES - 0.51%
Centric Capital Corp.
5.75% 03/15/00 25,000 24,944,097
- ----------------------------------------------------------------------------
5.97% 07/25/00 43,900 42,837,107
- ----------------------------------------------------------------------------
Fleet Funding Corp.
5.78% 03/13/00 35,000 34,932,566
- ----------------------------------------------------------------------------
102,713,770
- ----------------------------------------------------------------------------
ASSET BACKED SECURITIES-CONSUMER
RECEIVABLES - 0.94%
Thunder Bay Funding Inc.
5.79% 03/24/00 45,148 44,980,990
- ----------------------------------------------------------------------------
5.90% 04/03/00 70,098 69,718,887
- ----------------------------------------------------------------------------
5.86% 04/19/00 74,774 74,177,593
- ----------------------------------------------------------------------------
188,877,470
- ----------------------------------------------------------------------------
ASSET BACKED SECURITIES-MULTI-PURPOSE - 11.58%
Aspen Funding Corp.
5.77% 03/07/00 25,000 24,975,958
- ----------------------------------------------------------------------------
6.05% 10/10/00 50,000 48,126,181
- ----------------------------------------------------------------------------
Barton Capital Corp.
5.80% 03/07/00 100,000 99,903,332
- ----------------------------------------------------------------------------
5.78% 03/09/00 41,425 41,371,792
- ----------------------------------------------------------------------------
5.89% 04/25/00 27,000 26,757,038
- ----------------------------------------------------------------------------
Bavaria TRR Corp.
5.92% 03/17/00 50,000 49,868,444
- ----------------------------------------------------------------------------
5.92% 03/23/00 48,000 47,826,347
- ----------------------------------------------------------------------------
Clipper Receivables Corp.
5.78% 03/14/00 30,000 29,937,383
- ----------------------------------------------------------------------------
Corporate Receivables Corp.
5.73% 03/02/00 75,000 74,988,063
- ----------------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET BACKED SECURITIES-MULTI-PURPOSE -
(CONTINUED)
Edison Asset Securitization, L.L.C.
5.75% 03/02/00 $ 25,000 $ 24,996,007
- ----------------------------------------------------------------------------
5.84% 03/07/00 49,591 49,542,731
- ----------------------------------------------------------------------------
5.78% 03/10/00 35,000 34,949,425
- ----------------------------------------------------------------------------
5.83% 03/10/00 50,000 49,927,125
- ----------------------------------------------------------------------------
5.93% 03/10/00 50,000 49,925,875
- ----------------------------------------------------------------------------
5.75% 03/15/00 78,643 78,467,146
- ----------------------------------------------------------------------------
5.92% 03/17/00 75,000 74,802,667
- ----------------------------------------------------------------------------
5.81% 03/20/00 35,000 34,892,676
- ----------------------------------------------------------------------------
5.87% 03/22/00 42,923 42,776,024
- ----------------------------------------------------------------------------
Enterprise Funding Corp.
5.78% 03/27/00 35,140 34,993,310
- ----------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.75% 03/03/00 155,850 155,800,215
- ----------------------------------------------------------------------------
5.80% 03/10/00 55,025 54,945,214
- ----------------------------------------------------------------------------
5.80% 03/13/00 20,000 19,961,333
- ----------------------------------------------------------------------------
5.80% 03/23/00 22,000 21,922,022
- ----------------------------------------------------------------------------
5.88% 04/11/00 50,000 49,665,167
- ----------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.98% 03/09/00 50,000 49,933,555
- ----------------------------------------------------------------------------
5.85% 03/14/00 40,000 39,915,500
- ----------------------------------------------------------------------------
5.84% 03/14/00 80,456 80,286,327
- ----------------------------------------------------------------------------
Newport Funding Corp.
6.05% 10/10/00 50,000 48,126,181
- ----------------------------------------------------------------------------
6.22% 11/17/00 75,000 71,617,875
- ----------------------------------------------------------------------------
Park Avenue Receivables Corp.
5.81% 03/08/00 35,000 34,960,460
- ----------------------------------------------------------------------------
5.80% 03/15/00 50,000 49,887,222
- ----------------------------------------------------------------------------
5.90% 03/16/00 55,370 55,233,882
- ----------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.83% 03/21/00 16,085 16,032,903
- ----------------------------------------------------------------------------
5.80% 03/21/00 38,185 38,061,959
- ----------------------------------------------------------------------------
Quincy Capital Corp.
5.75% 03/13/00 48,374 48,281,283
- ----------------------------------------------------------------------------
5.75% 03/16/00 107,742 107,483,868
- ----------------------------------------------------------------------------
Sheffield Receivables Corp.
5.79% 03/07/00 81,200 81,121,642
- ----------------------------------------------------------------------------
5.75% 03/10/00 58,000 57,916,625
- ----------------------------------------------------------------------------
5.81% 03/17/00 118,770 118,463,309
- ----------------------------------------------------------------------------
5.79% 03/21/00 130,000 129,581,833
- ----------------------------------------------------------------------------
Three Rivers Funding Corp.
5.81% 03/16/00 74,772 74,590,989
- ----------------------------------------------------------------------------
2,322,816,888
- ----------------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET BACKED SECURITIES-TRADE
RECEIVABLES - 1.69%
Asset Securitization Cooperative Corp.
6.20% 03/27/00 $ 25,000 $ 24,999,820
- ---------------------------------------------------------------------------
Blue Ridge Asset Funding Corp.
5.80% 03/10/00 25,920 25,882,416
- ---------------------------------------------------------------------------
5.81% 03/20/00 39,011 38,891,377
- ---------------------------------------------------------------------------
Corporate Asset Funding Co.
5.80% 03/08/00 75,000 74,915,417
- ---------------------------------------------------------------------------
Variable Funding Capital
5.79% 03/20/00 150,000 149,541,625
- ---------------------------------------------------------------------------
5.97% 07/17/00 26,093 25,495,862
- ---------------------------------------------------------------------------
339,726,517
- ---------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.73%
ABN-Amro Bank
5.93% 07/13/00 75,000 73,345,938
- ---------------------------------------------------------------------------
5.97% 08/07/00 75,000 73,022,438
- ---------------------------------------------------------------------------
146,368,376
- ---------------------------------------------------------------------------
BANKS (MONEY CENTER) - 0.35%
Citicorp
5.80% 03/09/00 50,000 49,935,556
- ---------------------------------------------------------------------------
5.80% 03/13/00 20,000 19,961,333
- ---------------------------------------------------------------------------
69,896,889
- ---------------------------------------------------------------------------
BANKS (REGIONAL) - 0.97%
Bank of America Corp.
5.96% 07/31/00 100,000 97,483,556
- ---------------------------------------------------------------------------
6.09% 08/18/00 100,000 97,124,167
- ---------------------------------------------------------------------------
194,607,723
- ---------------------------------------------------------------------------
BROKERAGE/INVESTMENTS - 0.68%
Credit Suisse First Boston, Inc.
5.79% 03/03/00 35,000 34,988,742
- ---------------------------------------------------------------------------
5.77% 03/17/00 50,800 50,669,726
- ---------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
5.88% 03/08/00 50,000 49,942,833
- ---------------------------------------------------------------------------
135,601,301
- ---------------------------------------------------------------------------
CONSUMER FINANCE - 3.00%
General Motors Acceptance Corp.
5.84% 03/01/00 50,000 50,000,000
- ---------------------------------------------------------------------------
5.88% 03/01/00 200,000 200,000,000
- ---------------------------------------------------------------------------
5.89% 04/03/00 50,000 49,730,018
- ---------------------------------------------------------------------------
5.93% 04/03/00 200,000 198,912,818
- ---------------------------------------------------------------------------
Bank One Financial Corp.
5.90% 03/24/00 30,000 29,886,917
- ---------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
CONSUMER FINANCE - (CONTINUED)
5.80% 03/29/00 $ 25,000 $ 24,887,222
- ---------------------------------------------------------------------------
5.74% 05/26/00 50,000 49,314,389
- ---------------------------------------------------------------------------
602,731,364
- ---------------------------------------------------------------------------
FINANCIAL - DIVERSIFIED - 4.37%
Associates First Capital Corp.
5.89% 03/01/00 141,000 141,000,000
- ---------------------------------------------------------------------------
GE Capital International Funding, Inc.
5.82% 03/03/00 75,000 74,975,750
- ---------------------------------------------------------------------------
5.90% 03/07/00 50,000 49,950,833
- ---------------------------------------------------------------------------
5.87% 03/08/00 50,000 49,942,931
- ---------------------------------------------------------------------------
5.89% 03/09/00 50,000 49,934,556
- ---------------------------------------------------------------------------
5.83% 03/14/00 50,000 49,894,736
- ---------------------------------------------------------------------------
5.75% 03/27/00 100,000 99,584,722
- ---------------------------------------------------------------------------
5.74% 05/12/00 75,000 74,139,000
- ---------------------------------------------------------------------------
General Electric Capital Corp.
6.07% 08/17/00 50,000 48,575,236
- ---------------------------------------------------------------------------
6.06% 08/28/00 68,000 65,939,600
- ---------------------------------------------------------------------------
General Electric Capital Services
5.82% 03/03/00 75,000 74,975,750
- ---------------------------------------------------------------------------
6.06% 08/28/00 75,000 72,727,500
- ---------------------------------------------------------------------------
National Rural Utilities Coop
5.75% 03/14/00 25,000 24,948,090
- ---------------------------------------------------------------------------
876,588,704
- ---------------------------------------------------------------------------
OIL & GAS (REFINING) - 0.50%
Shell Oil Co.
5.91% 04/14/00 76,832 76,832,000
- ---------------------------------------------------------------------------
United Technologies Corp.
5.95% 03/03/00 24,000 23,992,067
- ---------------------------------------------------------------------------
100,824,067
- ---------------------------------------------------------------------------
TELEPHONE - 0.25%
American Telephone and Telegraph Corp.
5.70% 03/16/00 50,000 49,881,250
- ---------------------------------------------------------------------------
Total Financial 5,130,634,319
- ---------------------------------------------------------------------------
Total Commercial Paper (Cost
$5,203,313,063) 5,203,313,063
- ---------------------------------------------------------------------------
BANK NOTES - 0.87%
American Express Centurion Bank
5.89% 03/29/00 50,000 50,000,000
- ---------------------------------------------------------------------------
Bank of America Corp.
6.33% 10/04/00 100,000 100,000,000
- ---------------------------------------------------------------------------
National City Bank Cleveland
5.95%(b) 04/03/00 25,000 24,999,119
- ---------------------------------------------------------------------------
Total Bank Notes (Cost $174,999,119) 174,999,119
- ---------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 9.77%
ABN-Amro Bank
5.79% 03/16/00 $ 75,000 $75,000,155
- -----------------------------------------------------------------------
5.71% 07/03/00 25,000 24,996,747
- -----------------------------------------------------------------------
Bank Austria
5.84% 03/22/00 100,000 100,000,578
- -----------------------------------------------------------------------
5.65% 07/06/00 25,000 24,995,832
- -----------------------------------------------------------------------
6.48% 11/06/00 50,000 50,000,000
- -----------------------------------------------------------------------
Barclays Bank PLC
5.61% 06/14/00 25,000 24,996,553
- -----------------------------------------------------------------------
Canadian Imperial Bank of Commerce
5.80% 03/17/00 100,000 100,000,440
- -----------------------------------------------------------------------
6.32% 10/30/00 75,000 75,000,000
- -----------------------------------------------------------------------
Chase-USA-Delaware
5.37% 05/22/00 25,000 24,998,111
- -----------------------------------------------------------------------
Credit Communai de Belgique
5.93% 09/29/00 35,000 34,904,372
- -----------------------------------------------------------------------
Deutsche Bank Securities, Inc.
5.80% 03/21/00 100,000 100,000,000
- -----------------------------------------------------------------------
5.89% 03/31/00 100,000 100,000,000
- -----------------------------------------------------------------------
5.29% 05/19/00 25,000 24,997,138
- -----------------------------------------------------------------------
Dresdner Bank
5.80% 03/13/00 75,000 75,000,000
- -----------------------------------------------------------------------
First Union National Bank
6.29% 04/27/00 66,000 66,000,000
- -----------------------------------------------------------------------
6.27% 05/10/00 85,000 85,000,000
- -----------------------------------------------------------------------
Huntington National Bank
6.33% 10/16/00 75,000 75,000,000
- -----------------------------------------------------------------------
National City Bank
6.55% 01/31/01 50,000 49,978,134
- -----------------------------------------------------------------------
National Westminster Bank
5.82% 03/27/00 100,000 100,000,000
- -----------------------------------------------------------------------
5.67% 07/03/00 25,000 24,997,559
- -----------------------------------------------------------------------
6.32% 10/27/00 100,000 100,003,180
- -----------------------------------------------------------------------
Rabobank Nederland
5.87% 03/31/00 100,000 100,000,000
- -----------------------------------------------------------------------
6.30% 10/26/00 50,000 50,000,000
- -----------------------------------------------------------------------
Svenska Handelsbanken AB
6.39% 10/26/00 100,000 100,000,000
- -----------------------------------------------------------------------
6.48% 11/06/00 50,000 50,000,000
- -----------------------------------------------------------------------
6.50% 01/29/01 50,000 49,978,261
- -----------------------------------------------------------------------
Toronto-Dominion Bank
5.80% 03/20/00 75,000 75,000,392
- -----------------------------------------------------------------------
5.88% 03/31/00 50,000 50,000,166
- -----------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT - (continued)
U.S. Bank NA Minneapolis
5.95% 05/16/00 $ 50,000 $ 50,000,000
- ------------------------------------------------------------------------------
5.68% 06/12/00 25,000 25,000,000
- ------------------------------------------------------------------------------
UBS AG
5.24% 03/01/00 25,000 25,000,000
- ------------------------------------------------------------------------------
5.35% 05/30/00 25,000 24,997,039
- ------------------------------------------------------------------------------
5.60% 06/14/00 25,000 24,996,552
- ------------------------------------------------------------------------------
Total Certificates of Deposit (Cost
$1,960,841,209) 1,960,841,209
- ------------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 4.31%
Merrill Lynch Mortgage Capital Inc.
6.20%(c) 08/17/00 357,000 357,000,000
- ------------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.
6.06%(d) 05/01/00 271,000 271,000,000
- ------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
6.04%(e) 03/01/00 237,000 237,000,000
- ------------------------------------------------------------------------------
Total Master Note Agreements (Cost
$865,000,000) 865,000,000
- ------------------------------------------------------------------------------
MEDIUM TERM NOTES - 2.61%
American Telephone & Telegraph Corp.
5.99% 07/13/00 25,000 24,996,339
- ------------------------------------------------------------------------------
Bears, Stearns & Co., Inc.
6.13%(b) 11/14/00 122,200 122,200,000
- ------------------------------------------------------------------------------
Credit Suisse First Boston Corp.
6.09%(b) 11/14/00 80,000 80,000,000
- ------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
6.09%(b) 08/04/00 250,000 250,000,000
- ------------------------------------------------------------------------------
Toyota Motor Credit Corp.
6.11%(b) 09/20/00 35,000 35,000,000
- ------------------------------------------------------------------------------
SMM Trust 1999-E
6.02%(f) 04/05/00 10,750 10,750,000
- ------------------------------------------------------------------------------
Total Medium Term Notes (Cost
$522,946,339) 522,946,339
- ------------------------------------------------------------------------------
PROMISSORY NOTES - 3.12%
Goldman Sachs Group, L.P.
5.88% 03/24/00 300,000 300,000,000
- ------------------------------------------------------------------------------
6.09% 05/16/00 125,000 125,000,000
- ------------------------------------------------------------------------------
6.11% 05/24/00 200,000 200,000,000
- ------------------------------------------------------------------------------
Total Promissory Notes (Cost
$625,000,000) 625,000,000
- ------------------------------------------------------------------------------
VARIABLE RATE DEMAND BONDS - 1.26%
B. Braun Medical Inc. RB (LOC-First Union
National Bank)
5.95%(g) 02/01/15 30,755 30,755,000
- ------------------------------------------------------------------------------
Belk, Inc. RB (LOC-First Union National
Bank)
5.95%(g) 07/01/08 63,200 63,200,000
- ------------------------------------------------------------------------------
BMC Special Care Facilities RB
5.90%(g)(h) 11/15/29 20,000 20,000,000
- ------------------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
VARIABLE RATE DEMAND BONDS - (continued)
Borsis Finance, LLC RB (LOC-Wachovia Bank)
5.88%(g) 09/01/19 $ 20,000 $ 20,000,000
- -------------------------------------------------------------------------------
Connecticut State Housing Financing
Authority RB
5.87%(g)(h) 11/15/16 48,220 48,220,000
- -------------------------------------------------------------------------------
Gulf States Paper Corp. RB (LOC-Wachovia
Bank)
5.88%(g) 11/01/18 25,000 25,000,000
- -------------------------------------------------------------------------------
Southwestern Retirement Association Tax,
Inc. RB (LOC-First Union National Bank)
5.95%(g) 08/01/19 20,000 20,000,000
- -------------------------------------------------------------------------------
Texas (State of) GO Veteran's Housing
Assistance Program
5.85%(h) 12/01/29 25,000 25,000,000
- -------------------------------------------------------------------------------
Total Variable Rate Demand Bonds (Cost
$252,175,000) 252,175,000
- -------------------------------------------------------------------------------
TIME DEPOSITS - 32.22%
Amsouth Bank of Birmingham AL-Cayman
5.88% 03/01/00 267,000 267,000,000
- -------------------------------------------------------------------------------
Bank of America, NT & SA-Cayman
5.81% 03/01/00 500,000 500,000,000
- -------------------------------------------------------------------------------
Banque Bruxelles Lambert-London
5.94% 03/01/00 728,000 728,000,000
- -------------------------------------------------------------------------------
CIBC-Cayman
5.81% 03/01/00 200,000 200,000,000
- -------------------------------------------------------------------------------
Credit Communal De Belgique-Cayman
5.94% 03/01/00 128,000 128,000,000
- -------------------------------------------------------------------------------
Credit Suisse First Boston Corp.-Cayman
5.88% 03/01/00 700,000 700,000,000
- -------------------------------------------------------------------------------
Den Danske Bank-Cayman
5.91% 03/01/00 261,000 261,000,000
- -------------------------------------------------------------------------------
Deutsche Bank-Cayman
5.94% 03/01/00 38,000 38,000,000
- -------------------------------------------------------------------------------
Dresdner Bank-Cayman
5.81% 03/01/00 250,000 250,000,000
- -------------------------------------------------------------------------------
M&I Marshall & Isley Bank Milwaukee
5.81% 03/01/00 200,000 200,000,000
- -------------------------------------------------------------------------------
Norwest Bank, Minnesota Cayman
5.88% 03/01/00 250,000 250,000,000
- -------------------------------------------------------------------------------
Regions Bank-Cayman
5.94% 03/01/00 728,000 728,000,000
- -------------------------------------------------------------------------------
Societe Generale-Cayman
5.81% 03/01/00 635,788 635,788,481
- -------------------------------------------------------------------------------
Suntrust Bank Atlanta-Cayman
5.88% 03/01/00 850,000 850,000,000
- -------------------------------------------------------------------------------
UBS AG-Cayman
5.81% 03/01/00 500,000 500,000,000
- -------------------------------------------------------------------------------
Westdeutsche Landesbank-Cayman
5.94% 03/01/00 228,000 228,000,000
- -------------------------------------------------------------------------------
Total Time Deposits (Cost $6,463,788,481) 6,463,788,481
- -------------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION> PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS(i) - 21.37%
Bank of America Securities Inc.
5.87%(j) 03/01/00 $ 74,120 $ 74,119,581
- ------------------------------------------------------------------------------
Bank One Capital Markets, Inc.
5.87%(k) 03/01/00 373,000 373,000,000
- ------------------------------------------------------------------------------
Barclays Capital Inc.
5.87%(l) 03/01/00 355,254 355,253,977
- ------------------------------------------------------------------------------
Bear, Stearns & Co., Inc.
5.87%(m) -- 572,000 572,000,000
- ------------------------------------------------------------------------------
CIBC Oppenheimer Corp.
5.87%(n) 03/01/00 100,000 100,000,000
- ------------------------------------------------------------------------------
Credit Suisse First Boston Corp.
5.85%(o) 03/01/00 30,000 30,000,000
- ------------------------------------------------------------------------------
Deutsche Bank Securities, Inc.
5.86%(p) -- 200,000 200,000,000
- ------------------------------------------------------------------------------
5.86%(q) 03/01/00 71,233 71,232,687
- ------------------------------------------------------------------------------
First Union Capital Markets
5.87%(r) 03/01/00 125,000 125,000,000
- ------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.87%(s) 03/01/00 450,000 450,000,000
- ------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
5.85%(t) 03/01/00 72,198 72,197,905
- ------------------------------------------------------------------------------
Salomon Smith Barney, Inc.
5.86%(u) -- 915,000 915,000,000
- ------------------------------------------------------------------------------
5.76%(v) 03/01/00 51,807 51,807,034
- ------------------------------------------------------------------------------
Societe Generale Cowen Securities
Corp.
5.87%(w) 03/01/00 175,000 175,000,000
- ------------------------------------------------------------------------------
Warburg Dillon Read LLC
5.87%(x) 03/01/00 373,000 373,000,000
- ------------------------------------------------------------------------------
5.55%(y) 03/01/00 75,000 75,000,000
- ------------------------------------------------------------------------------
Westdeutsche Landesbank Girozentrale
5.87%(z) 03/01/00 275,000 275,000,000
- ------------------------------------------------------------------------------
Total Repurchase Agreements (Cost
$4,287,611,184) 4,287,611,184
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost
$20,355,674,395) - 101.46% 20,355,674,395 (aa)
- ------------------------------------------------------------------------------
OTHER LIABILITIES LESS ASSETS -
(1.46)% (294,206,669)
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $20,061,467,726
==============================================================================
</TABLE>
Investment Abbreviations:
GO -- General Obligation Bond
RB -- Revenue Bond
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
02/29/00.
See Notes to Financial Statements.
FS-8
<PAGE>
(c) 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 02/29/00.
(d) 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 02/29/00.
(e) Master Note Purchase Agreement may be terminated by either party upon three
business days' prior written notice, at which time all amounts outstanding
under the notes purchased under the Master Note Agreement will become
payable. Interest rates on master notes are redetermined periodically. Rate
shown is the rate in effect on 02/29/00.
(f) Interest rates are predetermined quarterly. Rate shown is the rate in
effect on 02/29/00.
(g) Demand security; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined periodically.
Rate shown is in effect on 02/29/00.
(h) Secured by bond insurance provided by one of the following companies:
AMBAC, FGIC, FSA or MBIA.
(i) Collateral on repurchase agreements, including the Portfolio's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Portfolio upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value is at least 102% of the
sales price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$800,130,444. Collateralized by $1,015,808,249 U.S. Government obligations,
5.50% to 8.50% due 07/15/03 to 11/01/28 with an aggregate market value at
02/29/00 of $816,000,001.
(k) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$500,081,528. Collateralized by $515,023,000 U.S. Government obligations,
0% to 8.00% due 03/01/00 to 08/25/14 with an aggregate market value at
02/29/00 of $510,003,862.
(l) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$396,637,718. Collateralized by $419,860,000 U.S. Government obligations,
0% to 6.25% due 04/13/00 to 05/15/29 with an aggregate market value at
02/29/00 of $404,505,314.
(m) Open repurchase agreement entered into 09/29/98; however, either party may
terminate the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $936,354,126 U.S. Government
obligations, 0% to 9.50% due 03/01/00 to 05/01/33 with an aggregate market
value at 02/29/00 of $629,015,201.
(n) Repurchase agreement entered into 02/29/00 with a maturing value of
$100,016,306. Collateralized by $266,306,141 U.S. Government obligations,
6.007% to 7.50% due 12/01/00 to 12/01/25 with an aggregate market value at
02/29/00 of $102,000,000.
(o) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$100,016,250. Collateralized by $107,780,000 U.S. Government obligations,
5.33% to 6.80% due 01/10/03 to 08/15/04 with an aggregate market value at
02/29/00 of $108,353,715.
(p) Open repurchase agreement entered into 10/02/97; however, either party may
terminate the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $241,953,163 U.S. Government
obligations, 5.50% to 6.50% due 02/01/06 to 01/01/29 with an aggregate
market value at 02/29/00 of $204,000,000.
(q) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$100,016,278. Collateralized by $101,295,000 U.S. Government obligation,
6.35% due 01/05/01 with a market value at 02/29/00 of $102,005,599.
(r) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$150,024,375. Collateralized by $164,246,000 U.S. Government obligations,
0% to 8.25% due 03/01/00 to 06/15/44 with an aggregate market value at
02/29/00 of $153,000,487.
(s) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$750,122,292. Collateralized by $1,294,709,963 U.S. Government obligations,
5.00% to 8.00% due 02/01/14 to 10/01/38 with an aggregate market value at
02/29/00 of $765,000,000.
(t) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$150,024,458. Collateralized by $156,510,000 U.S. Government obligations,
0% to 7.42% due 07/06/00 to 12/27/17 with an aggregate market value at
02/29/00 of $153,002,600.
(u) Open repurchase agreement entered into 12/25/97; however, either party may
terminate the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $2,307,348,000 U.S. Government
obligations, 0% to 10.70% due 03/17/00 to 07/15/43 with an aggregate market
value at 02/29/00 of $933,426,390.
(v) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$500,080,000. Collateralized by $1,248,055,000 U.S. Government obligations,
0% due 11/15/01 to 08/15/21 with an aggregate market value at 02/29/00 of
$510,176,897.
(w) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$200,032,611. Collateralized by $206,650,000 U.S. Government obligations,
0% to 6.875% due 06/01/00 to 01/15/05 with an aggregate market value at
02/29/00 of $204,474,729.
(x) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$500,081,528. Collateralized by $643,496,000 U.S. Government obligations,
0% to 9.375% due 03/07/00 to 01/15/30 with an aggregate market value at
02/29/00 of $510,001,318.
(y) Repurchase agreement entered into 02/29/00 with a maturing value of
$75,011,562. Collateralized by $80,392,000 U.S. Government obligations,
5.50% to 6.00% due 02/15/26 to 08/15/28 with an aggregate market value at
02/29/00 of $76,502,280.
(z) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$300,048,917. Collateralized by $331,666,013 U.S. Government obligations,
0% to 6.568% due 03/15/00 to 09/01/28 with an aggregate market value at
02/29/00 of $306,000,811.
(aa) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $16,068,063,211
- -------------------------------------------------------------------------
Repurchase agreements 4,287,611,184
- -------------------------------------------------------------------------
Cash 1,100,433
- -------------------------------------------------------------------------
Interest receivable 36,744,192
- -------------------------------------------------------------------------
Investment for deferred compensation plan 87,434
- -------------------------------------------------------------------------
Other assets 479,543
- -------------------------------------------------------------------------
Total assets 20,394,085,997
- -------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 248,642,836
- -------------------------------------------------------------------------
Dividends 81,477,022
- -------------------------------------------------------------------------
Deferred compensation 87,434
- -------------------------------------------------------------------------
Accrued administrative services fees 58,500
- -------------------------------------------------------------------------
Accrued advisory fees 803,454
- -------------------------------------------------------------------------
Accrued distribution fees 424,424
- -------------------------------------------------------------------------
Accrued transfer agent fees 511,660
- -------------------------------------------------------------------------
Accrued operating expenses 612,941
- -------------------------------------------------------------------------
Total liabilities 332,618,271
- -------------------------------------------------------------------------
Net assets $20,061,467,726
=========================================================================
NET ASSETS:
Institutional Class $15,639,959,687
=========================================================================
Private Investment Class $ 472,345,727
=========================================================================
Personal Investment Class $ 5,276,254
=========================================================================
Cash Management Class $ 2,708,766,732
=========================================================================
Reserve Class $ 108,325
=========================================================================
Resource Class $ 1,235,011,001
=========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 15,639,865,923
=========================================================================
Private Investment Class 472,344,416
=========================================================================
Personal Investment Class 5,276,240
=========================================================================
Cash Management Class 2,708,727,411
=========================================================================
Reserve Class 108,323
=========================================================================
Resource Class 1,235,021,505
=========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
=========================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE>
STATEMENT OF OPERATIONS
For the six months ended February 29, 2000
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $428,441,851
- -------------------------------------------------------------------
EXPENSES:
Advisory
fees 11,253,406
- -------------------------------------------------------------------
Custodian fees 529,540
- -------------------------------------------------------------------
Administrative services fees 307,096
- -------------------------------------------------------------------
Distribution fees (see Note 2) 2,554,713
- -------------------------------------------------------------------
Directors' fees 27,871
- -------------------------------------------------------------------
Transfer agent fees 1,488,703
- -------------------------------------------------------------------
Other 372,433
- -------------------------------------------------------------------
Total expenses 16,533,762
- -------------------------------------------------------------------
Less: Fee waivers (7,766,586)
- -------------------------------------------------------------------
Net expenses 8,767,176
- -------------------------------------------------------------------
Net investment income 419,674,675
- -------------------------------------------------------------------
Net realized gain on sales of investments 81,121
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $419,755,796
===================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended February 29, 2000 and year ended August 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 419,674,675 $ 326,765,434
- ------------------------------------------------------------------------------
Net realized gain on sales of investments 81,121 672,252
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 419,755,796 327,437,686
- ------------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (334,966,991) (264,791,600)
- ------------------------------------------------------------------------------
Private Investment Class (10,757,826) (9,376,339)
- ------------------------------------------------------------------------------
Personal Class (69,591) (3,765)
- ------------------------------------------------------------------------------
Cash Management Class (63,636,189) (46,551,990)
- ------------------------------------------------------------------------------
Reserve Class (769) --
- ------------------------------------------------------------------------------
Resource Class (10,243,309) (6,041,740)
- ------------------------------------------------------------------------------
Capital stock transactions -- net (see
Note 4) 13,866,891,254 2,284,209,435
- ------------------------------------------------------------------------------
Net increase in net assets 13,866,972,375 2,284,881,687
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,194,495,351 3,909,613,664
- ------------------------------------------------------------------------------
End of period $20,061,467,726 $6,194,495,351
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $20,061,343,818 $6,194,452,564
- ------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities 123,908 42,787
- ------------------------------------------------------------------------------
$20,061,467,726 $6,194,495,351
==============================================================================
</TABLE>
See Notes to Financial Statements.
