<PAGE>
ANNUAL REPORT / OCTOBER 31 1998
AIM DEVELOPING MARKETS FUND
Cover Artwork
AIM Logo
INVEST WITH DISCIPLINE-REGISTERED TRADEMARK-
<PAGE>
Artwork
MURAL FROM THE TEMPLE OF LONGING BY PAUL KLEE
PAUL KLEE'S ART WAS TRANSFORMED BY A TRIP HE TOOK TO TUNISIA IN 1914, WHERE
HE WAS AWED BY THE LANDSCAPE'S BEAUTIFULLY INTENSE COLOR AND LIGHT. KLEE
BROUGHT THOSE QUALITIES TO HIS OWN WORK, CREATING IMAGINATIVE, LIGHT-FILLED
PAINTINGS LIKE THE ONE ON THE COVER. RADIATING WITH OPTIMISM AND ENERGY,
KLEE'S MURAL IS A FITTING EMBLEM FOR THE DYNAMIC GROWTH PUSHING TODAY'S
EMERGING MARKETS INTO THE 21ST CENTURY.
AIM Developing Markets Fund is for shareholders who seek long-term growth of
capital and secondarily seek income, to the extent consistent with the goal
of capital appreciation. The Fund primarily invests in developing market
equity securities, but may also invest in developing market debt securities.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT
THIS REPORT:
- - AIM Developing Markets Fund (formerly GT Global Developing Markets
Fund) performance figures are historical and reflect reinvestment of all
distributions and changes in net asset value. Unless otherwise indicated, the
Fund's performance is computed at net asset value without a sales charge.
- - During the fiscal year ended October 31, 1998, Class A shares paid
distributions of $0.60 per share, Class B shares paid $0.59 per share, and
Advisor Class Shares paid $0.60 per share.
- - When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh year.
The performance of the Fund's Class B shares will differ from that of Class A
shares due to differences in sales charge structure and Fund expenses.
- - Advisor Class shares are not sold directly to the general public and
are available only through certain employee benefit plans, financial
institutions and other entities that have entered into specific agreements
with the Fund's Distributor. Please see the Fund's prospectus for more
complete information.
- - The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
- - International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to the values of other
currencies, the custody arrangements made for the Fund's foreign holdings,
differences in accounting, political risks, and the lesser degree of public
information required to be provided by non-U.S. companies.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
- - The IFC Investable Composite Index is a market value-weighted average
of the performance of the securities listed on the exchange of 29 countries.
It includes the effect of reinvested dividends and is measured in U.S.
dollars.
- - The MSCI Emerging Markets Free Index is a group of unmanaged
securities from emerging markets tracked by Morgan Stanley Capital
International. A "free" index includes only securities available to
non-domestic investors.
- - An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
AIM DEVELOPING MARKETS FUND
<PAGE>
ANNUAL REPORT / CHAIRMAN'S LETTER
Chairman's Letter
DEAR FELLOW SHAREHOLDER:
During the fiscal year covered by this report, a variety of events converged
to produce harsh market conditions in several sectors and geographic areas:
fallout from currency devaluations in Southeast Asia, the seemingly
intractable downturn in Japan, Russia's default on much of its foreign debt,
fear that Latin America could be engulfed by the world's difficulties, and
the virtual collapse of commodity prices as worldwide economic growth
faltered and many nations slipped into recession.
We understand how unnerving it is to have an investment lose value. While the
difficult market environment helps explain much of your Fund's poor
performance, it is not the whole story. When we added the former GT Global
funds to our fund family late in the fiscal year, we understood that several
of them needed to bolster their performance substantially. We also recognized
their significant long-term potential, and now that we are the funds'
investment adviser, we will strive to see that potential realized. Where
necessary, we have begun to make the changes in management and investment
strategy we believe will enhance your Fund's performance. We intend to
continue managing your Fund with the careful oversight and disciplined
investment strategy used in all AIM funds, and we hope you will share our
patience as investors while we work to improve your Fund's performance.
On the pages that follow, your Fund's management team offers more detailed
discussion of how markets behaved, how they managed the portfolio during the
fiscal year, and what they foresee for your Fund and the markets where it
invests. We hope you find their discussion informative.
INVESTING FUNDAMENTALS UNCHANGED
The abrupt reversals of market sentiment during this reporting period
reinforce our conviction that markets are unpredictable in the short term.
Since even the best money managers cannot know exactly when to enter and exit
a market, we remain convinced that the wisest strategy is to stay fully
invested despite volatility and short-term disappointment.
However difficult many markets have been this fiscal year, the fundamental
principles of investing are unchanged:
- - broad portfolio diversification, in which this Fund is part of a
complete investment strategy designed with your personal financial goals in
mind;
- - realistic expectations, recognizing that the potential for downturns
is always present; and
- - as always, long-term thinking.
Your financial consultant is your best resource for helping you construct a
diversified portfolio, weather turbulent markets, and keep your eye on your
long-term goals.
We are pleased to send you this report on your Fund's fiscal year. If you
have any questions or comments, please contact our Client Services department
at 800-959-4246 or e-mail your inquiry to us at [email protected]. You can
access information about your account through our AIM Investor Line at
800-246-5463 or on our Web site, www.aimfunds.com. We often post market
updates on our Web site.
We thank you for your continued participation in The AIM Family of
Funds-Registered Trademark-.
Sincerely,
CHAIRMAN'S SIGNATURE
Charles T. Bauer
Chairman
WE INTEND TO CONTINUE MANAGING YOUR FUND WITH THE CAREFUL OVERSIGHT AND
DISCIPLINED INVESTMENT STRATEGY USED IN ALL AIM FUNDS.
AIM DEVELOPING MARKETS FUND
<PAGE>
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND ENDURES TUMULTUOUS YEAR IN EMERGING MARKETS
GLOBAL MARKET VOLATILITY DOMINATED FINANCIAL NEWS IN 1998. HOW DID THE FUND
PERFORM IN THIS ENVIRONMENT?
We have been in a very challenging environment over the last year. The Fund
has suffered from the particular crises hitting individual countries, but it
has also been hurt by the increasingly negative perception of the riskiness
of emerging market investing.
Results for the fiscal year ended October 31, 1998 were quite disappointing.
Total return was -37.09% for Class A shares. In comparison, the MSCI Emerging
Markets Free Index had a return of -30.98%.
Since their inception on November 3, 1997, Class B shares had a cumulative
total return of -39.76%.
WHY WAS MARKET TURMOIL SO PERVASIVE?
The chain reaction started in Asia. Devalued currencies plus billions in bad
loans curtailed the region's ability to purchase goods and raw materials from
the world's sellers. When Asian companies flooded global commodities markets
with their inventories to produce desperately needed revenues, the
combination of oversupply and weakened demand caused prices to plummet,
contributing to worldwide deflation.
Meanwhile, investors worried over news of Russia's overwhelming government
debt and the speculative borrowing practiced by its private banks. The
situation was especially troubling because it was set against a backdrop of
weakening oil and commodity prices. In August, Russia attempted to stabilize
the banking system by floating the ruble and suspending repayment of much of
its foreign debt. These events spurred a worldwide flight to quality,
resulting in a broad-based selloff. Even though Russia has a relatively small
economy and engages in just a tiny portion of world trade, many investors
sustained millions of dollars in losses from their exposure to both its debt
and its equity markets.
In the wake of the Asian and Russian crises, investors began to reduce their
exposure to emerging markets. Latin America as well as the more open markets
in the Emerging EMEA (Europe, Middle East, and Africa) region suffered both
from investor flight and from the associated rising interest rates.
WHAT IS YOUR OVERALL STRATEGY IN MANAGING THE FUND?
First we determine the portfolio's target country allocations through a
top-down process that evaluates and scores countries based on their economic
growth, monetary cycle, government policy, and overall earnings growth. Our
stock research and selection process identifies stocks demonstrating growth,
but at a reasonable price. We then adjust our top-down allocation depending
on the availability of stocks suitable for investment in a particular country
or sector.
OUR STOCK RESEARCH AND SELECTION PROCESS IDENTIFIES STOCKS
DEMONSTRATING GROWTH, BUT AT A REASONABLE PRICE.
WHAT ARE THE MOST SIGNIFICANT CHANGES YOU'VE MADE IN THE PORTFOLIO RECENTLY?
The most important strategy we've taken in the last few months has been to
concentrate the portfolio in the markets and stocks where we are most
confident about the growth and valuation outlook. We've deliberately reduced
the breadth of holdings, and we've eliminated exposure to such highly
unstable markets as Pakistan, Sri Lanka, the Philippines, Thailand, and
Malaysia. We've also virtually eliminated the Fund's exposure to Russia. We
don't expect to invest in the Russian market until the political and economic
environment has stabilized.
YOUR LARGEST COUNTRY ALLOCATIONS ARE IN LATIN AMERICA. WHY DID YOU FAVOR THIS
REGION?
Despite recent market turbulence, we still believe in Latin America's
long-term potential. Relative to Asia, Latin America stands to perform much
better because of its more favorable trade ties to the United States. The
governments of the major economies in Latin America continue to emphasize
responsible fiscal and monetary policies. We feel that many are truly
committed to reform and deregulation. In fact, we've already witnessed
important restructuring efforts in the banking industries of several Latin
American countries and the first stages of fiscal reform in Brazil.
WHICH STOCKS DID YOU LIKE?
In Brazil, we own a number of privatization candidates. Many of the larger
utilities in Brazil appear undervalued given the strong medium-term growth
prospects for the economy. We emphasized oil and natural resource stocks
because they ben-
SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.
