<PAGE> 1
As filed with the Securities and Exchange Commission on December 15, 1998
Registration No. 333-68109
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. _1_ [X]
POST-EFFECTIVE AMENDMENT NO. ___ [ ]
(Check appropriate box or boxes)
----------------
AIM INVESTMENT FUNDS
(Exact name of Registrant as Specified in Charter)
11 GREENWAY PLAZA, SUITE 100, HOUSTON, TX 77046
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 626-1919
COPY TO:
Jeffrey H. Kupor, Esq. Arthur J. Brown, Esq.
A I M Advisors, Inc. R. Darrell Mounts, Esq.
11 Greenway Plaza, Suite 100 Kirkpatrick & Lockhart LLP
Houston, Texas 77046 1800 Massachusetts Avenue, N.W.,
(Name and Address of Agent for 2nd Floor
Service) Washington, D.C. 20036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THIS REGISTRATION STATEMENT
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
<PAGE> 2
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 3
NO FILING FEE IS REQUIRED BECAUSE, PURSUANT TO RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940, REGISTRANT HAS PREVIOUSLY REGISTERED AN
INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE,
PURSUANT TO A REGISTRATION STATEMENT ON FORM N-1A (FILE NO. 33-19338). THE
REGISTRANT WILL FILE A NOTICE UNDER RULE 24f-2 FOR ITS FISCAL YEAR ENDED OCTOBER
31, 1998 ON OR BEFORE JANUARY 29, 1999.
================================================================================
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a) UNDER THE SECURITIES ACT OF 1933)
<TABLE>
<CAPTION>
N-14 Item No. Location in
and Caption Prospectus/Proxy Statement
- ----------- --------------------------
<S> <C>
PART A
Item 1. Beginning of Registration Statement and Outside Front Cover Page
of Prospectus.......................................................... Cover Page of
Registration
Statement; Front Cover Page of
Prospectus
Item 2. Beginning and Outside Back Cover Page of Prospectus.................... Table of Contents
Item 3. Fee Table, Synopsis Information and Risk Factors....................... Synopsis; Risk Factors
Item 4. Information about the Transaction...................................... Reasons for the
Transaction;
Synopsis; Additional Information
About the Reorganization;
Capitalization; Appendix I
Item 5. Information about the Registrant....................................... Front Cover Page of
Prospectus;
Synopsis; Risk Factors;
Incorporation of Documents by
Reference in the Prospectus;
Comparison of Investment
Objectives and Policies; Financial
Highlights; Additional Information
about Developing Markets Fund and
Emerging Markets Fund; Appendix II
Item 6. Information about the Company Being Acquired........................... Front Cover Page of
Prospectus;
Incorporation of Documents by
Reference in the Prospectus;
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Comparison of Investment
Objectives and Policies, Financial
Highlights; Additional Information
about Developing Markets Fund and
Emerging Markets Fund
Item 7. Voting Information..................................................... Prospectus Cover Page;
Notice of
Meeting of Shareholders;
Introduction; Ownership of
Developing Markets Fund and
Emerging Markets Fund Shares
Item 8. Interest of Certain Persons and Experts................................ Not Applicable
Item 9. Additional Information Required for Reoffering by Persons Deemed
to be Underwriters.................................................... Not Applicable
<CAPTION>
PART B
Statement of Additional
Information Caption
-------------------
<S> <C>
Item 10. Cover Page............................................................ Cover Page of
Statement of
Additional Information
Item 11. Table of Contents..................................................... Not Applicable
Item 12. Additional Information about the Registrant........................... Statement of Additional
Information of AIM Developing
Markets Fund dated September 8,
1998
Item 13. Additional Information about the Company Being Acquired............... Not Applicable
Item 14. Financial Statements.................................................. Financial Statements as noted in
the Statement of Additional
Information
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE> 5
AIM DEVELOPING MARKETS FUND
AIM EMERGING MARKETS FUND
PORTFOLIOS OF AIM INVESTMENT FUNDS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION
(1999 Special Meeting of Shareholders of AIM Emerging Markets Fund)
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Combined Proxy Statement and Prospectus
dated December ___, 1998 of AIM Investment Funds (the "Company") for use in
connection with the Special Meeting of Shareholders of AIM Emerging Markets Fund
("Emerging Markets Fund") to be held on February ___, 1999. Copies of the
Combined Proxy Statement and Prospectus may be obtained at no charge by writing
the Company at the address shown above or by calling 1-800-347-4246.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement and Prospectus.
A Statement of Additional Information for the Company dated September
8, 1998, as supplemented on September 28, 1998, has been filed with the
Securities and Exchange Commission and is attached hereto as Appendix I which is
incorporated herein by this reference.
The date of this Statement of Additional Information is December ___,
1998.
TABLE OF CONTENTS
Appendix I - AIM Investment Funds Statement of Additional Information
Appendix II - AIM Developing Markets Fund Annual Report
Appendix III - AIM Emerging Markets Fund Annual Report
Appendix IV - Pro Forma Financial Statements
<PAGE> 6
AIM EMERGING MARKETS FUND
AIM DEVELOPING MARKETS FUND
PORTFOLIOS OF AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 347-4246
This Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-14 filed on November 30, 1998 (File No. 333-68109) hereby incorporates
by reference the Combined Proxy Statement and Prospectus and all other documents
filed with such Registration Statement.
<PAGE> 7
APPENDIX II
ANNUAL REPORT / OCTOBER 31 1998
AIM DEVELOPING MARKETS FUND
[Cover Artwork]
[AIM Logo]
Invest with DISCIPLINE--Registered Trademark--
<PAGE> 8
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
[Artwork] 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:
o 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.
o 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.
o 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.
o 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.
o 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.
o 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:
o 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.
o 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.
o 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> 9
ANNUAL REPORT / CHAIRMAN'S LETTER
[PHOTO OF CHARLES T. BAUER, CHAIRMAN
OF THE BOARD OF THE FUND APPEARS HERE.]
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:
o broad portfolio diversification, in which this Fund is part of a
complete investment strategy designed with your personal financial
goals in mind;
o realistic expectations, recognizing that the potential for downturns
is always present; and
o 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--.
WE INTEND TO CONTINUE
MANAGING YOUR FUND
WITH THE CAREFUL OVERSIGHT
AND DISCIPLINED
INVESTMENT STRATEGY
USED IN ALL AIM FUNDS.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
AIM DEVELOPING MARKETS FUND
<PAGE> 10
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 relative
ly 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> 11
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of October 31, 1998, based on total net assets
TOP 10 PORTFOLIO HOLDINGS
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
TOP 10 INDUSTRIES TOP 10 COUNTRIES
1. Services 20.2% 1. Mexico 16.3%
2. Finance 15.0 2. Brazil 16.1
3. Energy 9.7 3. South Africa 6.9
4. Consumer Non-Durables 9.5 4. Argentina 6.9
5. Materials/Basic Industry 8.3 5. India 6.2
6. Multi-Industry/Miscellaneous 6.7 6. Taiwan 5.9
7. Technology 4.3 7. Greece 5.8
8. Capital Goods 2.9 8. Egypt 5.7
9. Health Care 1.9 9. United States 5.3
10. Consumer Durables 0.6 10. Israel 4.2
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> 12
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>
MSCI Emerging IFC Investable
AIM Developing Markets Composite
Markets Fund Free Index 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
For periods ended October 31, 1998, including sales charges
CLASS A SHARES
Inception (1/11/94) -10.98%
1 year -40.09*
CLASS B SHARES
Inception (11/3/97) -42.63%**
ADVISOR CLASS SHARES
(sales charges do not apply)
Inception (11/3/97) -39.21%***
*-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> 13
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> 14
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 Russell 2000 Stock Index
with Monthly Dividends East Index with Dividends*
<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> 15
AIM DEVELOPING
MARKETS FUND
FINANCIAL
STATEMENTS
<PAGE> 16
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 L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 11, 1998
F1
<PAGE> 17
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.
F2
<PAGE> 18
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.
F3
<PAGE> 19
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.
F4
<PAGE> 20
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.
F5
<PAGE> 21
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.
F6
<PAGE> 22
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.
F7
<PAGE> 23
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.
F8
<PAGE> 24
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.
F9
<PAGE> 25
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.
F10
<PAGE> 26
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.
F11
<PAGE> 27
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.
F12
<PAGE> 28
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 year........................................... 457,379,188 504,012,379 422,347,520
---------------- ---------------- -----------------
End of year *............................................... $ 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.
F13
<PAGE> 29
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.
F14
<PAGE> 30
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.
F15
<PAGE> 31
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.
F16
<PAGE> 32
(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
F17
<PAGE> 33
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 &
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.
F18
<PAGE> 34
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.
F19
<PAGE> 35
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.
F20
<PAGE> 36
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. 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 Trustees 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........................................... [ 8,148,548 N/A 1,003,318
Frank S. Bayley............................................. 8,141,634 N/A 1,010,232
William J. Guilfoyle........................................ 8,152,322 N/A 999,544
Arthur C. Patterson......................................... 8,161,211 N/A 990,655
Ruth H. Quigley............................................. 8,161,411 N/A 990,445
(2)(a) Approval of investment management and administration
contract................................................... 6,214,229 523,624 557,973
(2)(b) Approval of sub-advisory and sub-administration contract.... 6,165,338 552,219 578,268
(3) Approval of replacement Rule 12b-1 plans of distribution
CLASS A..................................................... 7,788,067 720,705 624,489
CLASS B..................................................... 15,702 N/A N/A
(4) Approval of changes to the fundamental investment
restrictions............................................... 6,156,539 548,114 591,173
(5) Approval of an agreement and plan of conversion and
termination with respect to the Trust (approval at a
Special Meeting held on June 22, 1998)..................... 190,027,469 6,362,084 19,815,262
(6) Ratification of the selection of Coopers & Lybrand L.L.P. as
the Trust's Independent Public Accountants................. 8,594,659 145,618 411,587 ]
</TABLE>
F21
<PAGE> 37
- ------------------------
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 $.0186 per share (representing a total of $216,100). 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 21.60
Bulgaria............................................................................... 1.54 --
Chile.................................................................................. 2.38 28.12
China.................................................................................. 1.81 --
Egypt.................................................................................. 9.02 1.78
Israel................................................................................. 1.43 13.47
Malaysia............................................................................... 0.50 3.51
Mexico................................................................................. 6.32 --
Pakistan............................................................................... 1.37 1.79
Peru................................................................................... 1.90 --
Philippines............................................................................ 0.35 1.90
Russia................................................................................. 34.21 --
South Africa........................................................................... 5.64 --
Taiwan................................................................................. 0.44 5.82
Turkey................................................................................. 1.75 --
Zimbabwe............................................................................... 0.15 1.13
Various................................................................................ 8.37 2.96
-------------- --------
93.62 82.08
Nonqualifying.......................................................................... 1.54 17.92
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.