FS-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
(Unaudited)
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 commenced on January 14, 2000.
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 six months ended February 29, 2000, AIM waived fees of $7,127,157.
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 six months ended February 29, 2000,
AIM was paid $307,096 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 six months ended February 29,
2000, AFS was paid $1,389,867 for such services.
FS-13
<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, the 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. Currently, FMC has elected to waive a portion of its compensation
payable by the Fund such that the compensation paid pursuant to the Plan with
respect to the Private Investment Class, the Personal Investment Class, the
Cash Management Class, the Reserve Class, and the Resource Class equals 0.30%,
0.50%, 0.08%, 0.80% and 0.16%, respectively, maximum annual rate of the average
daily net assets attributable to such class. During the six months ended
February 29, 2000, the Private Investment Class, the Personal Investment Class,
the Cash Management Class, the Resource Class and the Reserve Class paid
$608,710, $6,756, $920,852, $378,842, and $124, respectively, as compensation
under the Plan. FMC waived fees of $639,429 for the same period.
Certain officers and directors of the Fund are officers of AIM, FMC and AFS.
During the six months ended February 29, 2000, the Fund paid legal fees of
$6,075 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.
FS-14
<PAGE>
NOTE 4 - SHARE INFORMATION
Changes in shares outstanding during the six months ended February 29, 2000 and
the year ended August 31, 1999 were as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, 2000 AUGUST 31, 1999
------------------------------------ -----------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 135,476,446,930 $ 135,476,446,930 153,902,899,999 $ 153,902,899,999
- ---------------------------------------------------------------------------------------------------
Private Investment Class 3,327,798,666 3,327,798,666 4,203,510,271 4,203,510,271
- ---------------------------------------------------------------------------------------------------
Personal Investment Class* 8,517,511 8,517,511 1,117,987 1,117,987
- ---------------------------------------------------------------------------------------------------
Cash Management Class 18,854,015,231 18,854,015,231 14,321,528,231 14,321,528,231
- ---------------------------------------------------------------------------------------------------
Resource Class 3,002,971,959 3,002,971,959 2,669,302,439 2,669,302,439
- ---------------------------------------------------------------------------------------------------
Reserve Class** 484,000 484,000 -- --
- ---------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Institutional Class 45,116,569 45,116,569 32,251,894 32,251,894
- ---------------------------------------------------------------------------------------------------
Private Investment Class 2,984,166 2,984,166 3,157,926 3,157,926
- ---------------------------------------------------------------------------------------------------
Personal Investment Class* 37,965 37,965 255 255
- ---------------------------------------------------------------------------------------------------
Cash Management Class 36,668,929 36,668,929 34,021,495 34,021,495
- ---------------------------------------------------------------------------------------------------
Resource Class 8,517,751 8,517,751 5,318,298 5,318,298
- ---------------------------------------------------------------------------------------------------
Reserve Class** 324 324 -- --
- ---------------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (124,423,602,077) (124,423,602,077) (152,491,320,126) (152,491,320,126)
- ---------------------------------------------------------------------------------------------------
Private Investment Class (3,124,470,758) (3,124,470,758) (4,010,706,089) (4,010,706,089)
- ---------------------------------------------------------------------------------------------------
Personal Investment
Class* (4,273,228) (4,273,228) (124,251) (124,251)
- ---------------------------------------------------------------------------------------------------
Cash Management Class (17,260,708,640) (17,260,708,640) (13,932,834,793) (13,932,834,793)
- ---------------------------------------------------------------------------------------------------
Resource Class (2,083,238,044) (2,083,238,044) (2,453,914,101) (2,453,914,101)
- ---------------------------------------------------------------------------------------------------
Reserve Class** (376,000) (376,000) -- --
- ---------------------------------------------------------------------------------------------------
Net increase 13,866,891,254 $ 13,866,891,254 2,284,209,435 $ 2,284,209,435
===================================================================================================
</TABLE>
*The Personal Investment Class commenced sales on June 22, 1999.
**The Reserve Class commenced sales on January 14, 2000.
FS-15
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Cash Management
Class capital stock outstanding during the six months ended February 29, 2000
and 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>
AUGUST 31,
FEBRUARY 29, --------------------------------------
2000 1999 1998 1997 1996
------------ ---------- -------- ------- -------
<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 0.03 0.05 0.06 0.05 0.03
- ----------------------- ---------- ---------- -------- ------- -------
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.06) (0.05) (0.03)
- ----------------------- ---------- ---------- -------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ---------- ---------- -------- ------- -------
Total return(a) 2.76% 5.09% 5.66% 5.50% 3.32%
======================= ========== ========== ======== ======= =======
Ratios/supplemental data:
Net assets, end of
period (000s omitted) $2,708,767 $1,078,777 $655,975 $83,487 $53,209
======================= ========== ========== ======== ======= =======
Ration of expenses to average net assets:
Including fee waivers and/or expense
reimbursements 0.17%(b) 0.17% 0.16% 0.15% 0.10%(c)
======================= ========== ========== ======== ======= =======
Excluding fee waivers and/or expense
reimbursements 0.28%(b) 0.28% 0.28% 0.28% 0.34%(c)
======================= ========== ========== ======== ======= =======
Ratio of net investment income to average net
assets 5.53%(b) 4.94% 5.51% 5.38% 5.27%(c)
======================= ========== ========== ======== ======= =======
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $2,314,780,004.
(c) Annualized.
FS-16
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during the six months ended February 29, 2000, and
for each of the years in the five-year period ended August 31, 1999.
<TABLE>
<CAPTION>
AUGUST 31,
FEBRUARY 29, ----------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ----------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income 0.03 0.05 0.06 0.05 0.06 0.06
- ----------------------- ----------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.03) (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 $ 1.00
======================= =========== ========== ========== ========== ========== ==========
Total return(a) 2.80% 5.17% 5.74% 5.58% 5.68% 5.83%
======================= =========== ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $15,639,960 $4,541,935 $3,097,539 $3,787,357 $1,988,755 $1,287,463
======================= =========== ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets:
Including fee waivers
and/or expense
reimbursements 0.09%(b) 0.09% 0.08% 0.06% 0.03% 0.11%
======================= =========== ========== ========== ========== ========== ==========
Excluding fee waivers
and/or expense
reimbursements 0.18%(b) 0.18% 0.18% 0.18% 0.18% 0.18%
======================= =========== ========== ========== ========== ========== ==========
Ratio of net investment
income to average net
assets 5.61%(b) 5.02% 5.59% 5.46% 5.52% 5.69%
======================= =========== ========== ========== ========== ========== ==========
</TABLE>
(a)Not annualized for periods less than one year.
(b)Ratios are annualized and based on average net assets of $12,021,004,659.
FS-17
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Personal Investment
Class capital stock outstanding during the six months ended February 29, 2000
and the period January 4, 1999 (date of inception) through August 31, 1999.
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
------------ ----------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $1.00
- ---------------------------------------------------- ------ -----
Income from investment operations:
Net investment income 0.03 0.01
- ---------------------------------------------------- ------ -----
Less distributions:
Dividends from net investment income (0.03) (0.01)
- ---------------------------------------------------- ------ -----
Net asset value, end of period $ 1.00 $1.00
==================================================== ====== =====
Total return(a) 2.55% 2.94%
==================================================== ====== =====
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,276 $ 994
==================================================== ====== =====
Ratio of expenses to average net assets:
Including fee waivers and/or expense reimbursements 0.58%(b) 0.59%(c)
==================================================== ====== =====
Excluding fee waivers and/or expense reimbursements 0.92%(b) 0.93%(c)
==================================================== ====== =====
Ratio of net investment income to average net assets 5.12%(b) 4.52%(c)
==================================================== ====== =====
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $2,717,394.
(c) Annualized.
FS-18
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Private Investment
Class capital stock outstanding during the six months ended February 29, 2000
and 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>
AUGUST 31,
FEBRUARY 29, -----------------------------------
2000 1999 1998 1997 1996
------------ -------- ------- ------- -------
<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 0.03 0.05 0.05 0.05 0.03
- ----------------------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.03)
- ----------------------- -------- -------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- -------- -------- ------- ------- -------
Total return(a) 2.65% 4.85% 5.43% 5.27% 2.74%
- ----------------------- -------- -------- ------- ------- -------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $472,346 $266,031 $70,058 $70,856 $44,981
- ----------------------- -------- -------- ------- ------- -------
Ratio of expenses to
average net assets:
Including fee waivers
and/or expense
reimbursements 0.39%(b) 0.39% 0.38% 0.36% 0.32%(c)
- ----------------------- -------- -------- ------- ------- -------
Excluding fee waivers
and/or expense
reimbursements 0.68%(b) 0.68% 0.68% 0.68% 0.69%(c)
- ----------------------- -------- -------- ------- ------- -------
Ratio of net investment
income to average net
assets 5.31%(b) 4.72% 5.29% 5.16% 5.04%(c)
- ----------------------- -------- -------- ------- ------- -------
</TABLE>
(a)Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $408,036,637.
(c)Annualized.
FS-19
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Reserve Class
capital stock outstanding during the period January 14, 2000 (date sales
commenced) through February 29, 2000.
<TABLE>
<CAPTION>
FEBRUARY 29,
2000
------------
<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) 0.64%
==================================================== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 108
==================================================== ======
Ratio of expenses to average net assets:
Including fee waivers and/or expense reimbursements 0.89%(b)
==================================================== ======
Excluding fee waivers and/or expense reimbursements 1.18%(b)
==================================================== ======
Ratio of net investment income to average net assets 4.81%(b)
==================================================== ======
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $120,265.
FS-20
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Resource Class
capital stock outstanding during the six months ended February 29, 2000 and
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>
AUGUST 31,
FEBRUARY 29, --------------------------
2000 1999 1998 1997
------------ -------- ------- -------
<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 0.03 0.05 0.05 0.05
- --------------------------------------------------- ---------- -------- ------- -------
Less distributions:
Dividends from net investment income (0.03) (0.05) (0.05) (0.05)
- --------------------------------------------------- ---------- -------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------- ---------- -------- ------- -------
Total return/(a)/ 2.70% 4.96% 5.53% 5.04%
- --------------------------------------------------- ---------- -------- ------- -------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,235,011 $306,758 $86,041 $80,510
- --------------------------------------------------- ---------- -------- ------- -------
Ratio of expenses to average net assets:
Including fee waivers and/or reimbursements 0.29%(b) 0.29% 0.28% 0.27%(c)
- ---------------------------------------------------- ---------- -------- ------- -------
Excluding fee waivers and/or expense reimbursements 0.38%(b) 0.38% 0.38% 0.39%(c)
- ---------------------------------------------------- ---------- -------- ------- -------
Ratio of net investment income to average net assets 5.41%(b) 4.82% 5.40% 5.34%(c)
- ---------------------------------------------------- ---------- -------- ------- -------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $380,923,463.
(c) Annualized.
FS-21
<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.
/s/ KPMG LLP
KPMG LLP
October 1, 1999
Houston, Texas
FS-22
<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-23
<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-24
<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-25
<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-26
<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-27
<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-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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-36
<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-37
<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-38
<PAGE>
PRIME PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
CASH MANAGEMENT CLASS
Prime Portfolio seeks to maximize current income consistent with the
preservation of capital and the maintenance of liquidity.
PROSPECTUS
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --Registered Trademark--
<PAGE>
-------------------
| PRIME 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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invertia con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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>
-------------------
| PRIME PORTFOLIO |
-------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to maximize current income consistent with
the preservation of capital and the maintenance of liquidity. The investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its objective by investing only in high-quality U.S.
dollar denominated obligations with maturities of 60 days or less, 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 generally maintain a weighted average maturity of 40 days or
less. The fund invests in compliance with Rule 2a-7 under the Investment
Company Act of 1940.
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 in 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 or are sold, 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 in enforcing its rights.
1
<PAGE>
-------------------
| PRIME 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 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 RETURNS
----------- -------
1995 5.95%
1996 5.39%
1997 5.54%
1998 5.51%
1999 5.12%
The Cash Management Class shares' year-to-date total return as of March 31,
2000 was 1.42%.
During the periods shown in the bar chart, the highest quarterly return was
1.49% (quarter ended June 30, 1995), 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
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Management Class 5.12% 5.50% -- 5.45% 06/30/94
- ------------------------------------------------------------------
</TABLE>
Cash Management Class shares' seven-day yield on December 31, 1999 was 5.16%.
For the current seven-day yield, call (800) 877-7745.
2
<PAGE>
-------------------
| PRIME 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>
CASH
(fees paid directly from MANAGEMENT
your 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
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
CASH
(expenses that are deducted MANAGEMENT
from fund assets) CLASS
- -----------------------------------------------------------
Management Fees 0.06%
Distribution and/or Service
(12b-1) Fees 0.10
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.19
- -----------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.02% of the Rule 12b-1 distribution
fee. The waiver may be terminated at any time. Total Annual Fund Operating
Expenses, net of this agreement, are 0.17%.
You should also consider the effect of any account fees charged by the
financial institution managing your 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 $19 $61 $107 $243
- ------------------------------------------------------
</TABLE>
3
<PAGE>
-------------------
| PRIME 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 120
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 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. Individuals, corporations,
partnerships and other businesses that maintain qualified accounts at an
institution may invest in shares of the Cash Management Class. 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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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 4:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 4:00 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>
-------------------
| PRIME PORTFOLIO |
-------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997, 1996 and 1995
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
SEPTEMBER 1, 1999
THROUGH YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.05 0.06
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.05) (0.06)
Net asset value, end of
period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.74% 5.07% 5.62% 5.45% 5.55% 5.71%
- ----------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- ----------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) 1,092,808 $1,253,799 $862,207 $767,304 $507,247 $194,479
Ratio of expenses to
average net assets
Including fee waivers
and/or expense
reimbursements 0.17%(b) 0.17% 0.17% 0.17% 0.17% 0.17%
Excluding fee waivers
and/or expense
reimbursements 0.19%(b) 0.19% 0.19% 0.19% 0.19% 0.32%
Ratio of net investment
income to average net
assets 5.47%(b) 4.94% 5.48% 5.33% 5.38% 5.69%
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $1,138,148,862.
5
<PAGE>
-------------------
| PRIME 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 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
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 4:00 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
0843, Houston, Texas 77001-0843 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 fund may also be
made via AIM LINK--Registered Trademark-- Remote, a personal computer
application software product.
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 4:00 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>
-------------------
| PRIME 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 4:00 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 4:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 4:00 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
fund 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>
-------------------
| PRIME 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 0843
Houston, TX 77001-0843
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.
- ---------------------------------------
| Prime Portfolio |
| SEC 1940 Act file number: 811-7892 |
- ---------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
- --Registered Trademark-- --Registered Trademark--
<PAGE>
PRIME PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INSTITUTIONAL CLASS
Prime Portfolio seeks to maximize current income consistent with the
preservation of capital and the maintenance of liquidity.
PROSPECTUS
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --Registered Trademark--
<PAGE>
-------------------
| PRIME 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
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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>
-------------------
| PRIME PORTFOLIO |
-------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to maximize current income consistent with
the preservation of capital and the maintenance of liquidity. The investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its objective by investing only in high-quality U.S.
dollar denominated obligations with maturities of 60 days or less, 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 generally maintain a weighted average maturity of 40 days or
less. The fund invests in compliance with Rule 2a-7 under the Investment
Company Act of 1940.
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 in 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 or are sold, 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 in enforcing its rights.
1
<PAGE>
-------------------
| PRIME 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 RETURNS
----------- -------
1990 8.48%
1991 6.13%
1992 3.74%
1993 3.16%
1994 4.32%
1995 6.04%
1996 5.48%
1997 5.63%
1998 5.59%
1999 5.21%
The Institutional Class shares' year-to-date total return as of March 31, 2000
was 1.44%.
During the periods shown in the bar chart, the highest quarterly return was
2.08% (quarter ended June 30, 1990), and the lowest quarterly return was 0.76%
(quarter ended June 30, 1993).
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.21% 5.59% 5.37% 7.59% 11/10/80
- ----------------------------------------------------------------------
</TABLE>
Institutional Class shares' seven-day yield on December 31, 1999 was 5.24%. For
the current seven-day yield, call (800) 659-1005.
2
<PAGE>
-------------------
| PRIME 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 0.06%
Distribution and/or Service
(12b-1) Fees None
Other Expenses 0.03
Total Annual Fund
Operating Expenses 0.09
- -----------------------------------------------------------
</TABLE>
You should also consider the effect of any account fees charged by the
financial institution managing your 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 $9 $29 $51 $115
- ----------------------------------------------------
</TABLE>
3
<PAGE>
-------------------
| PRIME 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 120
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. 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 reserve 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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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 4:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 4:00 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>
-------------------
| PRIME 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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997, 1996 and 1995
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
-----------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 1, 1999
THROUGH YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.05 0.06 0.05 0.05 0.06
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.06) (0.05) (0.05) (0.06)
Net asset value, end of
period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.78% 5.15% 5.71% 5.54% 5.64% 5.80%
- -------------------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- -------------------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $11,810,767 $6,210,056 $5,843,813 $5,593,043 $5,264,601 $3,752,693
Ratio of expenses to
average net assets 0.09%(b) 0.09% 0.09% 0.09% 0.09% 0.09%
Ratio of net investment
income (loss) to
average net assets 5.55%(b) 5.02% 5.56% 5.40% 5.48% 5.64%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $11,032,416,563
5
<PAGE>
-------------------
| PRIME 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 $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 4:00 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
0843, Houston, Texas 77001-0843 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 fund 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 4:00 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.
A-1
<PAGE>
-------------------
| PRIME PORTFOLIO |
-------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------
| 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 4:00 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 4:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 4:00 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
fund 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>
-------------------
| PRIME 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 0843
Houston, TX 77001-0843
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.
- --------------------------------------
| Prime Portfolio |
| SEC 1940 Act file number: 811-7892 |
- --------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
- --Registered Trademark-- INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
PRIME PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERSONAL INVESTMENT CLASS
Prime Portfolio seeks to maximize current income consistent with the
preservation of capital and the maintenance of liquidity.
PROSPECTUS
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --Registered Trademark--
<PAGE>
-------------------
| PRIME 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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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>
-------------------
| PRIME PORTFOLIO |
-------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to maximize current income consistent with
the preservation of capital and the maintenance of liquidity. The investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its objective by investing only in high-quality U.S.
dollar denominated obligations with maturities of 60 days or less, 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 generally will maintain a weighted average maturity of 40 days or
less. The fund invests in compliance with Rule 2a-7 under the Investment
Company Act of 1940.
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 in 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 or are sold, 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 in enforcing its rights.
1
<PAGE>
-------------------
| PRIME 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 Personal
Investment Class shares from year to year. The Personal Investment Class shares
are not subject to sales loads.
YEAR ANNUAL
ENDED TOTAL
DECEMBER 31 RETURNS
----------- ------
1992 3.32%
1993 2.68%
1994 3.80%
1995 5.51%
1996 4.95%
1997 5.10%
1998 5.07%
1999 4.68%
The Personal Investment Class shares' year-to-date total return as of March
31, 2000 was 1.32%.
During the periods shown in the bar chart, the highest quarterly return was
1.38% (quarter ended June 30, 1995), and the lowest quarterly return was 0.65%
(quarter ended June 30, 1993).
PERFORMANCE TABLE
The following performance table reflects the performance of Personal Investment
Class shares over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personal Investment Class 4.68% 5.06% -- 4.40% 08/20/91
- ----------------------------------------------------------------------
</TABLE>
Personal Investment Class shares' seven-day yield on December 31, 1999 was
4.74%. For the current seven-day yield, call (800) 877-4744.
2
<PAGE>
-------------------
| PRIME 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 0.06%
Distribution and/or Service
(12b-1) Fees 0.75
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.84
- -----------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.25% of the Rule 12b-1 distribution
fee. The waiver may be terminated at any time. Total Annual Fund Operating
Expenses, net of this agreement, are 0.59%.
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 your 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 5 YEARS 10 YEARS
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Personal Investment Class $86 $268 $466 $1,037
- ----------------------------------------------------------
</TABLE>
3
<PAGE>
-------------------
| PRIME 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 120
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). It is expected that the shares of the Personal
Investment Class may be particularly suitable investments for corporate cash
managers, municipalities or other public entities. Individuals, corporations,
partnerships and other businesses that maintain qualified accounts at an
institution may invest in shares of the Personal Investment Class. 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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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 4:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 4:00 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>
-------------------
| PRIME 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 on an investment in the fund (assuming reinvestment
of all dividends and distributions).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997, 1996 and 1995
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
SEPTEMBER 1, 1999
THROUGH YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.02 0.05 0.05 0.05 0.05 0.05
Less distributions:
Dividends from net
investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.52% 4.63% 5.18% 5.01% 5.11% 5.27%
- --------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $105,275 $87,754 $140,087 $97,215 $112,645 $99,630
Ratio of expenses to
average net assets
Including fee waivers
and/or expense
reimbursements 0.59%(b) 0.59% 0.59% 0.59% 0.59% 0.59%
Excluding fee waivers
and/or expense
reimbursements 0.84%(b) 0.84% 0.84% 0.84% 0.89% 0.86%
Ratio of net investment
income to average net
assets 5.05%(b) 4.52% 5.06% 4.89% 4.99% 5.23%
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $94,885,205.
5
<PAGE>
-------------------
| PRIME 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 4:00 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
0843, Houston, Texas 77001-0843 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 fund may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
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 4:00 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
A-1
<PAGE>
-------------------
| PRIME PORTFOLIO |
-------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
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 4:00 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 4:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 4:00 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
fund 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>
-------------------
| PRIME 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 0843
Houston, TX 77001-0843
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.
--------------------------------------
| Prime Portfolio |
| SEC 1940 Act file number: 811-7892 |
--------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
- --Registered Trademark-- INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
PRIME PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRIVATE INVESTMENT CLASS
Prime Portfolio seeks to maximize current income consistent with the
preservation of capital and the maintenance of liquidity.
PROSPECTUS
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --Registered Trademark--
<PAGE>
-------------------
| PRIME 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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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>
-------------------
| PRIME PORTFOLIO |
-------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to maximize current income consistent with
the preservation of capital and the maintenance of liquidity. The investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its objective by investing only in high-quality U.S.
dollar denominated obligations with maturities of 60 days or less, 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 generally maintain a weighted average maturity of 40 days or
less. The fund invests in compliance with Rule 2a-7 under the Investment
Company Act of 1940.
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 in 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, or are sold, 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 in enforcing its rights.
1
<PAGE>
-------------------
| PRIME 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 RETURNS
----------- -------
1994 4.01%
1995 5.72%
1996 5.16%
1997 5.31%
1998 5.28%
1999 4.89%
The Private Investment Class shares' year-to-date total return as of March 31,
2000 was 1.37%.
During the periods shown in the bar chart, the highest quarterly return was
1.43% (quarter ended June 30, 1995), and the lowest quarterly return was 0.73%
(quarter ended March 31, 1994).
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private Investment Class 4.89% 5.27% -- 4.91% 07/08/93
- ---------------------------------------------------------------------
</TABLE>
Private Investment Class shares' seven-day yield on December 31, 1999 was
4.94%. For the current seven-day yield, call (800) 877-7748.
2
<PAGE>
-------------------
| PRIME 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 0.06%
Distribution and/or Service
(12b-1) Fees 0.50
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.59
- -----------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.20% of the Rule 12b-1 distribution
fee. The waiver may be terminated at any time. Total Annual Fund Operating
Expenses, net of this agreement, are 0.39%.
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 your 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 $60 $189 $329 $738
- ---------------------------------------------------------
</TABLE>
3
<PAGE>
-------------------
| PRIME 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 120
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. 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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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 4:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 4:00 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>
-------------------
| PRIME 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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997, 1996 and 1995
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
SEPTEMBER 1, 1999
THROUGH YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.05 0.05
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.62% 4.84% 5.39% 5.21% 5.32% 5.48%
- --------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- --------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $437,813 $384,894 $294,811 $235,447 $209,443 $154,278
Ratio of expenses to
average net assets
Including fee waivers
and/or expense
reimbursements 0.39%(b) 0.39% 0.39% 0.39% 0.39% 0.39%
Excluding fee waivers
and/or expense
reimbursements 0.59%(b) 0.59% 0.59% 0.59% 0.59% 0.60%
Ratio of net investment
income to average net
assets 5.25%(b) 4.72% 5.26% 5.10% 5.20% 5.50%
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $396,893,615.
5
<PAGE>
-------------------
| PRIME 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 thousand.
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 4:00 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
0843, Houston, Texas 77001-0843 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 fund may also be made
via AIM LINK --Registered Trademark-- Remote, a personal computer application
software product.
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 4:00 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
A-1
<PAGE>
-------------------
| PRIME PORTFOLIO |
-------------------
SHAREHOLDER INFORMATION (continued)
- --------------------------------------------------------------------------------
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 4:00 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 4:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 4:00 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
fund 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>
-------------------
| PRIME 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 0843
Houston, TX 77001-0843
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.
- --------------------------------------
| Prime Portfolio |
| SEC 1940 Act file number: 811-7892 |
- --------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
- --Registered Trademark-- --Registered Trademark--
<PAGE>
PRIME PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
RESERVE CLASS
Prime Portfolio seeks to maximize current income consistent with the
preservation of capital and the maintenance of liquidity.
PROSPECTUS
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --Registered Trademark--
<PAGE>
-------------------
| PRIME 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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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>
-------------------
| PRIME PORTFOLIO |
-------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to maximize current income consistent with
the preservation of capital and the maintenance of liquidity. The investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its objective by investing only in high-quality U.S.
dollar denominated obligations with maturities of 60 days or less, 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 generally maintain a weighted average maturity of 40 days or
less. The fund invests in compliance with Rule 2a-7 under the Investment
Company Act of 1940.
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 in 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 or are sold, 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 in enforcing its rights.
1
<PAGE>
-------------------
| PRIME 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 RETURNS
----------- -------
1990 8.48%
1991 6.13%
1992 3.74%
1993 3.16%
1994 4.32%
1995 6.04%
1996 5.48%
1997 5.63%
1998 5.59%
1999 5.21%
The returns shown are those of the fund's Institutional Class shares, which
are not offered in this prospectus. Reserve Class shares would have lower
annual returns because, although the shares are invested in the same portfolio
of securities, the Reserve Class has higher expenses.
The Institutional Class and the Reserve Class shares' year-to-date total
return as of March 31, 2000 was 1.44% and 1.24%, respectively.
During the periods shown in the bar chart, Institutional Class' highest
quarterly return was 2.08% (quarter ended June 30, 1990), and the lowest
quarterly return was 0.76% (quarter ended June 30, 1993).
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, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class 5.21% 5.59% 5.37% 7.59% 11/10/80
- ----------------------------------------------------------------------
Reserve Class -- -- -- -- 01/04/99
- ----------------------------------------------------------------------
</TABLE>
Shares' seven-day yield on December 31, 1999 was 4.44%. For the current seven-
day yield, call (800) 417-8837.
2
<PAGE>
-------------------
| PRIME 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) RESERVE CLASS
- -----------------------------------------------------------
Management Fees 0.06%
Distribution and/or Service
(12b-1) Fees 1.00
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 1.09
</TABLE>
- --------------------------------------------------------------------------------
(1) The distributor has agreed to waive 0.20% of the Rule 12b-1 distribution
fee. The waiver may be terminated at any time. Total Annual Fund Operating
Expenses, net of this agreement, are 0.89%.
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 your 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 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Reserve Class $111 $347 $601 $1,329
- ----------------------------------------------
</TABLE>
3
<PAGE>
-------------------
| PRIME 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 120
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. 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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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 4:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 4:00 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>
-------------------
| PRIME PORTFOLIO |
-------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of the Reserve 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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the period January 4, 1999 through August 31, 1999 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>
RESERVE CLASS
----------------------------------
FOR THE PERIOD FOR THE PERIOD
SEPTEMBER 1, 1999 JANUARY 4,
THROUGH THROUGH
FEBRUARY 29, 2000 AUGUST 31, 1999
- ----------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.02 0.03
Less distributions:
Dividends from net investment income (0.02) (0.03)
Net asset value, end of period $1.00 $ 1.00
Total return(a) 2.37% 2.73%
- ----------------------------------------------------------------------------
Ratios/supplemental data:
- ----------------------------------------------------------------------------
Net assets, end of period (000s omitted) $113,865 $121,783
Ratio of expenses to average net assets
Including fee waivers and/or expense
reimbursements 0.89%(b) 0.89%(c)
Excluding fee waivers and/or expense
reimbursements 1.09%(b) 1.09%(c)
Ratio of net investment income to average
net assets 4.75%(b) 4.22%(c)
- ----------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $111,775,529.
(c) Annualized.
5
<PAGE>
-------------------
| PRIME 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 4:00 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
0843, Houston, Texas 77001-0843 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 fund may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
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 4:00 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.
A-1
<PAGE>
-------------------
| PRIME PORTFOLIO |
-------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------
| 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 4:00 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 4:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 4:00 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
fund 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>
-------------------
| PRIME 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 0843
Houston, TX 77001-0843
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.
--------------------------------------
| Prime Portfolio |
| SEC 1940 Act file number: 811-7892 |
--------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
- --Registered Trademark-- INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
PRIME PORTFOLIO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
RESOURCE CLASS
Prime Portfolio seeks to maximize current income consistent with the
preservation of capital and the maintenance of liquidity.
PROSPECTUS
JUNE 1, 2000
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.
An investment in the fund:
. is not FDIC insured;
. may lose value; and
. is not guaranteed by a bank.
[AIM LOGO
APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark--
- --Registered Trademark--
<PAGE>
------------------
| PRIME 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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM
Internet Connect 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>
PRIME PORTFOLIO
Investment Objective and Strategies
- --------------------------------------------------------------------------------
The fund's investment objective is to maximize current income consistent with
the preservation of capital and the maintenance of liquidity. The investment
objective of the fund may be changed by the Board of Directors without
shareholder approval.