AIM DEVELOPING MARKETS FUND
<PAGE>
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of October 31, 1998, based on total net assets
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO HOLDINGS
<S> <C> <C>
1. Telecomunicacoes Brasileiras S.A. (Brazil) 4.3%
(Telebras) Preferred- ADR
2. Telefonos de Mexico, S.A. de C.V. "L" - ADR (Mexico) 3.0
3. Merrill Lynch - Kospi 200 Call Warrants, due 9/9/99 (United States) 2.9
4. Petroleo Brasileiro, S.A. (Petrobras) Preferred (Brazil) 2.3
5. Companhia Energetica de Minas Gerais (CEMIG) - ADR (Brazil) 2.2
6. South African Breweries Ltd. (South Africa) 2.0
7. Hellenic Telecommunication Organization S.A. (OTE) (Greece) 1.9
8. Magyar Tavkozlesi Rt. - ADR (Hungary) 1.8
9. Grupo Carso, S.A. de C.V. "A1" (Mexico) 1.8
10. MISR Elgadida for Housing and Reconstruction (Egypt) 1.8
</TABLE>
<TABLE>
<CAPTION>
TOP 10 INDUSTRIES
<S> <C>
1. Services 20.2%
2. Finance 15.0
3. Energy 9.7
4. Consumer Non-Durables 9.5
5. Materials/Basic Industry 8.3
6. Multi-Industry/Miscellaneous 6.7
7. Technology 4.3
8. Capital Goods 2.9
9. Health Care 1.9
10. Consumer Durables 0.6
</TABLE>
<TABLE>
<CAPTION>
TOP 10 COUNTRIES
<S> <C>
1. Mexico 16.3%
2. Brazil 16.1
3. South Africa 6.9
4. Argentina 6.9
5. India 6.2
6. Taiwan 5.9
7. Greece 5.8
8. Egypt 5.7
9. United States 5.3
10. Israel 4.2
</TABLE>
Please keep in mind that the Fund's portfolio is subject to change and there
is no assurance the Fund will continue to hold any particular security.
efit from U.S. dollar revenues and from privatization efforts, which should
encourage greater operating efficiency. We also liked Brazil's utilities
such as Companhia Energetica de Minas Gerais (CEMIG), provider of electric
power to the Brazilian state of Minas Gerais. With political uncertainties
now reduced, such stocks have attracted investor interest once again.
Our largest country allocation was in Mexico, which we believe will show
relatively stable economic growth into 1999. We've focused on blue chips as
well as stocks that stand to benefit from the large devaluation of the peso.
Although earnings will certainly be affected this year by the monetary
correction, it should help the competitive position of companies like Fomento
Economico Mexicano, S.A. de C.V., a soft-drink producer that exports to 63
countries around the world.
WHERE ELSE DID YOU FIND OPPORTUNITIES?
One of the advantages of a global emerging markets portfolio is its
diversity. We have found a number of investments that were relatively
sheltered from global economic difficulties. For example, Hindustan Lever,
one of the largest low-end consumer good manufacturers in India, has
announced better-than-anticipated earnings expectations. The company makes
soap, toothpaste, and other personal care products.
Global volatility has created good buying opportunities in such smaller
markets as Egypt and Morocco, which have demonstrated relatively strong
growth, falling interest rates, a decline in inflation, and attractive
valuations.
Similarly, problems in Russia have affected the prices of some of Eastern
Europe's more attractive stocks. For instance, Magyar Olaj-es Gazipari
(MOL)--the gas distributor in Hungary, and KREDYT BANK of Poland are both
strong stocks that we believe are trading at a discount.
We've raised our weighting in Greece, which is committed to joining Europe's
Economic and Monetary Union (EMU). In anticipation of that goal, the country
has made major strides in economic and fiscal reform. An example of a Greek
company we liked is Stet Hellas, a cellular company that has shown very
strong earnings growth in recent quarters.
WHAT ABOUT EMERGING-MARKETS DEBT?
Political and currency instabilities have kept us in a cautious mode with
this asset class. At the end of the reporting period, just over 11% of the
portfolio was in foreign government and government agency obligations. The
largest allocation went to Mexican government debt; the remainder was spread
across several Eastern European and Latin American countries. We have very
limited exposure to corporate bonds, with a scattering of holdings in
Argentina, Brazil, and a few other countries.
WHAT IS YOUR OUTLOOK FOR EMERGING MARKETS AND FOR THE FUND?
Although we expect growth to be disappointing over the next year, we believe
that emerging markets continue to offer a long-term investment option for the
most aggressive investors. The fundamentals driving growth in emerging
markets are still there: consumption, industrialization, a maturing financial
services industry, and continuing investment in infrastructure.
Emerging markets potentially can offer earnings growth rates that exceed
those in developed countries; however, there are also many more risks
associated with this type of investment. We urge you to read your prospectus
for more information about the Fund's objectives, strategies, and risks.
SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.
AIM DEVELOPING MARKETS FUND
<PAGE>
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM DEVELOPING MARKETS FUND VS. BENCHMARK INDEXES
1/11/94--10/31/98
<TABLE>
<CAPTION>
AIM Fund MSCI Free Index IFC Index
<S> <C> <C> <C>
1/11.94 $9,524 $10,000 $10,000
4/30/94 7,943 8,922 8,601
10/31/94 9,314 10,641 10,176
4/30/95 7,250 8,494 7,776
10/31/95 7,664 8,573 7,782
4/30/96 9,036 9,716 8,963
10/31/96 9,581 9,130 8,598
4/30/97 10,511 10,133 9,433
10/31/97 9,092 8,356 7,735
4/30/98 9,427 8,660 8,018
10/31/98 5,720 5,767 5,503
</TABLE>
Past performance cannot guarantee comparable future results.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98, including sales charges
<TABLE>
<CAPTION>
CLASS A SHARES
<S> <C>
Inception (1/11/94) -10.98%
1 year -40.09*
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES
<S> <C>
Inception (11/3/97) -42.63%**
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES
(sales charges do not apply)
<S> <C>
Inception (11/3/97) -39.21%***
</TABLE>
*-37.09%, excluding sales charges
**-39.76%, excluding CDSC. Total return provided is cumulative total return
that has not been annualized.
***Total return provided is cumulative total return that has not been
annualized.
Sources: Towers Data Systems Hypo-Registered Trademark- and Bloomberg.
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of the Fund's Class B and Advisor Class shares will
differ from Class A shares due to differing fees and expenses. For Fund data
performance calculations and descriptions of indexes cited on this page,
please refer to the inside front cover.
On October 31, 1997, shareholders of record as of a certain date of GT Global
Developing Markets Fund, Inc., a closed-end fund, became Class A shareholders
of the Fund, an open-end fund. Performance of Class A shares prior to
November 1, 1997 reflects the different fees and expenses of the closed-end
fund.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
The chart above compares your Fund's Class A shares to benchmark indexes. Use
of these indexes is intended to give you a general idea of your Fund's
comparative performance. It is important to understand the differences
between your Fund and these indexes. An index measures performance of a
hypothetical portfolio.
A market index such as the MSCI Emerging Markets Free Index is not managed
and incurs no sales charges, expenses, or fees. If you could buy all the
securities that make up a market index, you would incur expenses that would
affect your investment's return.
Since the last reporting period, AIM Developing Markets Fund has elected to
use the MSCI Emerging Markets Free Index as one of its benchmarks. This index
more closely reflects the performance of the securities in which the Fund
invests. The Fund will no longer be measured against the IFC Investable
Composite Index, the index published in previous reports to shareholders.
Because this is the first reporting period since we have adopted the new
index, SEC guidelines require that we compare the Fund's performance to both
the old and the new index.
AIM DEVELOPING MARKETS FUND
<PAGE>
ANNUAL REPORT / FOR CONSIDERATION
TAKE A CLOSER LOOK AT MARKET INDEXES
You step into your car after work and hear the radio announcer say, "The
market was down 200 points today." Instantly you start to worry. But should
you? The question is, what exactly is "the market"? And how are your
investments going to be affected by it? You need the facts, and fast. Market
indexes are a good place to start. They can help you gauge how your
investments are performing.
"The market" actually is much broader than newspapers and television reports
make it out to be. The media often report movements in the Dow Jones
Industrial Average (the Dow) as indicative of the market as a whole. But the
Dow is made up of just 30 stocks; the U.S. market is made up of more than
12,000 stocks traded on the New York Stock Exchange, regional exchanges, and
over the counter. The Dow only measures the performance of the largest
American companies.
If you're like most investors, you've got a range of investments across
market segments, not just blue-chip stocks. The best way to compare your
investments to their peers in the marketplace is to find the right index. An
index measures the performance of a particular group of stocks. But keep in
mind, there is rarely a perfect match between the stocks in a mutual fund and
the stocks in an index.
Indexes and funds have different purposes. Mutual funds select stocks based
on their past performance or future potential. Indexes pick stocks based on
their ability to act as reliable measuring tools. For example, index makers
for the S&P 500 look for actively traded, widely owned stocks that reflect
the active stock market.
There are other important differences between a fund and an index. You cannot
invest directly in an index. Because indexes are unmanaged, they incur no
sales charges, expenses, or fees. Even if you bought all the securities
making up an index, your transaction expenses would lower your investment
returns.
As you follow the various indexes, you'll notice that their tracks often
diverge. When large-caps are up, small-caps or overseas stocks are down-and
vice
THE USUAL INDEXES
THE DOW JONES INDUSTRIAL AVERAGE
WHAT IT IS: In its 102-year history, the Dow always has focused on the
largest, most successful U.S. companies. The types of firms in the index have
changed drastically over the years--from the cotton companies of the 19th
century to the computer icons of the 20th. The 30 stocks now in the Dow
include household names such as International Business Machines Corp., Boeing
Co., McDonald's Corp., and Walt Disney Co.
WHAT IT TELLS YOU: While stocks in the Dow make up about 20% of the value of
all U.S. stocks, the index leaves out many sectors of the market. For most
mutual fund investors, the Dow is an inadequate and often inappropriate
measure of comparison. Use it to check the pulse of American big business,
but look elsewhere for a more inclusive market view.
S&P 500
WHAT IT IS: The S&P 500 (Standard & Poor's Composite Index of 500 Stocks) is
often used as a gauge of the whole market. But it measures only 500 stocks in
the large-capitalization portion of the U.S. stock market. Included in the
index are Apple Computer, Hilton Hotels, NIKE Inc., and Pennzoil Co.