F22
<PAGE> 38
TRUSTEES & OFFICERS
<TABLE>
<S> <C> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
C. Derek Anderson Robert H. Graham 11 Greenway Plaza
President, Plantagenet Capital Chairman and President Suite 100
Management, LLC (an investment Houston, TX 77046
partnership); Chief Executive Officer, John J. Arthur
Plantagenet Holdings, Ltd. Vice President INVESTMENT MANAGER
(an investment banking firm)
Helge K. Lee A I M Advisors, Inc.
Frank S. Bayley Vice President & Secretary 11 Greenway Plaza
Partner, law firm of Suite 100
Baker & McKenzie Dana R. Sutton Houston, TX 77046
Vice President and Assistant Treasurer
Robert H. Graham SUB-ADVISOR
President and Chief Executive Officer, Kenneth W. Chancey
A I M Management Group Inc. Vice President and Principal INVESCO (NY), Inc.
Accounting Officer 50 California Street, 27th Floor
Arthur C. Patterson San Francisco, CA 94111
Managing Partner, Accel Partners Melville B. Cox
(a venture capital firm) Vice President TRANSFER AGENT
Ruth H. Quigley Gary T. Crum A I M Fund Services, Inc.
Private Investor Vice President P.O. Box 4739
Houston, TX 77210-4739
Carol F. Relihan
Vice President CUSTODIAN
David P. Hess State Street Bank and Trust Company
Assistant Secretary 225 Franklin Street
Boston, MA 02110
Nancy L. Martin
Assistant Secretary COUNSEL TO THE FUND
Ofelia M. Mayo Kirkpatrick & Lockhart, LLP
Assistant Secretary 1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Kathleen J. Pflueger
Assistant Secretary COUNSEL TO THE TRUSTEES
Michael A. Silver Paul, Hastings, Janofsky & Walker LL
Assistant Secretary Twenty Third Floor
555 South Flower Street
Samuel D. Sirko Los Angeles, CA 90071
Assistant Secretary
DISTRIBUTOR
Pamela Ruddock
Assistant Treasurer A I M Distributors, Inc.
11 Greenway Plaza
Paul Wozniak Suite 100
Assistant Treasurer Houston, TX 77046
AUDITORS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
</TABLE>
<PAGE> 39
The AIM Family of Funds--Registered Trademark--
<TABLE>
<S> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(2)
AIM Constellation Fund AIM Emerging Markets Fund(2)
AIM Mid Cap Equity Fund(2), (A) AIM Europe Growth Fund(2)
AIM Select Growth Fund(3) AIM European Development Fund
AIM Small Cap Growth Fund(2), (B) AIM International Equity Fund
AIM Small Cap Opportunities Fund AIM International Growth Fund(2)
AIM Value Fund AIM Japan Growth Fund(2)
AIM Weingarten Fund AIM Latin American Growth Fund(2)
AIM New Pacific Growth Fund(2)
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Basic Value Fund(2), (C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund II AIM Global Government Income Fund(2)
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund(2)
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund(2)
AIM High Income Municipal Fund AIM Global Financial Services Fund(2)
AIM Municipal Bond Fund AIM Global Health Care Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
MONEY MARKET FUNDS AIM Global Trends Fund(2), (E)
AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(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.
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.
<PAGE> 40
APPENDIX III
ANNUAL REPORT / OCTOBER 31 1998
AIM EMERGING MARKETS FUND
[Cover Artwork]
[AIM Logo]
Invest with DISCIPLINE--Registration Trademark--
<PAGE> 41
Mural from the Temple of Longing by Paul Klee
[Artwork]
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 Emerging Markets Fund is for shareholders who seek long-term growth of
capital. The Fund primarily invests in equity securities of companies located
in emerging markets, which generally include every country except the U.S.,
Canada, Japan, Australia, New Zealand and most of the countries of western
Europe.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT
THIS REPORT:
o AIM Emerging Markets Fund (formerly GT Global Emerging 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.
o 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.
o 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.
o 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.
o 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:
o 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.
o 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.
o 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 EMERGING MARKETS FUND
<PAGE> 42
ANNUAL REPORT / CHAIRMAN'S LETTER
[PHOTO OF CHARLES T. BAUER, CHAIRMAN OF THE BOARD
OF THE FUND APPEARS HERE]
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:
o broad portfolio diversification, in which this Fund is part of a
complete investment strategy designed with your personal financial
goals in mind;
o realistic expectations, recognizing that the potential for
downturns is always present; and
o 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--.
WE INTEND TO CONTINUE
MANAGING YOUR FUND
WITH THE CAREFUL OVERSIGHT
AND DISCIPLINED
INVESTMENT STRATEGY
USED IN ALL AIM FUNDS.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
AIM EMERGING MARKETS FUND
<PAGE> 43
ANNUAL REPORT / MANAGERS' OVERVIEW
FLIGHT TO QUALITY AFFECTS 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 -39.62% for Class A shares and -39.90% for
Class B shares. In comparison, the MSCI Emerging Markets Free Index had a
return of -30.98%.
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 relative
ly 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 equity markets.
IN THE WAKE OF THE ASIAN AND RUSSIAN CRISES, INVESTORS BEGAN TO
REDUCE THEIR EXPOSURE TO EMERGING MARKETS.
In the wake of the Asian and Russian crises, investors began to
reduce their exposure to emerging markets. As external capital drained away,
expectations deteriorated for further growth in places like Brazil. 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.
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, bringing the number down from over 200 to about 110,
and we've nearly eliminated exposures 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. Growth estimates have indeed been revised down for 1999,
but, with the exception of Venezuela, growth is expected in the region.
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 LATIN AMERICAN STOCKS HAVE
YOU LIKED?
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 benefit 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 second largest country allocation
See important Fund and index disclosures inside front cover.
AIM EMERGING MARKETS FUND
<PAGE> 44
ANNUAL REPORT / MANAGERS' OVERVIEW
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, the competitive position of
Mexico's exporters has been protected by it.
That should help companies like soft-drink producer Fomento Economico
Mexicano S.A. de C.V., one of our largest holdings in Mexico. The company
exports to 63 countries around the world and benefits from strong domestic
demand.
WHERE ELSE ARE YOU FINDING
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, announced
better-than-anticipated earnings for the third quarter of 1998. The company
makes soap, toothpaste, and other personal care products.
Global volatility has created good buying opportunities in smaller mar
kets such as Egypt and Morocco, which have demonstrated relatively strong
growth, falling interest rates, a decline in inflation, and attractive
valuations. As investors turned negative on emerging markets as an asset
class, the resulting market correction allowed us to acquire some
fundamentally sound stocks at good prices.
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 Kreditbank of Poland are
both strong stocks that we believe are trading at a discount.
GLOBAL VOLATILITY HAS CREATED GOOD
BUYING OPPORTUNITIES IN SMALLER MARKETS
SUCH AS EGYPT AND MOROCCO . . .
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 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 as well as valuations at a considerable
discount in many cases; however, there are also many more risks and
uncertainties associated with this type of investment. We urge you to read
your prospectus for more information about the fund's objectives, strategies,
and risks.
TOP 10 COUNTRIES
As of 10/31/98 based on total net assets
1. Brazil 15.3%
2. Mexico 13.9
3. United States & Other 10.3
4. Egypt 7.2
5. Taiwan 6.8
6. South Africa 6.8
7. India 6.3
8. Greece 6.1
9. Israel 5.6
10. Argentina 3.9
TOP 10 PORTFOLIO HOLDINGS
As of 10/31/98 based on total net assets
1. Telecomunicacoes Brasileiras S.A. 4.8%
(Telebras) - ADR (Brazil)
2. Merrill Lynch - Kospi 200 2.8
Call Warrants, due 9/9/99 (United States)
3. Telefonos de Mexico, S.A. 2.7
de C.V. "L" - ADR (Mexico)
4. Grupo Carso, S.A. de C.V. "A1" 2.5
(Mexico)
5. Petroleo Brasileiro, S.A. 2.2
(Petrobras) Preferred (Brazil)
6. Hindustan Lever Ltd. (India) 2.1
7. Companhia Energetica de 2.0
Minas Gerais (CEMIG) - ADR (Brazil)
8. Heliopolis Housing (Egypt) 2.0
9. Magyar Tavkozlesi Rt. - ADR 2.0
(Hungary)
10. South African Breweries Ltd. 1.9
(South Africa)
TOP 10 INDUSTRIES
As of 10/31/98 based on total net assets
1. Services 22.1%
2. Finance 18.1
3. Consumer Non-Durables 11.7
4. Energy 10.4
5. Materials/Basic Industry 9.1
6. Multi-Industry/Miscellaneous 7.3
7. Technology 5.0
8. Capital Goods 3.6
9. Health Care 2.2
10. Consumer Durables 0.3
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.
See important Fund and index disclosures inside front cover.
AIM EMERGING MARKETS FUND
<PAGE> 45
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM EMERGING MARKETS FUND VS. BENCHMARK INDEXES
5/31/92-10/31/98
<TABLE>
<CAPTION>
IFC Investable AIM Emerging MSCI Emerging
Composite Markets Fund Markets
Index Class A Free Index
<S> <C> <C> <C>
5/18/92 $10,000 9,525 10,000
7/92 8,804 9,333 8,682
10/92 8,626 9,258 9,078
1/93 8,816 9,269 9,548
4/93 9,669 9,915 10,372
7/93 10,476 10,386 11,887
10/93 12,774 12,107 14,023
1/94 16,015 15,556 16,342
4/94 13,759 13,270 15,064
7/94 14,554 13,858 17,490
10/94 16,279 16,051 16,468
1/95 12,126 12,809 13,186
4/95 12,439 12,711 14,604
7/95 13,395 13,344 14,623
10/95 12,449 12,354 13,747
1/96 13,892 13,282 15,134
4/96 14,337 13,612 15,791
7/96 13,435 12,675 15,182
10/96 13,754 12,728 15,156
1/97 15,009 13,792 16,959
4/97 15,089 13,604 17,015
7/97 16,433 14,846 15,879
10/97 12,373 10,889 13,143
1/98 11,169 9,835 13,699
4/98 12,827 11,193 12,201
7/98 10,478 8,915 8,010
10/98 8,808 6,574 8,415
</TABLE>
Past performance cannot guarantee comparable future results.
AVERAGE ANNUAL TOTAL RETURNS
For periods ending 10/31/98, including sales charges
CLASS A SHARES
Inception (5/31/92) -6.29%
5 years -12.35
1 year -42.50*
CLASS B SHARES
Inception (4/1/93) -7.22%
5 years -12.28
1 year -42.90**
ADVISOR CLASS
(Sales charges do not apply.)
Inception (6/1/95) -18.12%
1 year -39.23
*-39.62%, excluding sales charges
**-39.90%, excluding sales charges
Source: Towers Data Systems HYPO--Registered Trademark--.
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.