The fund attempts to meet its objective by investing only in high-quality U.S.
dollar denominated obligations with maturities of 60 days or less, 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 generally maintain a weighted average maturity of 40 days or
less. The fund invests in compliance with Rule 2a-7 under the Investment
Company Act of 1940.
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 in 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 or are sold, 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 in enforcing its rights.
1
<PAGE>
PRIME 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 RETURNS
----------- -------
1997 5.46%
1998 5.43%
1999 5.04%
The Resource Class shares' year-to-date total return as of March 31, 2000 was
1.40%.
During the periods shown in the bar chart, the highest quarterly return was
1.38% (quarter ended December 31, 1997), and the lowest quarterly return was
1.27% (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
December 31, SINCE INCEPTION
1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Resource Class 5.04% -- -- 5.31% 01/16/96
- -----------------------------------------------------------
</TABLE>
Resource Class shares' seven-day yield on December 31, 1999 was 5.08%. For the
current seven-day yield, call (800) 825-6858.
2
<PAGE>
-------------------
| PRIME 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 0.06%
Distribution and/or Service
(12b-1) Fees 0.20
Other Expenses 0.03
Total Annual Fund
Operating Expenses(1) 0.29
- -----------------------------------------------------------
</TABLE>
(1) The distributor has agreed to waive 0.04% of the Rule 12b-1 distribution
fee. The waiver may be terminated at any time. Total Annual Fund Operating
Expenses, net of this agreement, are 0.25%.
You should also consider the effect of any account fees charged by the
financial institution managing your 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 $30 $93 $163 $368
- -----------------------------------------------
</TABLE>
3
<PAGE>
-------------------
| PRIME 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 120
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). It is expected that the shares of the Resource Class may be
particularly suitable investments for corporate cash managers, municipalities
or other public entities. Individuals, corporations, partnerships and other
businesses that maintain qualified accounts at an institution may invest in
shares of the Resource Class. 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, if any, will consist primarily of
income.
DIVIDENDS
The fund generally declares dividends on each business day and pays any
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 4:00 p.m. Eastern time.
Generally, shareholders whose purchase orders have been received by the fund
prior to 4:00 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>
PRIME 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).
The information for the six-month period ended February 29, 2000 is unaudited.
The information for the years ended August 31, 1999, 1998, 1997 and for the
period January 16, 1996 through August 31, 1996 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 FOR THE PERIOD
SEPTEMBER 1, 1999 JANUARY 16, 1996
THROUGH YEAR ENDED AUGUST 31, THROUGH
FEBRUARY 29, 2000 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 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.03
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.03)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.70% 4.99% 5.54% 5.36% 3.28%
- ------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- ------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $1,128,050 $665,939 $698,380 $161,701 $58,012
Ratio of expenses to
average net assets
Including fee waivers
and/or expense
reimbursements 0.25%(b) 0.25% 0.25% 0.25% 0.25%(c)
Excluding fee waivers
and/or expense
reimbursements 0.29%(b) 0.29% 0.29% 0.29% 0.29%(c)
Ratio of net investment
income to average net
assets 5.39%(b) 4.86% 5.40% 5.25% 5.18%(c)
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $746,623,311.
(c) Annualized.
5
<PAGE>
-------------------
| PRIME 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 4:00 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
0843, Houston, Texas 77001-0843 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 fund may also be
made via AIM LINK --Registered Trademark-- Remote, a personal computer
application software product.
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) 825-6858,
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 4:00 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.
A-1
<PAGE>
-------------------
| PRIME PORTFOLIO |
-------------------
SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------
| 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 4:00 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 4:00
p.m. Eastern time, the fund will normally wire redemption proceeds on that day.
If the transfer agent receives a redemption request after 4:00 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
fund 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>
-------------------
| PRIME 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 0843
Houston, TX 77001-0843
BY TELEPHONE: (800) 825-6858
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.
---------------------------------------
| Prime Portfolio |
| SEC 1940 Act file number: 811-7892 |
---------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com
- --Registered Trademark-- INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
SHORT-TERM INVESTMENTS CO.
PRIME 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 PRIME 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 JUNE 1, 2000
RELATING TO THE PROSPECTUS OF EACH OF THE FOLLOWING CLASSES OF THE PRIME
PORTFOLIO: CASH MANAGEMENT CLASS PROSPECTUS DATED JUNE 1, 2000,
INSTITUTIONAL CLASS PROSPECTUS DATED JUNE 1, 2000, PERSONAL INVESTMENT CLASS
PROSPECTUS DATED JUNE 1, 2000, PRIVATE INVESTMENT CLASS
PROSPECTUS DATED JUNE 1, 2000, RESERVE CLASS PROSPECTUS DATED JUNE 1, 2000 AND
RESOURCE CLASS PROSPECTUS DATED JUNE 1, 2000
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction......................................................... B-3
General Information about the Company................................ B-3
The Company and Its Shares......................................... B-3
Directors and Officers............................................. B-4
Remuneration of Directors.......................................... B-7
AIM Funds Retirement Plan for Eligible Directors/Trustees.......... B-7
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
Liquid Assets Portfolio............................................ B-11
Prime Portfolio.................................................... B-13
Share Purchases and Redemptions...................................... B-16
Purchases and Redemptions.......................................... B-16
Redemptions by the Company......................................... B-16
Net Asset Value Determination...................................... B-16
Distribution Agreement............................................. B-17
Distribution Plan.................................................. B-17
Banking Regulations................................................ B-19
Performance Information............................................ B-19
Redemptions in Kind................................................ B-20
Investment Program and Restrictions.................................. B-20
Investment Program................................................. B-20
Investment Policies................................................ B-21
Eligible Securities................................................ B-23
Commercial Paper Ratings........................................... B-23
Bond Ratings....................................................... B-23
Investment Restrictions............................................ B-25
Portfolio Transactions and Brokerage................................. B-26
General Brokerage Policy........................................... B-26
Allocation of Portfolio Transactions............................... B-26
Section 28(e) Standards............................................ B-27
Dividends, Distributions and Tax Matters............................. B-28
Dividends and Distributions........................................ B-28
Tax Matters........................................................ B-28
Qualification as a Regulated Investment Company.................... B-28
Excise Tax On Regulated Investment Companies....................... B-29
Portfolio Distributions............................................ B-29
Sale or Redemption of Shares....................................... B-29
Foreign Shareholders............................................... B-30
Effect of Future Legislation; Local Tax Considerations............. B-30
Financial Statements................................................. FS
</TABLE>
B-2
<PAGE>
INTRODUCTION
The Prime Portfolio (the "Portfolio") is an investment portfolio of Short-
Term Investments Co. (the Company), 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 June 1,
2000, the Institutional Class Prospectus dated June 1, 2000, the Personal
Investment Class Prospectus dated June 1, 2000, the Private Investment Class
Prospectus dated June 1, 2000, the Reserve Class Prospectus dated June 1, 2000
and the Resource Class Prospectus dated June 1, 2000 (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 Company 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 COMPANY
THE COMPANY AND ITS SHARES
The Company 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. On October 15, 1993, the Portfolio succeeded to the assets and
assumed the liabilities of the Prime Portfolio (the "Predecessor Portfolio")
of Short-Term Investments Co., a Massachusetts business trust ("STIC"),
pursuant to an Agreement and Plan of Reorganization between the Company and
STIC. All historical financial and other information contained in this
Statement of Additional Information for periods prior to October 15, 1993
relating to the Portfolio (or a class thereof) is that of the Predecessor
Portfolio (or the corresponding class thereof). Shares of common stock of the
Company are redeemable at their net asset value at the option of the
shareholder or at the option of the Company 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 Company offers on a continuous basis shares representing an interest in
one of two portfolios: the Portfolio and the Liquid Assets Portfolio. The
Portfolio consists of the following six classes of shares: Cash Management
Class, Institutional Class, Personal Investment Class, Private Investment
Class, the Reserve Class and the Resource Class. The Liquid Assets Portfolio
also consists of six classes of shares. Each class of shares has different
shareholder qualifications and bears expenses differently. This Statement of
Additional Information relates to the six classes of the Portfolio. The
classes of the Liquid Assets 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 Company, a particular portfolio or a particular class means, respectively,
the vote of the lesser of (i) 67% or more of the shares of the Company, such
portfolio or such class present at a meeting of the Company's shareholders, if
the holders of more than 50% of the outstanding shares of the Company, such
portfolio or such class are present or represented by proxy, or (ii) more than
50% of the outstanding shares of the Company, such portfolio or such class.
Shareholders of the Company do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of the
Company voting together for election of directors can elect all of the members
of the Board of Directors of the Company. In such event, the remaining holders
cannot elect any members of the Board of Directors of the Company.
There are no preemptive or conversion rights applicable to any of the
Company's shares. The Company'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.
B-3
<PAGE>
The Articles of Incorporation of the Company authorizes the issuance of
253.98 billion shares with a par value of $.001 each, of which 108.46 billion
shares represent an interest in the Liquid Assets Portfolio (or class thereof)
and 97.12 billion shares represent an interest in the Portfolio (or class
thereof). A share of a portfolio (or class) represents an equal proportionate
interest in such portfolio (or class) with each other share of that portfolio
(or class) and is entitled to a proportionate interest in the dividends and
distributions from that portfolio (or class).
The assets received by the Company 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 each of the portfolios are segregated and are charged
with the expenses with respect to that portfolio and with a share of the
general expenses of the Company. While the expenses of the Company 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 Company.
The Articles of Incorporation provide that no director or officer of the
Company shall be liable to the Company 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 Company against any liability to the
Company 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
Company shall indemnify and advance expenses to its currently acting and
former directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The Company 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 Company to the fullest
extent permitted by the Maryland General Corporation Law.
As described in each Prospectus, the Company 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 Company will provide a list of shareholders to the
requesting shareholders or 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 Company is vested
with its Board of Directors. The Board of Directors approves all significant
agreements between the Company and persons or companies furnishing services to
the Company, including agreements with the Portfolios' investment advisor,
distributor, custodian and transfer agent. The day-to-day operations of the
Company are delegated to the Company's officers and to A I M Advisors, Inc.
("AIM"), subject always to the objective and policies of the Portfolios and to
the general supervision of the Company's Board of Directors. Certain directors
and officers of the Company are affiliated with AIM and A I M Management Group
Inc. ("AIM Management"), the parent corporation of AIM.
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal occupations
during at least the last five years are set forth below. Unless otherwise
indicated, the address of each director and officer is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
==============================================================================
<C> <C> <S>
*CHARLES T. BAUER (81) Director and Chairman Director and Chairman, 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.
</TABLE>
- -------
* A director who is an "interested person" of the Company and AIM as defined
in the 1940 Act.
B-4
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5 YEARS
====================================================================================================================
<C> <C> <S>
BRUCE L. CROCKETT (56) Director Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer,
McLean, VA 22102 COMSAT Corporation; and Chairman, Board of Governors
of INTELSAT (international communications company).
- ---------------------------------------------------------------------------------------------------------------------
OWEN DALY II (75) Director Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), Director, CF & I Steel Corp., Monumental
Baltimore, MD 21210 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 Directors, Mercantile
2 Hopkins Plaza, 8th Floor, Suite 805 Mortgage Corp; Formerly, Vice Chairman of the
Baltimore, MD 21201 Board of Directors, President and Chief
Operating Officer, Mercantile - Safe Deposit &
Trust Co.; and President, Mercantile Bankshares.
- ---------------------------------------------------------------------------------------------------------------------
JACK M. FIELDS (48) Director Chief Executive Officer, Texana Global, Inc.
Jetero Plaza, Suite E (foreign trading company) and Twenty First
8810 Will Clayton Parkway Century Group, Inc. (a governmental affairs company).
Humble, TX 77338 Formerly, Member of the U.S. House of
Representatives.
- ---------------------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (63) Director Partner, Kramer Levin Naftalis & Frankel LLP
919 Third Avenue (law firm).
New York, NY 10022
- ---------------------------------------------------------------------------------------------------------------------
*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 and CEO,
Managed Products, AMVESCAP PLC.
- ---------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Director Chief Executive Officer, YWCA of the USA.
350 Fifth Avenue, Suite 301
New York, NY 10118
- ---------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Director Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
- ---------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Director Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
</TABLE>
- --------
** A director who is an "interested person" of the Company as defined in the
1940 Act.
* A director who is an "interested person" of the Company and AIM as defined
in the 1940 Act.
B-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING AT 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 President, General Counsel and
and Secretary 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 (41) Vice President Vice President and Fund Controller, A I M Advisors,
and Treasurer 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 (40) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------
J. ABBOTT SPRAGUE (45) 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>
The Board of Directors has an Audit Committee, a Capitalization Committee,
an Investments Committee and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's
recommendations of independent accountants for each portfolio and evaluating
such accountants' performance, costs and financial stability; (ii) with AIM,
reviewing and coordinating audit plans prepared by the portfolios' independent
accountants and management's internal audit staff; and (iii) reviewing
financial statements contained in periodic reports to shareholders with the
portfolios' independent accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for:
(i) increasing or decreasing the aggregate number of shares of any class of the
Company's common stock by classifying and reclassifying the Company's authorized
but unissued shares of common stock, up to the Company's authorized capital;
(ii) fixing the terms of such classified or reclassified shares of common stock;
and (iii) issuing such classified or reclassified shares of common stock upon
the terms set forth in the applicable portfolio's prospectuses, up to the
Company's authorized capital.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly,
Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr. Mathai-Davis.
The Investments Committee is responsible for: (i) overseeing AIM's investment-
related compliance systems and procedures to ensure their continued adequacy;
and (ii) considering and acting, on an interim basis between meetings of the
full Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-
Davis. The Nominating and Compensation Committee is responsible for:
(i) considering and nominating individuals to stand for election as independent
directors as long as the Company maintains a distribution plan pursuant to Rule
12b-1 under the 1940 Act; (ii) reviewing from time to time the compensation
payable to the independent directors; and (iii) making recommendations to the
Board regarding matters related to compensation, including deferred compensation
plans and retirement plans for the independent directors.
The Nominating and Compensation Committee will consider nominees recommended
by a shareholder to serve as directors, provided (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which directors will be elected, and
(ii) that the Nominating and Compensation Committee or the Board, as
applicable, shall make the final determination of persons to be nominated.
B-6
<PAGE>
All of the Company'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
Company'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 attended. The directors of
the Company who do not serve as officers of the Company are compensated for
their services according to a fee schedule which recognizes the fact that they
also serve as directors or trustees 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 Company:
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION RETIREMENT BENEFITS TOTAL COMPENSATION
DIRECTOR FROM COMPANY(1) ACCRUED BY ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
-------- ---------------------- ----------------------------- -----------------------
<S> <C> <C> <C>
Charles T. Bauer........ -0- -0- -0-
Bruce L. Crockett....... $9,888 $ 37,485 $103,500
Owen Daly II............ 9,888 122,898 103,500
Edward K. Dunn, Jr...... 9,888 55,565 103,500
Jack M. Fields.......... 9,845 15,826 101,500
Carl Frischling(4)...... 9,844 97,791 103,500
Robert H. Graham........ -0- -0- -0-
John F. Kroeger(5)...... 731 40,461 -0-
Prema Mathai-Davis...... 9,337 11,870 101,500
Lewis F. Pennock........ 9,844 45,766 103,500
Ian W. Robinson(6)...... 5,857 94,442 25,000
Louis S. Sklar.......... 9,844 90,232 101,500
</TABLE>
- -------
(1) The total amount of compensation deferred by all directors of the Company
during the fiscal year ended August 31, 1999, including earnings thereon,
was $61,406.
(2) During the fiscal year ended August 31, 1999, the total amount of expenses
allocated to the Company in respect of such retirement benefits was
$96,514. Data reflects compensation earned for the calendar year ended
December 31, 1999.
(3) Each director serves as a director or trustee of at least 12 registered
investment companies advised by AIM as of December 31, 1999. Data reflects
total compensation earned during the calendar year ended December 31,
1999.
(4) The Company paid the law firm of Kramer Levin Naftalis & Frankel LLP
$20,924 in legal fees for services provided to the independent directors
of the Company during the fiscal year ended August 31, 1999. Mr.
Frischling, a director of the Company, is a partner in such firm.
(5) Mr. Kroeger was a director of the Company until June 11, 1998. 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.
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, a director becomes eligible to retire and to receive full benefits
under the Plan when he or she 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 or her 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 all benefits under the Plan, 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.
B-7
<PAGE>
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming the retainer amount reflected
below and various years of service. The estimated credited years of service
for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 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 and Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Directors") have each executed
a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Directors
may elect to defer receipt of up to 100% of their compensation payable by the
Company, 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 accounts 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 Compensation Agreement) beginning on the date the Deferring
Director's retirement benefits commence under the Plan. The 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 Company. If a Deferring Director dies prior to
the distribution of amounts in his or her deferral account, the balance of the
deferral account will be distributed to his or her designated beneficiary in a
single lump sum payment as soon as practicable after such Deferring Director's
death. The Compensation 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 Company and of each other AIM
Fund from which they are deferring compensation.
During the fiscal year ended August 31, 1999, $63,108 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 120 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
Company, and their affiliations and addresses are shown under "Directors and
Officers."
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 Company have adopted a Code of Ethics which requires investment
personnel and certain other employees to (a) pre-clear all personal securities
transactions subject to the Code of Ethics; (b) file reports regarding such
transactions; (c) 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 (subject to a de minimis
exception), and (iii) transactions involving securities being considered for
investment by an AIM Fund (subject to the de minimis exception); and (d) abide
by certain other provisions of the Code of Ethics. The de minimis exception
under the Code of Ethics covers situations where there is no material conflict
of interest because of the large market capitalization of a security and the
relatively small number of shares involved in a personal transaction. The Code
of Ethics also generally prohibits AIM employees from purchasing securities in
initial public offerings. Personal trading reports are periodically reviewed
by AIM, and the Board of Directors reviews quarterly and annual reports (which
summarize any significant violations of the Code of Ethics). Sanctions for
violating the Code of Ethics may include censure, monetary penalties,
suspension or termination of employment.
The Company has entered into a Master Investment Advisory Agreement (the
"Advisory Agreement") with AIM dated June 1, 2000. The Advisory Agreement will
continue from year to year, provided that it is specifically approved at least
annually by the Company'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
B-8
<PAGE>
meeting called for such purpose. The Company 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 at all times will be
subject to the policies and control of the Company's Board of Directors. AIM
shall not be liable to the Company or its shareholders for any act or omission
by AIM or for any loss sustained by the Company or its shareholders except in
the case of willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.
Pursuant to an investment advisory agreement in effect prior to June 1,
2000, which provided for the same level of compensation to AIM as is provided
for under the Advisory Agreement, AIM received fees from the Portfolio for the
fiscal years ended August 31, 1999, 1998 and 1997 in the amounts of
$5,205,023, $4,251,522 and $4,007,070, respectively. During the fiscal years
ended August 31, 1999, 1998 and 1997, AIM did not voluntarily waive any
advisory fees with respect to the Portfolio.
As compensation for its services, AIM receives a monthly fee which is
calculated by applying the following annual rates to the average daily net
assets of the Portfolio:
<TABLE>
<CAPTION>
NET ASSETS RATE
---------- ----
<S> <C>
First $100 million............................................. .20%
Over $100 million to $200 million.............................. .15%
Over $200 million to $300 million.............................. .10%
Over $300 million to $1.5 billion.............................. .06%
Over $1.5 billion............................................... .05%
</TABLE>
AIM from time to time may 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 Company.
In addition, if the Portfolio engages in securities lending, AIM will
provide the Portfolio investment advisory services and related administrative
services. The Master Investment Advisory Agreement describes the
administrative services to be rendered by AIM if the Portfolio engages in
securities lending activities, as well as the compensation AIM may receive for
such administrative services. Services to be provided include: (a) overseeing
participation in the securities lending program to ensure compliance with all
applicable regulatory and investment guidelines; (b) assisting the securities
lending agent or principal (the agent) in determining which specific
securities are available for loan; (c) monitoring the agent to ensure that
securities loans are effected in accordance with AIM's instructions and with
procedures adopted by the Board; (d) preparing appropriate periodic reports
for, and seeking appropriate approvals from, the Board with respect to
securities lending activities; (e) responding to agent inquiries; and (f)
performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation
for the related administrative services AIM will provide, the Portfolio will
pay AIM a fee equal to 25% of the net monthly interest or fee income retained
or paid to the Portfolio from such activities. AIM currently intends to waive
such fee and has agreed to seek Board approval prior to its receipt of all or
a portion of such fee.
ADMINISTRATOR
AIM also acts as the Portfolio's administrator pursuant to a Master
Administrative Services Agreement between AIM and the Company (the
"Administrative Services Agreement").
Under the Administrative Services Agreement, AIM performs or arranges for
the performance of accounting services for the Portfolio. 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 Company and of
persons working under her supervision for maintaining the financial accounts
and books and records of the Company, 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 Company's
Board of Directors.
Under a prior administrative services agreement which provided for the same
level of reimbursement to AIM is provided for under the current Administrative
Services Agreement, AIM was reimbursed for the fiscal years ended August 31,
1999, 1998 and 1997 in the amounts of $258,934, $124,103 and $114,738,
respectively, for fund accounting services to the Portfolio.
B-9
<PAGE>
EXPENSES
Expenses of the Company 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 Company for the safekeeping of cash,
portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Company; brokers' commissions
chargeable to the Company in connection with portfolio securities transactions
to which the Company is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Company to federal, state or other
governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Company; all costs and expenses in
connection with the registration and maintenance of registration of the
Company 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 Company and supplements thereto to
the Company'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 Company's shares; charges and expenses of legal counsel,
including counsel to the directors of the Company who are not "interested
persons" (as defined in the 1940 Act) of the Company or AIM, and of
independent accountants in connection with any matter relating to the Company;
membership dues of industry associations; interest payable on borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Company 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 Company)
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
Company's shares.
Expenses of the Company which are not directly attributable to the
operations of either of the portfolios are prorated among all classes of the
Company. Expenses of the Company except those listed in the next sentence are
prorated among all classes of such portfolios. Distribution and service fees,
transfer agency fees and shareholder recordkeeping fees which are directly
attributable to a specific class of shares are charged against the income
available for distribution as dividends to the holders of such shares.
TRANSFER AGENT AND CUSTODIAN
A I M Fund Services, Inc. ("AFS"), a wholly owned subsidiary of AIM, P.O.
Box 0843, Houston, Texas 77001-0843, 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
Company 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 Company. As transfer
agent, AFS processes orders for purchases, redemptions and exchanges of
shares; prepares and transmits payments for dividends and distributions
declared by the Portfolio; maintains shareholder accounts; and provides
shareholders with information regarding the Portfolio and its accounts.
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 Company for its services
in such capacity as is agreed to from time to time by BONY and the Company.
BONY maintains the portfolio securities owned by the Portfolio, administers
the purchases and sales of portfolio securities, collects interest and other
distributions made on securities held by the Portfolio and performs other
ministerial duties.
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania serves as counsel to the Company.
REPORTS
The Company furnishes shareholders with semi-annual reports containing
information about the Company and its operations, including a schedule of
investments held in the Portfolio and its financial statements. The annual
financial statements are audited by the Portfolio'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 Company 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 Company 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
LIQUID ASSETS PORTFOLIO
To the best of the knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Liquid
Assets Portfolio as of May 19, 2000, and the percentage of the Liquid Assets
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>
MELLON GLOBAL CASH MANAGEMENT ACCOUNTS...... 14.97% --
Three Mellon Bank Center - Room 2501
Pittsburgh, PA 15259-0001
CIBC WORLD MARKETS.......................... 14.50% --
200 Liberty Street
World Financial Center
New York, NY 10281
BANK OF NEW YORK............................ 13.19% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
WELLER, ANDERSON, CHENEVIERE & CO. LTD...... 10.35% --
811 Rusk, Suite 715
Houston, TX 77002
HAMBRECHT & QUIST LLC....................... 9.52% --
230 Park Avenue, 19th Floor
New York, NY 10169
FIRST UNION SECURITIES, INC................. 5.73% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
</TABLE>
-------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
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>
INSTITUTIONAL CLASS
--------------------
AIM ADVISORS, INC........................... 25.84%* 25.84%*
AIM FUND OF FUNDS ACCOUNT
Money Market Portfolio Admin.
11 Greenway Plaza, Ste 100
Houston, TX 77046
TURTLE & CO SWEEP........................... 17.12% --
P.O. Box 9427
Boston, MA 02209
PAINE WEBBER SSB............................ 7.42% --
1000 Harbor Blvd 6th Floor
Mutual Fund Operations
State Street Custodial Accounts
Weehawken, NJ 07087-6790
MID ATLANTIC INSTITUTIONAL SHARES,
INC......................................... 6.36% --
Times Bldg.
336 Fourth Ave.
Pittsburgh, PA 15222
PERSONAL INVESTMENT CLASS
---------------------------
HUNTINGTON INVESTMENT 112................... 78.85% --
135 North Pennsylvania Suite 800
Indianapolis, IN 46204
TEXAS CAPITAL BANK, N.A..................... 9.01% --
2100 McKinney Ave., Ste 900
Dallas, TX 75201
HUNTINGTON CAPITAL CORP..................... 7.81% --
41 S. High St., Ninth Floor
Columbus, OH 43287
PRIVATE INVESTMENT CLASS
--------------------------
BANK OF NEW YORK............................ 69.89% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
MELLON BANK NA.............................. 6.82% --
P.O. Box 710
Pittsburgh, PA 15230-0710
</TABLE>
- -------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
* Represents shares held in a cash management account for the benefit of
certain AIM Funds. AIM has the power to direct the disposition of such
shares, and thus is deemed to be a beneficial owner of the shares. Shares
have been acquired in accordance with an exemptive order issued by the SEC.
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>
RESERVE CLASS
-------------
FIRST NATIONAL BANKER'S BANK................. 100.00% --
PO Drawer 80579
Baton Rouge, LA 70898
RESOURCE CLASS
--------------
CIBC WORLD MARKETS........................... 66.75% --
200 Liberty Street
World Financial Center
Attn: Lester Elson
New York, NY 10281
HAMBRECHT & QUIST LLC........................ 22.12% --
230 Park Avenue, 19th Floor
New York, NY 10169
</TABLE>
PRIME PORTFOLIO
To the best of the knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Portfolio
as of May 19, 2000, 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>
BANK OF NEW YORK............................. 30.49% --
One Wall Street
5th Floor
Stif/Master Note
New York, NY 10286
IGT.......................................... 9.03% --
P.O. Box 10120
Reno, NV 89502
CIBC WORLD MARKETS........................... 8.95% --
200 Liberty Street
World Financial Center
New York, NY 10281
BOST & CO FBO THE KWELM PARTNERSHIP.......... 8.47% --
P.O. Box 3198
Pittsburgh, PA 15230-3198
MELLON BANK NA .............................. 6.26% --
P.O. Box 710
Pittsburgh, PA 15230-0710
AmSOUTH CAPITAL MARKETS...................... 5.74% --
315 Deaderick St., 4th Floor
Nashville, TN 37237
</TABLE>
- -------
(a) The Company 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)
---------------- -------------- ---------------
INSTITUTIONAL CLASS
-------------------
<S> <C> <C>
AIM ADVISORS, INC........................... 33.98%* 33.98%*
AIM FUND OF FUNDS ACCOUNT
Money Market Portfolio Admin.
11 Greenway Plaza, Ste. 100
Houston, TX 77046
TURTLE & CO SWEEP........................... 6.33% --
P.O. Box 9427
Boston, MA 02209
TURLIN & CO................................. 6.24% --
P.O. Box 1412
Rochester, NY 14603
FIRST NATIONAL BANK TX...................... 6.20% --
Muir & Co
C/O Frost
San Antonio, TX 78298-2479
FIRST TRUST / VAR & CO...................... 5.53% --
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
<CAPTION>
PERSONAL INVESTMENT CLASS
-------------------------
<S> <C> <C>
CULLEN/FROST DISCOUNT BROKERS............... 79.29% --
P.O. Box 2358
San Antonio, TX 78299
FIRST AMERICAN BANK SSB..................... 7.05% --
P.O. Box 1033
Bryan, TX 77805
<CAPTION>
PRIVATE INVESTMENT CLASS
------------------------
<S> <C> <C>
HUNTINGTON CAPITAL CORP..................... 29.53% --
41 S High St., Ninth Floor
Columbus, OH 43287
FROST NATIONAL BANK TX...................... 14.93% --
Muir & Co
C/O Frost
P.O. Box 2479
San Antonio, TX 78298 2479
CULLEN/FROST DISCOUNT BROKERS............... 12.73% --
P.O. Box 2358
San Antonio, TX 78299
BANK OF NEW YORK............................ 11.76% --
One Wall Street 5th Floor
New York, NY 10286
BANK OF OKLAHOMA, N.A. INSTITUTIONAL INVEST-
MENTS...................................... 8.10% --
P.O. Box 2300
Tulsa, OK 74192
FIRST TRUST/VAR & CO........................ 6.61% --
Funds Control Suite 0404
180 East Fifth Street
St. Paul, MN 55101
</TABLE>
- -------
(a) The Company has no knowledge as to whether all or any portion of the
shares of the class owned of record are also owned beneficially.
* Represents shares held in a cash management account for the benefit of
certain AIM Funds. AIM has the power to direct the disposition of such
shares, and thus is deemed to be a beneficial owner of the shares. Shares
have been acquired in accordance with an exemptive order issued by the SEC.