WHAT IT TELLS YOU: The S&P 500 is useful for evaluating a fund that invests
in large-capitalization U.S. stocks. It's a poor gauge for others funds, such
as a small-cap aggressive growth fund.
Keep in mind that the S&P 500 is very concentrated. The top 50 companies
represent half the S&P 500's assets. For the past few years, the total return
of the S&P 500 has been unusually high, but much of this performance can be
attributed to just a few stocks in the index. Most mutual funds are more
diversified than this index.
NASDAQ COMPOSITE INDEX
WHAT IT IS: The NASDAQ (National Association of Securities Dealers Automated
Quotation system) Composite Index measures the performance of all NASDAQ
domestic and foreign stocks. Often associated with the over-the-counter
market, the index also includes some exchange-listed stocks. More than 5,300
stocks are in the NASDAQ Composite Index.
WHAT IT TELLS YOU: Many consider NASDAQ a barometer for small- and mid-cap
stocks. However, the index is market-value weighted--each company's stock
affects the index in proportion to that company's market value. Large-cap
technology stocks such as Microsoft, Intel, and Dell Computer dominate it.
The NASDAQ is not a good measure of small- and mid-cap stock performance. It
basically tells you how large-cap technology stocks are doing. It is not a
suitable index for most mutual funds.
AIM DEVELOPING MARKETS FUND
<PAGE>
ANNUAL REPORT / FOR CONSIDERATION
versa. The chart at the right shows calendar-year returns for two domestic
and one foreign equity index for the decade 12/31/87 through 12/31/97. The
market segments often move out of synch, and performance leadership often
rotates from one segment to another.
By positioning your investments strategically in various market segments,
you're less likely to miss out on the peaks, and you'll be more protected
from the valleys. Remember, patience is the key. If you jump in and out of
investments, you could miss out on some of the market's best moments. See
your financial adviser to build a diversified portfolio suited to fluctuating
markets.
DIVERGING INDEXES
<TABLE>
<CAPTION>
S&P 500 Index Europe-Australasia-Far
with Monthly Dividends East Index with Dividends* Russell 2000 Stock Index
<S> <C> <C> <C>
12/88 16.55% 25.02% 28.59%
12/89 31.64 16.26 10.8
12/90 (3.09) 19.48 23.2
12/91 30.41 46.04 12.5
12/92 7.61 18.41 11.85
12/93 10.06 18.88 32.94
12/94 1.32 (1.82) 8.06
12/95 37.54 28.45 11.55
12/96 22.95 16.49 6.36
12/97 33.35 22.36 2.06
</TABLE>
Past performance is no guarantee of future investment results.
*International investing presents risks not associated with investing solely
in the United States. These include risks relating to fluctuation in the
value of the U.S. dollar, custody arrangements made for a Fund's foreign
holdings, differences in accounting, political risks, and the lesser degree
of public information required to be provided by non-U.S. companies.
A FEW MORE INDEXES
S&P 400
WHAT IT IS: The Standard & Poor's 400 Mid-Cap Index is a relatively new index
that dates to 1981 and measures performance of 400 stocks in the
mid-capitalization sector of the domestic stock market. Companies in the
index include America Online, Inc., CompuWare Corp., Starbucks Corp., and
Office Depot. As of July 31, the median market capitalization in the S&P 400
was approximately $1.8 billion, but some stocks in the index have
capitalizations as large as $5 billion.
WHAT IT TELLS YOU: If your fund invests primarily in mid-caps, this is one of
the best benchmarks to use. But keep in mind that the index may include
companies smaller or larger than the ones in your fund.
RUSSELL 2000 INDEX
WHAT IT IS: The Russell 2000 Index measures the performance of small-cap
stocks. A total of 2,000 U.S. companies are represented in the index,
including such well-known firms as Bally Total Fitness, Bethlehem Steel,
Coca-Cola Bottling Co., and Coors Brewing Co. The index, which is
cap-weighted, represents about 10% of the U.S. stock market. More than 900 of
the stocks in the Russell 2000 trade on either the New York Stock Exchange or
the American Stock Exchange.
WHAT IT TELLS YOU: The Russell 2000 Index is a very good indicator of
small-cap stock performance. It is a true small-cap index with the market
value of companies represented in this index ranging from $171.7 million to
$1.1 billion. Many mutual funds investing in small-cap stocks use the Russell
2000 as their benchmark index.
THE EUROPE, AUSTRALASIA, AND FAR EAST INDEX (EAFE)
WHAT IT IS: The EAFE consists of approximately 1,600 foreign stocks tracked
by Morgan Stanley Capital International (MSCI). They are listed on stock
exchanges in 20 developed countries. Stocks are chosen to reflect 60% of the
market capitalization of each country and of each major industry group.
WHAT IT TELLS YOU: As international investing has grown, a need has arisen to
measure global stock-market performance. The EAFE fulfills this need for
developed markets in Europe, Australia and the Far East. It is frequently
used as a benchmark for mutual funds investing in stocks in these markets.
MSCI also has developed indexes for specific countries and regions and for
emerging markets. Since your fund's country allocation may be different from
EAFE, you may need to look at a more specific index.
An index is not an investment product available for purchase. An index
measures the performance of a hypothetical portfolio. An index is not
managed, incurring no sales charges, expenses, or fees. If you could buy all
the securities that make up a particular index, you would incur expenses that
would affect the return on your investment.
AIM DEVELOPING MARKETS FUND
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Developing Markets Fund (formerly GT Global
Developing Markets Fund) and Board of Trustees of AIM Investment Funds (formerly
G.T. Investment Funds, Inc.):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Developing Markets Fund at
October 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
DECEMBER 11, 1998
<PAGE>
PORTFOLIO OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Services (20.2%)
Telecomunicacoes Brasileiras S.A. (Telebras) Preferred -
ADR{\/} ................................................... BRZL 49,291 $ 3,743,034 4.3
TELEPHONE NETWORKS
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ............ MEX 50,583 2,671,415 3.0
TELEPHONE NETWORKS
Hellenic Telecommunication Organization S.A. (OTE) ......... GREC 74,322 1,690,938 1.9
TELEPHONE NETWORKS
Magyar Tavkozlesi Rt. - ADR{\/} ............................ HGRY 59,100 1,588,313 1.8
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ......................... PERU 80,900 1,051,700 1.2
TELEPHONE NETWORKS
Cifra, S.A. de C.V. "V"-/- ................................. MEX 748,662 1,015,210 1.2
RETAILERS-OTHER
Telefonica de Argentina S.A. - ADR{\/} ..................... ARG 27,528 910,145 1.0
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP): ............... BRZL -- -- 0.9
TELEPHONE - REGIONAL/LOCAL
Common-/- ................................................ -- 7,001,000 760,144 --
Preferred ................................................ -- 150,157 25,177 --
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................. MEX 26,700 724,238 0.8
BROADCASTING & PUBLISHING
STET Hellas Telecommunications S.A. - ADR-/- {\/} .......... GREC 24,976 655,620 0.7
WIRELESS COMMUNICATIONS
Mahanagar Telephone Nigam Ltd. ............................. IND 143,500 620,816 0.7
TELECOM - OTHER
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP .................................................... BRZL 7,132,127 574,014 0.7
BUSINESS & PUBLIC SERVICES
Videsh Sanchar Nigam Ltd. - Reg S GDR-/- {c} {\/} .......... IND 37,000 388,500 0.4
TELECOM - OTHER
Nortel Inversora S.A. - ADR{\/} ............................ ARG 15,500 344,875 0.4
TELEPHONE NETWORKS
Telecom Argentina S.A. - ADR{\/} ........................... ARG 10,300 332,175 0.4
TELEPHONE NETWORKS
ONA (Omnium Nord Africain) S.A. "A" ........................ MOR 2,320 301,551 0.3
BUSINESS & PUBLIC SERVICES
Bezeq Israeli Telecommunication Corporation Ltd. ........... ISRL 86,900 249,999 0.3
TELEPHONE NETWORKS
Blue Square Chain Investments & Properties Ltd.-/- ......... ISRL 14,898 190,525 0.2
RETAILERS-FOOD
Indian Hotels Co., Ltd. .................................... IND 50 484 --
LEISURE & TOURISM
-----------
17,838,873
-----------
Finance (15.0%)
Liberty Life Association of Africa Ltd. .................... SAFR 88,250 1,515,564 1.7
INSURANCE-LIFE
Cathay Life Insurance Co., Ltd. ............................ TWN 301,200 1,065,248 1.2
INSURANCE-LIFE
National Bank of Greece S.A. ............................... GREC 6,520 927,124 1.1
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Alpha Credit Bank .......................................... GREC 11,255 $ 900,040 1.0
BANKS-REGIONAL