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 Emerging Markets Fund has elected to
use the MSCI Emerging Markets Free Index as its benchmark. This index more
closely reflects the performance of the securities in which the Fund invests.
In previous reports to shareholders, the Fund used the IFC Investable
Composite Index. In the future, we will no longer use this index. Because
this is the first reporting period since we adopted the new index, SEC
guidelines require that we compare the Fund's performance to both the old and
the new index.
AIM Emerging Markets Fund
<PAGE> 46
AIM EMERGING
MARKETS FUND
FINANCIAL
STATEMENTS
<PAGE> 47
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Emerging Markets Fund (formerly GT Global Emerging
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 Emerging 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 opinions expressed above.
PRICEWATERHOUSECOOPERS L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 11, 1998
F1
<PAGE> 48
PORTFOLIO OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Services (22.1%)
Telecomunicacoes Brasileiras S.A. (Telebras) Preferred -
ADR{\/} ................................................... BRZL 59,262 $ 4,500,208 4.8
TELEPHONE NETWORKS
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ............ MEX 48,027 2,536,426 2.7
TELEPHONE NETWORKS
Magyar Tavkozlesi Rt. - ADR{\/} ............................ HGRY 67,990 1,827,231 2.0
TELEPHONE NETWORKS
Cifra, S.A. de C.V. " V"-/- ................................ MEX 995,730 1,350,243 1.4
RETAILERS-OTHER
Hellenic Telecommunication Organization S.A. (OTE) ......... GREC 57,266 1,302,888 1.4
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP): ............... BRZL -- -- 1.3
TELEPHONE - REGIONAL/LOCAL
Common-/- ................................................ -- 10,859,000 1,179,032 --
Preferred ................................................ -- 185,406 31,088 --
Telefonica del Peru S.A. - ADR{\/} ......................... PERU 81,400 1,058,200 1.1
TELEPHONE NETWORKS
Telefonica de Argentina S.A. - ADR{\/} ..................... ARG 30,983 1,024,375 1.1
TELEPHONE NETWORKS
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................. MEX 35,100 952,088 1.0
BROADCASTING & PUBLISHING
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP .................................................... BRZL 10,607,155 853,695 0.9
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd.: ............................ IND -- -- 0.9
TELECOM - OTHER
GDR{\/} .................................................. -- 43,300 465,475 --
Common ................................................... -- 84,400 365,135 --
STET Hellas Telecommunications S.A. - ADR-/- {\/} .......... GREC 24,829 651,761 0.7
WIRELESS COMMUNICATIONS
Telecom Argentina S.A. - ADR{\/} ........................... ARG 19,400 625,650 0.7
TELEPHONE NETWORKS
Nortel Inversora S.A. - ADR{\/} ............................ ARG 27,900 620,775 0.7
TELEPHONE NETWORKS
Videsh Sanchar Nigam Ltd. - Reg S GDR-/- {c} {\/} .......... IND 37,000 388,500 0.4
TELECOM - OTHER
ONA (Omnium Nord Africain) S.A. "A" ........................ MOR 2,809 365,111 0.4
BUSINESS & PUBLIC SERVICES
Bezeq Israeli Telecommunication Corporation Ltd. ........... ISRL 108,700 312,714 0.3
TELEPHONE NETWORKS
Blue Square Chain Investments & Properties Ltd.-/- ......... ISRL 18,591 237,753 0.3
RETAILERS-FOOD
-----------
20,648,348
-----------
Finance (18.1%)
Liberty Life Association of Africa Ltd. .................... SAFR 91,470 1,570,862 1.7
INSURANCE-LIFE
Cathay Life Insurance Co., Ltd. ............................ TWN 382,800 1,353,841 1.4
INSURANCE-LIFE
National Bank of Greece S.A. ............................... GREC 8,845 1,257,732 1.3
BANKS-MONEY CENTER
Alpha Credit Bank .......................................... GREC 14,955 1,195,922 1.3
BANKS-REGIONAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE> 49
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)
Bank Hapoalim Ltd. ......................................... ISRL 642,510 $ 1,162,416 1.2
BANKS-MONEY CENTER
Grupo Financiero Banamex Accival, S.A. de C.V. "B"-/- ...... MEX 1,007,400 1,046,986 1.1
BANKS-MONEY CENTER
Bank Leumi Le - Israel ..................................... ISRL 768,745 983,119 1.1
BANKS-MONEY CENTER
Turkiye Is Bankasi (Isbank) "C" ............................ TRKY 34,305,200 941,566 1.0
BANKS-MONEY CENTER
Uniao de Bancos Brasileiros S.A. (Unibanco): ............... BRZL -- -- 1.0
BANKS-MONEY CENTER
Units{=} ................................................. -- 16,569,429 543,841 --
GDR{\/} .................................................. -- 21,670 379,225 --
MISR International Bank - Reg S GDR{c} {\/} ................ EGPT 95,500 900,088 1.0
BANKS-MONEY CENTER
BIG Bank Gdanski S.A. - Reg S GDR{c} {\/} .................. POL 46,000 740,600 0.8
BANKS-REGIONAL
Ergo Bank S.A. ............................................. GREC 7,170 637,220 0.7
BANKS-REGIONAL
Commercial Bank of Greece S.A. ............................. GREC 7,460 632,496 0.7
BANKS-MONEY CENTER
Yapi ve Kredi Bankasi AS ................................... TRKY 48,631,340 549,115 0.6
BANKS-REGIONAL
Credicorp Ltd. - ADR{\/} ................................... PERU 77,770 524,948 0.5
BANKS-MONEY CENTER
Banco de Galicia y Buenos Aires, S.A. de C.V. - ADR{\/} .... ARG 28,226 481,606 0.5
BANKS-MONEY CENTER
Wafabank ................................................... MOR 3,500 456,830 0.5
BANKS-MONEY CENTER
KREDYT BANK S.A. - Reg S GDR-/- {c} {\/} ................... POL 22,010 439,100 0.5
BANKS-MONEY CENTER
Akbank T.A.S. .............................................. TRKY 22,711,500 335,350 0.4
BANKS-REGIONAL
Banco Rio de La Plata S.A. - ADR{\/} ....................... ARG 32,100 288,900 0.3
BANKS-MONEY CENTER
Inversiones y Representaciones S.A. (IRSA) - GDR{\/} ....... ARG 10,750 278,156 0.3
REAL ESTATE
National Development Bank .................................. SLNKA 68,000 78,598 0.1
BANKS-REGIONAL
Kazkommertsbank Co. - GDR-/- {\/} .......................... KAZ 12,610 69,986 0.1
BANKS-REGIONAL
Commercial International Bank .............................. EGPT 4,200 33,723 --
BANKS-MONEY CENTER
State Bank of India Ltd. ................................... IND 1,650 6,070 --
BANKS-REGIONAL
Housing Development Finance Corp. .......................... IND 5 264 --
OTHER FINANCIAL
-----------
16,888,560
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE> 50
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>
Consumer Non-Durables (11.7%)
Hindustan Lever Ltd. ....................................... IND 51,000 $ 1,932,695 2.1
PERSONAL CARE/COSMETICS
South African Breweries Ltd. ............................... SAFR 92,963 1,809,369 1.9
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. - ADR{\/} ......... MEX 64,322 1,676,392 1.8
BEVERAGES - NON-ALCOHOLIC
ITC Ltd. ................................................... IND 92,128 1,524,032 1.6
TOBACCO
Panamerican Beverages, Inc. "A"{\/} ........................ MEX 50,000 1,012,500 1.1
BEVERAGES - NON-ALCOHOLIC
A-Ahram Beverages Co., S.A.E.: ............................. EGPT -- -- 1.0
BEVERAGES - ALCOHOLIC
144A GDR{.} {\/} ......................................... -- 21,235 595,642 --
GDR{\/} .................................................. -- 11,000 308,550 --
Compania Cervecerias Unidas S.A. - ADR{\/} ................. CHLE 36,546 657,828 0.7
BEVERAGES - ALCOHOLIC
Companhia de Tecidos Norte de Minas Preferred .............. BRZL 5,002,000 578,702 0.6
TEXTILES & APPAREL
Companhia Cervejaria Brahma Preferred ...................... BRZL 663,129 311,328 0.3
BEVERAGES - ALCOHOLIC
Oriental Weavers "C" ....................................... EGPT 12,000 258,920 0.3
TEXTILES & APPAREL
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) .................. POL 1,560 212,562 0.2
BEVERAGES - ALCOHOLIC
Truworths International Ltd. ............................... SAFR 58,916 44,898 0.1
TEXTILES & APPAREL
-----------
10,923,418
-----------
Energy (10.4%)
Petroleo Brasileiro S.A. (Petrobras) Preferred ............. BRZL 16,324,080 2,052,827 2.2
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ..... BRZL 96,750 1,874,531 2.0
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ......... HGRY 72,410 1,649,138 1.8
GAS PRODUCTION & DISTRIBUTION
Huaneng Power International, Inc. - ADR-/- {\/} ............ CHNA 110,068 1,513,435 1.6
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} ..................................... CHLE 44,268 924,095 1.0
ELECTRICAL & GAS UTILITIES
Companhia de Eletricidade do Estado da Bahia - COELBA ...... BRZL 15,100,000 481,053 0.5
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR{\/} ................................... RUS 225,855 451,710 0.5
OIL
Eletropaulo Metropolitana Preferred ........................ BRZL 9,317,824 314,031 0.3
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ..................... BRZL 2,158,561 267,830 0.3
ELECTRICAL & GAS UTILITIES
Empresa Bandeirante de Energia S.A.-/- ..................... BRZL 9,317,824 90,538 0.1
ELECTRICAL & GAS UTILITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE> 51
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)
Companhia Brasileira de Petroleo Ipiranga S.A. Preferred ... BRZL 14,418,000 $ 77,360 0.1
GAS
Pakistan State Oil Co., Ltd. ............................... PAK 65 64 --
OIL
-----------
9,696,612
-----------
Materials/Basic Industry (9.1%)
Suez Cement Co. - Reg S GDR{c} {\/} ........................ EGPT 109,535 1,615,641 1.7
CEMENT
Anglo American Platinum Corporation Ltd. ................... SAFR 90,800 1,380,680 1.5
METALS - NON-FERROUS
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} .......... CHLE 34,370 1,142,803 1.2
CHEMICALS
Cemex, S.A. de C.V.: ....................................... MEX -- -- 1.0
CEMENT
"CPO" .................................................... -- 349,153 832,880 --
"A" ...................................................... -- 43,400 104,387 --
Companhia Vale do Rio Doce "A" Preferred ................... BRZL 54,200 817,907 0.9
METALS - STEEL
Compania de Minas Buenaventura S.A. - ADR{\/} .............. PERU 54,606 668,924 0.7
GOLD
Apasco, S.A. de C.V. "A" ................................... MEX 147,781 541,215 0.6