B-14
<PAGE>
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
OF RECORD OWNER RECORD ONLY(a) BENEFICIALLY(a)
---------------- -------------- ---------------
RESERVE CLASS
-------------
<S> <C> <C>
BANK OF NEW YORK............................ 98.27% --
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
<CAPTION>
RESOURCE CLASS
--------------
<S> <C> <C>
FIRST UNION SECURITIES, INC................. 35.34% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
NVIDIA CORPORATION CASH MANAGEMENT ACCOUNT.. 17.89% --
3535 Monroe Street
Santa Clara, CA 95051
HARRIS METHODIST HEALTH SYSTEM.............. 13.49% --
600 East Las Colinas Blvd Ste 1550
Irving, TX 75039
CIBC WORLD MARKETS.......................... 12.56% --
200 Liberty Street
World Financial Center
New York, NY 10281
MELLON BANK NA.............................. 6.15% --
P.O. Box 710
Pittsburgh, PA 15230-0710
FIRST UNION SUBACCOUNTS..................... 5.20% --
8739 Research Drive
Capital Markets
Charlotte, NC 28262-0675
</TABLE>
- -------
(a) The Company 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 Company, as of May 19, 2000, the
directors and officers of the Company as a group beneficially owned less than
1% of the outstanding shares of each class of each portfolio.
B-15
<PAGE>
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 headings
"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 0843, Houston, Texas 77001-
0843. 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 Company 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 Company 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 Company. Certificates (in
full shares only) will be issued without charge and may be redeposited at any
time.
An investor may terminate his or her 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 Company.
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 Company 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.
A "Business Day" of the Company is any day on which member banks of the
Federal Reserve Bank of New York and BONY are open for business. If AFS
receives a redemption request on a Business Day prior to 4:00 p.m. Eastern
time, the redemption will be effected at the net asset value of the Portfolio
determined as of 4:00 p.m. Eastern time, and the Company will normally wire
redemption proceeds on that day. A redemption request received by AFS after
4:00 p.m. Eastern time will be effected at the net asset value of the
Portfolio determined as of 4:00 p.m. Eastern time on the next Business Day 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 Company, 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 COMPANY
If the Company determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
Company may, at its discretion, redeem the account and distribute the proceeds
to you.
NET ASSET VALUE DETERMINATION
The net asset value per share of the Portfolio is determined as of 4:00 p.m.
Eastern time on each Business Day of the Company. 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
B-16
<PAGE>
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 Portfolio 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 requires 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 has established 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 it 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;
the redemption of shares in kind; or the establishment of a net asset value
per share by using available market quotations.
DISTRIBUTION AGREEMENT
The Company 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 Company--
Directors and Officers" and "General Information about the Company--
Investment Advisor" for information as to the affiliation of certain directors
and officers of the Company with FMC, AIM and AIM Management.
The Distribution Agreement provides that FMC has the exclusive right to
distribute the shares of each class of the Portfolio 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 of the Portfolio.
The Distribution Agreement will continue from year to year provided that it
is specifically approved at least annually by the Company'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 Company 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 Company has adopted a Master Distribution Plan (the "Distribution Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Portfolio's Cash
Management Class, Personal Investment Class, Private Investment Class, Reserve
Class and Resource Class. The Distribution Plan provides that the Company 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
Distribution Plan.
B-17
<PAGE>
Pursuant to the Distribution Plan, the Company 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 the 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
Company may request on behalf of the shares of these classes, to the extent
such firms are permitted to engage in such services by applicable statute,
rule or regulation. The Distribution Plan may only be used for the purposes
specified above and as stated in the Distribution Plan. Expenses may not be
carried over from year to year.
The Distribution Plan does not obligate the Company to reimburse FMC for the
actual expenses FMC may incur in fulfilling its obligations under the
Distribution Plan. Thus, even if FMC's actual expenses exceed the fee payable
to FMC thereunder at any given time, the Company 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 Company.
The Distribution Plan requires the officers of the Company to provide the
Board of Directors at least quarterly with a written report of the amounts
expended pursuant to the Distribution 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 Distribution Plan.
For the fiscal year ended August 31, 1999, FMC received compensation
pursuant to the Distribution Plan in the amount of $935,042, or an amount
equal to 0.08% of the average daily net assets of the Cash Management Class,
$758,574, or an amount equal to 0.50% of the average daily net assets of the
Personal Investment Class, $1,155,429, or an amount equal to 0.30% of the
average daily net assets of the Private Investment Class, $940,270, or an
amount equal to 0.16% of the average daily net assets of the Resource Class,
and $226,673, or an amount equal to 0.80% of the average daily net assets of
the Reserve Class. With respect to the Cash Management Class, $935,042 of such
amount (or an amount equal to 0.08% of the average daily net assets of the
class) was paid to dealers and financial institutions and $0 (or an amount
equal to 0% of the average daily net assets of the class) was retained by FMC.
With respect to the Personal Investment Class, $629,436 of such amount (or an
amount equal to 0.41% of the average daily net assets of the class) was paid
to dealers and financial institutions and $129,138 (or an amount equal to
0.09% of the average daily net assets of the class) was retained by FMC. With
respect to the Private Investment Class, $996,003 of such amount (or an amount
equal to 0.26% of the average daily net assets of the class) was paid to
dealers and financial institutions and $159,426 (or an amount equal to 0.04%
of the average daily net assets of the class) was retained by FMC. With
respect to the Resource Class, $938,600 of such amount (or an amount equal to
0.16% of the average daily net assets of the class) was paid to dealers and
financial institutions and $1,670 (or an amount equal to 0% of the average
daily net assets of the class) was retained by FMC. With respect to the
Reserve Class, 212,505 of such amount (or an amount equal to 0.50% of the
average daily net assets of the class) was paid to dealers and financial
institutions and 14,168 (or an amount equal to 0.03% of the average daily net
assets of the class) was retained by FMC.
As required by Rule 12b-1 under the 1940 Act, the Distribution 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 Company and
who have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreements related to the Distribution Plan
("Qualified Directors"). In approving the Distribution 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 Distribution Plan
would benefit the Company and the holders of shares of the applicable classes
of the Portfolio. Anticipated benefits that may result from the Distribution
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 Distribution 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.
B-18
<PAGE>
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 Company, and
Robert H. Graham, a Director and President of the Company, own shares of
AMVESCAP PLC.
The Distribution 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 Distribution Plan that would increase materially the
distribution expenses paid by an applicable class requires shareholder
approval; otherwise, the Distribution 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
Distribution Plan is in effect, the selection or nomination of the Qualified
Directors is committed to the discretion of the Qualified Directors.
The Distribution 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
Distribution Plan. The Distribution 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.
During the fiscal years ended August 31, 1999, 1998 and 1997 AIM voluntarily
waived fees with respect to the Portfolio in the amount of $1,675,069,
$1,154,715 and $851,042, respectively.
BANKING REGULATIONS
On November 12, 1999, the Gramm-Leach-Bliley Act of 1999 was signed into
law. This Act removed the regulatory barriers previously established between
banks and bank holding companies, and insurance companies and broker-dealers.
Various provisions of this Act became effective immediately, and others will
become effective through November 2000. While the ultimate effect of such
legislation is unclear, financial holding companies and their affiliated bank
and financial subsidiaries will be able to participate in the distribution of
mutual fund shares.
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 Company 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.
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 Company, 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 Company 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 Company. 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 February 29, 2000, the current yield and the
effective yield (which assumes the reinvestment of dividends for a 365-day
year and a return for the entire year equal to the annualized current yield
for the period) were 5.73% and 5.89%, for the Cash Management Class, were
5.81% and 5.98%, for the Institutional Class, were 5.31% and 5.45%, for the
Personal Investment Class, were 5.51% and 5.66%, for the Private
B-19
<PAGE>
Investment Class, were 5.01% and 5.13%, for the Reserve Class and were 5.65%
and 5.81%, for the Resource Class, respectively. These yields are quoted for
illustration purposes only. The yields for any other seven-day period may be
substantially different from the yields quoted above.
The Portfolio may compare the performance of a particular class or the
performance of securities in which it may invest to:
. IBC/Donoghue's Money Fund Averages, which are average yields of various
types of money market funds that include the effect of compounding
distributions;
. other mutual funds, especially those with similar investment objectives.
These comparisons may be based on data published by IBC/Donoghue's Money
Fund Report(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 Portfolio will not redeem shares representing an interest in the
Portfolio in kind (i.e. by distributing its portfolio securities).
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
Information concerning the Portfolio's investment objective is set forth in
each Prospectus under the heading, "Investment Objective and Strategies." 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.
Set forth in this section is a description of the Portfolio's investment
policies, strategies and practices. The investment objective of the Portfolio
is non-fundamental and may be changed by the Board of Directors without
shareholder approval. The Portfolio's investment policies, strategies and
practices are also non-fundamental. The Board of Directors of the Company
reserves the right to change any of these non-fundamental investment policies,
strategies or practices without shareholder approval. However, shareholders
will be notified before any material change in the investment policies becomes
effective. The Portfolio has adopted certain investment restrictions, some of
which are fundamental and cannot be changed without shareholder approval. See
"Investment Program and Restrictions--Investment Restrictions" in this
Statement of Additional Information.
Any percentage limitations with respect to assets of a Portfolio will be
applied at the time of purchase. A later change in percentage resulting from
changes in asset values will not be considered a violation of the percentage
limitations. The percentage limitations applicable to borrowings and reverse
repurchase agreements will be applied in accordance with applicable provisions
of the 1940 Act and the rules and regulations promulgated thereunder which
specifically limit each Portfolio's borrowing abilities.
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets of $5 billion as of the date of their most recently
published financial statements. Accordingly, an investment in the Portfolio
may involve risks that are different in some respects from those incurred by
an investment company which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible seizure or nationalization of foreign deposits, the possible
imposition of United Kingdom 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.
Rule 2a-7 under the 1940 Act provides that a money market fund shall not
invest more than 5% of its total assets in securities issued by a single
issuer, provided that such a fund may invest more than 5% of its total assets
in the First Tier (as defined under the heading "Commercial Instruments")
securities of a single issuer for a period of up to three business days after
the purchase thereof if the money market fund is a diversified investment
company, and provided further that the fund may not make more than one
investment in accordance with the foregoing provision at any time. Under Rule
2a-7, for purposes of determining the percentage of a fund's total assets that
are invested in securities of an issuer, a repurchase agreement shall be
deemed to be an acquisition of the underlying securities, provided that the
obligation of the seller to repurchase the securities from the money market
fund is fully collateralized. To be fully collateralized, the collateral must,
among other things, consist entirely of U.S. Government securities or
securities
B-20
<PAGE>
that, at the time the repurchase agreement is entered into, are rated in the
highest rating category by the Requisite NRSROs. The term "Requisite NRSROs"
means (a) any two nationally recognized statistical rating organizations
("NRSROs") that have issued a rating with respect to a security or class of
debt obligations of an issuer, or (b) if only one NRSRO has issued a rating
with respect to such security or issuer at the time the Portfolio acquires the
security, that NRSRO.
INVESTMENT POLICIES
The Portfolio may invest in a broad range of government, bank and commercial
obligations and taxable municipal securities that may be available in the
money markets. Such obligations are collectively referred to as "Money Market
Obligations" and include U.S. Treasury obligations, which include Treasury
bills, notes and bonds, and repurchase agreements relating to such securities.
The Portfolio may also engage in certain investment practices described below.
Money Market Obligations
The following list of descriptions illustrates the types of Money Market
Obligations in which the Portfolio intends to invest. The list does not
purport to be an exhaustive list of all Money Market Obligations, and the
Portfolio reserves the right to invest in Money Market Obligations other than
those listed below.
COMMERCIAL INSTRUMENTS. The Portfolio intends to invest in commercial
instruments, including commercial paper, master notes and other short-term
corporate instruments, that are denominated in U.S. dollars and which at the
date of purchase are "First Tier" securities as defined in Rule 2a-7 under the
1940 Act as such Rule may be amended from time to time. Briefly, "First Tier"
securities are securities that are rated in the highest rating category for
short-term debt obligations by two 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. Commercial paper
consists of short-term promissory notes issued by corporations. Commercial
paper may be traded in the secondary market after its issuance. Master notes
are demand notes that permit the investment of fluctuating amounts of money at
varying rates of interest pursuant to arrangements with issuers who meet the
quality criteria of the Portfolio. The interest rate on a master note may
fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master demand notes, if such notes have a
demand feature, the payee may demand payment of the principal amount of the
note upon relatively short notice.
REPURCHASE AGREEMENTS. The Portfolio intends to invest in repurchase
agreements with banks and broker-dealers pertaining to the securities eligible
under Rule 2a-7 of the 1940 Act. A repurchase agreement is an instrument under
which the Portfolio acquires ownership of a debt security and the seller
agrees, at the time of 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 Company'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.
GOVERNMENT OBLIGATIONS. The Portfolio may invest in securities issued or
guaranteed as to principal and interest by the U.S. Government or by its
agencies or instrumentalities. Such obligations may be supported (a) by the
full faith and credit of the U.S. Treasury (as in the case of Government
National Mortgage Association Certificates), (b) by the right of the issuer to
borrow from the U.S. Treasury (as in the case of obligations of the Federal
Home Loan Bank), (c) by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (as in the case
of the Federal National Mortgage Association), or (d) only by the credit of
the agency or instrumentality itself (as in the case of obligations of the
Student Loan Marketing Association). No assurance can be given that the U.S.
Government will provide financial support to such U.S. Government sponsored
agencies or instrumentalities in the future, and it is not obligated to do so
by law.
BANK INSTRUMENTS. The Portfolio may invest in certificates of deposits
("CDs"), time deposits and bankers' acceptances of domestic commercial banks
having total assets in excess of $5 billion as of the date of their most
recently published financial statements and CDs of other domestic banks that
are fully insured as to principal by the Federal Deposit Insurance
Corporation. CDs represent short-term interest-bearing deposits of commercial
banks against which negotiable certificates bearing stated rates of interest
are issued. Bankers' acceptances are short-term negotiable drafts endorsed by
commercial banks which arise primarily from international commercial
transactions.
The Portfolio may invest in certificates of deposit ("Eurodollar CDs") and
time deposits ("Eurodollar time deposits") of foreign branches of domestic
banks having total assets in excess of $5 billion as of the date of their most
recently published financial statements. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at
a stated interest rate.
B-21
<PAGE>
Investment Practices
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements with respect to its portfolio securities in amounts up
to 10% of the value of its total assets at the time of entering into a reverse
repurchase agreement. Reverse repurchase agreements involve the sale by the
Portfolio of a portfolio security at an agreed-upon price, date and interest
payment. The Portfolio will enter into reverse repurchase agreements solely
for temporary or defensive purposes, such as to facilitate the orderly sale of
portfolio securities or to accommodate abnormally heavy redemption requests
should they occur. Reverse repurchase transactions are limited to a term not
to exceed 92 days. The Portfolio will use reverse repurchase agreements when
the interest income to be earned from the securities that would otherwise have
to be liquidated to meet redemption requests is greater than the interest
expense of the reverse repurchase transaction. The Portfolio will give
shareholders notice of its intent to enter into a reverse repurchase agreement
in sufficient time to permit shareholder redemptions before the Portfolio
enters into any reverse repurchase agreements. 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 by the Portfolio under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Portfolio may lend its portfolio securities (principally to
broker-dealers) to the extent of 33 1/3% of its total assets. Such loans would
be callable at any time and will be continuously secured by collateral equal
to no less than the market value, determined daily, of the loaned securities.
Such collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or its agencies. The Portfolio would continue to receive the
income on loaned securities and would, at the same time, earn interest on the
loan collateral or on the investment of the loan collateral if it were cash.
Any cash collateral pursuant to these loans would be invested in short-term
money market instruments. Where voting or consent rights with respect to
loaned securities pass to the borrower, the Portfolio will follow the policy
of calling the loan, in whole or in part as may be appropriate, to permit the
exercise of such voting or consent rights if the matters involved are expected
to have a material effect on the Portfolio's investment in the loaned
securities. Lending securities entails a risk of loss to the Portfolio if and
to the extent that the market value of the securities loaned were to increase
and the lender did not increase the collateral accordingly.
INTERFUND LOANS. The Portfolio may lend up to 33 1/3% of its total assets to
another AIM Fund, on such terms and conditions as the SEC may require in an
exemptive order. An application for exemptive relief has been filed with the
SEC on behalf of the Portfolio and others. The Portfolio also may borrow from
another AIM Fund to satisfy redemption requests or to cover unanticipated cash
shortfalls due to a delay in the delivery of cash to the Portfolio's custodian
or improper delivery instructions by a broker effectuating a transaction. It
is anticipated that the Portfolio would not participate as a borrower in the
interfund lending facility because it would rarely need to borrow cash to meet
redemptions; however, it is anticipated that the Portfolio will be a lender to
other AIM Funds under the interfund lending facility.
PURCHASING DELAYED DELIVERY AND WHEN-ISSUED SECURITIES. The Portfolio may
enter into delayed agreements and may purchase securities on a "when-issued"
basis.
Delayed delivery agreements are commitments by the Portfolio to dealers or
issuers to acquire securities beyond the customary settlement date for such
securities. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Portfolio's
investment advisor can anticipate that cash for investment purposes will
result from scheduled maturities of existing portfolio instruments or from net
sales of shares of the Portfolio and may enter into delayed delivery
agreements to assure the Portfolio will be as fully invested as possible in
instruments meeting its investment objective.
Debt securities are sometimes offered on a "when-issued" basis; that is, the
date for delivery of and payment for the securities is not fixed at the date
of purchase but is set after the securities are issued (normally within forty-
five days after the date of the transaction). The payment obligation and the
interest rate that will be received on the securities are fixed at the time
the buyer enters into the commitment. The Portfolio will only make commitments
to purchase such debt securities with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable. The Portfolio may only purchase "when-issued"
securities with maturities of 60 days or less from the settlement date for
such "when-issued" securities.
If the Portfolio enters into a delayed delivery agreement or purchases a
when-issued security, the Portfolio will direct its custodian bank to
segregate liquid assets (including Money Market Obligations) in an amount
equal to its delayed delivery agreements or when-issued commitments. If the
market value of such securities declines, additional cash or securities will
be segregated on a daily basis so that the market value of the account will
equal the amount of the Portfolio's delayed delivery agreements and when-
issued commitments. To the extent that funds are segregated, they will not be
available for new investment or to meet redemptions. Investment in securities
on a when-issued basis and use of delayed delivery agreements may increase the
Portfolio's exposure to market fluctuation, or may increase the possibility
the Portfolio will incur a short-term loss, if the Portfolio must engage in
portfolio transactions in order to honor a when-issued commitment or accept
delivery of a security under a delayed delivery agreement. The Portfolio will
employ techniques designed to minimize these risks. No additional delayed
delivery agreements or when-issued commitments will be made by the Portfolio
if, as a result, more than 25% of the Portfolio's net assets would become so
committed.
ILLIQUID SECURITIES. The Portfolio will invest no more than 10% of its net
assets in illiquid securities.
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<PAGE>
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Portfolio may invest in other
investment companies to the extent permitted by the 1940 Act, and the rules
and regulations thereunder, and if applicable exemptive orders granted by the
SEC. The following restrictions apply to investments in other investment
companies: (i) the Portfolio may not purchase more than 3% of the total
outstanding voting stock of another investment company; (ii) the Portfolio may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) the Portfolio may not invest more than 10% of
its total assets in securities issued by other investment companies. With
respect to the Portfolio's purchase of shares of another investment company,
the Portfolio will indirectly bear its proportionate share of the advisory
fees and other operating expenses of such investment company.
ELIGIBLE SECURITIES
The Portfolio will invest in "Eligible Securities" as defined in Rule 2a-7
under the 1940 Act, which the Company'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.
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.
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.
B-23
<PAGE>
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 two highest bond ratings of S&P.
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.
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 guarantees 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.
B-24
<PAGE>
INVESTMENT RESTRICTIONS
The Portfolio is subject to the following investment restrictions, which may
be changed only by a vote of a majority of the Portfolio's outstanding shares.
Fundamental restrictions may be changed only by a vote of the lesser of (i)
67% or more of the Portfolio's shares present at a meeting if the holders of
more than 50% of the outstanding shares are present in person or represented
by proxy, or (ii) more than 50% of the Portfolio's outstanding shares. Any
investment restriction that involves a maximum or minimum percentage of
securities or assets shall not be considered to be violated unless an excess
over or a deficiency under the percentage occurs immediately after and is
caused by an acquisition or disposition of securities or utilization of assets
by the Portfolio.
Fundamental Restrictions
(1) The Portfolio is a "diversified company" as defined in the 1940 Act.
The Portfolio will not purchase the securities of any issuer if, as a
result, the Portfolio would fail to be a diversified company within the
meaning of the 1940 Act, and the rules and regulations promulgated
thereunder, as such statute, rules and regulations are amended from time to
time or are interpreted from time to time by the SEC staff (collectively,
the "1940 Act Laws and Interpretations" or except to the extent that the
Portfolio may be permitted to do so by exemptive order or similar relief
(collectively, with the 1940 Act Laws and Interpretations, the "1940 Act
Laws, Interpretations and Exemptions"). In complying with this restriction,
however, the Portfolio may purchase securities of other investment companies
to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(2) The Portfolio may not borrow money or issue senior securities, except
as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Portfolio may not underwrite the securities of other issuers. This
restriction does not prevent the Portfolio from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Portfolio may be considered to be an
underwriter under the Securities Act of 1933.
(4) The Portfolio will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act
Laws, Interpretations and Exemptions) of its investments in the securities
of issuers primarily engaged in the same industry. This restriction does not
limit the Portfolio's investments in (i) obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt
obligations issued by governments or political subdivisions of governments,
or (iii) bank instruments. In complying with this restriction, the Portfolio
will not consider a bank-issued guaranty or financial guaranty insurance as
a separate security.
(5) The Portfolio may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Portfolio from investing in issuers that
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein.
(6) The Portfolio may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Portfolio from engaging
in transactions involving futures contracts and options thereon or investing
in securities that are secured by physical commodities.
(7) The Portfolio may not make personal loans or loans of its assets to
persons who control or are under common control with the Portfolio, except
to the extent permitted by 1940 Act Laws, Interpretations and Exemptions.
This restriction does not prevent the Portfolio from, among other things,
purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker-dealers or institutional investors, or investing in
loans, including assignments and participation interests.
(8) The Portfolio may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies and restrictions as the
Portfolio.
The investment restrictions set forth above provide the Portfolio with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Portfolio has this flexibility, the Board of
Directors of the Company has adopted non-fundamental restrictions for the
Portfolio relating to certain of these restrictions which the advisor must
follow in managing the Portfolio. Any changes to these non-fundamental
restrictions, which are set forth below, require the approval of the Board of
Directors.
Non-Fundamental Restrictions
The following non-fundamental investment restrictions apply to the
Portfolio. They may be changed without approval of the Portfolio's voting
securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Portfolio will not, with respect to 100% of its total
assets, purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Portfolio's
total assets would be invested in the securities of that issuer, except as
B-25
<PAGE>
permitted by Rule 2a-7 under the 1940 Act, or (ii) the Portfolio would hold
more than 10% of the outstanding voting securities of that issuer. The
Portfolio may (i) purchase securities of other investment companies as
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in
securities of other money market funds and lend money to other investment
companies or their series portfolios that have AIM or an affiliate of AIM as
an investment advisor (an "AIM Advised Fund"), subject to the terms and
conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Portfolio may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The Portfolio may borrow
from banks, broker-dealers or an AIM Advised Fund. The Portfolio may not
borrow for leveraging but may borrow for temporary or emergency purposes, in
anticipation of or in response to adverse market conditions or for cash
management purposes. The Portfolio may not purchase additional securities
when any borrowings from banks exceed 5% of the Portfolio's total assets.
(3) In complying with the fundamental restriction regarding industry
concentration, the Portfolio may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry.
(4) In complying with the fundamental restriction with regard to making
loans, the Portfolio may lend up to 33 1/3% of its total assets and may lend
money to another AIM Advised Fund, on such terms and conditions as the SEC
may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to investing
all assets in an open-end fund, the Portfolio may not invest all of its
assets in the securities of a single open-end management investment company
with the same fundamental investment objectives, policies and restrictions
as the Portfolio.
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 or spread (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 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, in the Portfolio and in 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.
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 or account (including
affiliated money market funds) provided the Portfolio follows procedures
adopted by the Board of Directors/Trustees of the various AIM Funds, including
the Company. These inter-fund transactions do not generate brokerage
commissions but may result in custodial fees or taxes or other related
expenses.
The Portfolio does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity, but AIM may
seek to enhance the yield of the Portfolio by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. AIM may dispose of any portfolio security prior to its maturity if
such disposition and reinvestment of proceeds are expected to enhance yield
consistent with AIM's judgment as to desirable portfolio maturity structure or
if such disposition is believed to be advisable due to other circumstances or
conditions. The amortized cost method of valuing portfolio securities requires
that the Portfolio maintain an average weighted portfolio maturity of ninety
days or less. Thus, there is likely to be relatively high portfolio turnover,
but since brokerage commissions are not normally paid on money market
instruments, the high rate of portfolio turnover is not expected to have a
material effect on the net income or expenses of the Portfolio. The
Portfolio's policy of investing in securities with maturities of 397 days or
less will result in high portfolio turnover. Since brokerage commissions are
not normally paid on investments of the type made by the Portfolio, the high
turnover rate should not adversely affect the Portfolio's net income.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous 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.
B-26
<PAGE>
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, as amended, 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 or [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, a fund 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 Company'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.
Under the 1940 Act, certain persons affiliated with the Company are
prohibited from dealing with the Portfolio 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 Portfolio from
purchasing a security being publicly underwritten by a syndicate of which
certain persons affiliated with the Company 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 Company 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 Company's Board of
Directors and any such purchases are reviewed at least quarterly by the
Company'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 Company was fair and reasonable in relation
to the fees charged by others performing similar services. During the fiscal
year ended August 31, 1999, 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.
B-27
<PAGE>
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 4:00 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 4:00 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 4:00 p.m. Eastern time on that day and redemption proceeds
have not be wired to the shareholder on the same day. Thus, if a purchase
order is accepted prior to 4:00 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 thereof. Such
election, or any revocation thereof, must be made in writing and sent by the
shareholder to AFS at P.O. Box 0843, Houston, Texas 77001-0843. 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 5:00 p.m. Eastern time on that day.
The dividends accrued and paid for each class of shares of the Portfolio
will consist of: (a) interest accrued and original issued 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) Portfolio 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 Company 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, 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., 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
B-28
<PAGE>
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 (net long-term capital gain over net short-term capital loss), 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 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 distributions 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 Company 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 the Portfolio 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 Portfolio within 30 days before
or after the sale or redemption. In general, any gain or loss arising from
B-29
<PAGE>
(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 gain 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
rates 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 From 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 May
23, 2000. 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 investment in the Company.
B-30
<PAGE>
FINANCIAL STATEMENTS
FS
<PAGE>
SCHEDULE OF INVESTMENTS
February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 78.59%(a)
BASIC INDUSTRIES - 1.96%
CHEMICALS - 1.69%
Bayer Corp.
5.68% 03/13/00 $100,000 $ 99,810,667
- -------------------------------------------------------------------------
5.81% 04/04/00 49,600 49,327,834
- -------------------------------------------------------------------------
Du Pont (E.I.) de Nemours and Co.
5.68% 03/20/00 50,000 49,850,111
- -------------------------------------------------------------------------
5.80% 04/07/00 50,000 49,701,944
- -------------------------------------------------------------------------
248,690,556
- -------------------------------------------------------------------------
METAL MINING - 0.27%
Rio Tinto America, Inc.
5.82% 04/12/00 40,000 39,728,400
- -------------------------------------------------------------------------
Total Basic Industries 288,418,956
- -------------------------------------------------------------------------
CONSUMER DURABLES - 2.03%
AUTOMOBILE - 2.03%
Daimler-Chrysler North America Holding
Corp.
5.64% 03/01/00 100,000 100,000,000
- -------------------------------------------------------------------------
5.85% 04/17/00 100,000 99,236,250
- -------------------------------------------------------------------------
5.85% 04/20/00 100,000 99,187,500
- -------------------------------------------------------------------------
Total Consumer Durables 298,423,750
- -------------------------------------------------------------------------
CONSUMER NONDURABLES - 1.70%
BEVERAGES - 0.68%
Coca-Cola Co. (The)
5.66% 03/14/00 100,000 99,795,611
- -------------------------------------------------------------------------
FOODS - 0.34%
General Mills, Inc.
5.65% 03/09/00 49,870 49,807,385
- -------------------------------------------------------------------------
PERSONAL CARE - 0.68%
Gillette Co.
5.66% 03/14/00 50,000 49,897,806
- -------------------------------------------------------------------------
5.69% 03/24/00 50,000 49,818,236
- -------------------------------------------------------------------------
99,716,042
- -------------------------------------------------------------------------
Total Consumer Nondurables 249,319,038
- -------------------------------------------------------------------------
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ENERGY - 1.09%
OIL & GAS - 1.09%
Chevron U.S.A., Inc.
5.65% 03/13/00 $ 60,000 $ 59,887,000
- ---------------------------------------------------------------------
Koch Industries, Inc.
5.64% 03/06/00 100,000 99,921,667
- ---------------------------------------------------------------------
Total Energy 159,808,667
- ---------------------------------------------------------------------
FINANCIAL - 68.59%
ASSET-BACKED SECURITIES-COMMERCIAL
LOANS/LEASES - 4.01%
Atlantis One Funding Corp.
5.80% 03/28/00 96,111 95,692,917
- ---------------------------------------------------------------------
5.80% 03/31/00 47,440 47,210,707
- ---------------------------------------------------------------------
5.86% 04/13/00 75,000 74,475,042
- ---------------------------------------------------------------------
Centric Capital Corp.
5.73% 03/06/00 43,200 43,165,620
- ---------------------------------------------------------------------
5.77% 03/27/00 62,400 62,139,965
- ---------------------------------------------------------------------
5.86% 03/31/00 52,000 51,746,067
- ---------------------------------------------------------------------
5.85% 04/12/00 50,000 49,658,750
- ---------------------------------------------------------------------
Fleet Funding Corp.
5.78% 03/24/00 21,962 21,880,899
- ---------------------------------------------------------------------
5.85% 04/03/00 64,725 64,377,912
- ---------------------------------------------------------------------
5.85% 04/05/00 25,493 25,348,008
- ---------------------------------------------------------------------
5.87% 04/19/00 53,417 52,990,213
- ---------------------------------------------------------------------
588,686,100
- ---------------------------------------------------------------------
ASSET-BACKED SECURITIES-CONSUMER
RECEIVABLES - 3.21%
Old Line Funding Corp.