Uniao de Bancos Brasileiros S.A. (Unibanco): ............... BRZL -- -- 0.9
BANKS-MONEY CENTER
Units{=} ................................................. -- 14,649,042 480,810 --
GDR{\/} .................................................. -- 18,510 323,925 --
Bank Hapoalim Ltd. ......................................... ISRL 440,500 796,944 0.9
BANKS-MONEY CENTER
Grupo Financiero Banamex Accival, S.A. de C.V. "B"-/- ...... MEX 691,100 718,257 0.8
BANKS-MONEY CENTER
BIG Bank Gdanski S.A. - Reg S GDR{c} {\/} .................. POL 43,000 692,300 0.8
BANKS-REGIONAL
Bank Leumi Le - Israel ..................................... ISRL 519,768 664,712 0.8
BANKS-MONEY CENTER
MISR International Bank - Reg S GDR{c} {\/} ................ EGPT 69,400 654,095 0.7
BANKS-MONEY CENTER
Turkiye Is Bankasi (Isbank) "C" ............................ TRKY 23,068,549 633,157 0.7
BANKS-MONEY CENTER
Banco de Galicia y Buenos Aires, S.A. de C.V. - ADR{\/} .... ARG 28,872 492,629 0.6
BANKS-MONEY CENTER
Commercial Bank of Greece S.A. ............................. GREC 5,800 491,753 0.6
BANKS-MONEY CENTER
Ergo Bank S.A. ............................................. GREC 5,360 476,360 0.5
BANKS-REGIONAL
Yapi ve Kredi Bankasi AS ................................... TRKY 41,379,593 467,233 0.5
BANKS-REGIONAL
Credicorp Ltd. - ADR{\/} ................................... PERU 56,220 379,485 0.4
BANKS-MONEY CENTER
Wafabank ................................................... MOR 2,900 378,516 0.4
BANKS-MONEY CENTER
KREDYT BANK S.A. - Reg S GDR-/- {c} {\/} ................... POL 14,680 292,866 0.3
BANKS-MONEY CENTER
Akbank T.A.S. .............................................. TRKY 19,162,500 282,947 0.3
BANKS-REGIONAL
Banco Rio de La Plata S.A. - ADR{\/} ....................... ARG 26,900 242,100 0.3
BANKS-MONEY CENTER
Inversiones y Representaciones S.A. (IRSA) - GDR{\/} ....... ARG 9,000 232,875 0.3
REAL ESTATE
National Development Bank .................................. SLNKA 70,000 80,910 0.1
BANKS-REGIONAL
Kazkommertsbank Co. - GDR-/- {\/} .......................... KAZ 12,700 70,485 0.1
BANKS-REGIONAL
State Bank of India Ltd. ................................... IND 3,000 11,035 --
BANKS-MONEY CENTER
-----------
13,271,370
-----------
Energy (9.7%)
Petroleo Brasileiro S.A. (Petrobras) Preferred ............. BRZL 16,207,398 2,038,154 2.3
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ..... BRZL 97,731 1,893,538 2.2
ELECTRICAL & GAS UTILITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Energy (Continued)
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ......... HGRY 68,330 $ 1,556,216 1.8
GAS PRODUCTION & DISTRIBUTION
Huaneng Power International, Inc. - ADR-/- {\/} ............ CHNA 70,958 975,673 1.1
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} ..................................... CHLE 30,728 641,447 0.7
ELECTRICAL & GAS UTILITIES
Companhia de Eletricidade do Estado da Bahia - COELBA ...... BRZL 12,500,000 398,223 0.5
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR{\/} ................................... RUS 163,020 326,040 0.4
OIL
Eletropaulo Metropolitana Preferred ........................ BRZL 7,843,375 264,339 0.3
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ..................... BRZL 1,654,290 205,261 0.2
ELECTRICAL & GAS UTILITIES
Empresa Bandeirante de Energia S.A.-/- ..................... BRZL 7,843,375 76,211 0.1
ELECTRICAL & GAS UTILITIES
Companhia Brasileira de Petroleo Ipiranga S.A. Preferred ... BRZL 12,154,000 65,213 0.1
GAS
Bombay Suburban Electric Supply (BSES) Ltd.-/- ............. IND 1,350 4,774 --
ELECTRICAL & GAS UTILITIES
-----------
8,445,089
-----------
Consumer Non-Durables (9.5%)
South African Breweries Ltd. ............................... SAFR 89,806 1,747,924 2.0
BEVERAGES - ALCOHOLIC
Hindustan Lever Ltd. ....................................... IND 40,650 1,540,472 1.8
PERSONAL CARE/COSMETICS
ITC Ltd. ................................................... IND 79,900 1,321,750 1.5
TOBACCO
Fomento Economico Mexicano, S.A. de C.V. - ADR{\/} ......... MEX 44,311 1,154,855 1.3
BEVERAGES - NON-ALCOHOLIC
Panamerican Beverages, Inc. "A"{\/} ........................ MEX 34,000 688,500 0.8
BEVERAGES - NON-ALCOHOLIC
A-Ahram Beverages Co. S.A.E. - 144A GDR{\/} {.} ............ EGPT 15,814 443,583 0.5
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. - ADR{\/} ................. CHLE 18,100 325,800 0.4
BEVERAGES - ALCOHOLIC
Companhia de Tecidos Norte de Minas Preferred .............. BRZL 2,747,000 317,812 0.4
TEXTILES & APPAREL
Companhia Cervejaria Brahma Preferred ...................... BRZL 563,721 264,658 0.3
BEVERAGES - ALCOHOLIC
Oriental Weavers "C" ....................................... EGPT 11,400 245,974 0.3
TEXTILES & APPAREL
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) .................. POL 1,243 169,369 0.2
BEVERAGES - ALCOHOLIC
Truworths International Ltd. ............................... SAFR 47,740 36,381 --
TEXTILES & APPAREL
-----------
8,257,078
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (8.3%)
Suez Cement Co. - Reg S GDR{c} {\/} ........................ EGPT 95,195 $ 1,404,126 1.6
CEMENT
Anglo American Platinum Corporation Ltd. ................... SAFR 87,900 1,336,583 1.5
METALS - NON-FERROUS
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} .......... CHLE 31,500 1,047,375 1.2
CHEMICALS
Companhia Vale do Rio Doce "A" Preferred ................... BRZL 55,700 840,543 1.0
METALS - STEEL
Compania de Minas Buenaventura S.A. - ADR{\/} .............. PERU 47,792 585,452 0.7
GOLD
Cemex, S.A. de C.V. "CPO" .................................. MEX 238,120 568,019 0.6
CEMENT
Apasco, S.A. de C.V. "A" ................................... MEX 115,233 422,015 0.5
CEMENT
Hindalco Industries Ltd.: .................................. IND -- -- 0.3
METALS - NON-FERROUS
GDR{\/} .................................................. -- 26,200 307,195 --
Common ................................................... -- 1,634 19,759 --
Makhteshim-Agan Industries Ltd.-/- ......................... ISRL 144,665 256,973 0.3
CHEMICALS
Siderca S.A. "A" ........................................... ARG 118,000 165,250 0.2
METALS - STEEL
Grupo Cementos de Chihuahua, S.A. de C.V. "B" .............. MEX 283,300 151,983 0.2
CEMENT
Engro Chemicals Pakistan Ltd. .............................. PAK 69,370 63,948 0.1
CHEMICALS
Nan Ya Plastics Corp.-/- ................................... TWN 35,360 44,780 0.1
PLASTICS & RUBBER
-----------
7,214,001
-----------
Multi-Industry/Miscellaneous (6.7%)
Grupo Carso, S.A. de C.V. "A1" ............................. MEX 452,400 1,567,257 1.8
MULTI-INDUSTRY
Rembrandt Group Ltd. ....................................... SAFR 220,610 1,472,049 1.7
CONGLOMERATE
Haci Omer Sabanci Holding AS ............................... TRKY 43,775,250 661,579 0.8
CONGLOMERATE
China Development Corp. .................................... TWN 288,900 571,107 0.7
CONGLOMERATE
Central Asia Regional Growth Fund(::) -/- {\/} ............. IRE 175,000 525,000 0.6
COUNTRY FUNDS
Koc Holding AS ............................................. TRKY 5,220,550 480,647 0.5
CONGLOMERATE
Koor Industries Ltd. - ADR{\/} ............................. ISRL 24,643 398,909 0.5
CONGLOMERATE
John Keells Holdings Ltd. .................................. SLNKA 17,000 48,173 0.1
CONGLOMERATE
-----------
5,724,721
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Technology (4.3%)
Taiwan Semiconductor Manufacturing Co.-/- .................. TWN 597,950 $ 1,209,752 1.4
SEMICONDUCTORS
Asustek Computer Inc. - Reg S GDR-/- {c} {\/} .............. TWN 96,862 743,416 0.8
COMPUTERS & PERIPHERALS
Hon Hai Precision Industry ................................. TWN 112,000 539,676 0.6
COMPUTERS & PERIPHERALS
Compal Electronics, Inc.-/- ................................ TWN 160,000 499,151 0.6
COMPUTERS & PERIPHERALS
Delta Electronics, Inc. .................................... TWN 153,600 443,602 0.5
COMPUTERS & PERIPHERALS
Formula Systems Ltd.-/- .................................... ISRL 16,505 353,214 0.4
SOFTWARE
-----------
3,788,811
-----------
Capital Goods (2.9%)
MISR Elgadida for Housing and Reconstruction ............... EGPT 17,100 1,563,864 1.8
CONSTRUCTION
NASR (El) City Company For Housing & Construction .......... EGPT 23,005 713,659 0.8
CONSTRUCTION
Corporacion GEO, S.A. de C.V. "B"-/- ....................... MEX 165,800 287,192 0.3
CONSTRUCTION
-----------
2,564,715
-----------
Health Care (1.9%)
Ranbaxy Laboratories Ltd. .................................. IND 79,850 942,438 1.1
MEDICAL TECHNOLOGY & SUPPLIES
Teva Pharmaceutical Industries Ltd. ........................ ISRL 18,700 737,188 0.8
PHARMACEUTICALS
-----------
1,679,626
-----------
Consumer Durables (0.6%)
Bajaj Auto Ltd. ............................................ IND 29,300 383,567 0.4
AUTOMOBILES
Qingling Motors Co., Ltd.{*} ............................... CHNA 1,022,000 188,709 0.2
AUTOMOBILES