CEMENT
Hindalco Industries Ltd.: .................................. IND -- -- 0.4
METALS - NON-FERROUS
"GDR"{\/} ................................................ -- 34,200 400,995 --
Common ................................................... -- 1,802 21,790 --
Grupo Cementos de Chihuahua, S.A. de C.V. "B" .............. MEX 537,100 288,140 0.3
CEMENT
Siderca S.A. "A" ........................................... ARG 187,600 262,719 0.3
METALS - STEEL
Makhteshim-Agan Industries Ltd.-/- ......................... ISRL 142,780 253,624 0.3
CHEMICALS
Engro Chemicals Pakistan Ltd. .............................. PAK 72,711 67,027 0.1
CHEMICALS
Nan Ya Plastics Corp.-/- ................................... TWN 43,350 54,899 0.1
PLASTICS & RUBBER
Associated Cement Cos., Ltd. ............................... IND 16 356 --
CEMENT
Dewan Salman Fibre Ltd.-/- ................................. PAK 4 1 --
CHEMICALS
-----------
8,453,988
-----------
Multi-Industry/Miscellaneous (7.3%)
Grupo Carso, S.A. de C.V. "A1" ............................. MEX 664,600 2,302,385 2.5
MULTI-INDUSTRY
Rembrandt Group Ltd. ....................................... SAFR 228,160 1,522,427 1.6
CONGLOMERATE
Haci Omer Sabanci Holding AS ............................... TRKY 57,726,250 872,422 0.9
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE> 52
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>
Multi-Industry/Miscellaneous (Continued)
China Development Corp. .................................... TWN 380,700 $ 752,581 0.8
CONGLOMERATE
Koor Industries Ltd. - ADR{\/} ............................. ISRL 31,615 511,768 0.6
CONGLOMERATE
Central Asia Regional Growth Fund(::) -/- {\/} ............. IRE 156,000 468,000 0.5
COUNTRY FUNDS
Koc Holding AS ............................................. TRKY 3,488,650 321,194 0.3
CONGLOMERATE
Romanian Growth Fund-/- {\/} ............................... ROM 75,800 94,750 0.1
COUNTRY FUNDS
John Keells Holdings Ltd. .................................. SLNKA 3,800 10,768 --
CONGLOMERATE
KEC International Ltd.-/- .................................. IND 200 113 --
MISCELLANEOUS
-----------
6,856,408
-----------
Technology (5.0%)
Taiwan Semiconductor Manufacturing Co.-/- .................. TWN 667,450 1,350,362 1.4
SEMICONDUCTORS
Asustek Computer Inc. - Reg S GDR-/- {c} {\/} .............. TWN 127,997 982,377 1.1
COMPUTERS & PERIPHERALS
Hon Hai Precision Industry ................................. TWN 141,960 684,039 0.7
COMPUTERS & PERIPHERALS
Compal Electronics, Inc.-/- ................................ TWN 212,000 661,375 0.7
COMPUTERS & PERIPHERALS
Delta Electronics, Inc. .................................... TWN 196,800 568,364 0.6
COMPUTERS & PERIPHERALS
Formula Systems Ltd.-/- .................................... ISRL 21,505 460,212 0.5
SOFTWARE
-----------
4,706,729
-----------
Capital Goods (3.6%)
MISR Elgadida for Housing and Reconstruction ............... EGPT 20,165 1,844,170 2.0
CONSTRUCTION
NASR (El) City Company For Housing & Construction .......... EGPT 27,170 842,865 0.9
CONSTRUCTION
Corporacion GEO, S.A. de C.V. "B"-/- ....................... MEX 214,600 371,721 0.4
CONSTRUCTION
Arabian International Construction-/- ...................... EGPT 41,822 303,927 0.3
CONSTRUCTION
-----------
3,362,683
-----------
Health Care (2.2%)
Teva Pharmaceutical Industries Ltd. ........................ ISRL 29,600 1,166,886 1.3
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. .................................. IND 75,000 885,195 0.9
MEDICAL TECHNOLOGY & SUPPLIES
-----------
2,052,081
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE> 53
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>
Consumer Durables (0.3%)
Qingling Motors Co., Ltd.{*} ............................... CHNA 1,475,000 $ 272,355 0.3
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd. .................. IND 100 267 --
AUTOMOBILES
-----------
272,622
----------- -----
TOTAL EQUITY INVESTMENTS (cost $113,133,206) ................. 83,861,449 89.8
----------- -----
<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 $2,596,012) ......................... US 796,274 2,675,640 2.8
----------- -----
INVESTMENT MANAGEMENT
<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 $9,170,000 U.S. Treasury Notes, 5.75% due
9/30/99 (market value of collateral is $9,328,082,
including accrued interest). (cost $9,141,000) ............ 9,141,000 9.8
----------- -----
TOTAL INVESTMENTS (cost $124,870,218) * ..................... 95,678,089 102.4
Other Assets and Liabilities ................................. (2,275,508) (2.4)
----------- -----
NET ASSETS ................................................... $93,402,581 100.0
----------- -----
----------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{*} Denominated in Hong Kong Dollars.
{.} 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.
{\/} 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 usingprocedures approved by the
Board of Trustees (See Note 1 of Notes to Financial Statements).
* For Federal income tax purposes, cost is $125,339,599 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 3,991,003
Unrealized depreciation: (33,652,513)
-------------
Net unrealized depreciation: $ (29,661,510)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
F7
<PAGE> 54
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) .................. 3.9 3.9
Brazil (BRZL/BRL) .................... 15.3 15.3
Chile (CHLE/CLP) ..................... 2.9 2.9
China (CHNA/RMB) ..................... 1.9 1.9
Egypt (EGPT/EGP) ..................... 7.2 7.2
Greece (GREC/GRD) .................... 6.1 6.1
Hungary (HGRY/HUF) ................... 3.8 3.8
India (IND/INR) ...................... 6.3 6.3
Ireland (IRE/IEP) .................... 0.5 0.5
Israel (ISRL/ILS) .................... 5.6 5.6
Kazakhstan (KAZ/KTS) ................. 0.1 0.1
Mexico (MEX/MXN) ..................... 13.9 13.9
Morocco (MOR/MAD) .................... 0.9 0.9
Pakistan (PAK/PKR) ................... 0.1 0.1
Peru (PERU/PES) ...................... 2.3 2.3
Poland (POL/PLZ) ..................... 1.5 1.5
Romania (ROM/ROL) .................... 0.1 0.1
Russia (RUS/SUR) ..................... 0.5 0.5
South Africa (SAFR/ZAR) .............. 6.8 6.8
Sri Lanka (SLNKA/LKR) ................ 0.1 0.1
Taiwan (TWN/TWD) ..................... 6.8 6.8
Turkey (TRKY/TRL) .................... 3.2 3.2
United States (US/USD) ............... 2.8 7.4 10.2
------ ----- ----- -----
Total ............................... 89.8 2.8 7.4 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $93,402,581.
The accompanying notes are an integral part of the financial statements.
F8
<PAGE> 55
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $124,870,218) (Note 1).......................... $ 95,678,089
U.S. currency.................................................................. $ 827
Foreign currencies (cost $1,251,796)........................................... 1,235,418 1,236,245
---------
Receivable for Fund shares sold........................................................... 413,554
Dividends and dividend withholding tax reclaims receivable................................ 320,223
Receivable for securities sold............................................................ 66,130
Interest receivable....................................................................... 2,692
------------
Total assets............................................................................ 97,716,933
------------
Liabilities:
Payable for securities purchased.......................................................... 3,143,073
Payable for investment management and administration fees (Note 2)........................ 394,425
Payable for Fund shares repurchased....................................................... 288,586
Payable for service and distribution expenses (Note 2).................................... 147,714
Payable for transfer agent fees (Note 2).................................................. 136,937
Payable for printing and postage expenses................................................. 102,809
Payable for professional fees............................................................. 43,949
Payable for registration and filing fees.................................................. 24,709
Payable for custodian fees................................................................ 8,199
Payable for fund accounting fees (Note 2)................................................. 4,847
Payable for Trustees' fees and expenses (Note 2).......................................... 4,101
Other accrued expenses.................................................................... 15,003
------------
Total liabilities....................................................................... 4,314,352
------------
Net assets.................................................................................. $ 93,402,581
------------
------------
Class A:
Net asset value and redemption price per share ($43,925,435 DIVIDED BY 5,964,824 shares
outstanding)............................................................................... $ 7.36
------------
------------
Maximum offering price per share (100/95.25 of $7.36) *..................................... $ 7.73
------------
------------
Class B:+
Net asset value and offering price per share ($49,439,410 DIVIDED BY 6,894,258 shares
outstanding)............................................................................... $ 7.17
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($37,736 DIVIDED
BY 5,067 shares outstanding)............................................................... $ 7.45
------------
------------
Net assets consist of:
Paid in capital (Note 4).................................................................. $206,291,653
Accumulated net realized loss on investments and foreign currency transactions............ (83,677,566)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (19,377)
Net unrealized depreciation of investments................................................ (29,192,129)
------------
Total -- representing net assets applicable to capital shares outstanding................... $ 93,402,581
------------
------------
<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.