5.75% 03/23/00 42,921 42,770,180
- ---------------------------------------------------------------------
5.86% 04/17/00 68,939 68,411,578
- ---------------------------------------------------------------------
5.89% 04/24/00 49,803 49,362,990
- ---------------------------------------------------------------------
5.89% 04/25/00 44,430 44,030,192
- ---------------------------------------------------------------------
5.88% 04/27/00 99,450 98,524,120
- ---------------------------------------------------------------------
Riverwood Funding Corp.
5.85% 04/04/00 54,487 54,185,959
- ---------------------------------------------------------------------
5.85% 04/10/00 50,000 49,675,000
- ---------------------------------------------------------------------
Thunder Bay Funding Corp.
5.90% 04/25/00 64,812 64,227,792
- ---------------------------------------------------------------------
471,187,811
- ---------------------------------------------------------------------
</TABLE>
FS-2
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES-MULTI-PURPOSE -
24.48%
Aspen Funding Corp.
5.79% 03/17/00 $ 75,000 $ 74,807,000
- --------------------------------------------------------------------------
5.76% 03/23/00 45,000 44,841,600
- --------------------------------------------------------------------------
Barton Capital Corp.
5.85% 04/04/00 83,896 83,432,475
- --------------------------------------------------------------------------
5.85% 04/05/00 26,643 26,491,468
- --------------------------------------------------------------------------
5.85% 04/06/00 130,825 130,059,674
- --------------------------------------------------------------------------
5.85% 04/07/00 69,775 69,355,478
- --------------------------------------------------------------------------
5.85% 04/10/00 82,697 82,159,469
- --------------------------------------------------------------------------
5.87% 04/18/00 75,000 74,413,000
- --------------------------------------------------------------------------
5.89% 04/19/00 100,000 99,198,306
- --------------------------------------------------------------------------
5.87% 04/20/00 100,000 99,184,722
- --------------------------------------------------------------------------
Clipper Receivables Corp.
5.75% 03/07/00 50,000 49,952,083
- --------------------------------------------------------------------------
5.75% 03/08/00 50,000 49,944,097
- --------------------------------------------------------------------------
5.75% 03/15/00 50,000 49,888,194
- --------------------------------------------------------------------------
5.85% 04/07/00 44,461 44,193,678
- --------------------------------------------------------------------------
5.85% 04/10/00 50,000 49,675,000
- --------------------------------------------------------------------------
Corporate Receivables Corp.
5.75% 03/13/00 50,000 49,904,167
- --------------------------------------------------------------------------
5.75% 03/21/00 75,000 74,760,417
- --------------------------------------------------------------------------
5.85% 04/05/00 50,000 49,715,625
- --------------------------------------------------------------------------
5.85% 04/06/00 50,000 49,707,500
- --------------------------------------------------------------------------
5.85% 04/11/00 50,000 49,666,875
- --------------------------------------------------------------------------
5.86% 04/18/00 50,000 49,609,333
- --------------------------------------------------------------------------
Edison Asset Securitization, L.L.C.
5.77% 03/08/00 105,157 105,039,020
- --------------------------------------------------------------------------
5.78% 03/17/00 100,000 99,743,111
- --------------------------------------------------------------------------
5.75% 03/21/00 75,000 74,760,417
- --------------------------------------------------------------------------
5.84% 04/10/00 44,913 44,621,565
- --------------------------------------------------------------------------
5.85% 04/14/00 66,870 66,391,880
- --------------------------------------------------------------------------
5.85% 04/18/00 100,000 99,220,000
- --------------------------------------------------------------------------
5.89% 04/24/00 65,058 64,483,213
- --------------------------------------------------------------------------
5.88% 04/27/00 72,087 71,415,870
- --------------------------------------------------------------------------
Enterprise Funding Corp.
5.87% 04/24/00 119,121 118,072,140
- --------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES-MULTI-PURPOSE -
(CONTINUED)
Falcon Asset Securitization Corp.
5.75% 03/01/00 $100,000 $ 100,000,000
- --------------------------------------------------------------------------
5.85% 04/10/00 60,475 60,081,913
- --------------------------------------------------------------------------
5.88% 04/11/00 103,243 102,551,616
- --------------------------------------------------------------------------
Mont Blanc Capital Corp.
5.80% 03/15/00 39,698 39,608,459
- --------------------------------------------------------------------------
5.87% 04/04/00 32,843 32,660,922
- --------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.80% 03/20/00 36,618 36,505,908
- --------------------------------------------------------------------------
5.78% 03/20/00 36,621 36,509,286
- --------------------------------------------------------------------------
5.86% 04/17/00 27,317 27,108,010
- --------------------------------------------------------------------------
Newport Funding Corp.
5.74% 03/07/00 50,000 49,952,167
- --------------------------------------------------------------------------
5.76% 03/23/00 50,000 49,824,000
- --------------------------------------------------------------------------
5.88% 04/28/00 100,000 99,052,667
- --------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.75% 03/01/00 50,000 50,000,000
- --------------------------------------------------------------------------
5.78% 03/27/00 63,690 63,424,130
- --------------------------------------------------------------------------
5.87% 04/17/00 38,250 37,956,867
- --------------------------------------------------------------------------
5.87% 04/18/00 51,250 50,848,883
- --------------------------------------------------------------------------
5.88% 04/27/00 100,000 99,069,000
- --------------------------------------------------------------------------
Quincy Capital Corp.
5.80% 03/28/00 69,425 69,123,001
- --------------------------------------------------------------------------
5.85% 04/05/00 124,608 123,899,292
- --------------------------------------------------------------------------
5.85% 04/12/00 31,711 31,494,572
- --------------------------------------------------------------------------
Receivables Capital Corp.
5.75% 03/22/00 61,994 61,786,062
- --------------------------------------------------------------------------
5.82% 03/28/00 45,586 45,387,017
- --------------------------------------------------------------------------
5.85% 04/07/00 70,649 70,224,223
- --------------------------------------------------------------------------
Sheffield Receivables Corp.
5.82% 03/17/00 49,800 49,671,184
- --------------------------------------------------------------------------
5.80% 03/28/00 50,000 49,782,500
- --------------------------------------------------------------------------
5.85% 04/14/00 25,000 24,821,250
- --------------------------------------------------------------------------
5.88% 04/25/00 40,900 40,532,582
- --------------------------------------------------------------------------
3,596,582,888
- --------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES-TRADE RECEIVABLES -
11.30%
Asset Securitization Cooperative Corp.
5.74% 03/22/00 $ 65,000 $ 64,782,358
- ------------------------------------------------------------------------------
5.74% 03/24/00 35,000 34,871,647
- ------------------------------------------------------------------------------
5.80% 03/28/00 50,000 49,782,500
- ------------------------------------------------------------------------------
5.82% 03/29/00 100,000 99,547,333
- ------------------------------------------------------------------------------
5.85% 04/12/00 100,000 99,317,500
- ------------------------------------------------------------------------------
5.87% 04/19/00 75,000 74,400,771
- ------------------------------------------------------------------------------
Blue Ridge Asset Funding Corp.
5.86% 04/10/00 50,000 49,674,444
- ------------------------------------------------------------------------------
5.87% 04/19/00 31,294 31,043,970
- ------------------------------------------------------------------------------
5.87% 04/21/00 50,000 49,584,208
- ------------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.75% 03/16/00 75,000 74,820,312
- ------------------------------------------------------------------------------
5.77% 03/16/00 100,000 99,759,583
- ------------------------------------------------------------------------------
5.75% 03/21/00 50,000 49,840,278
- ------------------------------------------------------------------------------
Delaware Funding Corp.
5.75% 03/16/00 50,000 49,880,208
- ------------------------------------------------------------------------------
5.75% 03/17/00 60,680 60,524,929
- ------------------------------------------------------------------------------
5.75% 03/21/00 44,930 44,786,474
- ------------------------------------------------------------------------------
5.75% 03/23/00 37,885 37,751,876
- ------------------------------------------------------------------------------
5.83% 03/31/00 60,594 60,299,614
- ------------------------------------------------------------------------------
5.88% 04/25/00 80,799 80,073,156
- ------------------------------------------------------------------------------
Variable Funding Capital Corp.
5.75% 03/02/00 200,000 199,968,055
- ------------------------------------------------------------------------------
5.75% 03/10/00 100,000 99,856,250
- ------------------------------------------------------------------------------
5.78% 03/16/00 50,000 49,879,583
- ------------------------------------------------------------------------------
5.75% 03/20/00 50,000 49,848,264
- ------------------------------------------------------------------------------
5.75% 03/23/00 50,000 49,824,306
- ------------------------------------------------------------------------------
5.87% 04/26/00 100,000 99,086,889
- ------------------------------------------------------------------------------
1,659,204,508
- ------------------------------------------------------------------------------
BANKING - 2.65%
Banc One Financial Corp.
5.78% 03/15/00 100,000 99,775,222
- ------------------------------------------------------------------------------
Citicorp
5.80% 03/29/00 50,000 49,774,444
- ------------------------------------------------------------------------------
5.84% 03/29/00 50,000 49,772,889
- ------------------------------------------------------------------------------
5.80% 03/30/00 50,000 49,766,389
- ------------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
BANKING - (CONTINUED)
Wells Fargo & Co.
5.69% 03/14/00 $ 90,500 $ 90,314,048
- ----------------------------------------------------------------------
5.82% 04/13/00 50,000 49,652,417
- ----------------------------------------------------------------------
389,055,409
- ----------------------------------------------------------------------
BROKERAGE/INVESTMENTS - 7.28%
Bear, Stearns & Co., Inc.
5.73% 03/15/00 50,000 49,888,583
- ----------------------------------------------------------------------
Credit Suisse First Boston Corp.
5.72% 03/03/00 100,000 99,968,222
- ----------------------------------------------------------------------
5.84% 04/18/00 50,000 49,610,667
- ----------------------------------------------------------------------
Goldman Sachs & Co.
5.75% 03/22/00 100,000 99,664,584
- ----------------------------------------------------------------------
5.85% 04/06/00 100,000 99,415,000
- ----------------------------------------------------------------------
Merrill Lynch & Co., Inc.
5.85% 04/03/00 75,000 74,597,812
- ----------------------------------------------------------------------
5.86% 04/17/00 50,000 49,617,472
- ----------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
5.71% 03/15/00 50,000 49,888,972
- ----------------------------------------------------------------------
5.86% 04/20/00 100,000 99,186,111
- ----------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.
5.73% 03/22/00 75,000 74,749,312
- ----------------------------------------------------------------------
5.74% 03/23/00 50,000 49,824,611
- ----------------------------------------------------------------------
5.74% 03/24/00 50,000 49,816,639
- ----------------------------------------------------------------------
5.83% 04/03/00 100,000 99,465,583
- ----------------------------------------------------------------------
5.85% 04/07/00 50,000 49,699,375
- ----------------------------------------------------------------------
5.87% 04/28/00 75,000 74,290,708
- ----------------------------------------------------------------------
1,069,683,651
- ----------------------------------------------------------------------
CONSUMER FINANCE - 2.88%
Household Finance Corp.
5.65% 03/07/00 75,000 74,929,375
- ----------------------------------------------------------------------
5.68% 03/08/00 100,000 99,889,556
- ----------------------------------------------------------------------
IBM Credit Corp.
5.71% 03/10/00 75,000 74,892,937
- ----------------------------------------------------------------------
5.77% 03/31/00 100,000 99,519,167
- ----------------------------------------------------------------------
5.80% 04/14/00 75,000 74,468,333
- ----------------------------------------------------------------------
423,699,368
- ----------------------------------------------------------------------
</TABLE>
FS-6
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
FINANCIAL (DIVERSIFIED) - 11.59%
Associates First Capital Corp.
5.67% 03/08/00 $ 30,000 $ 29,966,925
- --------------------------------------------------------------------------
5.67% 03/09/00 35,000 34,955,900
- --------------------------------------------------------------------------
5.74% 03/27/00 75,000 74,689,083
- --------------------------------------------------------------------------
5.84% 03/30/00 50,000 49,764,778
- --------------------------------------------------------------------------
5.84% 03/31/00 50,000 49,756,667
- --------------------------------------------------------------------------
5.83% 04/04/00 50,000 49,724,694
- --------------------------------------------------------------------------
5.83% 04/14/00 50,000 49,643,722
- --------------------------------------------------------------------------
BellSouth Capital Funding Corp.
5.80% 04/05/00 100,000 99,436,111
- --------------------------------------------------------------------------
CIT Group Inc.
5.68% 03/09/00 100,000 99,873,778
- --------------------------------------------------------------------------
5.86% 04/24/00 100,000 99,121,000
- --------------------------------------------------------------------------
Deutsche Bank Financial Inc.
5.76% 03/20/00 100,000 99,696,000
- --------------------------------------------------------------------------
5.76% 03/24/00 100,000 99,632,000
- --------------------------------------------------------------------------
5.77% 03/27/00 100,000 99,583,278
- --------------------------------------------------------------------------
Dresdner U.S.Finance, Inc.
5.73% 03/03/00 100,000 99,968,167
- --------------------------------------------------------------------------
Ford Motor Credit Co.
5.63% 03/07/00 50,000 49,953,083
- --------------------------------------------------------------------------
5.70% 03/21/00 50,000 49,841,667
- --------------------------------------------------------------------------
5.85% 04/28/00 75,000 74,293,125
- --------------------------------------------------------------------------
General Electric Capital Services, Inc.
5.83% 04/13/00 100,000 99,303,639
- --------------------------------------------------------------------------
General Motors Acceptance Corp.
5.83% 04/11/00 100,000 99,336,028
- --------------------------------------------------------------------------
International Lease Finance Corp.
5.65% 03/13/00 40,000 39,924,667
- --------------------------------------------------------------------------
5.78% 03/29/00 35,000 34,842,656
- --------------------------------------------------------------------------
5.78% 03/30/00 35,000 34,837,036
- --------------------------------------------------------------------------
5.80% 04/06/00 50,000 49,710,000
- --------------------------------------------------------------------------
Toyota Motor Credit Corp.
5.66% 03/14/00 60,000 59,877,367
- --------------------------------------------------------------------------
UBS Finance (Delaware), Inc.
5.71% 03/06/00 75,000 74,940,521
- --------------------------------------------------------------------------
1,702,671,892
- --------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
INSURANCE (LIFE) - 0.68%
Prudential Funding Corp.
5.68% 03/08/00 $100,000 $ 99,889,556
- ---------------------------------------------------------------------------
PERSONAL CREDIT - 0.51%
American Express Credit Corp.
5.63% 03/07/00 75,000 74,929,625
- ---------------------------------------------------------------------------
Total Financial 10,075,590,808
- ---------------------------------------------------------------------------
UTILITIES - 3.22%
TELEPHONE - 3.22%
American Telephone and Telegraph Co.
5.65% 03/02/00 100,000 99,984,305
- ---------------------------------------------------------------------------
5.66% 03/03/00 50,000 49,984,278
- ---------------------------------------------------------------------------
5.68% 03/09/00 75,000 74,905,333
- ---------------------------------------------------------------------------
5.75% 03/10/00 100,000 99,856,250
- ---------------------------------------------------------------------------
BellSouth Telecommunications, Inc.
5.80% 04/11/00 48,400 48,080,291
- ---------------------------------------------------------------------------
SBC Communications, Inc.
5.82% 03/30/00 100,000 99,531,167
- ---------------------------------------------------------------------------
Total Utilities 472,341,624
- ---------------------------------------------------------------------------
Total Commercial Paper (Cost -
$11,543,902,843) 11,543,902,843
- ---------------------------------------------------------------------------
MASTER NOTE AGREEMENT - 2.12%
Merrill Lynch Mortgage Capital, Inc.
6.20%(b) (Cost - $311,200,000) 08/17/00 311,200 311,200,000
- ---------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT - 0.51%
First Union National Bank Corp.
5.80% (Cost - $75,000,000) 03/21/00 75,000 75,000,000
- ---------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 11,930,102,843
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 19.21%(c)
Bank of America Securities, Inc.
5.86%(d) 03/01/00 150,500 150,500,000
- ---------------------------------------------------------------------------
5.87%(e) 03/01/00 655,880 655,880,419
- ---------------------------------------------------------------------------
Bear, Stearns & Co., Inc.
5.87%(f) -- 500,000 500,000,000
- ---------------------------------------------------------------------------
Chase Securites, Inc.
5.86%(g) 03/01/00 130,000 130,000,000
- ---------------------------------------------------------------------------
First Union Capital Markets
5.87%(h) 03/01/00 447,882 447,882,701
- ---------------------------------------------------------------------------
</TABLE>
FS-8
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - (continued)
Goldman, Sachs & Co.
5.87%(i) 03/01/00 $300,000 $ 300,000,000
- ---------------------------------------------------------------------------
Societe Generale Cowen Securities Corp.
5.87%(j) 03/01/00 87,204 87,204,708
- ---------------------------------------------------------------------------
Warburg Dillon Read LLC
5.87%(k) 03/01/00 550,000 550,000,000
- ---------------------------------------------------------------------------
Total Repurchase Agreements (Cost -
$2,821,467,828) 2,821,467,828
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.43% (Cost -
$14,751,570,671)(l) 14,751,570,671
- ---------------------------------------------------------------------------
OTHER LIABILITIES LESS ASSETS - (0.43%) (62,993,133)
- ---------------------------------------------------------------------------
NET ASSETS - 100% $14,688,577,538
===========================================================================
</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) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon one business day's notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
02/29/00.
(c) 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.
(d) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$500,081,389. Collateralized by $611,791,640 U.S. Government obligations,
5.50% to 6.00% due 10/01/13 to 01/01/14 with an aggregate market value at
02/29/00 of $510,000,000.
(e) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$800,130,444. Collateralized by $1,015,808,249 U.S. Government obligations,
5.50% to 8.50% due 07/15/03 to 11/01/28 with an aggregate market value at
02/29/00 of $816,000,001.
(f) Open repurchase agreement entered into 12/21/99; however, either party may
terminate the agreement upon demand. Interests rates, par and collateral
are redetermined daily. Collateralized by $518,700,000 U.S. Government
obligations, 0% to 7.00% due 01/21/00 to 09/14/09 with an aggregate market
value at 02/29/00 of $510,018,009.
(g) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$200,032,556. Collateralized by $262,530,613 U.S. Government obligations,
5.50% to 9.50% due 02/01/02 to 02/01/30 with an aggregate market value at
02/29/00 of $204,004,059.
(h) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$450,073,375. Collateralized by $494,116,268 U.S. Government obligations,
0% to 5.50% due 07/01/14 to 02/01/30 with an aggregate market value at
02/29/00 of $459,000,000.
(i) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$750,122,292. Collateralized by $1,294,709,963 U.S. Government obligations,
5.00% to 8.00% due 02/01/14 to 10/01/38 with an aggregate market value at
02/29/00 of $765,000,000.
(j) Joint repurchase agreement entered into 02/29/00 with a maturing value of
$200,032,611. Collateralized by $408,920,728 U.S. Government obligations,
5.858% to 5.92% due 10/01/32 to 04/01/34 with an aggregate market value at
02/29/00 of $207,110,166.
(k) Repurchase agreement entered into 02/29/00 with a maturing value of
$550,089,681. Collateralized by $673,981,545 U.S. Government obligations,
0% to 10.50% due 04/13/00 to 01/15/33 with an aggregate market value at
02/29/00 of $561,001,427.
(l) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $11,930,102,843
- -------------------------------------------------------------------------
Repurchase agreements 2,821,467,828
- -------------------------------------------------------------------------
Interest receivable 2,443,397
- -------------------------------------------------------------------------
Investment for deferred compensation plan 160,975
- -------------------------------------------------------------------------
Other assets 438,961
- -------------------------------------------------------------------------
Total assets 14,754,614,004
- -------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 63,767,778
- -------------------------------------------------------------------------
Deferred compensation 160,975
- -------------------------------------------------------------------------
Accrued administrative services fees 44,369
- -------------------------------------------------------------------------
Accrued advisory fees 596,118
- -------------------------------------------------------------------------
Accrued distribution fees 409,959
- -------------------------------------------------------------------------
Accrued transfer agent fees 185,005
- -------------------------------------------------------------------------
Accrued operating expenses 872,262
- -------------------------------------------------------------------------
Total liabilities 66,036,466
- -------------------------------------------------------------------------
Net assets $14,688,577,538
=========================================================================
NET ASSETS:
Institutional Class $11,810,767,167
=========================================================================
Private Investment Class $ 437,812,562
=========================================================================
Personal Investment Class $ 105,275,253
=========================================================================
Cash Management Class $ 1,092,807,547
=========================================================================
Reserve Class $ 113,865,096
=========================================================================
Resource Class $ 1,128,049,913
=========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 11,810,767,330
=========================================================================
Private Investment Class 437,812,697
=========================================================================
Personal Investment Class 105,275,283
=========================================================================
Cash Management Class 1,092,807,397
=========================================================================
Reserve Class 113,865,106
=========================================================================
Resource Class 1,128,056,063
=========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
=========================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE>
STATEMENT OF OPERATIONS
For the six months ended February 29, 2000
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $378,976,908
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 3,570,567
- -------------------------------------------------------------------
Custodian fees 570,883
- -------------------------------------------------------------------
Administrative services fees 267,131
- -------------------------------------------------------------------
Directors' fees 27,865
- -------------------------------------------------------------------
Transfer agent fees 1,100,089
- -------------------------------------------------------------------
Distribution fees (see Note 2) 3,205,019
- -------------------------------------------------------------------
Other 584,346
- -------------------------------------------------------------------
Total expenses 9,325,900
- -------------------------------------------------------------------
Less: Fee waivers (885,550)
- -------------------------------------------------------------------
Net expenses 8,440,350
- -------------------------------------------------------------------
Net investment income 370,536,558
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $370,536,558
==================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended February 29, 2000 and year ended August 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 370,536,558 $ 476,740,526
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 370,536,558 476,740,526
- -----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (304,572,178) (364,347,968)
- -----------------------------------------------------------------------------
Private Investment Class (10,305,434) (18,159,703)
- -----------------------------------------------------------------------------
Personal Investment Class (2,372,732) (6,869,222)
- -----------------------------------------------------------------------------
Cash Management Class (30,748,987) (57,786,622)
- -----------------------------------------------------------------------------
Reserve Class (2,620,446) (1,195,139)
- -----------------------------------------------------------------------------
Resource Class (19,916,781) (28,381,872)
- -----------------------------------------------------------------------------
Capital stock transactions-net (see Note 4) 5,964,352,847 884,926,848
- -----------------------------------------------------------------------------
Net increase in net assets 5,964,352,847 884,926,848
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 8,724,224,691 7,839,297,843
- -----------------------------------------------------------------------------
End of period $14,688,577,538 $8,724,224,691
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $14,688,583,876 $8,724,231,029
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sale of investments (6,338) (6,338)
- -----------------------------------------------------------------------------
$14,688,577,538 $8,724,224,691
=============================================================================
</TABLE>
See Notes to Financial Statements.
FS-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
(Unaudited)
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 Prime 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 Private Investment Class, the Personal
Investment Class, the Cash Management Class, the Reserve Class and the Resource
Class. Matters affecting each class are voted on exclusively by the
shareholders of each class. The Portfolio is a money market fund whose
objective is the maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the 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 calculated
by applying a monthly rate, based upon the following annual rates, to the
average daily net assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
- ----------------------------------------
<S> <C>
First $100 million 0.20%
- ----------------------------------------
Over $100 million to $200 million 0.15%
- ----------------------------------------
Over $200 million to $300 million 0.10%
- ----------------------------------------
Over $300 million to $1.5 billion 0.06%
- ----------------------------------------
Over $1.5 billion 0.05%
- ----------------------------------------
</TABLE>
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 six months ended February 29, 2000,
AIM was paid $267,131 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 six months ended February 29,
2000, AFS was paid $1,008,514 for such services.
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
FS-13
<PAGE>
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, the 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. Currently, FMC has elected to waive a portion of its compensation
payable by the Fund such that the compensation paid pursuant to the Plan with
respect to the Private Investment Class, the Personal Investment Class, the
Cash Management Class, the Reserve Class, and the Resource Class equals 0.30%,
0.50%, 0.08%, 0.80% and 0.16%, respectively, maximum annual rate of the average
daily net assets attributable to such class. During the six months ended
February 29, 2000, the Private Investment Class, the Personal Investment Class,
the Cash Management Class, the Reserve Class, and the Resource Class paid
$592,086, $235,917, $452,772, $594,035, and $444,659, respectively, as
compensation under the Plan. FMC waived fees of $885,550 for the same period.
Certain officers and directors of the Fund are officers of AIM, FMC and AFS.
During the six months ended February 29, 2000, the Portfolio paid legal fees
of $6,546 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 six months ended February 29, 2000 and
the year ended August 31, 1999 were as follows.
<TABLE>
<CAPTION>
FEBRUARY 29, 2000 AUGUST 31, 1999
---------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 64,721,197,490 $ 64,721,197,490 109,937,908,800 $ 109,937,908,800
- ------------------------------------------------------------------------------------------------
Private Investment
Class 1,281,174,582 1,281,174,582 3,170,645,036 3,170,645,036
- ------------------------------------------------------------------------------------------------
Personal Investment
Class 581,309,133 581,309,133 1,878,724,152 1,878,724,152
- ------------------------------------------------------------------------------------------------
Cash Management Class 6,006,962,623 6,006,962,623 12,368,423,760 12,368,423,760
- ------------------------------------------------------------------------------------------------
Reserve Class* 569,297,569 569,297,569 427,972,822 427,972,822
- ------------------------------------------------------------------------------------------------
Resource Class 3,304,240,415 3,304,240,415 4,803,364,271 4,803,364,271
- ------------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 25,229,488 25,229,488 27,367,341 27,367,341
- ------------------------------------------------------------------------------------------------
Private Investment
Class 5,657,322 5,657,322 9,729,854 9,729,854
- ------------------------------------------------------------------------------------------------
Personal Investment
Class 2,212,188 2,212,188 7,060,491 7,060,491
- ------------------------------------------------------------------------------------------------
Cash Management Class 21,677,507 21,677,507 43,017,293 43,017,293
- ------------------------------------------------------------------------------------------------
Reserve Class* 2,596,970 2,596,970 763,247 763,247
- ------------------------------------------------------------------------------------------------
Resource Class 18,074,764 18,074,764 24,478,821 24,478,821
- ------------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (59,145,722,351) (59,145,722,351) (109,599,031,637) (109,599,031,637)
- ------------------------------------------------------------------------------------------------
Private Investment
Class (1,233,913,435) (1,233,913,435) (3,090,291,929) (3,090,291,929)
- ------------------------------------------------------------------------------------------------
Personal Investment
Class (565,999,618) (565,999,618) (1,938,117,905) (1,938,117,905)
- ------------------------------------------------------------------------------------------------
Cash Management Class (6,189,631,742) (6,189,631,742) (12,019,849,792) (12,019,849,792)
- ------------------------------------------------------------------------------------------------
Reserve Class* (579,812,157) (579,812,157) (306,953,345) (306,953,345)
- ------------------------------------------------------------------------------------------------
Resource Class (2,860,197,901) (2,860,197,901) (4,860,284,432) (4,860,284,432)
================================================================================================
Net increase $ 5,964,352,847 $ 5,964,352,847 884,926,848 $ 884,926,848
================================================================================================
</TABLE>
* The Reserve Class commenced sales on January 4, 1999.
FS-14
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Cash Management
Class capital stock outstanding during the six months ended February 29, 2000
and each of the years in the five-year period ended August 31, 1999.
<TABLE>
<CAPTION>
AUGUST 31,
FEBRUARY 29, --------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ---------- ---------- -------- -------- -------- --------
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.05 0.06
- ----------------------- ---------- ---------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.05) (0.06)
- ----------------------- ---------- ---------- -------- -------- -------- --------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ========== ========== ======== ======== ======== ========
Total return(a) 2.74% 5.07% 5.62% 5.45% 5.55% 5.71%
======================= ========== ========== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $1,092,808 $1,253,799 $862,207 $767,304 $507,247 $194,479
======================= ========== ========== ======== ======== ======== ========
Ratio of expenses to
average net assets:
Including fee waivers
and/or expense
reimbursements 0.17%(b) 0.17% 0.17% 0.17% 0.17% 0.17%
======================= ========== ========== ======== ======== ======== ========
Excluding fee waivers
and/or expense
reimbursements 0.19%(b) 0.19% 0.19% 0.19% 0.19% 0.32%
======================= ========== ========== ======== ======== ======== ========
Ratio of net investment
income to average net
assets 5.47%(b) 4.94% 5.48% 5.33% 5.38% 5.69%
======================= ========== ========== ======== ======== ======== ========
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $1,138,148,862.
FS-15
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional
Class capital stock outstanding during the six months ended February 29, 2000
and each of the years in the five-year period ended August 31, 1999.
<TABLE>
<CAPTION>
AUGUST 31,
FEBRUARY 29, ----------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.03 0.05 0.06 0.05 0.05 0.06
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.03) (0.05) (0.06) (0.05) (0.05) (0.06)
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
Total return(a) 2.78% 5.15% 5.71% 5.54% 5.64% 5.80%
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $11,810,767 $6,210,056 $5,843,813 $5,593,043 $5,264,601 $3,752,693
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
Ratio of expenses to average net assets 0.09%(b) 0.09% 0.09% 0.09% 0.09% 0.09%
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
Ratio of net investment income to average net assets 5.55%(b) 5.02% 5.56% 5.40% 5.48% 5.64%
- ---------------------------------------------------- ----------- ---------- ---------- ---------- ---------- ----------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $11,032,416,563.
FS-16
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Personal Investment
Class capital stock outstanding during the six months ended February 29, 2000
and each of the years in the five-year period ended August 31, 1999.