-----------
572,276
----------- -----
TOTAL EQUITY INVESTMENTS (cost $92,943,216) .................. 69,356,560 79.1
----------- -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (11.2%)
Algeria (0.6%)
Algeria Tranche 1 Loan Assignment, 6.625% due 9/4/06+ .... USD 1,050,000 535,500 0.6
Argentina (2.2%)
Republic of Argentina:
Discount Bond, 6.625% due 3/31/23+ ..................... USD 1,425,000 970,781 1.1
Par Bond Series L, 5.75% (6% at 3/31/99) due
3/31/23++ ............................................. USD 875,000 608,125 0.7
I.O. Strip, 12.11% due 4/10/05 ......................... USD 350,000 308,000 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Brazil (0.6%)
Brazil Floating Rate Discount Note, 6.125% due
4/15/24+ ................................................ USD 845,000 $ 502,247 0.6
Bulgaria (1.1%)
Republic of Bulgaria:
Discount Bond Series A, 6.6875% due 7/28/24 - Euro+ .... USD 771,000 541,628 0.6
Front Loaded Interest Reduction Bond Series A, 2.5%
(2.75% at 7/99) due 7/28/12++ ......................... USD 760,000 419,900 0.5
Colombia (0.5%)
Republic of Colombia:
8.625% due 4/1/08{j} ................................... USD 472,000 370,520 0.4
7.27% due 6/15/03 - 144A{.} ............................ USD 59,000 48,085 0.1
Mexico (4.4%)
United Mexican States:
Discount Bond Series D, 6.6016% due 12/31/19+ .......... USD 1,570,000 1,225,581 1.4
Discount Bond Series C, 6.6172% due 12/31/19+ +/+ ...... USD 1,353,000 1,056,186 1.2
9.875% due 1/15/07 ..................................... USD 575,000 546,969 0.6
6.63% due 12/31/19 ..................................... FRF 3,000,000 420,666 0.5
Discount Bond Series A, 6.1156% due 12/31/19+ +/+ ...... USD 412,000 321,618 0.4
Discount Bond Series B, 6.47656% due 12/31/19+ +/+ ..... USD 375,000 292,734 0.3
Panama (0.4%)
Republic of Panama:
Interest Reduction Bond, 4% (4.25% at 7/99) due
7/17/14++ ............................................. USD 370,000 270,794 0.3
8.875% due 9/30/27 ..................................... USD 67,000 61,808 0.1
Peru (0.7%)
Republic of Peru, Past Due Interest Bond, 4% (4.5% at
3/8/99) due 3/7/17++ .................................... USD 1,116,000 641,700 0.7
Poland (0.5%)
3% (3.5% at 10/28/99) due 10/27/24 - Euro++ ............ USD 685,000 455,525 0.5
Past Due Interest Bond, 5% (6% at 10/28/99)
due 10/27/14 - Euro++ ................................. USD 2,000 1,819 --
Russia (0.2%)
Bank for Foreign Economic Affairs (Venesheconombank)
Principal Loans, 6.625% due 12/15/20+ ................... USD 2,717,360 215,690 0.2
-----------
Total Government & Government Agency Obligations (cost
$11,677,186) ................................................ 9,815,876
-----------
Corporate Bonds (4.0%)
Argentina (1.5%)
Telefonica de Argentina, 9.125% due 5/7/08 - Reg S{c} .... USD 1,504,000 1,305,649 1.5
Brazil (1.3%)
Banco Hipotecario Espana, 10% due 4/17/03 - 144A{.} ...... USD 710,000 624,800 0.7
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ......... USD 1,042,000 468,900 0.5
Globo Comunicacoes Participacoes, 10.625% due 5/12/08 -
144A{.} ................................................. USD 125,000 71,563 0.1
Colombia (0.1%)
Financiera Energia Nacional, 9.375% due 6/15/06 - Reg
S{c} .................................................... USD 148,000 108,528 0.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Korea (0.1%)
Pohang Iron & Steel, 2% due 10/9/00 ...................... JPY 5,500,000 $ 40,886 0.1
Mexico (0.6%)
Petroleos Mexicanos (PEMEX), 9.25% due 3/30/18 -
144A{.} ................................................. USD 360,000 293,400 0.3
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ......... USD 210,000 165,900 0.2
Banco Nacional Comercio Exte., 8% due 7/18/02 - Reg
S{c} .................................................... USD 97,000 88,513 0.1
Russia (0.4%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ................................................. USD 851,000 310,615 0.4
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ....... USD 5,000 875 --
-----------
Total Corporate Bonds (cost $4,998,295) ...................... 3,479,629
-----------
Structured Notes (0.4%)
Korea (0.4%)
Fixed Rate Trust Certificate 13.55% due 2/15/02[::]
(Issued by a newly created Delaware Business Trust,
collateralized by triple A paper. This trust certificate
has a credit risk component linked to the value of a
referenced security: Korean Development Bank, 1.875%
2002.) (cost $470,000) .................................. USD 470,000 343,805 0.4
----------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $17,145,481) ............ 13,639,310 15.6
----------- -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Merrill Lynch - Kospi 200 Call Warrants, due 9/9/99
Performance linked to equity securities. Redemption amount
100% of the final closing price of the Korean Kospi 200
Index converted to the prevailing foreign exchange rate.
(cost $2,495,011) ......................................... US 765,294 2,571,541 2.9
----------- -----
INVESTMENT MANAGEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Dated October 30, 1998, with State Street Bank & Trust Co.,
due November 2, 1998, for an effective yield of 5.30%,
collateralized by $4,145,000 U.S. Treasury Notes, 6.50% due
5/15/05 (market value of collateral is $4,750,253,
including accrued interest). (cost $4,653,000) ............ $ 4,653,000 5.3
----------- -----
TOTAL INVESTMENTS (cost $117,236,708) * ..................... 90,220,411 102.9
Other Assets and Liabilities ................................. (2,519,957) (2.9)
----------- -----
NET ASSETS ................................................... $87,700,454 100.0
----------- -----
----------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{*} Security denominated in Hong Kong Dollars.
{\/} U.S. currency denominated.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{=} Each unit represents one preferred share of Unibanco and one
preferred "B" share of Unibanco Holdings.
(::) Valued in good faith at fair value using procedures approved by the
Board of Trustees (See Note 1 of Notes to Financial Statements).
[::] Certain events may cause the contract to terminate prior to date
shown.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
+ The coupon rate shown on floating rate note represents the rate at
period end.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{j} All or part of the Fund's holdings in this security is segregated
as collateral for extended settlement of derivative instruments.
(See Note 1 of Notes to the Financial Statements).
* For Federal income tax purposes, cost is $118,742,569 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 3,055,324
Unrealized depreciation: (31,577,482)
-------------
Net unrealized depreciation: $ (28,522,158)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1998, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 3.2 3.7 6.9
Algeria (ALG/DZD) .................... 0.6 0.6
Brazil (BRZL/BRL) .................... 14.2 1.9 16.1
Bulgaria (BUL/LEV) ................... 1.1 1.1
Chile (CHLE/CLP) ..................... 2.3 2.3
China (CHNA/RMB) ..................... 1.3 1.3
Colombia (COL/COP) ................... 0.6 0.6
Egypt (EGPT/EGP) ..................... 5.7 5.7
Greece (GREC/GRD) .................... 5.8 5.8
Hungary (HGRY/HUF) ................... 3.6 3.6
India (IND/INR) ...................... 6.2 6.2
Ireland (IRE/IEP) .................... 0.6 0.6
Israel (ISRL/ILS) .................... 4.2 4.2
Kazakhstan (KAZ/KTS) ................. 0.1 0.1
Korea (KOR/KRW) ...................... 0.5 0.5
Mexico (MEX/MXN) ..................... 11.3 5.0 16.3
Morocco (MOR/MAD) .................... 0.7 0.7
Pakistan (PAK/PKR) ................... 0.1 0.1
Panama (PAN/PND) ..................... 0.4 0.4
Peru (PERU/PES) ...................... 2.3 0.7 3.0
Poland (POL/PLZ) ..................... 1.3 0.5 1.8
Russia (RUS/SUR) ..................... 0.4 0.6 1.0
South Africa (SAFR/ZAR) .............. 6.9 6.9
Sri Lanka (SLNKA/LKR) ................ 0.2 0.2
Taiwan (TWN/TWD) ..................... 5.9 5.9
Turkey (TRKY/TRL) .................... 2.8 2.8
United States (US/USD) ............... 2.9 2.4 5.3
------ ----- --- -----
Total ............................... 79.1 18.5 2.4 100.0
------ ----- --- -----
------ ----- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $87,700,454.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
OCTOBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
(U.S. CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: DOLLARS) PRICE DATE DEPRECIATION
- ---------------------------------------- ------------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 39,670 118.80000 11/27/98 $ (950)
------------- ---------------
Total Contract to Sell (Receivable
amount $38,720)...................... 39,670 (950)
------------- ---------------
THE VALUE OF CONTRACT TO SELL AS
PERCENTAGE OF NET ASSETS IS 0.05%.