F9
<PAGE> 56
STATEMENT OF OPERATIONS
Year ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $336,014)............................... $ 4,700,768
Interest income............................................................................ 250,454
Securities lending income.................................................................. 186,080
------------
Total investment income.................................................................. 5,137,302
------------
Expenses:
Investment management and administration fees (Note 2)..................................... 1,660,548
Service and distribution expenses:(Note 2)
Class A.................................................................... $ 406,198
Class B.................................................................... 871,360 1,277,558
------------
Transfer agent fees (Note 2)............................................................... 1,069,500
Interest expense (Note 1).................................................................. 447,556
Printing and postage expenses.............................................................. 219,000
Custodian fees............................................................................. 160,000
Professional fees.......................................................................... 122,310
Registration and filing fees............................................................... 74,900
Fund accounting fees (Note 2).............................................................. 45,603
Trustees' fees and expenses (Note 2)....................................................... 13,870
Other expenses (Note 1).................................................................... 10,950
------------
Total expenses before reductions......................................................... 5,101,795
------------
Expenses reimbursed by A I M Advisors, Inc............................................. (821,992)
Expense reductions (Note 5)............................................................ (39,255)
------------
Total net expenses....................................................................... 4,240,548
------------
Net investment income........................................................................ 896,754
------------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (72,668,661)
Net realized loss on foreign currency transactions........................... (2,512,849)
------------
Net realized loss during the year........................................................ (75,181,510)
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... 601,285
Net change in unrealized depreciation of investments......................... 5,031,551
------------
Net unrealized appreciation during the year.............................................. 5,632,836
------------
Net realized and unrealized loss on investments and foreign currencies....................... (69,548,674)
------------
Net decrease in net assets resulting from operations......................................... $(68,651,920)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE> 57
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- ----------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income (loss).............................................. $ 896,754 $ (1,050,632)
Net realized gain (loss) on investments and foreign currency
transactions............................................................. (75,181,510) 26,113,895
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................. 601,285 (282,179)
Net change in unrealized appreciation (depreciation) of investments....... 5,031,551 (52,070,476)
---------------- ----------------
Net decrease in net assets resulting from operations.................... (68,651,920) (27,289,392)
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................................................ -- (37,319)
In excess of net investment income........................................ -- (104,807)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................................................ -- (4,161)
In excess of net investment income........................................ -- (11,686)
---------------- ----------------
Total distributions..................................................... -- (157,973)
---------------- ----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.......................... 483,750,036 1,140,272,411
Decrease from capital shares repurchased.................................. (564,596,584) (1,314,030,266)
---------------- ----------------
Net decrease from capital share transactions............................ (80,846,548) (173,757,855)
---------------- ----------------
Total decrease in net assets................................................ (149,498,468) (201,205,220)
Net assets:
Beginning of year......................................................... 242,901,049 444,106,269
---------------- ----------------
End of year *............................................................. $ 93,402,581 $ 242,901,049
---------------- ----------------
---------------- ----------------
* Includes undistributed net investment income of.......................... $ -- $ --
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE> 58
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 ENDED OCTOBER 31,
----------------------------------------------------------
1998 (D) 1997 (D) 1996 (D) 1995 (D) 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.08* -- 0.11 0.13 (0.02)
Net realized and unrealized gain
(loss) on investments................ (4.92) (2.05) 0.30 (4.32) 4.68
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (4.84) (2.05) 0.41 (4.19) 4.66
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- -- (0.01)
From net realized gain on
investments.......................... -- -- -- (0.77) (0.26)
In excess of net investment income.... -- (0.01) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions................. -- (0.01) -- (0.77) (0.27)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 7.36 $ 12.20 $ 14.26 $ 13.85 $ 18.81
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. (39.62)% (14.45)% 2.96% (23.04)% 32.58%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 43,925 $ 113,319 $ 224,964 $ 252,457 $ 417,322
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement (Notes 2 & 5).......... 0.78% (0.01)% 0.76% 0.89% (0.11)%
Without expense reductions and
reimbursement........................ 0.27% (0.09)% 0.64% 0.87% N/A
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and
reimbursement (Notes 2 & 5).......... 1.97% 2.10% 1.96% 2.12% 2.06%
Without expense reductions and
reimbursement........................ 2.48% 2.18% 2.08% 2.14% N/A
Ratio of interest expense to average net
assets++............................... 0.26% N/A N/A N/A N/A
Portfolio turnover rate++............... 114% 150% 104% 114% 100%
</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 average
shares outstanding during the period.
* Before reimbursement the net investment income per share would have
been reduced by $0.05 for Class A, B, and Advisor.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F12
<PAGE> 59
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>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1998 (D) 1997 (D) 1996 (D) 1995 (D) 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.94 $ 14.02 $ 13.68 $ 18.68 $ 14.39
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.02* (0.08) 0.04 0.06 (0.12)
Net realized and unrealized gain
(loss) on investments................ (4.79) (2.00) 0.30 (4.29) 4.67
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (4.77) (2.08) 0.34 (4.23) 4.55
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- -- --
From net realized gain on
investments.......................... -- -- -- (0.77) (0.26)
In excess of net investment income.... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions................. -- -- -- (0.77) (0.26)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 7.17 $ 11.94 $ 14.02 $ 13.68 $ 18.68
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. (39.90)% (14.91)% 2.49% (23.37)% 31.77%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 49,439 $ 127,658 $ 216,004 $ 225,861 $ 291,289
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement (Notes 2 & 5).......... 0.28% (0.51)% 0.26% 0.39% (0.61)%
Without expense reductions and
reimbursement........................ (0.23)% (0.59)% 0.14% 0.37% N/A
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and
reimbursement (Notes 2 & 5).......... 2.47% 2.60% 2.46% 2.62% 2.56%
Without expense reductions and
reimbursement........................ 2.98% 2.68% 2.58% 2.64% N/A
Ratio of interest expense to average net
assets++............................... 0.26% N/A N/A N/A N/A
Portfolio turnover rate++............... 114% 150% 104% 114% 100%
</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 average
shares outstanding during the period.
* Before reimbursement the net investment income per share would have
been reduced by $0.05 for Class A, B, and Advisor.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F13
<PAGE> 60
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+
-----------------------------------------------
JUNE 1,
YEAR ENDED 1995
OCTOBER 31, TO
---------------------------------- OCTOBER 31,
1998 (D) 1997 (D) 1996 (D) 1995
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.27 $ 14.38 $ 13.88 $ 14.71
---------- ---------- ---------- -----------
Income from investment operations:
Net investment income (loss).......... 0.13* 0.05 0.18 0.08
Net realized and unrealized gain
(loss) on investments................ (4.95) (2.05) 0.32 (0.91)
---------- ---------- ---------- -----------
Net increase (decrease) from
investment operations.............. (4.82) (2.00) 0.50 (0.83)
---------- ---------- ---------- -----------
Distributions to shareholders:
From net investment income............ -- (0.03) -- --
From net realized gain on
investments.......................... -- -- -- --
In excess of net investment income.... -- (0.08) -- --
---------- ---------- ---------- -----------
Total distributions................. -- (0.11) -- --
---------- ---------- ---------- -----------
Net asset value, end of period.......... $ 7.45 $ 12.27 $ 14.38 $ 13.88
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Total investment return (c)............. (39.23)% (14.05)% 3.60% (5.71)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 38 $ 1,924 $ 3,139 $ 1,675
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement (Notes 2 & 5).......... 1.28% 0.49% 1.26% 1.39%(a)
Without expense reductions and
reimbursement........................ 0.77% 0.41% 1.14% 1.37%(a)
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and
reimbursement (Notes 2 & 5).......... 1.47% 1.60% 1.46% 1.62%(a)
Without expense reductions and
reimbursement........................ 1.98% 1.68% 1.58% 1.64%(a)
Ratio of interest expense to average net
assets++............................... 0.26% N/A N/A N/A
Portfolio turnover rate++............... 114% 150% 104% 114%(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 average
shares outstanding during the period.
* Before reimbursement the net investment income per share would have
been reduced by $0.05 for Class A, B, and Advisor.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F14
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Emerging Markets Fund (the "Fund"), formerly GT Global Emerging 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 a diversified, open-end management investment company. The Trust has thirteen
series of shares in operation, each series corresponding to a distinct portfolio
of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. 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 in the principal over-the-counter market in 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
ask prices for such investments or, if such prices are not available, at prices
for investments 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 are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and 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
arising 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 or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference 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 or 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, U.S. 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.
(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
F15
<PAGE> 62
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 the contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forwards 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. 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 securities
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 market
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 would realize a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund would
realize 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 market
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 its collection, 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 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 $12,179,747
were on loan to brokers. The loans were secured by cash collateral of
$12,442,778 received by the Fund. For the year ended October 31, 1998, the Fund
received fees of $186,080.
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 the 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
F16
<PAGE> 63
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, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$83,208,185, of which $5,742,880 expires in 2003, $4,421,874 expires in 2004,
and $73,043,431 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) 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.
(L) 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.
(M) 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. At the end of the year, restricted
securities, if any, (excluding 144A issues), are shown at the end of the Fund's
Portfolio of Investments.
(N) 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 &
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)
for the Fund was $9,465,579, with a weighted average interest rate of 6.30%.
Interest expense for the Fund for the year ended October 31, 1998 was $428,894.
Other interest expense charges amounted to $18,662.
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 investment management and administration fees to the Manager 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.
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 $6,628 and $9,517, 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 $0 and $1,590, respectively. AIM Distributors also makes
ongoing shareholder
F17
<PAGE> 64
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 $163,704 and $623,588, 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 at the annualized rate of 0.50% 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 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.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of a 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
F18
<PAGE> 65
$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 $192,075,345 and $285,778,997, respectively. For the
year ended October 31, 1998, there were no purchases or sales of U.S. government
obligations.
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 YEAR ENDED OCTOBER 31, 1997
--------------------------- ---------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 34,143,237 $ 357,364,219 57,294,454 $ 859,844,827
Shares issued in connection with reinvestment of
distributions................................................ -- -- 8,654 123,333
------------ ------------- ------------ -------------
34,143,237 357,364,219 57,303,108 859,968,160
Shares repurchased............................................. (37,470,268) (396,532,594) (63,783,507) (962,241,730)
------------ ------------- ------------ -------------
Net decrease................................................... (3,327,031) $ (39,168,375) (6,480,399) $(102,273,570)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
<CAPTION>
CLASS B
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 7,002,516 $ 75,225,005 16,394,355 $ 245,887,976
Shares repurchased............................................. (10,803,195) (116,402,011) (21,109,926) (316,251,415)
------------ ------------- ------------ -------------
Net decrease................................................... (3,800,679) $ (41,177,006) (4,715,571) $ (70,363,439)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 4,672,316 $ 51,160,812 2,213,447 $ 34,400,471
Shares issued in connection with reinvestment of
distributions................................................ -- -- 1,106 15,804
------------ ------------- ------------ -------------
4,672,316 51,160,812 2,214,553 34,416,275
Shares repurchased............................................. (4,824,080) (51,661,979) (2,275,943) (35,537,121)
------------ ------------- ------------ -------------
Net decrease................................................... (151,764) $ (501,167) (61,390) $ (1,120,846)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
F19
<PAGE> 66
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 $39,255 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
the Fund would transfer substantially all of its assets to AIM Developing
Markets Fund ("Developing Markets Fund"). As a result of the transaction,
shareholders of the Fund would receive shares of Developing Markets Fund in
exchange for their shares of the Fund, and the Fund would cease operations.
While Developing Markets Fund may invest more extensively in debt securities (up
to 50% of its assets) than the Fund, like the Fund, Developing Markets Fund
invests primarily in securities of issuers located in emerging markets.
The Plan requires the approval of the Fund's 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 the Fund and certain conditions
required by the Plan are satisfied, the transaction is expected to become
effective before the end of February 1999.
7. 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 Trustees 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>
TRUSTEE/MATTER
---------------------------------------------------------------------------------------------------
<S> <C>
(1) C. Derek Anderson..................................................................................
Frank S. Bayley....................................................................................
William J. Guilfoyle...............................................................................
Arthur C. Patterson................................................................................
Ruth H. Quigley....................................................................................
(2)(a) Approval of investment management and administration contract......................................
(2)(b) Approval of sub-advisory and sub-administration contract...........................................
(3) Approval of replacement Rule 12b-1 plans of distribution
CLASS A............................................................................................
CLASS B............................................................................................
(4) Approval of changes to the fundamental investment restrictions.....................................
(5) Approval of an agreement and plan of conversion and termination with respect to the Trust (approval
at a Special Meeting held on June 22, 1998).......................................................
(6) Ratification of the selection of Coopers and Lybrand L.L.P. as the Trust's Independent Public
Accountants.......................................................................................