<TABLE>
<CAPTION>
AUGUST 31,
FEBRUARY 29, ---------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------ -------- ------- -------- ------- -------- -------
Income from investment operations:
Net investment income 0.02 0.05 0.05 0.05 0.05 0.05
- ------------------------------------------------------ -------- ------- -------- ------- -------- -------
Less distributions:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.05)
- ------------------------------------------------------ -------- ------- -------- ------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================== ======== ======= ======== ======= ======== =======
Total return(a) 2.52% 4.63% 5.18% 5.01% 5.11% 5.27%
====================================================== ======== ======= ======== ======= ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $105,275 $87,754 $140,087 $97,215 $112,645 $99,630
====================================================== ======== ======= ======== ======= ======== =======
Ratio of expenses to average net assets:
Including fee waivers and/or expense reimbursements 0.59%(b) 0.59% 0.59% 0.59% 0.59% 0.59%
====================================================== ======== ======= ======== ======= ======== =======
Excluding fee waivers and/or expense reimbursements 0.84%(b) 0.84% 0.84% 0.84% 0.89% 0.86%
====================================================== ======== ======= ======== ======= ======== =======
Ratio of net investment income to average net assets 5.05%(b) 4.52% 5.06% 4.89% 4.99% 5.23%
====================================================== ======== ======= ======== ======= ======== =======
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $94,885,205.
FS-17
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Private Investment
Class capital stock outstanding during the six months ended February 29, 2000
and each of the years in the five-year period ended August 31, 1999.
<TABLE>
<CAPTION>
AUGUST 31,
FEBRUARY 29, ------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.05 0.05
- ----------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.05) (0.05)
- ----------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ======== ======== ======== ======== ======== ========
Total return(a) 2.62% 4.84% 5.39% 5.21% 5.32% 5.48%
======================= ======== ======== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $437,813 $384,894 $294,811 $235,447 $209,443 $154,278
======================= ======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets:
Including fee waivers
and/or expense
reimbursements 0.39%(b) 0.39% 0.39% 0.39% 0.39% 0.39%
======================= ======== ======== ======== ======== ======== ========
Excluding fee waivers
and/or expense
reimbursements 0.59%(b) 0.59% 0.59% 0.59% 0.59% 0.60%
======================= ======== ======== ======== ======== ======== ========
Ratio of net investment
income to average net
assets 5.25%(b) 4.72% 5.26% 5.10% 5.20% 5.50%
======================= ======== ======== ======== ======== ======== ========
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $396,893,615.
FS-18
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Reserve Class
capital stock outstanding during the six months ended February 29, 2000 and the
period January 4, 1999 (date sales commenced) through August 31, 1999.
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
------------ ----------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
- --------------------------------------------- -------- --------
Income from investment operations:
Net investment income 0.02 0.03
- --------------------------------------------- -------- --------
Less distributions:
Dividends from net investment income (0.02) (0.03)
- --------------------------------------------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00
============================================= ======== ========
Total return(a) 2.37% 2.73%
============================================= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $113,865 $121,783
============================================= ======== ========
Ratio of expenses to average net assets:
Including fee waivers and/or expense
reimbursements 0.89%(b) 0.89%(c)
============================================= ======== ========
Excluding fee waivers and/or expense
reimbursements 1.09%(b) 1.09%(c)
============================================= ======== ========
Ratio of net investment income to average net
assets 4.75%(b) 4.22%(c)
============================================= ======== ========
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $111,775,529.
(c) Annualized.
FS-19
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Resource Class
capital stock outstanding during the six months ended February 29, 2000 and
each of the years in the three-year period ended August 31, 1999 and the period
January 16, 1996 (date sales commenced) through August 31, 1996.
<TABLE>
<CAPTION>
AUGUST 31,
FEBRUARY 29, -------------------------------------
2000 1999 1998 1997 1996
------------ -------- -------- -------- -------
<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 0.03 0.05 0.05 0.05 0.03
- ----------------------- ---------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.03)
- ----------------------- ---------- -------- -------- -------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ---------- -------- -------- -------- -------
Total return(a) 2.70% 4.99% 5.54% 5.36% 3.28%
- ----------------------- ---------- -------- -------- -------- -------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $1,128,050 $665,939 $698,380 $161,701 $58,012
- ----------------------- ---------- -------- -------- -------- -------
Ratio of expenses to
average net assets:
Including fee waivers
and/or expense
reimbursements 0.25%(b) 0.25% 0.25% 0.25% 0.25%(c)
- ----------------------- ---------- -------- -------- -------- -------
Excluding fee waivers
and/or expense
reimbursements 0.29%(b) 0.29% 0.29% 0.29% 0.29%(c)
- ----------------------- ---------- -------- -------- -------- -------
Ratio of net investment
income to average net
assets 5.39%(b) 4.86% 5.40% 5.25% 5.18%(c)
- ----------------------- ---------- -------- -------- -------- -------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $746,623,311.
(c) Annualized.
FS-20
<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 Prime
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 statements 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. 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
Prime 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.
/s/ KPMG LLP
KPMG LLP
October 1, 1999
Houston, Texas
FS-21
<PAGE>
SCHEDULE OF INVESTMENTS
August 31, 1999
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 82.48%(a)
BASIC INDUSTRIES - 2.62%
CHEMICALS - 0.63%
Du Pont (E.I.) de Nemours and Co.
5.05% 09/03/99 $ 25,000 $ 24,992,985
- ------------------------------------------------------------------------------
Henkel Corp.
5.07% 09/02/99 30,000 29,995,775
- ------------------------------------------------------------------------------
54,988,760
- ------------------------------------------------------------------------------
METAL MINING - 1.99%
Rio Tinto America, Inc.
5.12% 09/01/99 50,000 50,000,000
- ------------------------------------------------------------------------------
5.11% 09/07/99 50,000 49,957,417
- ------------------------------------------------------------------------------
5.27% 09/29/99 42,300 42,126,617
- ------------------------------------------------------------------------------
5.27% 09/30/99 32,000 31,864,151
- ------------------------------------------------------------------------------
173,948,185
- ------------------------------------------------------------------------------
Total Basic Industries 228,936,945
- ------------------------------------------------------------------------------
CAPITAL GOODS - 0.83%
ELECTRICAL EQUIPMENT - 0.83%
Siemens Capital Corp.
5.12% 09/24/99 72,775 72,536,944
- ------------------------------------------------------------------------------
CONSUMER DURABLES - 1.43%
AUTOMOBILE - 1.43%
Daimler-Chrysler North America Holding Corp.
5.09% 09/09/99 50,000 49,943,444
- ------------------------------------------------------------------------------
5.27% 10/12/99 25,000 24,849,951
- ------------------------------------------------------------------------------
5.29% 10/22/99 25,000 24,812,646
- ------------------------------------------------------------------------------
5.28% 10/26/99 25,000 24,798,333
- ------------------------------------------------------------------------------
Total Consumer Durables 124,404,374
- ------------------------------------------------------------------------------
CONSUMER NONDURABLES - 2.61%
HOUSEHOLD PRODUCTS - 2.61%
Colgate-Palmolive Co.
5.26% 09/30/99 67,000 66,716,106
- ------------------------------------------------------------------------------
Kimberly-Clark Worldwide, Inc.
5.27% 10/13/99 33,021 32,817,976
- ------------------------------------------------------------------------------
Procter & Gamble Co.
5.10% 09/13/99 50,000 49,915,000
- ------------------------------------------------------------------------------
5.14% 09/20/99 28,500 28,422,686
- ------------------------------------------------------------------------------
5.16% 09/23/99 50,000 49,842,333
- ------------------------------------------------------------------------------
Total Consumer Nondurables 227,714,101
- ------------------------------------------------------------------------------
</TABLE>
FS-22
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ENERGY - 1.94%
OIL & GAS - 1.94%
Chevron U. S. A., Inc.
5.27% 10/29/99 $ 50,000 $ 49,575,472
- --------------------------------------------------------------------
Koch Industries, Inc.
5.07% 09/01/99 50,000 50,000,000
- --------------------------------------------------------------------
Petrofina Delaware, Inc.
5.13% 09/27/99 20,000 19,925,900
- --------------------------------------------------------------------
5.30% 10/25/99 50,000 49,602,500
- --------------------------------------------------------------------
Total Energy 169,103,872
- --------------------------------------------------------------------
FINANCIAL - 71.52%
ASSET-BACKED SECURITIES-COMMERCIAL
LOANS/LEASES - 4.98%
Centric Capital Corp.
5.13% 09/13/99 40,000 39,931,600
- --------------------------------------------------------------------
5.14% 09/23/99 40,742 40,614,025
- --------------------------------------------------------------------
5.16% 09/28/99 40,000 39,845,200
- --------------------------------------------------------------------
5.20% 09/29/99 50,000 49,797,778
- --------------------------------------------------------------------
5.30% 09/29/99 80,226 79,895,291
- --------------------------------------------------------------------
5.35% 10/06/99 20,000 19,895,972
- --------------------------------------------------------------------
5.31% 10/08/99 44,000 43,759,870
- --------------------------------------------------------------------
Fleet Funding Corp.
5.12% 09/17/99 54,655 54,530,629
- --------------------------------------------------------------------
5.31% 10/12/99 66,381 65,979,561
- --------------------------------------------------------------------
434,249,926
- --------------------------------------------------------------------
ASSET-BACKED SECURITIES-CONSUMER
RECEIVABLES - 4.00%
Old Line Funding Corp.
5.33% 10/07/99 25,851 25,713,214
- --------------------------------------------------------------------
Riverwoods Funding Corp.
5.17% 09/08/99 40,000 39,959,789
- --------------------------------------------------------------------
5.12% 09/24/99 50,000 49,836,444
- --------------------------------------------------------------------
5.13% 09/27/99 50,000 49,814,750
- --------------------------------------------------------------------
5.20% 09/27/99 50,000 49,812,222
- --------------------------------------------------------------------
5.30% 10/01/99 50,000 49,779,167
- --------------------------------------------------------------------
Thunder Bay Funding Inc.
5.12% 09/10/99 42,273 42,218,891
- --------------------------------------------------------------------
5.14% 09/17/99 42,280 42,183,414
- --------------------------------------------------------------------
349,317,891
- --------------------------------------------------------------------
</TABLE>
FS-23
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES-
MULTI-PURPOSE - 31.69%
Aspen Funding Corp.
5.30% 10/05/99 $ 50,000 $ 49,749,722
- -------------------------------------------------------------------------
5.34% 10/15/99 100,000 99,347,334
- -------------------------------------------------------------------------
5.35% 10/22/99 50,000 49,621,042
- -------------------------------------------------------------------------
Clipper Receivables Corp.
5.13% 09/03/99 50,000 49,985,750
- -------------------------------------------------------------------------
5.12% 09/07/99 50,000 49,957,333
- -------------------------------------------------------------------------
5.30% 10/05/99 50,000 49,749,722
- -------------------------------------------------------------------------
5.30% 10/08/99 80,000 79,564,222
- -------------------------------------------------------------------------
Corporate Receivables Corp.
5.12% 09/08/99 50,000 49,950,222
- -------------------------------------------------------------------------
5.12% 09/15/99 50,000 49,900,444
- -------------------------------------------------------------------------
5.13% 09/15/99 50,000 49,900,250
- -------------------------------------------------------------------------
5.12% 09/16/99 50,000 49,893,333
- -------------------------------------------------------------------------
5.11% 09/20/99 50,000 49,865,153
- -------------------------------------------------------------------------
5.13% 09/21/99 30,000 29,914,500
- -------------------------------------------------------------------------
5.13% 09/23/99 50,000 49,843,250
- -------------------------------------------------------------------------
5.30% 10/04/99 75,000 74,635,625
- -------------------------------------------------------------------------
5.30% 10/08/99 50,000 49,727,639
- -------------------------------------------------------------------------
Edison Asset Securitization, L.L.C.
5.16% 09/14/99 50,000 49,906,833
- -------------------------------------------------------------------------
Enterprise Funding Corp.
5.13% 09/10/99 50,000 49,935,875
- -------------------------------------------------------------------------
5.17% 09/28/99 24,693 24,597,253
- -------------------------------------------------------------------------
5.20% 09/28/99 53,999 53,788,404
- -------------------------------------------------------------------------
5.28% 09/30/99 25,185 25,077,880
- -------------------------------------------------------------------------
5.35% 10/07/99 17,632 17,537,669
- -------------------------------------------------------------------------
Falcon Asset Securitization Corp.
4.13% 09/09/99 50,000 49,943,000
- -------------------------------------------------------------------------
5.16% 09/15/99 40,000 39,919,733
- -------------------------------------------------------------------------
5.17% 09/27/99 25,000 24,906,653
- -------------------------------------------------------------------------
Mont Blanc Capital Corp.
5.35% 10/19/99 40,000 39,714,667
- -------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.35% 10/13/99 92,000 91,425,767
- -------------------------------------------------------------------------
5.35% 10/15/99 25,000 24,836,528
- -------------------------------------------------------------------------
5.35% 10/18/99 47,000 46,671,718
- -------------------------------------------------------------------------
</TABLE>
FS-24
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES-
MULTI-PURPOSE - (CONTINUED)
Newport Funding Corp.
5.13% 09/16/99 $ 50,000 $ 49,893,125
- -------------------------------------------------------------------------
5.13% 09/21/99 50,000 49,857,500
- -------------------------------------------------------------------------
5.30% 10/07/99 100,000 99,470,000
- -------------------------------------------------------------------------
5.35% 10/22/99 50,000 49,621,042
- -------------------------------------------------------------------------
Park Avenue Receivables Corp.
5.12% 09/10/99 35,000 34,955,200
- -------------------------------------------------------------------------
5.14% 09/22/99 40,119 39,998,710
- -------------------------------------------------------------------------
5.19% 09/22/99 50,000 49,848,625
- -------------------------------------------------------------------------
5.35% 10/12/99 29,976 29,793,355
- -------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.12% 09/13/99 25,000 24,957,333
- -------------------------------------------------------------------------
5.13% 09/13/99 20,000 19,965,800
- -------------------------------------------------------------------------
5.13% 09/16/99 50,000 49,893,125
- -------------------------------------------------------------------------
5.12% 09/20/99 10,000 9,972,978
- -------------------------------------------------------------------------
5.30% 10/05/99 24,800 24,675,862
- -------------------------------------------------------------------------
Quincy Capital Corp.
5.13% 09/07/99 50,000 49,957,250
- -------------------------------------------------------------------------
5.12% 09/08/99 31,655 31,623,486
- -------------------------------------------------------------------------
5.12% 09/14/99 88,620 88,456,151
- -------------------------------------------------------------------------
5.13% 09/14/99 27,151 27,100,703
- -------------------------------------------------------------------------
5.14% 09/16/99 26,066 26,010,175
- -------------------------------------------------------------------------
5.12% 09/17/99 30,226 30,157,219
- -------------------------------------------------------------------------
5.17% 09/20/99 29,997 29,915,150
- -------------------------------------------------------------------------
5.30% 10/06/99 74,274 73,891,283
- -------------------------------------------------------------------------
5.30% 10/07/99 57,131 56,828,206
- -------------------------------------------------------------------------
5.35% 10/12/99 55,101 54,765,266
- -------------------------------------------------------------------------
Receivables Capital Corp.
5.14% 09/16/99 20,000 19,957,167
- -------------------------------------------------------------------------
5.30% 10/06/99 53,193 52,918,908
- -------------------------------------------------------------------------
5.30% 10/08/99 83,865 83,408,169
- -------------------------------------------------------------------------
Sheffield Receivables Corp.
5.15% 09/24/99 22,500 22,425,969
- -------------------------------------------------------------------------
5.22% 09/28/99 42,800 42,632,438
- -------------------------------------------------------------------------
5.28% 10/04/99 80,400 80,010,864
- -------------------------------------------------------------------------
5.38% 10/15/99 42,200 41,922,511
- -------------------------------------------------------------------------
2,764,751,091
- -------------------------------------------------------------------------
</TABLE>
FS-25
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES-TRADE
RECEIVABLES - 11.33%
Asset Securitization Cooperative Corp.
5.12% 09/17/99 $ 30,000 $ 29,931,733
- -----------------------------------------------------------------------------
5.12% 09/20/99 50,000 49,864,889
- -----------------------------------------------------------------------------
5.15% 09/27/99 50,000 49,814,028
- -----------------------------------------------------------------------------
Ciesco, L.P.
5.16% 09/22/99 50,000 49,849,500
- -----------------------------------------------------------------------------
Corporate Asset Funding Co., Inc.
5.12% 09/01/99 20,000 20,000,000
- -----------------------------------------------------------------------------
5.12% 09/09/99 50,000 49,943,111
- -----------------------------------------------------------------------------
5.16% 09/23/99 40,000 39,873,867
- -----------------------------------------------------------------------------
5.20% 09/28/99 75,000 74,707,500
- -----------------------------------------------------------------------------
5.31% 10/08/99 50,000 49,727,125
- -----------------------------------------------------------------------------
Delaware Funding Corp.
5.12% 09/10/99 25,000 24,968,000
- -----------------------------------------------------------------------------
5.13% 09/15/99 25,059 25,009,007
- -----------------------------------------------------------------------------
5.18% 09/20/99 32,031 31,943,431
- -----------------------------------------------------------------------------
5.33% 10/08/99 66,368 66,004,432
- -----------------------------------------------------------------------------
Variable Funding Capital
5.12% 09/07/99 50,000 49,957,333
- -----------------------------------------------------------------------------
5.11% 09/13/99 25,000 24,957,416
- -----------------------------------------------------------------------------
5.13% 09/14/99 20,000 19,962,950
- -----------------------------------------------------------------------------
5.30% 10/07/99 59,075 58,761,903
- -----------------------------------------------------------------------------
5.34% 10/13/99 100,000 99,377,000
- -----------------------------------------------------------------------------
5.34% 10/18/99 50,000 49,651,417
- -----------------------------------------------------------------------------
5.34% 10/19/99 50,000 49,644,000
- -----------------------------------------------------------------------------
5.35% 10/22/99 75,000 74,431,563
- -----------------------------------------------------------------------------
988,380,205
- -----------------------------------------------------------------------------
BANKING - 3.48%
Canadian Imperial Holdings, Inc.
5.10% 09/01/99 30,000 30,000,000
- -----------------------------------------------------------------------------
Citicorp
5.15% 09/21/99 70,000 69,799,722
- -----------------------------------------------------------------------------
Banc One Financial Corp.
5.11% 09/08/99 50,000 49,950,319
- -----------------------------------------------------------------------------
5.13% 09/13/99 35,000 34,940,150
- -----------------------------------------------------------------------------
5.28% 10/04/99 45,000 44,782,200
- -----------------------------------------------------------------------------
5.26% 10/12/99 15,000 14,910,142
- -----------------------------------------------------------------------------
5.34% 10/18/99 60,000 59,581,700
- -----------------------------------------------------------------------------
303,964,233
- -----------------------------------------------------------------------------
</TABLE>
FS-26
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
BROKERAGE/INVESTMENTS - 1.15%
Bear, Stearns & Co., Inc.
5.12% 09/08/99 $ 50,000 $ 49,950,222
- ------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.
5.30% 10/01/99 50,000 49,779,167
- ------------------------------------------------------------------------------
99,729,389
- ------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 12.62%
Ameritech Capital Funding Corp.
5.08% 09/02/99 50,000 49,992,944
- ------------------------------------------------------------------------------
Associates First Capital Corp.
5.15% 09/21/99 50,000 49,856,944
- ------------------------------------------------------------------------------
5.14% 09/23/99 40,000 39,874,356
- ------------------------------------------------------------------------------
5.33% 10/20/99 50,000 49,637,264
- ------------------------------------------------------------------------------
5.33% 10/26/99 30,000 29,755,708
- ------------------------------------------------------------------------------
BellSouth Capital Funding Corp.
5.12% 09/22/99 50,000 49,850,667
- ------------------------------------------------------------------------------
CIT Group Holdings, Inc. (The)
5.30% 10/26/99 50,000 49,595,139
- ------------------------------------------------------------------------------
Commercial Credit Co.
5.11% 09/10/99 50,000 49,936,125
- ------------------------------------------------------------------------------
Deere (John) Capital Corp.
5.13% 09/17/99 50,000 49,886,000
- ------------------------------------------------------------------------------
Deutsche Bank Financial Inc.
5.10% 09/03/99 50,000 49,985,833
- ------------------------------------------------------------------------------
Dresdner U.S. Finance, Inc.
5.11% 09/02/99 50,000 49,992,903
- ------------------------------------------------------------------------------
Ford Motor Credit Co.
5.11% 09/03/99 50,000 49,985,806
- ------------------------------------------------------------------------------
5.13% 09/15/99 50,000 49,900,250
- ------------------------------------------------------------------------------
5.30% 10/06/99 50,000 49,742,361
- ------------------------------------------------------------------------------
General Electric Capital Services
5.31% 10/19/99 100,000 99,292,000
- ------------------------------------------------------------------------------
5.30% 10/20/99 100,000 99,278,612
- ------------------------------------------------------------------------------
General Motors Acceptance Corp.
5.31% 10/20/99 50,000 49,638,625
- ------------------------------------------------------------------------------
International Lease Finance Corp.
5.08% 09/09/99 50,000 49,943,556
- ------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.24% 10/12/99 35,000 34,791,128
- ------------------------------------------------------------------------------
</TABLE>
FS-27
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
UBS Finance (Delaware) Inc.
5.11% 09/02/99 $ 50,000 $ 49,992,903
- -------------------------------------------------------------------------
5.25% 10/12/99 50,000 49,701,042
- -------------------------------------------------------------------------
1,100,630,166
- -------------------------------------------------------------------------
INSURANCE (LIFE) - 0.57%
Prudential Funding Corp.
5.16% 09/21/99 50,000 49,856,667
- -------------------------------------------------------------------------
PERSONAL CREDIT - 1.14%
American Express Credit Corp.
5.07% 09/01/99 50,000 50,000,000
- -------------------------------------------------------------------------
5.27% 10/26/99 50,000 49,597,431
- -------------------------------------------------------------------------
99,597,431
- -------------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.56%
American General Corp.
5.31% 10/25/99 50,000 49,601,750
- -------------------------------------------------------------------------
Total Financial 6,240,078,749
- -------------------------------------------------------------------------
TECHNOLOGY - 0.39%
COMPUTERS (SOFTWARE & SERVICES) - 0.39%
Electronic Data Systems Corp.
5.13% 09/24/99 33,550 33,440,040
- -------------------------------------------------------------------------
Total Technology 33,440,040
- -------------------------------------------------------------------------
UTILITIES - 1.14%
TELEPHONE - 1.14%
BellSouth Telecommunications, Inc.
5.28% 10/15/99 50,000 49,677,333
- -------------------------------------------------------------------------
SBC Communications, Inc.
5.28% 10/27/99 50,000 49,589,333
- -------------------------------------------------------------------------
Total Utilities 99,266,666
- -------------------------------------------------------------------------
Total Commercial Paper (Cost -
$7,195,481,691) 7,195,481,691
- -------------------------------------------------------------------------
MASTER NOTE AGREEMENT - 3.57%
Merrill Lynch Mortgage Capital, Inc.
5.82%(b) 08/17/00 311,525 311,525,000
- -------------------------------------------------------------------------
Total Master Note Agreement (Cost -
$311,525,000) 311,525,000
- -------------------------------------------------------------------------
</TABLE>
FS-28
<PAGE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
MEDIUM TERM NOTE - 0.45%
Toyota Motor Credit Corp.
5.26% 09/29/99 $ 40,000 $ 39,996,709
- ---------------------------------------------------------------------------------
Total Medium Term Note (cost - $39,996,709) 39,996,709
- ---------------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 7,547,003,400
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 13.95%(c)
Dean Witter Reynolds Inc.
5.51%(d) 09/01/99 163,902 163,901,609
- ---------------------------------------------------------------------------------
Goldman, Sachs & Co.
5.40%(e) 01/24/00 100,000 100,000,000
- ---------------------------------------------------------------------------------
4.625%(f) 01/26/00 100,000 100,000,000
- ---------------------------------------------------------------------------------
Salomon Smith Barney Inc.
5.51%(g) -- 853,000 853,000,000
- ---------------------------------------------------------------------------------
Total Repurchase Agreements (Cost -
$1,216,901,609) 1,216,901,609
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.45% 8,763,905,009(h)
- ---------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.45%) (39,680,318)
- ---------------------------------------------------------------------------------
NET ASSETS - 100.00% $8,724,224,691
=================================================================================
</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) Master Note Purchase Agreement may be terminated by either party upon one
business day 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.
(c) 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.
(d) Joint repurchase agreement entered into 08/31/99 with a maturing value of
$300,045,913. Collateralized by $312,373,000 U.S. Government obligations,
0% to 8.25% due 09/14/99 to 05/15/29 with an aggregate market value at
08/31/99 of $306,004,298.
(e) Term repurchase agreement entered into 07/29/99; however, either party may
terminate the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $105,904,376 U.S. Government Agency
securities, 5.00% to 7.50% due 09/01/06 to 08/01/29 with an aggregate
market value at 08/31/99 of $102,000,000.
(f) Term repurchase agreement entered into 08/13/99; however, either party may
terminate the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $106,703,765 U.S. Government Agency
securities, 5.50% to 8.00% due 01/01/05 to 08/01/29 with an aggregate
market value at 08/31/99 of $102,000,001.
(g) Open repurchase agreement. Either party may terminate the agreement upon
demand. Interest rates, par and collateral are redetermined daily.
Collateralized by $880,779,143 U.S. Government obligations, 0% to 6.85% due
10/21/99 to 01/15/29 with an aggregate market value at 08/31/99 of
$889,114,611.
(h) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-29
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value
(amortized cost) $7,547,003,400
- ------------------------------------------------------------------------
Repurchase agreements 1,216,901,609
- ------------------------------------------------------------------------
Interest receivable 2,570,288
- ------------------------------------------------------------------------
Investment for deferred compensation plan 133,814
- ------------------------------------------------------------------------
Other assets 473,146
- ------------------------------------------------------------------------
Total assets 8,767,082,257
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 41,245,353
- ------------------------------------------------------------------------
Deferred compensation 133,814
- ------------------------------------------------------------------------
Accrued administrative services fees 37,708
- ------------------------------------------------------------------------
Accrued advisory fees 455,928
- ------------------------------------------------------------------------
Accrued distribution fees 409,769
- ------------------------------------------------------------------------
Accrued transfer agent fees 92,318
- ------------------------------------------------------------------------
Accrued operating expenses 482,676
- ------------------------------------------------------------------------
Total liabilities 42,857,566
- ------------------------------------------------------------------------
NET ASSETS $8,724,224,691
========================================================================
NET ASSETS:
Institutional Class $6,210,056,165
========================================================================
Private Investment Class $ 384,893,974
========================================================================
Personal Investment Class $ 87,753,556
========================================================================
Cash Management Class $1,253,799,271
========================================================================
Reserve Class $ 121,782,725
========================================================================
Resource Class $ 665,939,000
========================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Institutional Class 6,210,062,703
========================================================================
Private Investment Class 384,894,228
========================================================================
Personal Investment Class 87,753,580
========================================================================
Cash Management Class 1,253,799,009
========================================================================
Reserve Class 121,782,724
========================================================================
Resource Class 665,938,785
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
FS-30
<PAGE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $488,890,186
- -------------------------------------------------------------------
EXPENSES:
Advisory fees 5,205,023
- -------------------------------------------------------------------
Custodian fees 419,158
- -------------------------------------------------------------------
Administrative services fees 258,934
- -------------------------------------------------------------------
Directors' fees and expenses 63,108
- -------------------------------------------------------------------
Transfer agent fees 1,057,109
- -------------------------------------------------------------------
Distribution fees (Note 2) 5,691,057
- -------------------------------------------------------------------
Other 1,130,340
- -------------------------------------------------------------------
Total expenses 13,824,729
- -------------------------------------------------------------------
Less: Fee waivers (1,675,069)
- -------------------------------------------------------------------
Net expenses 12,149,660
- -------------------------------------------------------------------
Net investment income 476,740,526
- -------------------------------------------------------------------
Net increase in net assets resulting from operations $476,740,526
===================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended August 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 476,740,526 $ 423,578,403
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 476,740,526 423,578,403
- ----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (364,347,968) (334,784,531)
- ----------------------------------------------------------------------------
Private Investment Class (18,159,703) (14,188,012)
- ----------------------------------------------------------------------------
Personal Investment Class (6,869,222) (5,889,522)
- ----------------------------------------------------------------------------
Cash Management Class (57,786,622) (49,287,200)
- ----------------------------------------------------------------------------
Reserve Class (1,195,139) (19,429,138)
- ----------------------------------------------------------------------------
Resource Class (28,381,872) --
- ----------------------------------------------------------------------------
Capital stock transactions-net (See Note 4) 884,926,848 984,587,209
- ----------------------------------------------------------------------------
Net increase in net assets 884,926,848 984,587,209
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 7,839,297,843 6,854,710,634
- ----------------------------------------------------------------------------
End of period $8,724,224,691 $7,839,297,843
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $8,724,231,029 $7,839,304,181
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (6,338) (6,338)
- ----------------------------------------------------------------------------
$8,724,224,691 $7,839,297,843
============================================================================
</TABLE>
See Notes to Financial Statements.
FS-31
<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 Prime 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 Private Investment Class, the Personal
Investment Class, the Cash Management Class, the Reserve Class and the Resource
Class. Matters affecting each class are voted on exclusively by the
shareholders of each class. The Portfolio is a money market fund whose
objective is the maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the 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 calculated
by applying a monthly rate, based upon the following annual rates, to the
average daily net assets of the Portfolio:
<TABLE>
<CAPTION>
Net Assets RATE
- ----------------------------------------
<S> <C>
First $100 million 0.20%
- ----------------------------------------
Over $100 million to $200 million 0.15%
- ----------------------------------------
Over $200 million to $300 million 0.10%
- ----------------------------------------
Over $300 million to $1.5 billion 0.06%
- ----------------------------------------
Over $1.5 billion 0.05%
- ----------------------------------------
</TABLE>
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 $258,934 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 $903,145 for such services.