Total Open Forward Foreign Currency
Contract............................... $ (950)
---------------
---------------
</TABLE>
- --------------
See Note 1 of Notes to the Financial Statements.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $117,236,708) (Note 1).......................... $ 90,220,411
U.S. currency................................................................... $ 895
Foreign currencies (cost $730,519).............................................. 723,408 724,303
--------
Receivable for securities sold............................................................ 903,099
Interest receivable....................................................................... 424,599
Dividends receivable...................................................................... 268,551
Unamortized organizational costs (Note 1)................................................. 14,557
Receivable for Fund shares sold........................................................... 5,619
-------------
Total assets............................................................................ 92,561,139
-------------
Liabilities:
Payable for securities purchased.......................................................... 3,823,511
Payable for Fund shares repurchased....................................................... 394,946
Payable for investment management and administration fees (Note 2)........................ 356,752
Payable for service and distribution expenses (Note 2).................................... 96,087
Payable for professional fees............................................................. 49,710
Payable for transfer agent fees (Note 2).................................................. 30,788
Payable for Trustees' fees and expenses (Note 2).......................................... 25,309
Payable for custodian fees................................................................ 10,081
Payable for registration and filing fees.................................................. 7,596
Payable for printing and postage expenses................................................. 6,093
Payable for open forward foreign currency contracts (Note 1).............................. 950
Payable for fund accounting fees (Note 2)................................................. 883
Other accrued expenses.................................................................... 57,979
-------------
Total liabilities....................................................................... 4,860,685
-------------
Net assets.................................................................................. $ 87,700,454
-------------
-------------
Class A:
Net asset value and redemption price per share ($87,517,225 DIVIDED BY 11,616,154 shares
outstanding)............................................................................... $ 7.53
-------------
-------------
Maximum offering price per share (100/95.25 of $7.53) *..................................... $ 7.91
-------------
-------------
Class B:+
Net asset value and offering price per share ($153,941 DIVIDED BY 20,565 shares
outstanding)............................................................................... $ 7.49
-------------
-------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($29,288 DIVIDED
BY 3,877 shares outstanding)............................................................... $ 7.55
-------------
-------------
Net assets consist of:
Paid in capital (Note 4).................................................................. $ 250,014,000
Undistributed net investment income....................................................... 1,105,906
Accumulated net realized loss on investments and foreign currency transactions............ (136,393,263)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (9,892)
Net unrealized depreciation of investments................................................ (27,016,297)
-------------
Total -- representing net assets applicable to capital shares outstanding................... $ 87,700,454
-------------
-------------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Year ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income............................................................................ $ 5,875,109
Dividend income (net of foreign withholding tax of $263,295)............................... 4,212,609
Securities lending income.................................................................. 241,088
------------
Total investment income.................................................................. 10,328,806
------------
Expenses:
Investment management and administration fees (Note 2)..................................... 1,740,733
Transfer agent fees (Note 2)............................................................... 538,250
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 454,554
Class B.................................................................... 1,576 456,130
------------
Professional fees.......................................................................... 360,255
Interest expense (Note 1).................................................................. 359,635
Printing and postage expenses.............................................................. 312,740
Custodian fees............................................................................. 155,690
Registration and filing fees............................................................... 96,900
Amortization of organization costs (Note 1)................................................ 70,755
Fund accounting fees (Note 2).............................................................. 53,782
Trustees' fees and expenses (Note 2)....................................................... 30,660
Other expenses............................................................................. 17,000
------------
Total expenses before reductions......................................................... 4,192,530
------------
Expenses reimbursed by A I M Advisors, Inc. (Note 2)................................... (691,157)
Expense reductions (Note 5)............................................................ (41,663)
------------
Total net expenses....................................................................... 3,459,710
------------
Net investment income........................................................................ 6,869,096
------------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (81,224,308)
Net realized loss on foreign currency transactions........................... (2,134,815)
------------
Net realized loss during the year........................................................ (83,359,123)
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... 197,153
Net change in unrealized depreciation of investments......................... 13,544,276
------------
Net unrealized appreciation during the year.............................................. 13,741,429
------------
Net realized and unrealized loss on investments and foreign currencies....................... (69,617,694)
------------
Net decrease in net assets resulting from operations......................................... $(62,748,598)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997 DECEMBER 31, 1996
---------------- ---------------- -----------------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income....................................... $ 6,869,096 $ 9,089,483 $ 19,406,553
Net realized gain (loss) on investments and foreign currency
transactions............................................... (83,359,123) 45,653,300 945,154
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign
currencies................................................. 197,153 (297,303) 91,835
Net change in unrealized appreciation (depreciation) of
investments................................................ 13,544,276 (101,078,671) 78,628,364
---------------- ---------------- -----------------
Net increase (decrease) in net assets resulting from
operations............................................... (62,748,598) (46,633,191) 99,071,906
---------------- ---------------- -----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.................................. (11,841,080) -- (17,407,047)
Class B:
Distributions to shareholders: (Note 1)
From net investment income.................................. (1,499) -- --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income.................................. (46) -- --
---------------- ---------------- -----------------
Total distributions....................................... (11,842,625) -- (17,407,047)
---------------- ---------------- -----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested............ 13,579,722 -- --
Decrease from capital shares repurchased.................... (308,667,233) -- --
---------------- ---------------- -----------------
Net increase (decrease) from capital share transactions... (295,087,511) -- --
---------------- ---------------- -----------------
Total increase (decrease) in net assets....................... (369,678,734) (46,633,191) 81,664,859
Net assets:
Beginning of period......................................... 457,379,188 504,012,379 422,347,520
---------------- ---------------- -----------------
End of period *............................................. $ 87,700,454 $ 457,379,188 $504,012,379
---------------- ---------------- -----------------
---------------- ---------------- -----------------
* Includes undistributed net investment income of............ $ 1,105,906 $ 8,645,635 $ 363,782
---------------- ---------------- -----------------
---------------- ---------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------------------
YEAR TEN MONTHS YEAR ENDED JANUARY 11, 1994
ENDED ENDED DECEMBER 31, (COMMENCEMENT
OCTOBER 31, OCTOBER 31, --------------------- OF OPERATIONS) TO
1998 (D) 1997 (E) 1996 (E) 1995 (E) DECEMBER 31, 1994(E)
----------- ----------- --------- --------- --------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
----------- ----------- --------- --------- -----------
Income from investment operations:
Net investment income................. 0.39*{/\} 0.25 0.53 0.72 0.35
Net realized and unrealized gain
(loss) on investments................ (5.10) (1.53) 2.19 (0.84) (2.46)
----------- ----------- --------- --------- -----------
Net increase (decrease) from
investment operations.............. (4.71) (1.28) 2.72 (0.12) (2.11)
----------- ----------- --------- --------- -----------
Redemption fees retained (Note 4)..... 0.28 -- -- -- --
----------- ----------- --------- --------- -----------
Distributions to shareholders:
From net investment income............ (0.60) -- (0.48) (0.72) (0.35)
From net realized gain on
investments.......................... -- -- -- -- (0.10)
----------- ----------- --------- --------- -----------
Total distributions................. (0.60) -- (0.48) (0.72) (0.45)
----------- ----------- --------- --------- -----------
Net asset value, end of period.......... $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
----------- ----------- --------- --------- -----------
----------- ----------- --------- --------- -----------
Market value, end of period............. N/A $ 11.81 $ 11.63 $ 9.75 $ 9.75
----------- ----------- --------- --------- -----------
----------- ----------- --------- --------- -----------
Total investment return (based on market
value)................................. N/A 1.62%(b) 24.18% 6.60% (32.16)% (b)
Total investment return (based on net
asset value)........................... (37.09)% (c) (9.25)%(b) 23.59% (0.95)% (14.07)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $87,517 $457,379 $504,012 $422,348 $452,872
Ratio of net investment income to
average net assets:
With expense reductions and
reimbursement (Notes 2 & 5).......... 3.84% 2.03%(a) 4.07% 6.33% 2.75% (a)
Without expense reductions and
reimbursement........................ 3.43% 1.95%(a) 4.04% 6.30% 2.75% (a)
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and
reimbursement (Notes 2 & 5).......... 1.73% 1.75%(a) 1.82% 1.77% 2.01% (a)
Without expense reductions and
reimbursement........................ 2.14% 1.83%(a) 1.85% 1.80% 2.01% (a)
Ratio of interest expense to average net
assets (Note 1)+++..................... 0.20% N/A N/A N/A N/A
Portfolio turnover rate+++.............. 111% 184%(a) 138% 75% 56% (a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
(e) These financial highlights provide per share information of G.T.
Global Developing Markets Fund, Inc. ("Predecessor Fund") (See Note 1
to Notes to Financial Statements) for the periods up to and including
October 31, 1997. The fees and expenses of the Fund differ from those
of the Predecessor Fund.
{/\} Net investment income per share reflects an interest payment received
from the conversion of Vnesheconombank loan agreements of $0.14 per
share for Class A, B, and Advisor.
* Before reimbursement the net investment income per share would have
been reduced by $0.04 for Class A, B, and Advisor.
+ All capital shares issued and outstanding on October 31, 1997 were
reclassified as Class A shares.
++ Commencing November 1, 1997, the Fund began offering Class B and
Advisor Class shares.
+++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR
CLASS B++ CLASS++
----------- -----------
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1998 (D) 1998 (D)
----------- -----------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $12.56 $12.56
----------- -----------
Income from investment operations:
Net investment income................. 0.31*{/\} 0.40*{/\}
Net realized and unrealized gain
(loss) on investments................ (5.07) (5.09)
----------- -----------
Net increase (decrease) from
investment operations.............. (4.76) (4.69)
----------- -----------
Redemption fees retained (Note 4)..... 0.28 0.28
----------- -----------
Distributions to shareholders:
From net investment income............ (0.59) (0.60)
From net realized gain on
investments.......................... -- --
----------- -----------
Total distributions................. (0.59) (0.60)
----------- -----------
Net asset value, end of period.......... $ 7.49 $ 7.55
----------- -----------
----------- -----------
Total investment return (based on net
asset value)........................... (39.76)% (c) (42.63)% (c)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 154 $ 29
Ratio of net investment income to
average net assets:
With expense reductions and
reimbursement (Notes 2 & 5).......... 3.09% 4.09%
Without expense reductions and
reimbursement........................ 2.68% 3.68%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and
reimbursement (Notes 2 & 5).......... 2.48% 1.48%
Without expense reductions and
reimbursement........................ 2.89% 1.89%
Ratio of interest expense to average net
assets (Note 1)+++..................... 0.20% 0.20%
Portfolio turnover rate+++.............. 111% 111%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
{/\} Net investment income per share reflects an interest payment received
from the conversion of Vnesheconombank loan agreements of $0.14 per
share for Class A, B, and Advisor.
* Before reimbursement the net investment income per share would have
been reduced by $0.04 for Class A, B, and Advisor.
+ All capital shares issued and outstanding on October 31, 1997 were
reclassified as Class A shares.
++ Commencing November 1, 1997, the Fund began offering Class B and
Advisor Class shares.
+++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO
FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Developing Markets Fund (the "Fund"), formerly GT Global Developing Markets
Fund, is a separate series of AIM Investment Funds (the "Trust"), formerly G.T.
Investment Funds, Inc. The Trust is organized as a Delaware business trust and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as an open-end management investment company. The Trust has thirteen series of
shares in operation, each series corresponding to a distinct portfolio of
investments.