<CAPTION>
VOTES WITHHELD/
VOTES FOR AGAINST ABSTENTIONS
--------------------- ------------------ --------------------
<S> <C> <C> <C>
(1) [ 8,468,683 N/A 769,317
8,474,357 N/A 763,643
8,474,965 N/A 763,035
8,474,965 N/A 763,035
8,475,851 N/A 762,149
(2)(a) 6,334,458 225,808 619,486
(2)(b) 6,254,819 256,680 668,254
(3)
4,005,218 147,786 334,721
4,115,707 138,886 377,670
(4) 6,229,144 258,969 691,640
(5)
190,027,469 6,362,084 19,815,262
(6)
8,598,703 118,975 520,321 ]
</TABLE>
F20
<PAGE> 67
TRUSTEES & OFFICERS
<TABLE>
<S> <C> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
C. Derek Anderson Robert H. Graham 11 Greenway Plaza
President, Plantagenet Capital Chairman and President Suite 100
Management, LLC (an investment Houston, TX 77046
partnership); Chief Executive Officer, John J. Arthur
Plantagenet Holdings, Ltd. Vice President INVESTMENT MANAGER
(an investment banking firm)
Helge K. Lee A I M Advisors, Inc.
Frank S. Bayley Vice President & Secretary 11 Greenway Plaza
Partner, law firm of Suite 100
Baker & McKenzie Dana R. Sutton Houston, TX 77046
Vice President and Assistant Treasurer
Robert H. Graham SUB-ADVISOR
President and Chief Executive Officer, Kenneth W. Chancey
A I M Management Group Inc. Vice President and Principal INVESCO (NY), Inc.
Accounting Officer 50 California Street, 27th Floor
Arthur C. Patterson San Francisco, CA 94111
Managing Partner, Accel Partners Melville B. Cox
(a venture capital firm) Vice President TRANSFER AGENT
Ruth H. Quigley Gary T. Crum A I M Fund Services, Inc.
Private Investor Vice President P.O. Box 4739
Houston, TX 77210-4739
Carol F. Relihan
Vice President CUSTODIAN
Kenneth Chancey State Street Bank and Trust Company
Principal Accounting Officer 225 Franklin Street
Boston, MA 02110
David P. Hess
Assistant Secretary COUNSEL TO THE FUND
Nancy L. Martin Kirkpatrick & Lockhart, LLP
Assistant Secretary 1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Ofelia M. Mayo
Assistant Secretary COUNSEL TO THE TRUSTEES
Michael A. Silver Paul, Hastings, Janofsky & Walker LL
Assistant Secretary Twenty Third Floor
555 South Flower Street
Kathleen J. Pflueger Los Angeles, CA 90071
Assistant Secretary
DISTRIBUTOR
Samuel D. Sirko
Assistant Secretary A I M Distributors, Inc.
11 Greenway Plaza
Pamela Ruddock Suite 100
Assistant Treasurer Houston, TX 77046
Paul Wozniak AUDITORS
Assistant Treasurer
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
</TABLE>
<PAGE> 68
The AIM Family of Funds--Registered Trademark--
<TABLE>
<S> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(2)
AIM Constellation Fund AIM Emerging Markets Fund(2)
AIM Mid Cap Equity Fund(2), (A) AIM Europe Growth Fund(2)
AIM Select Growth Fund(3) AIM European Development Fund
AIM Small Cap Growth Fund(2), (B) AIM International Equity Fund
AIM Small Cap Opportunities Fund AIM International Growth Fund(2)
AIM Value Fund AIM Japan Growth Fund(2)
AIM Weingarten Fund AIM Latin American Growth Fund(2)
AIM New Pacific Growth Fund(2)
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Basic Value Fund(2), (C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund II AIM Global Government Income Fund(2)
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund(2)
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund(2)
AIM High Income Municipal Fund AIM Global Financial Services Fund(2)
AIM Municipal Bond Fund AIM Global Health Care Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
MONEY MARKET FUNDS AIM Global Trends Fund(2), (E)
AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(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.
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.
<PAGE> 69
APPENDIX IV
PRO FORMA SCHEDULE
OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
SHARE AMOUNTS VALUE
DEVELOPING EMERGING COMBINING DEVELOPING EMERGING VALUE
MARKETS MARKETS PRO FORMA SECURITY MARKETS MARKETS PRO FORMA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Investments (84.6%)
Services (21.2%)
49,291 59,262 108,553 Telecomunicacoes Brasileiras S.A
(Telebras)
Preferred - ADR 3,743,034 4,500,208 8,243,242
Telephone Networks
50,583 48,027 98,610 Telefonos de Mexico, S.A. de C.V.
"L" - ADR 2,671,415 2,536,426 5,207,841
Telephone Networks
74,322 57,266 131,588 Hellenic Telecommunication Organi-
zation S.A. (OTE) 1,690,938 1,302,888 2,993,826
Telephone Networks
59,100 67,990 127,090 Magyar Tavkozlesi Rt. - ADR 1,588,313 1,827,231 3,415,544
Telephone Networks
80,900 81,400 162,300 Telefonica del Peru S.A. - ADR 1,051,700 1,058,200 2,109,900
Telephone Networks
748,662 995,730 1,744,392 Cifra, S.A. de C.V. " V" 1,015,210 1,350,243 2,365,453
Retailers-Other
27,528 30,983 58,511 Telefonica de Argentina S.A. - ADR 910,145 1,024,375 1,934,520
Telephone Networks
Telecomunicacoes de Sao Paulo S.A.
(TELESP):
Telephone - Regional/Local
7,001,000 10,859,000 17,860,000 Common 760,144 1,179,032 1,939,176
150,157 185,406 335,563 Preferred 25,177 31,088 56,265
26,700 35,100 61,800 Grupo Televisa, S.A. de C.V. - GDR 724,238 952,088 1,676,326
Broadcasting & Publishing
24,976 24,829 49,805 STET Hellas Telecommunications
S.A. - ADR 655,620 651,761 1,307,381
Wireless Communications
Mahanagar Telephone Nigam Ltd.
Telecom - Other
-- 43,300 43,300 GDR -- 465,475 465,475
143,500 84,400 227,900 Common 620,816 365,135 985,951
7,132,127 10,607,155 17,739,282 Companhia de Saneamento Basico do
Estado de Sao Paulo - SABESP 574,014 853,695 1,427,709
Business & Public Services
37,000 37,000 74,000 Videsh Sanchar Nigam Ltd. - Reg S GDR 388,500 388,500 777,000
Telecom - Other
15,500 27,900 43,400 Nortel Inversora S.A. - ADR 344,875 620,775 965,650
Telephone Networks
10,300 19,400 29,700 Telecom Argentina S.A. - ADR 332,175 625,650 957,825
Telephone Networks
2,320 2,809 5,129 ONA (Omnium Nord Africain) S.A. "A" 301,551 365,111 666,662
Business & Public Services
86,900 108,700 195,600 Bezeq Israeli Telecommunication
Corporation Ltd. 249,999 312,714 562,713
Telephone Networks
14,898 18,591 33,489 Blue Square Chain Investments &
Properties Ltd. 190,525 237,753 428,278
Retailers-Food
50 -- 50 Indian Hotels Co., Ltd. 484 -- 484
Leisure & Tourism
-----------------------------------------
17,838,873 20,648,348 38,487,221
-----------------------------------------
Finance (16.6%)
88,250 91,470 179,720 Liberty Life Association of Africa Ltd. 1,515,564 1,570,862 3,086,426
Insurance-Life
301,200 382,800 684,000 Cathay Life Insurance Co., Ltd. 1,065,248 1,353,841 2,419,089
Insurance-Life
6,520 8,845 15,365 National Bank of Greece S.A. 927,124 1,257,732 2,184,856
Banks-Money Center
11,255 14,955 26,210 Alpha Credit Bank 900,040 1,195,922 2,095,962
Banks-Regional
Uniao de Bancos Brasileiros S.A.
(Unibanco):
Banks-Money Center
14,649,042 16,569,429 31,218,471 Units 480,810 543,841 1,024,651
18,510 21,670 40,180 GDR 323,925 379,225 703,150
440,500 642,510 1,083,010 Bank Hapoalim Ltd. 796,944 1,162,416 1,959,360
Banks-Money Center
691,100 1,007,400 1,698,500 Grupo Financiero Banamex Accival,
S.A. de C.V. "B" 718,257 1,046,986 1,765,243
Banks-Money Center
43,000 46,000 89,000 BIG Bank Gdanski S.A. - Reg S GDR 692,300 740,600 1,432,900
Banks-Regional
519,768 768,745 1,288,513 Bank Leumi Le - Israel 664,712 983,119 1,647,831
Banks-Money Center
69,400 95,500 164,900 MISR International Bank - Reg S GDR 654,095 900,088 1,554,183
Banks-Money Center
23,068,549 34,305,200 57,373,749 Turkiye Is Bankasi (Isbank) "C" 633,157 941,566 1,574,723
Banks-Money Center
28,872 28,266 57,138 Banco de Galicia y Buenos Aires, S.A.
de C.V. - ADR 492,629 481,606 974,235
Banks-Money Center
5,800 7,460 13,260 Commercial Bank of Greece S.A. 491,753 632,496 1,124,249
Banks-Money Center
5,360 7,170 12,530 Ergo Bank S.A. 476,360 637,220 1,113,580
Banks-Regional
41,379,593 48,631,340 90,010,933 Yapi ve Kredi Bankasi AS 467,233 549,115 1,016,348
Banks-Regional
56,220 77,770 133,990 Credicorp Ltd. - ADR 379,485 524,948 904,433
Banks-Money Center
2,900 3,500 6,400 Wafabank 378,516 456,830 835,346
Banks-Money Center
14,680 22,010 36,690 KREDYT BANK S.A. - Reg S GDR 292,866 439,100 731,966
Banks-Money Center
19,162,500 22,711,500 41,874,000 Akbank T.A.S. 282,947 335,350 618,297
Banks-Regional
26,900 32,100 59,000 Banco Rio de La Plata S.A. - ADR 242,100 288,900 531,000
Banks-Money Center
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
SHARE AMOUNTS VALUE
DEVELOPING EMERGING COMBINING DEVELOPING EMERGING VALUE
MARKETS MARKETS PRO FORMA SECURITY MARKETS MARKETS PRO FORMA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9,000 10,750 19,750 Inversiones y Representaciones S.A.