FS-32
<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, the Reserve Class, and
the Resource Class paid $1,155,429, $758,574, $935,042, $940,270, and $226,673,
respectively, as compensation under the Plan. FMC waived fees of $1,675,069 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 Portfolio paid legal fees of
$20,924 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 year 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 109,937,908,800 $ 109,937,908,800 70,953,094,776 $ 70,953,094,776
- -----------------------------------------------------------------------------------------------
Private Investment
Class 3,170,645,036 3,170,645,036 2,265,361,261 2,265,361,261
- -----------------------------------------------------------------------------------------------
Personal Investment
Class 1,878,724,152 1,878,724,152 1,442,106,992 1,442,106,992
- -----------------------------------------------------------------------------------------------
Cash Management Class 12,368,423,760 12,368,423,760 10,266,695,255 10,266,695,255
- -----------------------------------------------------------------------------------------------
Reserve Class* 427,972,822 427,972,822 -- --
- -----------------------------------------------------------------------------------------------
Resource Class 4,803,364,271 4,803,364,271 5,571,480,416 5,571,480,416
- -----------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 27,367,341 27,367,341 25,834,568 25,834,568
- -----------------------------------------------------------------------------------------------
Private Investment
Class 9,729,854 9,729,854 6,616,509 6,616,509
- -----------------------------------------------------------------------------------------------
Personal Investment
Class 7,060,491 7,060,491 5,817,504 5,817,504
- -----------------------------------------------------------------------------------------------
Cash Management Class 43,017,293 43,017,293 27,781,043 27,781,043
- -----------------------------------------------------------------------------------------------
Reserve Class* 763,247 763,247 -- --
- -----------------------------------------------------------------------------------------------
Resource Class 24,478,821 24,478,821 16,446,253 16,446,253
- -----------------------------------------------------------------------------------------------
Reacquired:
Institutional Class (109,599,031,637) (109,599,031,637) (70,728,159,503) (70,728,159,503)
- -----------------------------------------------------------------------------------------------
Private Investment
Class (3,090,291,929) (3,090,291,929) (2,212,613,562) (2,212,613,562)
- -----------------------------------------------------------------------------------------------
Personal Investment
Class (1,938,117,905) (1,938,117,905) (1,405,052,971) (1,405,052,971)
- -----------------------------------------------------------------------------------------------
Cash Management Class (12,019,849,792) (12,019,849,792) (10,199,573,686) (10,199,573,686)
- -----------------------------------------------------------------------------------------------
Reserve Class* (306,953,345) (306,953,345) -- --
- -----------------------------------------------------------------------------------------------
Resource Class (4,860,284,432) (4,860,284,432) (5,051,247,646) (5,051,247,646)
- -----------------------------------------------------------------------------------------------
Net increase 884,926,848 $ 884,926,848 984,587,209 $ 984,587,209
===============================================================================================
</TABLE>
* The Reserve Class commenced sales on January 4, 1999.
FS-33
<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 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 0.05 0.05 0.05 0.06
- ------------------------------------------------------- ---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.06)
- ------------------------------------------------------- ---------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================================================= ========== ======== ======== ======== ========
Total return 5.07% 5.62% 5.45% 5.55% 5.71%
======================================================= ========== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end ofperiod (000s omitted) $1,253,799 $862,207 $767,304 $507,247 $194,479
======================================================= ========== ======== ======== ======== ========
Ratio of expenses to average net assets(a) 0.17%(b) 0.17% 0.17% 0.17% 0.17%
======================================================= ========== ======== ======== ======== ========
Ratio of net investment income to average net assets(c) 4.94%(b) 5.48% 5.33% 5.38% 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
0.19%, 0.19%, 0.19%, 0.19% and 0.32% for the periods 1999-1995,
respectively.
(b) Ratios based on average net assets of $1,168,802,213.
(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%, 5.46%, 5.31%, 5.36% and 5.54% for the periods
1999-1995, respectively.
FS-34
<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 0.05 0.06
- ----------------------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.05) (0.06) (0.05) (0.05) (0.06)
- ----------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ========== ========== ========== ========== ==========
Total return 5.15% 5.71% 5.54% 5.64% 5.80%
======================= ========== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $6,210,056 $5,843,813 $5,593,043 $5,264,601 $3,752,693
======================= ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets 0.09%(a) 0.09% 0.09% 0.09% 0.09%
======================= ========== ========== ========== ========== ==========
Ratio of net investment
income to average net
assets 5.02%(a) 5.56% 5.40% 5.48% 5.64%
======================= ========== ========== ========== ========== ==========
</TABLE>
(a) Ratios based on average net assets of $7,248,383,889.
FS-35
<PAGE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Personal Investment
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 0.05 0.05 0.05 0.05
- ----------------------- ------- -------- ------- --------- -------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.05) (0.05)
- ----------------------- ------- -------- ------- --------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ------- -------- ------- --------- -------
Total return 4.63% 5.18% 5.01% 5.11% 5.27%
======================= ======= ======== ======= ========= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $87,754 $140,087 $97,215 $112,645 $99,630
======================= ======= ======== ======= ========= =======
Ratio of expenses to
average net assets(a) 0.59%(b) 0.59% 0.59% 0.59% 0.59%
======================= ======= ======== ======= ========= =======
Ratio of net investment
income to average net
assets(c) 4.52%(b) 5.06% 4.89% 4.99% 5.23%
======================= ======= ======== ======= ========= =======
</TABLE>
(a) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.84%, 0.84%, 0.84%, 0.89% and 0.86% for the periods 1999-1995,
respectively.
(b) Ratios based on average net assets of $151,714,818.
(c) After fee waivers and/or expense reimbursement. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.27%, 4.81%, 4.64%, 4.69% and 4.96% for the periods
1999-1995, respectively.
FS-36
<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 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 0.05 0.05 0.05 0.05
- ------------------------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.05) (0.05)
- ------------------------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========================= ======== ======== ======== ======== ========
Total return 4.84% 5.39% 5.21% 5.32% 5.48%
========================= ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $384,894 $294,811 $235,447 $209,443 $154,278
========================= ======== ======== ======== ======== ========
Ratio of expenses to
average net assets(a) 0.39%(b) 0.39% 0.39% 0.39% 0.39%
========================= ======== ======== ======== ======== ========
Ratio of net investment
income to average net
assets(c) 4.72%(b) 5.26% 5.10% 5.20% 5.50%
========================= ======== ======== ======== ======== ========
</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
0.59%, 0.59%, 0.59%, 0.59% and 0.60% for the periods 1999-1995,
respectively.
(b) Ratios based on average net assets of $385,143,051.
(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 4.52%, 5.06%, 4.90%, 5.00% and 5.29% for the periods
1999-1995, respectively.
FS-37
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Reserve Class
outstanding during the period January 4, 1999 (date sales commenced) through
August 31, 1999.
<TABLE>
<CAPTION>
AUGUST 31,
1999
----------
<S> <C>
Net asset value, beginning of period $ 1.00
- ------------------------------------------------------- --------
Income from investment operations:
Net investment income 0.03
- ------------------------------------------------------- --------
Less distributions:
Dividends from net investment income (0.03)
- ------------------------------------------------------- --------
Net asset value, end of period $ 1.00
======================================================= ========
Total return(a) 2.73%
======================================================= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $121,783
======================================================= ========
Ratio of expenses to average net assets(b) 0.89%(c)
======================================================= ========
Ratio of net investment income to average net assets(d) 4.22%(c)
======================================================= ========
</TABLE>
(a) Not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.09% (annualized).
(c) Ratios are annualized and based on average net assets of $42,559,418.
(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 was 4.02% (annualized).
FS-38
<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 three-year period ended August
31, 1999 and the period January 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 4.99% 5.54% 5.36% 3.28%
================================= ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $665,939 $698,380 $161,701 $58,012
================================= ======== ======== ======== =======
Ratio of expenses to average net
assets(a) 0.25%(b) 0.25% 0.25% 0.25%(c)
================================= ======== ======== ======== =======
Ratio of net investment income to
average net assets(d) 4.86%(b) 5.40% 5.25% 5.18%(c)
================================= ======== ======== ======== =======
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursement were
0.29%, 0.29%, 0.29% and 0.29% (annualized) for the periods 1999-1996,
respectively.
(b) Ratios based on average net assets of $587,668,917.
(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 4.82%, 5.36%, 5.21% and 5.14% (annualized) for the
periods 1999-1996, respectively.
FS-39
<PAGE>
PART C
OTHER INFORMATION
Item 23 Exhibits
a(1) - (a) Articles of Incorporation of Registrant, as filed with the
State of Maryland on May 3, 1993, were filed as an Exhibit to
Registrant's initial Registration Statement on July 19, 1993, and
were filed electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and are hereby incorporated by
reference.
- (b) Certificate of Correction of Registrant, as filed with the
State of Maryland on June 10, 1993, was filed as an Exhibit to
Registrant's initial Registration Statement on July 19, 1993, and
was filed electronically as an Exhibit to Post- Effective Amendment
No. 4 on November 8, 1995, and is hereby incorporated by reference.
- (c) Articles of Amendment of Registrant, as filed with the State of
Maryland on October 15, 1993, were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2 on August 22, 1994, and
were filed electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and are hereby incorporated by
reference.
- (d) Articles Supplementary of Registrant, as filed with the State
of Maryland on October 10, 1995, were filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8, 1995, and
are hereby incorporated by reference.
- (e) Articles Supplementary of Registrant, as filed with the State
of Maryland on November 6, 1995, were filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8, 1995, and
are hereby incorporated by reference.
- (f) Articles of Amendment of Registrant, as filed with the State of
Maryland on November 6, 1995, were filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8, 1995, and
are hereby incorporated by reference.
- (g) Certificate of Correction of Registrant, as filed with the
State of Maryland on November 8, 1995, was filed electronically as
an Exhibit to Post-Effective Amendment No. 4 on November 8, 1995,
and is hereby incorporated by reference.
- (h) Certificate of Correction of Registrant, as filed with the
State of Maryland on August 5, 1996, was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on December 23, 1996, and
is hereby incorporated by reference.
- (i) Certificate of Correction of Registrant, as filed with the
State of Maryland on August 5, 1996, was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on December 23, 1996, and
is hereby incorporated by reference.
- (j) Articles Supplementary of Registrant as filed with the State of
Maryland on August 7, 1996, were filed electronically as an Exhibit
to Post-Effective Amendment No. 7 on December 23, 1996, and are
hereby incorporated by reference.
- (k) Articles Supplementary of Registrant as filed with the State of
Maryland on June 12, 1997, were filed electronically as an Exhibit
to Post-Effective Amendment No. 8 on December 17, 1997, and are
hereby incorporated by reference.
- (l) Articles of Amendment of Registrant, as filed with the State of
Maryland on October 1, 1998, were filed electronically as an
Exhibit to Post-Effective Amendment No. 9 on November 25, 1998, and
are hereby incorporated by reference.
C-1
<PAGE>
- (m) Articles Supplementary of Registrant, as filed with the State
of Maryland on November 5, 1998, were filed electronically as an
Exhibit to Post-Effective Amendment No. 9 on November 25, 1998, and
are hereby incorporated by reference.
- (n) Articles Supplementary of Registrant, as filed with the State
of Maryland on June 9, 1999, were filed electronically as an
Exhibit to Post-Effective Amendment No. 10 on November 8, 1999, and
are hereby incorporated by reference.
- (o) Articles Supplementary of Registrant, as filed with the State
of Maryland on December 3, 1999, were filed electronically as an
Exhibit to Post-Effective Amendment No. 11 on March 21, 2000, and
are hereby incorporated by reference.
- (p) Articles Supplementary of Registrant, as filed with the State
of Maryland on December 9, 1999, were filed electronically as an
Exhibit to Post-Effective Amendment No. 11 on March 21, 2000, and
are hereby incorporated by reference.
- (q) Articles Supplementary of Registrant, as filed with the State
of Maryland on December 29, 1999, were filed electronically as an
Exhibit to Post-Effective Amendment No. 11 on March 21, 2000, and
are hereby incorporated by reference.
b(1) - (a) By-Laws of Registrant were filed as an exhibit to Registrant's
initial Registration Statement on July 19, 1993, and were filed
electronically as an Exhibit to Post-Effective Amendment No. 4 on
November 8, 1995.
- (b) First Amendment, dated March 14, 1995, to By-Laws of Registrant
was filed electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995.
(2) - (a) Amended and Restated By-Laws of Registrant, dated December 11,
1996, were filed electronically as an Exhibit to Post-Effective
Amendment No. 8 on December 17, 1997, and are hereby incorporated
by reference.
- (b) First Amendment, dated June 9, 1999, to By-Laws of Registrant,
were filed electronically as an Exhibit to Post-Effective Amendment
No. 10 on November 8, 1999, and are hereby incorporated by
reference.
c(1) - Form of Specimen Certificate for Liquid Assets Portfolio was filed
as an exhibit to Registrant's Pre-Effective Amendment No. 1 on
October 1, 1993, and is hereby incorporated by reference.
(2) - Form of Specimen Certificate for Prime Portfolio - Cash Management
Class was filed as an exhibit to Registrant's Post-Effective
Amendment No. 1 on October 15, 1993, and is hereby incorporated by
reference.
(3) - Form of Specimen Certificate for Prime Portfolio - Institutional
Class was filed as an exhibit to Registrant's Post-Effective
Amendment No. 1 on October 15, 1993, and is hereby incorporated by
reference.
(4) - Form of Specimen Certificate for Prime Portfolio - Personal
Investment Class was filed as an exhibit to Registrant's Post-
Effective Amendment No. 1 on October 15, 1993, and is hereby
incorporated by reference.
(5) - Form of Specimen Certificate for Prime Portfolio - Private
Investment Class was filed as an exhibit to Registrant's Post-
Effective Amendment No. 1 on October 15, 1993, and is hereby
incorporated by reference.
(6) - Form of Specimen Certificate for Prime Portfolio - Resource Class
was filed electronically as an Exhibit to Post-Effective Amendment
No. 4 on November 8, 1995, and is hereby incorporated by reference.
C-2
<PAGE>
(7) - Form of Specimen Certificate for Liquid Assets Portfolio - Cash
Management Class was filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995, and is hereby
incorporated by reference.
(8) - Form of Specimen Certificate for Liquid Assets Portfolio - Private
Investment Class was filed electronically as an Exhibit to Post-
Effective Amendment No. 4 on November 8, 1995, is hereby
incorporated by reference.
d(1) - Master Investment Advisory Agreement between Registrant and A I M
Advisors, Inc. dated August 6, 1993 was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on October 15, 1993.
(2) - Master Investment Advisory Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc. was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 2 on August 22, 1994,
and was filed electronically as an Exhibit to Post-Effective
Amendment No. 4 on November 8, 1995.
(3) - Master Investment Advisory Agreement dated February 28, 1997,
between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment No. 8 on
December 17, 1997 and is hereby incorporated by reference.
(4) - Form of Master Investment Advisory Agreement dated May 25, 2000,
between Registrant and A I M Advisors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment No. 11 on
March 21, 2000, and is hereby incorporated by reference.
e(1) - Master Distribution Agreement between Registrant and Fund
Management Company dated August 6, 1993 was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on October 15, 1993.
(2) - (a) Master Distribution Agreement between Registrant and Fund
Management Company, dated October 18, 1993, was filed as an exhibit
to Registrant's Post-Effective Amendment No. 2 on August 22, 1994,
and was filed electronically as an Exhibit to Post-Effective
Amendment No. 4 on November 8, 1995.
- (b) Amendment No. 1, dated September 19, 1995, to Master
Distribution Agreement between Registrant and Fund Management
Company, dated October 18, 1993, was filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8, 1995.
- (c) Amendment No. 2, dated as of December 4, 1995, to Master
Distribution Agreement between Registrant and Fund Management
Company, dated October 18, 1993, was filed electronically as an
Exhibit to Post-Effective Amendment No. 5 on July 9, 1996.
- (d) Amendment No. 3, dated June 11, 1996, to Master Distribution
Agreement between Registrant and Fund Management Company, dated
October 18, 1993, was filed electronically as an Exhibit to Post-
Effective Amendment No. 7 on December 23, 1996.
(3) - (a) Master Distribution Agreement between Registrant and Fund
Management Company dated February 28, 1997 was filed electronically
as an Exhibit to Post-Effective Amendment No. 8 on December 17,
1997, and is hereby incorporated by reference.
- (b) Amendment No. 1 to Master Distribution Agreement between
Registrant and Fund Management Company dated February 28, 1997 was
filed electronically as an Exhibit to Post-Effective Amendment No.
10 on November 8, 1999, and is hereby incorporated by reference.
C-3
<PAGE>
f(1) - Retirement Plan for Eligible Directors/Trustees was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and is hereby incorporated by reference.
(2) - Form of Deferred Compensation Agreement was filed as an exhibit to
Registrant's Post-Effective Amendment No. 2 on August 22, 1994, and
was filed electronically as an Exhibit to Post-Effective Amendment
No. 7 on December 23, 1996.
(3) - Form of Deferred Compensation Agreement was filed electronically as
an Exhibit to Post-Effective Amendment No. 8 on December 17, 1997,
and is hereby incorporated by reference.
g(1) - (a) Second Amended and Restated Custodian Agreement between the
Registrant and The Bank of New York, dated June 16, 1987, was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996, and is hereby
incorporated by reference.
- (b) Amendment No. 1, dated May 17, 1993, to Second Amended and
Restated Custodian Agreement between Registrant and The Bank of New
York, dated June 16, 1987, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 2 on August 22, 1994, and was filed
electronically as an Exhibit to Post-Effective Amendment No. 7 on
December 23, 1996, and is hereby incorporated by reference.
- (c) Assignment and Acceptance of Assignment, dated October 15,
1993, to Second Amended and Restated Custodian Agreement, dated
June 16, 1987, was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 2 on August 22, 1994, and was filed
electronically as an Exhibit to Post-Effective Amendment No. 7 on
December 23, 1996, and is hereby incorporated by reference.
- (d) Amendment No. 2, dated October 19, 1993, to Second Amended and
Restated Custodian Agreement, dated June 16, 1987, was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996, and is hereby
incorporated by reference.
- (e) Letter Agreement, dated July 30, 1996, to Second Amended and
Restated Custodian Agreement, dated June 16, 1987, and was filed
electronically as an Exhibit to Post-Effective Amendment No. 7 on
December 23, 1996, and is hereby incorporated by reference.
h(1) - Transfer Agency Agreement between the Registrant and State Street
Bank and Trust Company, dated October 15, 1993 was filed as an
exhibit to Registrant's Post-Effective Amendment No. 2 on
August 22, 1994.
(2) - (a) Transfer Agency and Service Agreement between A I M
Institutional Fund Services, Inc. and Registrant, dated September
16, 1994, was filed electronically as an Exhibit to Post-Effective
Amendment No. 4 on November 8, 1995.
- (b) Amendment No.1, dated July 1, 1995, to Transfer Agency and
Service Agreement between A I M Institutional Fund Services, Inc.
and Registrant, dated September 16, 1994, was filed electronically
as an Exhibit to Post-Effective Amendment No. 4 on November 8,
1995.
- (c) Amendment No. 2, dated July 1, 1996, to Transfer Agency and
Service Agreement between A I M Institutional Fund Services, Inc.
and Registrant, dated September 16,
C-4
<PAGE>
1994, was filed electronically as an Exhibit to Post-Effective
Amendment No. 8 on December 17, 1997.
- (d) Amendment No. 3, dated July 1, 1997, to Transfer Agency and
Service Agreement between A I M Institutional Fund Services, Inc.
and Registrant, dated September 16, 1994, was filed electronically
as an Exhibit to Post-Effective Amendment No. 8 on December 17,
1997.
(3) - (a) Transfer Agency and Service Agreement, dated December 29,
1997, between A I M Fund Services, Inc. and Registrant was filed
electronically as an Exhibit to Post-Effective Amendment No. 9 on
November 25, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated January 1, 1999, to Transfer Agency and
Service Agreement, between A I M Fund Services, Inc. and Registrant
was filed electronically as an Exhibit to Post-Effective Amendment
No. 10 on November 8, 1999, and is hereby incorporated by
reference.
- (c) Amendment No. 2, dated July 1, 1999, to Transfer Agency and
Service Agreement, between A I M Fund Services, Inc. and Registrant
was filed electronically as an Exhibit to Post-Effective Amendment
No. 10 on November 8, 1999, and is hereby incorporated by
reference.
(4) - Master Administrative Services Agreement between the Registrant and
A I M Advisors, Inc. dated August 6, 1993 was filed as an exhibit
to Registrant's Post-Effective Amendment No. 1 on October 15, 1993.
(5) - (a) Master Administrative Services Agreement between the
Registrant and A I M Advisors, Inc., dated October 18, 1993, was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 2 on August 22, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on November 8, 1995.
- (b) Amendment No. 1, dated November 2, 1995, to Master
Administrative Services Agreement between the Registrant and A I M
Advisors, Inc., dated October 18, 1993, was filed electronically as
an Exhibit to Post-Effective Amendment No. 4 on November 8, 1995.
- (c) Amendment No. 2, dated as of December 4, 1995, to Master
Administrative Services Agreement between the Registrant and A I M
Advisors, Inc., dated October 18, 1993, was filed electronically as
an Exhibit to Post-Effective Amendment No. 5 on July 9, 1996.
- (d) Amendment No. 3, dated June 11, 1996, to Master Administrative
Services Agreement between the Registrant and A I M Advisors, Inc.
dated October 18, 1993, was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996.
(6) - (a) Administrative Service Agreement between A I M Advisors, Inc.
and A I M Fund Services, Inc., dated October 18, 1993, as amended
on May 11, 1994, was filed as an exhibit to Registrant's Post-
Effective Amendment No. 2 on August 22, 1994.
- (b) Amendment No. 2 to Administrative Services Agreement between A
I M Advisors, Inc. and A I M Fund Services, Inc., dated October 18,
1993, as amended on May 11, 1994, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 3 on December 21, 1994.
- (c) Amendment No. 3 to Administrative Services Agreement between A
I M Advisors, Inc. and A I M Fund Services, Inc., dated October 18,
1993, as amended on May 11,
C-5
<PAGE>
1994, was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 3 on December 21, 1994.
- (d) Form of Administrative Services Agreement between A I M
Advisors, Inc. and A I M Institutional Fund Services, Inc., on
behalf of the Portfolios and Classes of the Registrant was filed as
an Exhibit to Registrant's Post-Effective Amendment No. 3 on
December 21, 1994.
(7) - Master Administrative Services Agreement between the Registrant and
A I M Advisors, Inc., dated February 28, 1997, was filed
electronically as an Exhibit to Post-Effective Amendment No. 8 on
December 17, 1997, and is hereby incorporated by reference.
(8) - Memorandum of Agreement, between Registrant and Fund Management
Company, was filed electronically as an Exhibit to Post-Effective
Amendment No. 11 on March 21, 2000, and is hereby incorporated by
reference.
i - Consent of Ballard Spahr Andrews & Ingersoll, LLP is filed herewith
electronically.
j - Consent of KPMG LLP is filed herewith electronically.
k - Financial Statements - None.
l - Agreements Concerning Initial Capitalization - None.
m(1) - Master Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act
for Registrant's Prime Portfolio - Personal Investment Class,
Private Investment Class and Cash Management Class, and related
forms of agreements were filed as an Exhibit to Registrant's Post-
Effective Amendment No. 3 on December 21, 1994 and were filed
electronically as an Exhibit to Post-Effective Amendment No. 4 on
November 8, 1995.
(2) - (a) Master Distribution Plan Pursuant to Rule 12b-1 under the 1940
Act, dated August 6, 1993, amended as of September 19, 1995 and
December 4, 1995, and amended and restated as of December 4, 1995,
for Registrant's Prime Portfolio - Personal Investment Class,
Private Investment Class, Resource Class and Cash Management Class
and Registrant's Liquid Assets Portfolio - Private Investment Class
and Cash Management Class, and related forms of agreements were
filed electronically as an Exhibit to Post-Effective Amendment No.
5 on July 9, 1996.
- (b) Amendment No. 1, dated June 11, 1996, to Master Distribution
Plan Pursuant to Rule 12b-1 under the 1940 Act Amended and Restated
as of December 4, 1995, for Registrant's Liquid Assets Portfolio -
MSTC Cash Reserves Class was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996.
(3) - (a) Amended and Restated Master Distribution Plan Pursuant to Rule
12b-1, amended and restated as of June 30, 1997, for Registrant was
filed electronically as an Exhibit to Post-Effective Amendment No.
8 on December 17, 1997, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated December 18, 1998, to Amended and
Restated Master Distribution Plan pursuant to Rule 12b-1 for
Registrant was filed electronically as an Exhibit to Post-Effective
Amendment No. 10 on November 8, 1999, and is hereby incorporated by
reference.
(4) - Form of Shareholder Service Agreement to be used in connection with
Registrant's Amended and Restated Master Distribution Plan, as
amended, was filed electronically as an Exhibit to Post-Effective
Amendment No. 9 on November 25, 1998, and is hereby incorporated by
reference.
C-6
<PAGE>
n(1) - (a) Multiple Class (Rule 18f-3) Plan was filed as an Exhibit to
Post-Effective Amendment No. 7 on December 23, 1996.
- (b) Amended and Restated Multiple Class (Rule 18f-3) Plan was filed
electronically as an Exhibit to Post-Effective Amendment No. 8 on
December 17, 1997, and is hereby incorporated by reference.
- (c) Second Amended and Restated Multiple Class (Rule 18f-3) Plan
was filed electronically as an Exhibit to Post-Effective Amendment
No. 8 on December 17, 1997, and is hereby incorporated by
reference.
- (d) Third Amended and Restated Multiple Class (Rule 18f-3) Plan,
was filed electronically as an Exhibit to Post-Effective Amendment
No. 10 on November 8, 1999, and is hereby incorporated by
reference.
o(1) - The AIM Management Group Code of Ethics adopted May 1, 1981 and as
amended August 17, 1999 relating to A I M Management Group Inc. and
A I M Advisors, Inc., was filed electronically as an Exhibit to
Post-Effective Amendment No. 10 on November 8, 1999.
(2) - The A I M Management Group Inc. Code of Ethics adopted May 1, 1981
as last amended February 24, 2000 relating to A I M Management
Group Inc. and A I M Advisors, Inc., is filed herewith
electronically.
(3) - The Short-Term Investments Co. Code of Ethics effective as of
October 14, 1993, is filed herewith electronically.
Item 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Provide a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant. For any person controlled by
another person, disclose the percentage of voting securities owned by the
immediately controlling person or other basis of that person's control. For
each company, also provide the state or other sovereign power under the laws of
which the company is organized.
None.
Item 25. Indemnification
---------------
State the general effect of any contract, arrangement or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified against any liability incurred in their official
capacity, other than insurance provided by any director, officer, affiliated
person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and the
Registrant's Charter and By-Laws, the Registrant may indemnify any person
who was or is a director, officer, employee or agent of the Registrant to
the maximum extent permitted by the Maryland General Corporation Law. The
specific terms of such indemnification are reflected in the Registrant's
Charter and By-Laws, which are incorporated herein as part of this
Registration Statement. No indemnification will be provided by the
Registrant to any director or officer of the Registrant for any liability
to the Registrant or shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the
C-7
<PAGE>
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereby, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue. Insurance coverage is
provided under a joint Mutual Fund & Investment Advisory Professional
Directors & Officers Liability Policy, issued by ICI Mutual Insurance
Company, with a $35,000,000 limit of liability.
Item 26. Business and Other Connections of Investment Advisor
----------------------------------------------------
Describe any other business, profession, vocation or employment of a
substantial nature that each investment advisor and each director, officer or
partner of any such investment advisor, is or has been, engaged within the last
two fiscal years, for his or her own account or in the capacity of director,
officer, employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's directors and
officers is with the Advisor and its affiliated companies. Reference is
also made to the discussion under the captions "Fund Management" of the
Prospectus which comprises Part A of this Registration Statement, and to
the discussion under the caption "General Information about the Fund -
Investment Advisor" of the Statement of Additional Information which
comprises Part B of this Registration Statement, and to Item 29(b) of this
Part C of the Registration Statement.
Item 27. Principal Underwriters
----------------------
(a) State the name of each investment company (other than Registrant) for
which each principal underwriter currently distributing the
Registrant's securities also acts as a principal underwriter,
depositor, or investment advisor.
Fund Management Company, the Registrant's principal underwriter, also
acts as a principal underwriter to the following investment companies:
AIM Equity Funds (Institutional Classes)
AIM Investment Securities Fund (AIM Limited Maturity Treasury Fund -
Institutional Class)
Short-Term Investments Trust
Tax-Free Investments Co.
(b) Provide the information required by the following tables for each
director, officer or partner of each principal underwriter named in
response to Item 20.
The following table sets forth information with respect to each
director and officer of Fund Management Company:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C>
Charles T. Bauer Chairman and Director Chairman and Director
J. Abbott Sprague President and Director Vice President
Robert H. Graham Senior Vice President and Director and President
Director
Mark D. Santero Senior Vice President None
William J. Wendel Senior Vice President None
</TABLE>
- ---------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-8
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------------------- ------------------------------- ------------------------------
<S> <C> <C>
Melville B. Cox Vice President & Vice President
Chief Compliance Officer
Carol F. Relihan Vice President, Senior Vice President &
General Counsel and Director Secretary
Dawn M. Hawley Vice President and Treasurer None
Lisa A. Moss Vice President, Assistant Assistant Secretary
General Counsel and Assistant
Secretary
Stephen I. Winer Vice President, Assistant Assistant Secretary
General Counsel & Assistant
Secretary
James R. Anderson Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
David E. Hessel Assistant Vice President, None
Assistant Treasurer &
Controller
Rebecca Starling-Klatt Assistant Vice President None
Jeffrey L. Horne Assistant Vice President None
Robert W. Morris, Jr. Assistant Vice President None
Ann M. Srubar Assistant Vice President None
Dana R. Sutton Assistant Vice President Vice President & Treasurer
& Assistant Treasurer
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Ofelia M. Mayo Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
</TABLE>
(c) Provide the information required by the following table for all
commissions and other compensation received directly or indirectly,
from the Registrant during the last fiscal year by each principal
underwriter who is not an affiliated person of the Registrant or any
affiliated person of an affiliated person.