On October 31, 1997, at the close of business, the Fund acquired the assets and
assumed the liabilities of G.T. Global Developing Markets Fund, Inc., a Maryland
corporation registered under the 1940 Act as a non-diversified closed-end
management investment company ("Predecessor Fund"), in exchange for Class A
shares of the Fund in a tax-free reorganization of the Predecessor Fund.
Shareholders of the Predecessor Fund approved the reorganization on October 20,
1997. Prior to October 28, 1997, the Predecessor Fund's shares traded on the New
York Stock Exchange.
Commencing November 1, 1997, the Fund offers Class A, Class B, and Advisor Class
shares, each of which has equal rights as to assets and voting privileges except
that Class A and Class B each has exclusive voting rights with respect to its
distribution plan. Investment income, realized and unrealized capital gains and
losses, and the common expenses of the Fund are allocated on a pro rata basis to
each class based on the relative net assets of each class to the total net
assets of the Fund. Each class of shares differs in its respective service and
distribution expenses, and may differ in its transfer agent, registration, and
certain other class-specific fees and expenses.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by A I M Advisors, Inc. (the
"Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities of comparative maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost, adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
<PAGE>
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection of income on securities, income is
recorded net of all withholding tax with any rebate recorded when received. The
Fund may trade securities on other than normal settlement terms. This may
increase the market risk if the other party to the transaction fails to deliver
and causes the Fund to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1998, stocks with an aggregate value of approximately $8,703,342
were on loan to brokers. The loans were secured by cash collateral of $8,903,149
received by the Fund. For the year ended October 31, 1998, the Fund received
securities lending income of $241,088.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of each loan. The cash collateral is
invested in a securities lending trust which consists
<PAGE>
of a portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$134,888,352 of which $54,472,976 expires in 2003 and $80,415,376 expires in
2006.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has purchased and sold when-issued securities during the period and has set
aside liquid securities as collateral for these commitments.
(P) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with each of BankBoston and State Street Bank and
Trust Company. The arrangements with the banks allow the Fund and certain other
Funds to borrow, on a first come, first serve basis, an aggregate maximum amount
of $250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of
the Fund's total assets. On October 31, 1998, the Fund had no loans outstanding.
For the year ended October 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $7,855,160, with a weighted average interest rate of 6.29%. Interest expense
for the year ended October 31, 1998 was $308,816. Other interest expense charges
amounted to $50,819.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator and INVESCO
(NY), Inc., (formerly, Chancellor LGT Asset Management, Inc.) is the Fund's
investment sub-advisor and sub-administrator. As of the close of business on May
29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT")
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, is the Fund's distributor as of the close of business
on May 29, 1998. The Trust was reorganized from a Maryland corporation into a
Delaware business trust on September 8, 1998. Finally, as of the close of
business on September 4, 1998, A I M Fund Services, Inc. ("AFS"), an affiliate
of the Manager and AIM Distributors, replaced GT Global Investor Services, Inc.
("GT Services") as the transfer agent of the Fund.
The Fund pays the Manager investment management and administration fees at the
annualized rate of 0.975% on the first $500 million of average daily net assets
of the Fund; 0.95% on the next $500 million; 0.925% on the next $500 million and
0.90% on amounts thereafter. These fees are computed daily and paid monthly.
AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the Fund's distributor. The Fund offers
Class A, Class B, and Advisor Class shares for purchase.
<PAGE>
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended October 31, 1998, AIM Distributors and GT
Global retained sales charges of $819 and $0, respectively. Purchases of Class A
shares exceeding $1,000,000 may be subject to a contingent deferred sales charge
("CDSC") upon redemption, in accordance with the Fund's current prospectus. AIM
Distributors and GT Global collected CDSCs for the year ended October 31, 1998
of $2,664 and $0, respectively. AIM Distributors also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors, from its own resources, pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended October 31, 1998, AIM Distributors and GT
Global collected CDSCs in the amount of $1,588 and $0, respectively. In
addition, AIM Distributors makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors up to an annualized rate of 0.50% of the average
daily net assets of the Fund's Class A shares. Class A shares issued as a result
of the conversion of shares from the Predecessor Fund are limited to 0.25% of
the average daily net assets of the Fund's Class A shares. Under the Class B
Plan, the Fund compensates AIM Distributors at an annualized rate of 1.00% of
the average daily net assets of the Fund's Class B shares.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial institutions are calculated at the annual rate of
0.25% of the average daily net asset value of those Fund shares that are held in
such institution's customers' accounts that were purchased on or after a
prescribed date set forth in the Plans.
The Manager and AIM Distributors voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by the waivers by
the Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 per shareholder accounts that are open
during any monthly period (this fee includes all out-of-pocket expenses), and an
annualized fee of $0.70 per shareholder account that is closed during any
monthly period. Both fees shall be billed by AFS monthly in arrears on a
prorated basis of 1/12 of the annualized fee for all such accounts.
For the period November 1, 1997 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
also was reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
<PAGE>
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services paid to the Manager is a percentage, not to exceed 0.03%
annually, of the Fund's average daily net assets. The annual fee rate is derived
based on the aggregate net assets of the funds which comprise the following
investment companies: AIM Growth Series, AIM Investment Funds, AIM Investment
Portfolios, AIM Series Trust, G.T. Global Variable Investment Series and G.T.
Global Variable Investment Trust. The fee is calculated at the rate of 0.03% of
the first $5 billion of assets and 0.02% to the assets in excess of $5 billion.
An amount is allocated to and paid by each such fund based on its relative
average daily net assets.
The Trust pays each Trustee who is not an employee, officer or director of the
Manager, or any other affiliated company, $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $202,780,180 and $438,952,561, respectively. For the
year ended October 31, 1998, purchases and sales of U.S. government obligations
aggregated $0 and $7,170,550, respectively.
4. CAPITAL SHARES
At October 31, 1998, there were 6,000,000,000 shares of the Trust's common stock
authorized, at $0.0001 par value. Of this amount, 400,000,000 were classified as
shares of the AIM Global Telecommunications Fund; 400,000,000 were classified as
shares of AIM Global Government Income Fund; 200,000,000 were classified as
shares of AIM Global Health Care Fund; 200,000,000 were classified as shares of
AIM Strategic Income Fund; 200,000,000 were classified as shares of AIM
Developing Markets Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of AIM Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of AIM Latin
American Growth Fund; 200,000,000 were classified as shares of AIM Emerging
Markets Fund; 200,000,000 were classified as shares of AIM Emerging Markets Debt
Fund; 200,000,000 were classified as shares of AIM Global Financial Services
Fund; 200,000,000 were classified as shares of AIM Global Resources Fund;
200,000,000 were classified as shares of AIM Global Infrastructure Fund;
200,000,000 were classified as shares of AIM Global Consumer Products and
Services Fund. The shares of each of the foregoing series of the Trusts were
divided equally into two classes, designated Class A and Class B common stock.
With respect to the issuance of Advisor Class shares, 100,000,000 shares were
classified as shares of each of the fifteen series of the Trusts and designated
as Advisor Class common stock. 1,100,000,000 shares remain unclassified.
Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1998
--------------------------
CLASS A SHARES AMOUNT
- -------------------------------------------------- ----------- -------------
<S> <C> <C>
Shares sold....................................... 486,628 $ 5,011,027
Shares issued in connection with reinvestment of
distributions................................... 676,257 8,203,222
----------- -------------
1,162,885 13,214,249
Shares repurchased including those purchased in
connection with open ending of the Fund on
11/1/97*........................................ (25,963,398) (308,568,937)
----------- -------------
Net decrease...................................... (24,800,513) $(295,354,688)
----------- -------------
----------- -------------
<CAPTION>
CLASS B
- --------------------------------------------------
<S> <C> <C>
Shares sold....................................... 30,654 $ 314,666
Shares issued in connection with reinvestment of
distributions................................... 124 1,499
----------- -------------
30,778 316,165
Shares repurchased................................ (10,213) (89,300)
----------- -------------
Net increase...................................... 20,565 $ 226,865
----------- -------------
----------- -------------
<CAPTION>
ADVISOR CLASS
- --------------------------------------------------
<S> <C> <C>
Shares sold....................................... 4,782 $ 49,262
Shares issued in connection with reinvestment of
distributions................................... 4 46
----------- -------------
4,786 49,308
Shares repurchased................................ (909) (8,996)
----------- -------------
Net increase...................................... 3,877 $ 40,312
----------- -------------
----------- -------------
</TABLE>
- --------------
* The redemption amount for Class A is net of a 2% redemption fee of $4,945,536
incurred in the period from November 1, 1997 to May 1, 1998 in connection with
redemptions upon the open ending of the Fund.
<PAGE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended October 31, 1998, the Fund's
expenses were reduced by $41,663 under these arrangements.
6. ADDITIONAL INFORMATION
The Board of Trustees of AIM Investment Funds unanimously approved, on September
23, 1998, a Plan of Reorganization and Termination ("Plan") pursuant to which
AIM Emerging Markets Fund ("Emerging Markets Fund") would transfer substantially
all of its assets to the Fund. As a result of the transaction, shareholders of
the Emerging Markets Fund would receive shares of the Fund in exchange for their
shares of Emerging Markets Fund, and Emerging Markets Fund would cease
operations.
The Plan requires the approval of Emerging Markets Fund shareholders and will be
submitted to the shareholders for their consideration at a meeting to be held in
February 1999. If the Plan is approved by shareholders of Emerging Markets Fund
and certain conditions required by the Plan are satisfied, the transaction is
expected to become effective before the end of February 1999.
7. SUBSEQUENT EVENT (UNAUDITED)
Effective December 14, 1998, sub-advisory and sub-administration responsibility
for the Fund was transferred from INVESCO (NY), Inc. to INVESCO Asset Management
Ltd., another indirect wholly-owned subsidiary of AMVESCAP PLC. A I M Advisors,
Inc. will continue to serve as the manager and administrator of the Fund. The
transfer will not change the fees paid by A I M Advisors, Inc. for sub-advisory
services and will not change the nature of the sub-advisory services provided to
the Fund or the personnel providing such services.