(IRSA) - GDR 232,875 278,156 511,031
Real Estate
70,000 68,000 138,000 National Development Bank 80,910 78,598 159,508
Banks-Regional
12,700 12,610 25,310 Kazkommertsbank Co. - GDR 70,485 69,986 140,471
Banks-Regional
-- 4,200 4,200 Commercial National Bank -- 33,723 33,723
Banks-Money Center
3,000 1,650 4,650 State Bank of India Ltd. 11,035 6,070 17,105
Banks-Money Center
-- 5 5 Housing Development Finance Corp. -- 264 264
Other Financial
-----------------------------------------
13,271,370 16,888,560 30,159,930
-----------------------------------------
Energy (10%)
16,207,398 16,324,080 32,531,478 Petroleo Brasileiro S.A. (Petrobras)
Preferred 2,038,154 2,052,827 4,090,981
Oil
97,731 96,750 194,481 Companhia Energetica de Minas Gerais
(CEMIG) - ADR 1,893,538 1,874,531 3,768,069
Electrical & Gas Utilities
68,330 72,410 140,740 MOL Magyar Olaj-es Gazipari RT -
Reg S GDR 1,556,216 1,649,138 3,205,354
Gas Production & Distribution
70,958 110,068 181,026 Huaneng Power International, Inc. - ADR 975,673 1,513,435 2,489,108
Electrical & Gas Utilities
30,728 44,268 74,996 Enersis S.A. - ADR 641,447 924,095 1,565,542
Electrical & Gas Utilities
12,500,000 15,100,000 27,600,000 Companhia de Eletricidade do
Estado da Bahia - COELBA 398,223 481,053 879,276
Electrical & Gas Utilities
163,020 225,855 388,875 Surgutneftegaz - ADR 326,040 451,710 777,750
Oil
7,843,375 9,317,824 17,161,199 Eletropaulo Metropolitana Preferred 264,339 314,031 578,370
Electrical & Gas Utilities
1,654,290 2,158,561 3,812,851 Light - Servicos de Electricidade S.A. 205,261 267,830 473,091
Electrical & Gas Utilities
7,843,375 9,317,824 17,161,199 Empresa Bandeirante de Energia S.A. 76,211 90,538 166,749
Electrical & Gas Utilities
12,154,000 14,418,000 26,572,000 Companhia Brasileira de Petroleo
Ipiranga S.A.
Preferred 65,213 77,360 142,573
Gas
1,350 -- 1,350 Bombay Suburban Electric Supply
(BSES) Ltd. 4,774 -- 4,774
Electrical & Gas Utilities
-- 65 65 Pakistan State Oil., Ltd. -- 64 64
Oil
-----------------------------------------
8,445,089 9,696,612 18,141,701
-----------------------------------------
Consumer Non-Durables (10.6%)
89,806 92,963 182,769 South African Breweries Ltd. 1,747,924 1,809,369 3,557,293
Beverages - Alcoholic
40,650 51,000 91,650 Hindustan Lever Ltd. 1,540,472 1,932,695 3,473,167
Personal Care/Cosmetics
79,900 92,128 172,028 ITC Ltd. 1,321,750 1,524,032 2,845,782
Tobacco
44,311 64,322 108,633 Fomento Economico Mexicano, S.A.
de C.V. - ADR 1,154,855 1,676,392 2,831,247
Beverages - Non-alcoholic
34,000 50,000 84,000 Panamerican Beverages, Inc. "A" 688,500 1,012,500 1,701,000
Beverages - Non-alcoholic
A-Ahram Beverages Co. S.A.E.:
Beverages - Alcoholic
15,814 21,235 37,049 144A GDR 443,583 595,642 1,039,225
-- 11,000 11,000 GDR -- 308,550 308,550
18,100 36,546 54,646 Compania Cervecerias Unidas S.A. - ADR 325,800 657,828 983,628
Beverages - Alcoholic
2,747,000 5,002,000 7,749,000 Companhia de Tecidos Norte de
Minas Preferred 317,812 578,702 896,514
Textiles & Apparel
563,721 663,129 1,226,850 Companhia Cervejaria Brahma Preferred 264,658 311,328 575,986
Beverages - Alcoholic
11,400 12,000 23,400 Oriental Weavers "C" 245,974 258,920 504,894
Textiles & Apparel
1,243 1,560 2,803 Zaklady Piwowarskie w Zywcu S.A.
(Zywiec) 169,369 212,562 381,931
Beverages - Alcoholic
47,740 58,916 106,656 Truworths International Ltd. 36,381 44,898 81,279
Textiles & Apparel
-----------------------------------------
8,257,078 10,923,418 19,180,496
-----------------------------------------
Materials/Basic Industry (8.7%)
95,195 109,535 204,730 Suez Cement Co. - Reg S GDR 1,404,126 1,615,641 3,019,767
Cement
87,900 90,800 178,700 Anglo American Platinum Corporation Ltd. 1,336,583 1,380,680 2,717,263
Metals - Non-Ferrous
31,500 34,370 65,870 Sociedad Quimica y Minera de Chile
S.A. - ADR 1,047,375 1,142,803 2,190,178
Chemicals
55,700 54,200 109,900 Companhia Vale do Rio Doce "A"
Preferred 840,543 817,907 1,658,450
Metals - Steel
47,792 54,606 102,398 Compania de Minas Buenaventura
S.A. - ADR 585,452 668,924 1,254,376
Gold
Cemex, S.A. de C.V. "CPO"
Cement
238,120 349,153 587,273 "CPO" 568,019 832,880 1,400,899
-- 43,400 43,400 "A" -- 104,387 104,387
115,233 147,781 263,014 Apasco, S.A. de C.V. 422,015 541,215 963,230
Cement
Hindalco Industries Ltd.:
Metals - Non-Ferrous
26,200 34,200 60,400 GDR 307,195 400,995 708,190
1,634 1,802 3,436 Common 19,759 21,790 41,549
144,665 142,780 287,445 Makhteshim-Agan Industries Ltd. 256,973 253,624 510,597
Chemicals
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
SHARE AMOUNTS VALUE
DEVELOPING EMERGING COMBINING DEVELOPING EMERGING VALUE
MARKETS MARKETS PRO FORMA SECURITY MARKETS MARKETS PRO FORMA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
118,000 187,600 305,600 Siderca S.A. "A" 165,250 262,719 427,969
Metals - Steel
283,300 537,100 820,400 Grupo Cementos de Chihuahua, S.A. de
C.V. "B" 151,983 288,140 440,123
Cement
69,370 72,711 142,081 Engro Chemicals Pakistan Ltd. 63,948 67,027 130,975
Chemicals
35,360 43,350 78,710 Nan Ya Plastics Corp. 44,780 54,899 99,679
Plastics & Rubber
-- 16 16 Associated Cement Cos., Ltd. -- 356 356
Cement
-- 4 4 Dewan Salman Fibre Ltd. -- 1 1
Chemicals
-----------------------------------------
7,214,001 8,453,988 15,667,989
-----------------------------------------
Multi-Industry/Miscellaneous (6.9%)
452,400 664,600 1,117,000 Grupo Carso, S.A. de C.V. "A1" 1,567,257 2,302,385 3,869,642
Multi-Industry
220,610 228,160 448,770 Rembrandt Group Ltd. 1,472,049 1,522,427 2,994,476
Conglomerate
43,775,250 57,726,250 101,501,500 Haci Omer Sabanci Holding AS 661,579 872,422 1,534,001
Conglomerate
288,900 380,700 669,600 China Development Corp. 571,107 752,581 1,323,688
Conglomerate
175,000 156,000 331,000 Central Asia Regional Growth Fund 525,000 468,000 993,000
Country Funds
5,220,550 3,488,650 8,709,200 Koc Holding AS 480,647 321,194 801,841
Conglomerate
24,643 31,615 56,258 Koor Industries Ltd. - ADR 398,909 511,768 910,677
Conglomerate
17,000 3,800 20,800 John Keells Holdings Ltd. 48,173 10,768 58,941
Conglomerate
-- 75,800 75,800 Romanian Growth Fund -- 94,750 94,750
Country Funds
-- 200 200 KEC International -- 113 113
Miscellaneous
-----------------------------------------
5,724,721 6,856,408 12,581,129
-----------------------------------------
Technology (4.7%)
597,950 667,450 1,265,400 Taiwan Semiconductor Manufacturing Co. 1,209,752 1,350,362 2,560,114
Semiconductors
96,862 127,997 224,859 Asustek Computer Inc. - Reg S GDR 743,416 982,377 1,725,793
Computers & Peripherals
112,000 141,960 253,960 Hon Hai Precision Industry 539,676 684,039 1,223,715
Computers & Peripherals
160,000 212,000 372,000 Compal Electronics, Inc. 499,151 661,375 1,160,526
Computers & Peripherals
153,600 196,800 350,400 Delta Electronics, Inc. 443,602 568,364 1,011,966
Computers & Peripherals
16,505 21,505 38,010 Formula Systems Ltd. 353,214 460,212 813,426
Software
-----------------------------------------
3,788,811 4,706,729 8,495,540
-----------------------------------------
Capital Goods (3.3%)
17,100 20,165 37,265 Heliopolis Housing 1,563,864 1,844,170 3,408,034
Construction
23,005 27,170 50,175 NASR (El) City Company For Housing
& Construction 713,659 842,865 1,556,524
Construction
165,800 214,600 380,400 Corporacion GEO, S.A. de C.V. "B" 287,192 371,721 658,913
Construction
-- 41,822 41,822 Arabian International Construction -- 303,927 303,927
Construction
-----------------------------------------
2,564,715 3,362,683 5,927,398
-----------------------------------------
Health Care (2.1%)
79,850 75,000 154,850 Ranbaxy Laboratories Ltd. 942,438 885,195 1,827,633
Medical Technology & Supplies
18,700 29,600 48,300 Teva Pharmaceutical Industries Ltd. 737,188 1,166,886 1,904,074
Pharmaceuticals
-----------------------------------------
1,679,626 2,052,081 3,731,707
-----------------------------------------
Consumer Durables (0.5%)
29,300 -- 29,300 Bajaj Auto Ltd. 383,567 -- 383,567
Automobiles
-- 100 100 Tata Engineering and Locomotive
Co., Ltd. -- 267 267
Automobiles
1,022,000 1,475,000 2,497,000 Qingling Motors Co., Ltd. 188,709 272,355 461,064
Automobiles
-----------------------------------------
572,276 272,622 844,898
-----------------------------------------
TOTAL EQUITY INVESTMENTS 69,356,560 83,861,449 153,218,009
=========================================
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT FIX INCOME INVESTMENTS (7.5%)
- ----------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Government & Government Agency
Obligations (5.4%)
Algeria (0.3%)
1,050,000 -- 1,050,000 Algeria Tranche 1 Loan Assignment,
6.625% due 9/4/06 535,500 -- 535,500
Argentina (1%)