Not Applicable
- -------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-9
<PAGE>
Item 28. Location of Accounts and Records
--------------------------------
State the name and address of each person maintaining physical possession
of each account, book, or other document required to be maintained by section
31(a) [15 U.S.C. 80a-30(a)] and the rules under that section.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, will maintain physical possession of each such account, book or other
document of the Registrant at its principal executive offices, except for
those maintained by the Registrant's Custodian, The Bank of New York, 90
Washington Street, 11th Floor, New York, New York 10286, and Transfer
Agent, A I M Fund Services, Inc., 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
Item 29. Management Services
-------------------
Provide a summary of the substantive provisions of any management-related
service contract not discussed in Part A or B, disclosing the parties to the
contract, the total amount paid and by whom, for the Registrant's last three
fiscal years.
Not applicable.
Item 30. Undertakings
------------
Not Applicable
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the city of Houston, Texas on the 23rd day
of May, 2000.
Registrant: SHORT-TERM INVESTMENTS CO.
By: /s/ ROBERT H. GRAHAM
---------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ CHARLES T. BAUER
- --------------------------- Chairman & Director May 23, 2000
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM
- --------------------------- Director & President May 23, 2000
(Robert H. Graham) (Principal Executive Officer)
/s/ BRUCE L. CROCKETT
- --------------------------- Director May 23, 2000
(Bruce L. Crockett)
/s/ OWEN DALY II
- --------------------------- Director May 23, 2000
(Owen Daly II)
/s/ EDWARD K. DUNN, JR.
- --------------------------- Director May 23, 2000
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS
- --------------------------- Director May 23, 2000
(Jack Fields)
/s/ CARL FRISCHLING
- --------------------------- Director May 23, 2000
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS
- --------------------------- Director May 23, 2000
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK
- --------------------------- Director May 23, 2000
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR
- --------------------------- Director May 23, 2000
(Louis S. Sklar)
/s/ DANA R. SUTTON Vice President & May 23, 2000
- --------------------------- Treasurer (Principal Financial
(Dana R. Sutton) and Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
i Consent of Ballard Spahr Andrews & Ingersoll, LLP
j Consent of KPMG LLP
o(2) The A I M Management Group Inc. Code of Ethics adopted May 1, 1981 as
last amended February 24, 2000 relating to A I M Management Group Inc.
and A I M Advisors, Inc.
o(3) The Short-Term Investments Co. Code of Ethics effective as of
October 14, 1993
<PAGE>
EXHIBIT i
CONSENT OF COUNSEL
Short-Term Investment Co.
We hereby consent to the use of our name and to reference to our firm
under the caption "General Information About the Fund--Legal Matters" in the
Statements of Additional Information for the Liquid Assets Portfolio and the
Prime Portfolio, both of which are included in Post-Effective Amendment No. 12
to the Registration Statement under the Securities Act of 1933, as amended (No.
33-66240), and Amendment No. 13 to the Registration Statement under the
Investment Company Act of 1940, as amended (No. 811-7892), on Form N-1A of
Short-Term Investments Co.
/s/ BALLARD SPAHR ANDREWS & INGERSOLL, LLP
-------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
May 22, 2000
<PAGE>
EXHIBIT j
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
Short-Term Investments Co.:
We consent to the use of our reports on the Liquid Assets Portfolio and the
Prime Portfolio (series portfolios of Short-Term Investments Co.) dated October
1, 1999 included herein and the references to our firm under the headings
"Financial Highlights" in the Prospectuses and "Reports" in the Statements of
Additional Information.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
May 17, 2000
<PAGE>
EXHIBIT o(2)
A I M MANAGEMENT GROUP INC.
CODE OF ETHICS
(ADOPTED MAY 1, 1981)
(As Last Amended February 24, 2000)
WHEREAS, the members of the AIM Management Group are A I M Management Group
Inc. ("AIM Management") and A I M Advisors, Inc. ("AIM Advisors") and its wholly
owned and indirect subsidiaries (individually and collectively referred to as
"AIM"); and
WHEREAS, certain members of AIM provide investment advisory services to AIM's
investment companies and other clients; and
WHEREAS, certain members of AIM provide distribution services as principal
underwriters for AIM's investment company clients; and
WHEREAS, certain members of AIM provide shareholder services as the transfer
agent, dividend disbursing agent and shareholder processing agent for AIM's
investment company clients; and
WHEREAS, the investment advisory business involves decisions and information
which may have at least a temporary impact on the market price of securities,
thus creating a potential for conflicts of interest between the persons engaged
in such business and their clients; and
WHEREAS, the members of AIM have a fiduciary relationship with respect to
each portfolio under management and the interests of the client accounts and of
the shareholders of AIM's investment company clients must take precedence over
the personal interests of the employees of AIM, thus requiring a rigid adherence
to the highest standards of conduct by such employees; and
WHEREAS, every practical step must be taken to ensure that no intentional or
inadvertent action is taken by an employee of AIM which is, or appears to be,
adverse to the interests of AIM or any of its client accounts, including the
defining of standards of behavior for such employees, while at the same time
avoiding unnecessary interference with the privacy or personal freedom of such
employees; and
WHEREAS, the members of AIM originally adopted a Code of Ethics ("the Code")
on May 1, 1981, and adopted amendments thereto in January 1989, October 1989,
April 1991, December 6, 1994 and December 5, 1995, December 10, 1996, and now
deem it advisable to update and revise said Code in light of new investment
company products developed by AIM and changing circumstances in the securities
markets in which AIM conducts business; and
NOW, THEREFORE, the Boards of Directors of AIM Management and AIM Advisors
hereby adopt the following revised Code pursuant to the provisions of Rule 17j-1
under the Investment Company Act of 1940 ("1940 Act"), with the intention that
certain provisions of the Code shall become applicable to the officers,
directors and employees of AIM.
I. APPLICABILITY
A. The provisions of AIM's Code shall apply to certain officers, directors
and employees (as hereinafter designated) of AIM. Unless otherwise
indicated, the term "employee" as used herein means: (i) all officers,
directors and employees of AIM Advisors and its wholly owned and indirect
subsidiaries and (ii) officers, directors and employees of AIM Management
who have an active part in the management, portfolio selection,
underwriting or shareholder
-1-
<PAGE>
functions with respect to AIM's investment company clients or provide one
or more similar services for AIM's non-investment company clients. The
term "employee" does not include directors of AIM Management who do not
maintain an office at the home office of AIM Management and who do not
regularly obtain information concerning the investment recommendations or
decisions made by AIM on behalf of client accounts ("independent
directors").
B. The Code shall also apply to any person or entity appointed as a sub-
advisor for an AIM investment company client account unless such person or
entity has adopted a code of ethics in compliance with Section 17(j) of
the 1940 Act; or, in the event that such person or entity is domiciled
outside of the United States, has adopted employee standards of conduct
that provide equivalent protections to AIM's client accounts. In
performing sub-advisory services, such person or entity will be subject to
the direction and supervision of AIM, and subject to the policies and
control of the Boards of Directors/Trustees of the respective AIM
investment company client(s).
II. INTERPRETATION AND ENFORCEMENT
A. The Chief Executive Officer of AIM Management shall appoint a Code of
Ethics Committee ("Committee"). The Committee shall have the
responsibility for interpreting the provisions of the Code, for adopting
and implementing Procedures for the enforcement of the provisions of the
Code, and for determining whether a violation of the provisions of the
Code, or of any such related Procedures has occurred. The Committee will
appoint an officer to monitor personal investment activity by "Covered
Persons" (as defined in the Procedures adopted hereunder), both before and
after any trade occurs and to prepare periodic and annual reports, conduct
education seminars and obtain employee certifications as deemed
appropriate. In the event of a finding that a violation has occurred
requiring significant remedial action, the Committee shall take such
action as it deems appropriate on the imposition of sanctions or
initiation of disgorgement proceedings. The Committee shall also make
recommendations and submit reports to the Boards of Directors/Trustees of
AIM's investment company clients.
B. If a sub-advisor has adopted a code of ethics in accordance with Section
17(j) of the 1940 Act, then pursuant to a sub-advisory agreement with AIM,
it shall be the duty of such sub-advisor to furnish AIM with a copy of the
following:
. code of ethics and related procedures of the sub-advisor, and a
statement as to its employees' compliance therewith;
. any statement or policy on insider trading adopted pursuant to Section
204A under the 1940 Act; and the procedures designed to prevent the
misuse of material non-public information by any person associated with
such sub-advisor; and
. such other information as may reasonably be necessary for AIM to report
to the Boards of Directors/Trustees of its investment company client
account(s) as to such sub-advisor's adherence to the Boards' policies
and controls referenced in Section I.B. above.
III. PROCEDURES ADOPTED UNDER THE CODE
From time to time, AIM's Committee shall adopt Procedures to carry out the
intent of the Code. Among other things, the Procedures require certain new
employees to complete an Asset Disclosure Form, a Brokerage Accounts Listing
Form and such other forms as deemed appropriate by the Committee. Such
Procedures are hereby incorporated into the Code and are made a part of the
Code. Therefore, a violation of the Procedures shall be deemed a violation
of the Code itself.
IV. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
-2-
<PAGE>
A. Each employee shall have and maintain knowledge of and shall comply
strictly with all applicable federal and state laws and all rules and
regulations of any governmental agency or self-regulatory organization
governing his/her actions as an employee.
B. Each employee shall comply with all laws and regulations, and AIM's
prohibition against insider trading. Trading on or communicating material
non-public information, or "inside information", of any sort, whether
obtained in the course of research activities, through a client
relationship or otherwise, is strictly prohibited.
C. Each employee shall comply with the procedures and guidelines established
by AIM to ensure compliance with applicable federal and state laws and
regulations of governmental agencies and self-regulatory organizations.
No employee shall knowingly participate in, assist, or condone any act in
violation of any statute or regulation governing AIM or any act that would
violate any provision of this Code, or of the Procedures adopted
hereunder.
D. Each employee shall have and maintain knowledge of and shall comply with
the provisions of this Code and any Procedures adopted hereunder.
E. Each employee having supervisory responsibility shall exercise reasonable
supervision over employees subject to his/her control, with a view to
preventing any violation by such persons of applicable statutes or
regulations, AIM's corporate procedures, or the provisions of the Code, or
the Procedures adopted hereunder.
F. Any employee obtaining evidence that an act in violation of applicable
statutes, regulations or provisions of the Code or of any Procedures
adopted hereunder has occurred shall immediately report such evidence to
the Chief Compliance Officer of AIM. Such action by the employee will
remain confidential, unless the employee waives confidentiality or federal
or state authorities compel disclosure. Failure to report such evidence
may result in disciplinary proceedings and may include sanctions as set
forth in Section VI hereof.
V. ETHICAL STANDARDS
A. Employees shall conduct themselves in a manner consistent with the highest
ethical and fiduciary standards. They shall avoid any action, whether for
personal profit or otherwise, that results in an actual or potential
conflict of interest with AIM or its client accounts, or which may be
otherwise detrimental to the interests of the members of AIM or its client
accounts.(1)
B. Employees shall act in a manner consistent with their fiduciary obligation
to clients of AIM, and shall not deprive any client account of an
investment opportunity in order to personally benefit from that
opportunity.
C. Without the knowledge and approval of the Chief Executive Officer of AIM
Management, employees shall not engage in a business activity or practice
for compensation in competition with the members of AIM. Each employee,
who is deemed to be a "Covered Person" as defined in the Procedures
adopted hereunder, shall obtain the written approval of AIM
______________________
(1) Conflicts of interest generally result from a situation in which an
individual has a personal interest in a matter that is or may be competitive
with his or her responsibilities to other persons or entities (such as AIM or
its client accounts) or where an individual has or may have competing
obligations or responsibilities to two or more persons or entities. In the case
of the relationship between a client account on the one hand, and AIM, its
officers, directors and employees, on the other hand, such conflict may result
from the purchase or sale of securities for a client account and for the
personal account of the individual involved or the account of any "affiliate" of
such individual, as such term is defined in the 1940 Act. Such conflict may also
arise from the purchase or sale for a client account of securities in which an
officer, director or employee of AIM has an economic interest. Moreover, such
conflict may arise in connection with vendor relationships in which such
employee has any direct or indirect financial interest, family interests or
other personal interest. To the extent of conflicts of interest between AIM and
a vendor, such conflicts must be resolved in a manner that is not
disadvantageous to AIM. In any such case, potential or actual conflicts must be
disclosed to AIM and the first preference and priority must be to avoid such
conflicts of interest wherever possible and, where they unavoidably occur, to
resolve them in a manner that is not disadvantageous to a client.
-3-
<PAGE>
Management's Chief Executive Officer to participate on a board of
directors/trustees of any of the following organizations:
. publicly traded company, partnership or trust;
. hospital or philanthropic institution;*
. local or state municipal authority;* and/or
. charitable organization.*
* These restrictions relate to organizations that have or intend to raise
proceeds in a public securities offering.
In the relatively small number of instances in which board approval is
authorized, investment personnel serving as directors shall be isolated
from those making investment decisions through AIM's "Chinese Wall"
Procedures.
D. Each employee, in making an investment recommendation or taking any
investment action, shall exercise diligence and thoroughness, and shall
have a reasonable and adequate basis for any such recommendation or
action.
E. Each employee shall not attempt to improperly influence for such person's
personal benefit any investment strategy to be followed or investment
action to be taken by the members of AIM for its client accounts.
F. Each employee shall not improperly use for such person's personal benefit
any knowledge, whether obtained through such person's relationship with
AIM or otherwise, of any investment recommendation made or to be made, or
of any investment action taken or to be taken by AIM for its client
accounts.
G. Employees shall not disclose any non-public information relating to a
client account's portfolio or transactions or to the investment
recommendations of AIM, nor shall any employee disclose any non-public
information relating to the business or operations of the members of AIM,
unless properly authorized to do so.
H. Employees shall not accept, directly or indirectly, from a broker/dealer
or other vendor who transacts business with AIM or its client accounts,
any gifts, gratuities or other things of more than de minimis value or
significance that their acceptance might reasonably be expected to
interfere with or influence the exercise of independent and objective
judgment in carrying out such person's duties or otherwise gives the
appearance of a possible impropriety. For this purpose, gifts, gratuities
and other things of value shall not include unsolicited entertainment so
long as such unsolicited entertainment is not so frequent or extensive as
to raise any question of impropriety.
I. Employees who are registered representatives and/or principals of AIM
shall not acquire securities for an account for which he/she has a direct
or indirect beneficial interest in an initial public offering ("IPO") or
on behalf of any person, entity or organization that is not an AIM client.
All other employees shall not acquire securities for an account for which
he/she has a direct or indirect beneficial interest offered in an IPO or
on behalf of any person, entity or organization that is not an AIM client
account except in those circumstances where different amounts of such
offerings are specified for different investor types (e.g., private
investors and institutional investors) and such transaction has been pre-
cleared by the Compliance Office.
J. All personal securities transactions by employees must be conducted
consistent with this Code and the Procedures adopted hereunder, and in
such a manner as to avoid any actual or potential conflicts of interest or
any abuse of such employee's position of trust and responsibility. Unless
an exemption is available, employees who are deemed to be "Covered
Persons" as defined in
-4-
<PAGE>
the Procedures adopted hereunder, shall pre-clear all personal securities
transactions in securities in accordance with the Procedures adopted
hereunder.
K. Each employee, who is deemed to be a "Covered Person" as defined in the
Procedures adopted hereunder, (or registered representative and/or
principal of AIM), shall refrain from engaging in personal securities
transactions in connection with a security that is not registered under
Section 12 of the Securities Act of 1933 (i.e., a private placement
security) unless such transaction has been pre-approved by the Chief
Compliance Officer or the Director of Investments (or their designees).
L. Employees, who are deemed to be "Covered Persons" as defined in the
Procedures adopted hereunder, may not engage in a transaction in
connection with the purchase or sale of a security within seven calendar
days before and after an AIM investment company client trades in that same
(or equivalent) security unless the de minimis exemption is available.
M. Each employee, who is deemed to be a "Covered Person" as defined in the
Procedures adopted hereunder, may not purchase and voluntarily sell, or
sell and voluntarily purchase the same (or equivalent) securities of the
same issuer within 60 calendar days unless such employee complies with the
disgorgement procedures adopted by the Code of Ethics Committee. Subject
to certain limited exceptions set forth in the related Procedures, any
transaction under this provision may result in disgorgement proceedings
for any profits received in connection with such transaction by such
employee.
VI. SANCTIONS
Employees violating the provisions of AIM's Code or any Procedures adopted
hereunder may be subject to sanctions, which may include, among other things,
restrictions on such person's personal securities transactions; a letter of
admonition, education or formal censure; fines, suspension, re-assignment,
demotion or termination of employment; or other significant remedial action.
Employees may also be subject to disgorgement proceedings for transactions in
securities that are inconsistent with Sections V.L. and V.M. above.
VII. ADDITIONAL DISCLOSURE
This Code and the related Procedures cannot, and do not, cover every
situation in which choices and decisions must be made, because other company
policies, practices and procedures (as well as good common sense) and good
business judgment also apply. Every person subject to this Code should read
and understand these documents thoroughly. They present important rules of
conduct and operating controls for all employees. Employees are also expected
to present questions to the attention of their supervisors and to the Chief
Compliance Officer (or designee) and to report suspected violations as
specified in these documents.
For the Boards of Directors:
The AIM Management Group
by: /s/ CHARLES T. BAUER
--------------------------------
Charles T. Bauer
February 24, 2000
--------------------------------
Date
-5-
<PAGE>
EXHIBIT o(3)
CODE OF ETHICS
OF
SHORT-TERM INVESTMENTS CO.
WHEREAS, Short-Term Investments Co. (the "Company") is a registered
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, Rule 17j-1 under the 1940 Act requires the Company to adopt a Code
of Ethics ("the Code"); and
NOW, THEREFORE, the Company hereby adopts the following Code, effective as of
October 14, 1993.
I. DEFINITIONS
For the purpose of the Code the following terms shall have the meanings set
forth below:
A. "ACCESS PERSON" means any director, trustee, officer, or advisory person
of the Company; provided, however, that any person who is an access person
of any investment advisor of, or principal underwriter for, any registered
investment company and who is required by Rule 17j-1 of the 1940 Act to
report his or her securities transactions to such investment advisor or
principal underwriter, shall not be deemed an access person of the
Company.
B. "ADVISORY PERSON" means
1. any employee of the Company, its investment advisor or administrator
(or of any entity in a control relationship with the Company, its
investment advisor or administrator, as defined in Section I.D.
hereof), who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information (other than
publicly available information) regarding the purchase or sale of a
security by the Company, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
2. any natural person directly or indirectly owning, controlling, or
holding with power to vote, 25% or more of the outstanding voting
securities of any of the Company, its investment advisor or
administrator, who obtains information (other than publicly available
information) concerning recommendations made by the Company, its
investment advisor or administrator with regard to the purchase or sale
of a security.
C. "AFFILIATED PERSONS" or "AFFILIATES" means
1. any employee or access person of the Company, and any member of the
immediate family (defined as spouse, child, mother, father, brother,
sister, in-law or any other relative) of any such person who lives in
the same household as such person or who is financially dependent upon
such person;
2. any account for which any of the persons described in Section I.C.1.
hereof is a custodian, trustee or otherwise acting in a fiduciary
capacity, or with respect to which any such person either has the
authority to make investment decisions or from time to time give
investment advice; and
3. any partnership, corporation, joint venture, trust or other entity in
which any employee of the Company or access person of the Company
directly or indirectly, in the aggregate, has a 10% or more beneficial
interest or for which any such person is a general partner or an
executive officer.
-1-
<PAGE>
D. "CONTROL" means the power to exercise a controlling influence over the
management or policies of a corporation. Any person who owns
beneficially, either directly or through one or more controlled
corporations, more than 25% of the voting securities of a corporation
shall be presumed to control such corporation.
E. "SECURITY" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, or, in
general, any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim
certificate for, receipt of, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing; provided, however, that
"security" shall not mean securities issued or guaranteed by the
Government of the United States, its agencies or instrumentalities,
bankers' acceptances, bank certificates of deposit, commercial paper and
shares of registered open-end investment companies.
F. "PURCHASE OR SALE OF A SECURITY" includes the writing of an option to
purchase or sell a security.
G. "SECURITY HELD OR TO BE ACQUIRED" by the Company means any security that,
within the most recent fifteen (15) days:
1. is or has been held by the Company, or
2. is being or has been considered by the Company for purchase by the
Company.
H. "BENEFICIAL OWNERSHIP OF A SECURITY" by any person includes securities
held by:
1. a spouse, minor children or relatives who share the same home with such
person;
2. an estate for such person's benefit;
3. a trust, of which
a. such person is a trustee or such person or members of such person's
immediate family have a vested interest in the income or corpus of
the trust, or
b. such person owns a vested beneficial interest, or
c. such person is the settlor and such person has the power to revoke
the trust without the consent of all the beneficiaries;
4. a partnership in which such person is a partner;
5. a corporation (other than with respect to treasury shares of the
corporation) of which such person is an officer, director or 10%
stockholder;
6. any other person if, by reason of contract, understanding,
relationship, agreement or other arrangement, such person obtains
therefrom benefits substantially equivalent to those of ownership; or
7. such person's spouse or minor children or any other person, if, even
though such person does not obtain therefrom the above-mentioned
benefits of ownership, such person can vest or re-vest title in himself
at once or at some future time.
A beneficial owner of a security also includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship
or otherwise, has or shares voting power and/or investment power with
respect to such security. Voting power includes the power to vote, or to
direct the voting of such security, and investment power includes the
power to
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dispose, or to direct the disposition of such security. A person is the
beneficial owner of a security if he has the right to acquire beneficial
ownership of such security at any time within sixty (60) days.
II. IDENTIFICATION OF ACCESS PERSONS
A. The Company will maintain a list of all access persons and will notify
each access person in writing that such person is an access person. Once
a person has been so identified, he/she shall continue to be an access
person until otherwise notified in writing by the Company; PROVIDED,
HOWEVER, if such person is an access person solely because he/she is a
director/trustee of the Company, such person shall cease to be an access
person at the time such person ceases to be a director/trustee.
B. Each access person will be given a copy of the Code at the time such
person becomes an access person.
III. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
A. Each access person shall comply strictly with all applicable federal and
state laws and all rules and regulations of any governmental agency or
self-regulatory organization governing his or her activities.
B. Each access person shall comply strictly with procedures established by
the Company to ensure compliance with applicable federal and state laws
and regulations of governmental agencies and self-regulatory
organizations.
C. Access persons shall not knowingly participate in, assist, or condone any
acts in violation of any statute or regulation governing securities
matters, nor any act that would violate any provision of this Code or any
rules adopted thereunder.
IV. CONFIDENTIALITY OF TRANSACTIONS
A. Information relating to the Company's portfolio and research and studies
activities is confidential until publicly available. Whenever statistical
information or research is supplied to or requested by the Company, such
information must not be disclosed to any persons other than as duly
authorized by the President or the Board of Directors/Trustees of the
Company. If the Company is considering a particular purchase or sale of a
security, this must not be disclosed except to such duly authorized
persons.
B. If any access person should obtain information concerning the Company's
portfolio (including the consideration by the Company of acquiring or
recommending any security for the Company's portfolio), whether in the
course of such person's duties or otherwise, such person shall respect the
confidential nature of this information and shall not divulge it to anyone
unless it is properly part of such person's services to the Company to do
so or such person is specifically authorized to do so by the President of
the Company.
V. ETHICAL STANDARDS
A. Access persons shall conduct themselves in a manner consistent with the
highest ethical standards. They shall avoid any action, whether for
personal profit or otherwise, that results in an actual or potential
conflict of interest, or the appearance of a conflict of interest, with
the Company or which may be otherwise detrimental to the interests of the
Company.
B. Conflicts of interest generally result from a situation in which an
individual has personal interests in a matter that is or may be
competitive with his responsibilities to another person or entity (such as
the Company) or where an individual has or may have competing obligations
or responsibilities to two or more persons or entities. In the case of
the relationship between the
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Company on the one hand, and its employees and access persons and their
respective affiliates on the other hand, such conflicts may result from
the purchase or sale of securities for the account of the Company and for
the personal account of the individual involved or the account of any
affiliate of such person. Such conflict may also arise from the purchase
or sale for the account of the Company of securities in which an access
person or employee of the Company (or an affiliate of such person) has an
interest. In any such case, potential or actual conflicts must be
disclosed to the Company, and the first preference and priority must be to
avoid such conflicts of interest wherever possible and, where they
unavoidably occur, to resolve them in a manner not disadvantageous to the
Company.
VI. ACTIVITIES AND TRANSACTIONS OF ACCESS PERSONS
A. No access person shall recommend to, or cause or attempt to cause, the
Company to acquire, dispose of, or hold any security (including, any
option, warrant or other right or interest relating to such security)
which such access person or an affiliate of such access person has direct
or indirect beneficial ownership, unless the access person shall first
disclose to the Board of Directors/Trustees all facts reasonably necessary
to identify the nature of the ownership of such access person or his or
her affiliate in such security.
B. No access person or affiliate of such access person shall engage in a
purchase or sale of a security (including, any option, warrant or other
right or interest relating to such security), other than on behalf of the
Company, with respect to any security, which, to the actual knowledge of
such access person at the time of such purchase or sale, is (i) being
considered for purchase or sale by the Company; or (ii) being purchased or
sold by the Company.
C. The prohibitions of Section VI.B. above shall not apply to:
1. Purchases or sales effected in any account over which the access person
has no direct or indirect influence or control.
2. Purchases or sales which are non-volitional on the part of either the
access person or the Company.
3. Purchases that are part of an automatic dividend reinvestment plan.
4. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
5. Purchases or sales which receive the prior approval of the President of
the Company because they are only remotely potentially harmful to the
Company because they would be very unlikely to affect trading in or the
market value of the security, or because they clearly are not related
economically to the securities to be purchased, sold or held by the
Company.
D. If, in compliance with the limitations and procedures set forth in this
Section VI, any access person or an affiliate of such person shall engage
in a purchase or sale of a security held or to be acquired by the Company,
first preference and priority must be given to any transactions that
involve the Company, and the Company must have the benefit of the best
price obtainable on acquisition and the best price obtainable on
disposition of such securities.
E. If, as a result of fiduciary obligations to other persons or entities, an
access person believes that such person or an affiliate of such person is
unable to comply with certain provisions of the Code, such access person
shall so advise the Board of Directors/Trustees in writing, setting forth
with reasonable specificity the nature of such fiduciary obligations and
the reasons why such access person believes such person is unable to
comply with any such provisions. The Board of Directors/Trustees may, in
its discretion, exempt such access person or an affiliate of
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such person from any such provisions, if the Board of Directors/Trustees
shall determine that the services of such access person are valuable to
the Company and the failure to grant such exemption is likely to cause
such access person to be unable to render services to the Company. Any
access person granted an exemption (including, an exception for an
affiliate of such person) pursuant to this Section VI.E. shall, within
three business days after engaging in a purchase or sale of a security
held or to be acquired by a client, furnish the Board of
Directors/Trustees with a written report concerning such transaction,
setting forth the information specified in Section VII.B. hereof.
VII. REPORTING PROCEDURES
A. Except as provided by Sections VII.C. and VII.D. hereof, every access
person shall report to the Board of Directors/Trustees the information
described in Section VII.B. hereof with respect to transactions in any
security in which such access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security
(whether or not such security is a security held or to be acquired by a
client); provided, however, that any such report may contain a statement
that the report shall not be construed as an admission by the person
making such report that he has any direct or indirect beneficial ownership
in the security to which the report relates.
B. Every report required to be made pursuant to Section VII.A. hereof shall
be made not later than ten days after the end of the calendar quarter in
which the transaction to which the report relates was effected and shall
contain the following information:
1. The date of the transaction, the title and the number of shares, and
the principal amount of each security involved;
2. The nature of the transaction (i.e., purchase, sale or any other type
of acquisition or disposition);
3. The price at which the transaction was effected; and
4. The name of the broker, dealer or bank with or through whom the
transaction was effected.
C. Notwithstanding the provisions of Section VII.A. and VII.B. hereof, no
person shall be required to make a report with respect to transactions
effected for any account over which such person does not have any direct
or indirect influence or control.
D. Notwithstanding the provisions of Section VII.A. and VII.B. hereof, an
access person who is not an "interested person" of the Company within the
meaning of Section 2(a)(19) of the 1940 Act, and who would be required to
make a report solely by reason of being a director/trustee of the Company,
need only report a transaction in a security if such director/trustee, at
the time of the transaction, knew or, in the ordinary course of fulfilling
his official duties as a director/trustee of the Company, should have
known, that, during the 15-day period immediately preceding or after the
date of the transaction by the director/trustee, such security is or was
purchased or sold, or considered by the Company or its investment advisor
for purchase or sale by the Company.
E. Every access person who beneficially owns, directly or indirectly, 1/2% or
more of the stock of any company the securities of which are eligible for
purchase by the Company shall report such holdings to the Company.
VIII. REVIEW PROCEDURES
A. The reports submitted by access persons pursuant to Section VII.B. hereof
shall be reviewed at least quarterly by the Board of Directors/Trustees or
such other persons or committees as shall
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be designated by the Board of Directors/Trustees, in order to monitor
compliance with this Code.
B. If it is determined by the Board of Directors/Trustees that a violation of
this Code has occurred and that the person violating this Code has
purchased or sold a security at a more advantageous price than that
obtained by the Company, such person shall be required to offer to sell to
or purchase from the Company, as the case may be, such security at the
more advantageous price. If this cannot be consummated, then the Board of
Directors/Trustees shall take such other course of action as it may deem
appropriate. With respect to any violation of this Code, the Board of
Directors/Trustees may take any preventive, remedial or other action that
it may deem appropriate. In determining whether or not there has been, or
may be, a conflict of interest between the Company and any person subject
to this Code, the Board of Directors/Trustees shall consider all of the
relevant facts and circumstances.
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