8. PROXY RESULTS (UNAUDITED)
The Special Meeting of Shareholders of the G.T. Investment Funds, Inc. now known
as AIM Investment Funds (the "Trust") was held on May 20, 1998 at the Trust's
offices, 50 California Street, 26th Floor, San Francisco, California. The
meeting was held for the following purposes:
(1) To elect Directors as follows: C. Derek Anderson, Frank S. Bayley, William
J. Guilfoyle, Arthur C. Patterson, Ruth H. Quigley.
(2) To approve a new Investment Management and Administration Contract and
Sub-Advisory and Sub-Administration Contract with respect to each series of
the Trust (each, a "Fund," and collectively, the "Funds").
(3) To approve replacement Rule 12b-1 plans of distribution with respect to
Class A and B Shares of the Fund.
(4) To approve changes to the fundamental investment restrictions of the Fund.
(5) To approve an agreement and plan of conversion and termination for the
Trust.
(6) To ratify the selection of Coopers & Lybrand L.L.P., now known as
PricewaterhouseCoopers LLP, as the Trust's independent public accountants.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
VOTES WITHHELD/
TRUSTEE/MATTER VOTES FOR AGAINST ABSTENTIONS
------------------------------------------------------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
(1) C. Derek Anderson........................................... 191,685,088 N/A 13,123,292
Frank S. Bayley............................................. 191,766,811 N/A 13,041,568
William J. Guilfoyle........................................ 191,828,959 N/A 12,979,420
Arthur C. Patterson......................................... 191,845,270 N/A 12,963,109
Ruth H. Quigley............................................. 191,869,887 N/A 12,938,492
(2)(a) Approval of investment management and administration
contract................................................... 6,214,229 523,624 2,414,013*
(2)(b) Approval of sub-advisory and sub-administration contract.... 6,165,338 552,219 2,434,309*
(3) Approval of replacement Rule 12b-1 plans of distribution
CLASS A SHARES.............................................. 7,788,067 720,705 624,489
CLASS B SHARES.............................................. 15,702 N/A N/A
(4)(a) Modification of Fundamental Restriction on Concentration.... 6,156,539 548,114 2,447,213*
(4)(b) Modification of Fundamental Restrictions on Issuing Senior
Securities and Borrowing Money............................. 6,156,539 548,114 2,447,213*
(4)(c) Modification of Fundamental Restriction on Making Loans..... 6,156,539 548,114 2,447,213*
(4)(d) Modification of Fundamental Restriction on Underwriting
Securities................................................. 6,156,539 548,114 2,447,213*
(4)(e) Modification of Fundamental Restriction on Real Estate
Investments................................................ 6,156,539 548,114 2,447,213*
(4)(f) Modification of Fundamental Restriction on Investing in
Commodities................................................ 6,154,943 549,710 2,447,213*
(4)(g) Elimination of Fundamental Restriction on Margin
Transactions............................................... 6,154,943 549,710 2,447,213*
(4)(h) Elimination of Fundamental Restriction on Selling Securities
Short...................................................... 6,151,293 553,360 2,447,213*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VOTES WITHHELD/
TRUSTEE/MATTER VOTES FOR AGAINST ABSTENTIONS
------------------------------------------------------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
(4)(i) Approval of New Fundamental Investment Policy Regarding
Investment of All of Each Fund's in an Open-End Fund....... 6,156,539 548,114 2,447,213*
(5) Approval of an agreement and plan of conversion and
termination with respect to the Company.................... 190,027,469 6,362,084 94,055,040*
(6) Ratification of the selection of Coopers and Lybrand L.L.P.,
now known as PricewaterhouseCoopers LLP, as the Trust's
Independent Public Accountants............................. 191,358,779 2,114,168 11,333,063
</TABLE>
- ------------------------
* Includes Broker Non-Votes
- ------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the fiscal year ended October 31, 1998, the amount of income received by the
Fund from sources within foreign countries and possessions of the United States
was $.852 per share (representing a total of $9,916,743). The amount of taxes
paid by the Fund to such countries for the fiscal year ended October 31, 1998
was $.03 per share (representing a total of $349,544). The following table
provides a breakdown by country of ordinary income dividends and foreign taxes
paid by the Fund during the fiscal year ended October 31, 1998:
<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- --------------------------------------------------------------------------------------- -------------- ------------------
<S> <C> <C>
Argentina.............................................................................. 4.34 --
Brazil................................................................................. 12.10 14.33
Bulgaria............................................................................... 1.54 --
Chile.................................................................................. 2.38 18.66
China.................................................................................. 1.81 --
Egypt.................................................................................. 9.02 1.18
Israel................................................................................. 1.43 8.94
Malaysia............................................................................... 0.50 2.33
Mexico................................................................................. 6.32 --
Pakistan............................................................................... 1.37 1.19
Peru................................................................................... 1.90 --
Philippines............................................................................ 0.35 1.26
Russia................................................................................. 34.21 --
South Africa........................................................................... 5.64 --
Taiwan................................................................................. 0.44 3.86
Thailand............................................................................... 0.07 33.73
Turkey................................................................................. 1.75 --
Various................................................................................ 8.45 2.62
-------------- --------
93.62 88.10
Nonqualifying.......................................................................... 1.54 11.90
United States.......................................................................... 4.84 --
-------------- --------
100.00% 100.00%
-------------- --------
-------------- --------
</TABLE>
Information needed by shareholders to prepare their 1998 federal income tax
return will be provided with the annual 1099 information in January 1999.
<PAGE>
BOARD OF TRUSTEES
C. Derek Anderson
President, Plantagenet Capital
Management, LLC (an investment
partnership); Chief Executive Officer,
Plantagenet Holdings, Ltd.
(an investment banking firm)
Frank S. Bayley
Partner, law firm of
Baker & McKenzie
Robert H. Graham
President and Chief Executive Officer,
A I M Management Group Inc.
Arthur C. Patterson
Managing Partner, Accel Partners
(a venture capital firm)
Ruth H. Quigley
Private Investor
OFFICERS
Robert H. Graham
Chairman and President
Helge K. Lee
Vice President & Secretary
Dana R. Sutton
Vice President & Assistant Treasurer
Kenneth W. Chancey
Vice President &
Principal Accounting Officer
John J. Arthur
Vice President
Melville B. Cox
Vice President
Gary T. Crum
Vice President
Carol F. Relihan
Vice President
David P. Hess
Assistant Secretary
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Pamela Ruddock
Assistant Treasurer
Paul Wozniak
Assistant Treasurer
OFFICE OF THE FUND
11 Greenway Plaza
Suite 100
Houston, TX 77046
INVESTMENT MANAGER
A I M Advisors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
SUB-ADVISOR
INVESCO Asset Management
11 Devonshire Square
London EC2M 4YR
England
TRANSFER AGENT
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
COUNSEL TO THE FUND
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
COUNSEL TO THE TRUSTEES
Paul, Hastings, Janofsky & Walker LLP
Twenty Third Floor
555 South Flower Street
Los Angeles, CA 90071
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
AUDITORS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
<PAGE>
THE AIM FAMILY OF FUNDS-REGISTERED TRADEMARK-
A I M MANAGEMENT GROUP INC. HAS PROVIDED LEADERSHIP IN THE MUTUAL FUND
INDUSTRY SINCE 1976 AND MANAGED APPROXIMATELY $91 BILLION IN ASSETS FOR MORE
THAN 5.5 MILLION SHAREHOLDERS, INCLUDING INDIVIDUAL INVESTORS, CORPORATE
CLIENTS, AND FINANCIAL INSTITUTIONS, AS OF SEPTEMBER 30, 1998.
THE AIM FAMILY OF FUNDS-REGISTERED TRADEMARK- IS DISTRIBUTED NATIONWIDE, AND
AIM TODAY IS THE 11TH-LARGEST MUTUAL FUND COMPLEX IN THE U.S. IN ASSETS UNDER
MANAGEMENT, ACCORDING TO STRATEGIC INSIGHT, AN INDEPENDENT MUTUAL FUND
MONITOR.
GROWTH FUNDS
AIM Aggressive Growth Fund(1)
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Constellation Fund
AIM Mid Cap Equity Fund(2),(A)
AIM Select Growth Fund(3)
AIM Small Cap Growth Fund(2),(B)
AIM Small Cap Opportunities Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Basic Value Fund(2),(C)
AIM Charter Fund
INCOME FUNDS
AIM Floating Rate Fund(2)
AIM High Yield Fund
AIM High Yield Fund II
AIM Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
TAX-FREE INCOME FUNDS
AIM High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
MONEY MARKET FUNDS
AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
INTERNATIONAL GROWTH FUNDS
AIM Advisor International Value Fund
AIM Asian Growth Fund
AIM Developing Markets Fund(2)
AIM Emerging Markets Fund(2)
AIM Europe Growth Fund(2)
AIM European Development Fund
AIM International Equity Fund
AIM International Growth Fund(2)
AIM Japan Growth Fund(2)
AIM Latin American Growth Fund(2)
AIM New Pacific Growth Fund(2)
GLOBAL GROWTH FUNDS
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Worldwide Growth Fund(2)
Global Growth & Income Funds
AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
GLOBAL INCOME FUNDS
AIM Emerging Markets Debt Fund(2),(D)
AIM Global Government Income Fund(2)
AIM Global Income Fund
AIM Strategic Income Fund(2)
THEME FUNDS
AIM Global Consumer Products and Services Fund(2)
AIM Global Financial Services Fund(2)
AIM Global Health Care Fund(2)
AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2),(E)
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998.
(2) Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former
GT Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select
Growth Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed
AIM Mid Cap Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund
was renamed AIM Small Cap Growth Fund. (C) On September 8, 1998, AIM America
Value Fund was renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM
Global High Income Fund was renamed AIM Emerging Markets Debt Fund. (E) On
September 8, 1998, AIM New Dimension Fund was renamed AIM Global Trends Fund.
For more complete information about any AIM Fund(s), including sales charges
and expenses, ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money.