Republic of Argentina:
1,425,000 -- 1,425,000 Discount Bond, 6.625% due 3/31/23 970,781 -- 970,781
875,000 -- 875,000 Par Bond Series L, 5.75% (6% at
3/31/99) due 3/31/23 608,125 -- 608,125
350,000 -- 350,000 Strip, 12.11% due 4/10/05 308,000 -- 308,000
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
SHARE AMOUNTS VALUE
DEVELOPING EMERGING COMBINING DEVELOPING EMERGING VALUE
MARKETS MARKETS PRO FORMA SECURITY MARKETS MARKETS PRO FORMA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brazil (0.3%)
845,000 -- 845,000 Brazil Floating Rate Discount Note,
6.125% due 4/15/24 502,247 -- 502,247
Bulgaria (0.5%)
Republic of Bulgaria:
771,000 -- 771,000 Discount Bond Series A, 6.6875% due
7/28/24 - Euro 541,628 -- 541,628
760,000 -- 760,000 Front Loaded Interest Reduction Bond
Series A, 2.25% (2.5% at 7/99) due
7/28/12 419,900 -- 419,900
Colombia (0.2%)
Republic of Colombia:
472,000 -- 472,000 8.625% due 4/1/08 370,520 -- 370,520
59,000 -- 59,000 7.27% due 6/15/03 - 144A 48,085 -- 48,085
Mexico (2.1%)
United Mexican States:
1,570,000 -- 1,570,000 Discount Bond Series D, 6.6016%
due 12/31/19 1,225,581 -- 1,225,581
1,353,000 -- 1,353,000 Discount Bond Series C, 6.6172%
due 12/31/19 1,056,186 -- 1,056,186
575,000 -- 575,000 9.875% due 1/15/07 546,969 -- 546,969
3,000,000 -- 3,000,000 6.63% due 12/31/19 420,666 -- 420,666
412,000 -- 412,000 Discount Bond Series A, 6.1156%
due 12/31/19 321,618 -- 321,618
375,000 -- 375,000 Discount Bond Series B, 6.47656%
due 12/31/19 292,734 -- 292,734
Panama (0.2%)
Republic of Panama:
370,000 -- 370,000 Interest Reduction Bond, 4.00% (4.50%
at 7/99) due 7/17/14 270,794 -- 270,794
67,000 -- 67,000 8.875% due 9/30/27 61,808 -- 61,808
Peru (0.4%)
1,116,000 -- 1,116,000 Republic of Peru, Past Due Interest
Bond, 4.00% (4.50% at 7/99) due
3/7/17 641,700 -- 641,700
Poland (0.3%)
Poland:
685,000 -- 685,000 3% due 10/27/24 - Euro 455,525 -- 455,525
2,000 -- 2,000 Past Due Interest Bond, 4% due
10/27/14 - Euro 1,819 -- 1,819
Russia (0.1%)
2,717,360 -- 2,717,360 Bank for Foreign Economic Affairs
(Venesheconombank) Principal Loans,
6.625% due 12/15/20 215,690 -- 215,690
----------------------------------------
Total Government & Government Agency
Obligations 9,815,876 -- 9,815,876
========================================
Corporate Bonds (1.9%)
Argentina (0.7%)
1,504,000 -- 1,504,000 Telefonica de Argentina, 9.125% due
5/7/08 - Reg S 1,305,649 -- 1,305,649
Brazil (0.6%)
710,000 -- 710,000 Banco Hipotecario Espana, 10% due
4/17/03 - 144A 624,800 -- 624,800
1,042,000 -- 1,042,000 RBS Participacoes S.A., 11% due
4/1/07 - 144A 468,900 -- 468,900
125,000 -- 125,000 Globo Comunicacoes Participacoes,
10.625% due 5/12/08 - 144A 71,563 -- 71,563
Colombia (0.1%)
148,000 -- 148,000 Financiera Energia Nacional, 9.375%
due 6/15/06 - Reg S 108,528 -- 108,528
Korea (0%)
5,500,000 -- 5,500,000 Pohang Iron & Steel, 2% due 10/9/00 40,886 -- 40,886
Mexico (0.3%)
360,000 -- 360,000 Petroleos Mexicanos (PEMEX), 9.25%
due 3/30/18 - 144A 293,400 -- 293,400
210,000 -- 210,000 Dine, S.A. de C.V., 8.75% due 10/15/07
- 144A 165,900 -- 165,900
97,000 -- 97,000 Banco Nacional Comercio Exte., 8%
due 7/18/02 - Reg S 88,513 -- 88,513
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
SHARE AMOUNTS VALUE
DEVELOPING EMERGING COMBINING DEVELOPING EMERGING VALUE
MARKETS MARKETS PRO FORMA SECURITY MARKETS MARKETS PRO FORMA
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Russia (0.2%)
851,000 -- 851,000 Lukinter Finance BV Convertible, 3.5%
due 5/6/02 - 144A 310,615 -- 310,615
5,000 -- 5,000 Mosenergo Finance BV, 8.375% due
10/9/02 - 144A 875 -- 875
-----------------------------------------
Total Corporate Bonds 3,479,629 -- 3,479,629
=========================================
Structured Notes (0.2%)
Korea (0.2%)
Fixed Rate Trust Certificate 13.55%
due 2/15/02 (Issued by a newly
created Delaware Business Trust,
collateralized by triple A paper.
470,000 -- 470,000 This trust certificate has a credit
risk component linked to the value
of a referenced security: Korean
Development Bank, 1.875% 2002). 343,805 -- 343,805
-----------------------------------------
TOTAL FIXED INCOME INVESTMENTS 13,639,310 -- 13,639,310
=========================================
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS WARRANTS
- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
765,294 796,274 1,561,568 Merrill Lynch - Kospi 200 Call Warrants,
due 9/9/99 2,571,541 2,675,640 5,247,181
Warrants
Repurchase Agreements
Dated October 30, 1998, with State
Street Bank & Trust Co., due
November 2, 1998, for an effective
yield of 5.30%4,653,000ralized by
$4,145,000 U.S. Treasury Notes,
6.50% due 5/05 (market value of
collateral is $4,750,253, including
4,653,000 4,653,000 accrued interest). 4,653,000 -- 4,653,000
Dated October 30, 1998, with State
Street Bank & Trust Co., due
November 2, 1998, for an effective
yield of 5.30%, collateralized by
$9,170,000 U.S. Treasury Notes,
due 9/30/99 (market value of
collateral is $9,328,082, including
9,141,000 9,141,000 accrued interest). -- 9,141,000 9,141,000
TOTAL INVESTMENTS (102.6%) 90,220,411 95,678,089 185,898,500
Other Assets and Liabilities (-2.6%) (2,519,957) (2,275,508) (4,795,465)
------------------------------------------
NET ASSETS (100%) 87,700,454 93,402,581 181,103,035
==========================================
</TABLE>
<PAGE> 74
AIM DEVELOPING MARKETS FUND
AIM EMERGING MARKETS FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED OCTOBER 31, 1998
(AUDITED)
<TABLE>
<CAPTION>
AIM DEVELOPING AIM EMERGING PRO FORMA
ASSETS: MARKETS FUND MARKETS FUND COMBINING
-------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENTS, AT MARKET VALUE $90,220,411 $95,678,089 $185,898,500
(COST $117,236,708 - AIM DEVELOPING MARKETS FUND)
(COST $124,870,218 - AIM EMERGING MARKETS FUND)
U.S. AND FOREIGN CURRENCIES 724,303 1,236,245 1,960,548
RECEIVABLES FOR:
INVESTMENTS SOLD 903,099 66,130 969,229
DIVIDENDS & INTEREST 693,150 322,915 1,016,065
FUND SHARES SOLD 5,619 413,554 419,173
UNAMORTIZED ORGANIZATIONAL COSTS 14,557 -- 14,557
----------- ----------- ------------
TOTAL ASSETS 92,561,139 97,716,933 190,278,072
----------- ----------- ------------
LIABILITIES:
PAYABLES FOR:
INVESTMENTS PURCHASED 3,823,511 3,143,073 6,966,584
FUND SHARES REPURCHASED 394,946 288,586 683,532
INVESTMENT MANAGEMENT AND ADMINISTRATION FEES 356,752 394,425 751,177
SERVICE AND DISTRIBUTION FEES 96,087 147,714 243,801
PROFESSIONAL FEES 49,710 43,949 93,659
TRANSFER AGENT FEES 30,788 136,937 167,725
TRUSTEES' FEES AND EXPENSES 25,309 4,101 29,410
CUSTODIAN FEES 10,081 8,199 18,280
REGISTRATION AND FILING FEES 7,596 24,709 32,305
PRINTING AND POSTAGE FEES 6,093 102,809 108,902
OPEN FORWARD FOREIGN CURRENCY CONTRACTS 950 -- 950
FUND ACCOUNTING FEES 883 4,847 5,730
OTHER ACCRUED EXPENSES 57,979 15,003 72,982
----------- ----------- ------------
TOTAL LIABILITIES 4,860,685 4,314,352 9,175,037
----------- ----------- ------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $87,700,454 $93,402,581 $181,103,035
=========== =========== ============
NET ASSETS:
CLASS A $87,517,225 $43,925,435 $131,442,660
CLASS B $ 153,941 $49,439,410 $ 49,593,351
ADVISOR CLASS $ 29,288 $ 37,736 $ 67,024
SHARES OUTSTANDING:
CLASS A 11,616,154 5,964,824 17,446,312
CLASS B 20,565 6,894,258 6,620,273
ADVISOR CLASS 3,877 5,067 8,877
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE: $ 7.53 $ 7.36 $ 7.53
OFFERING PRICE PER SHARE:
(NET ASSET VALUE OF $7.53 / 95.25%)-AIM DEVELOPING MARKETS FUND $ 7.91
(NET ASSET VALUE OF $7.36 / 95.25%)-AIM EMERGING MARKETS FUND $ 7.73
CLASS B:
NET ASSET VALUE AND OFFERING PRICE PER SHARE: $ 7.49 $ 7.17 $ 7.49
ADVISOR CLASS
NET ASSET VALUE AND OFFERING PRICE PER SHARE: $ 7.55 $ 7.45 $ 7.55
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS.
<PAGE> 75
AIM DEVELOPING MARKETS FUND
AIM EMERGING MARKETS FUND
PRO FORMA COMBINING STATEMENTS OF OPERATIONS
FOR TO YEAR ENDED OCTOBER 31, 1998
(AUDITED)
<TABLE>
<CAPTION>
AIM DEVELOPING AIM EMERGING PRO FORMA
MARKETS FUND MARKETS FUND ADJUSTMENTS COMBINING
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INTEREST $ 5,875,109 $ 250,454 $ -- $ 6,125,563
DIVIDEND 4,212,609 4,700,768 -- 8,913,377
SECURITIES LENDING 241,088 186,080 -- 427,168
------------ ------------ ------------- -------------
TOTAL INVESTMENT INCOME 10,328,806 5,137,302 -- 15,466,108
------------ ------------ ------------- -------------
EXPENSES:
INVESTMENT MANAGEMENT AND ADMINISTRATION FEES 1,740,733 1,660,548 -- 3,401,281
TRANSFER AGENT FEES 538,250 1,069,500 -- 1,607,750
PROFESSIONAL FEES 360,255 122,310 -- 482,565
SERVICE AND DISTRIBUTION EXPENSES - CLASS A 454,554 406,198 -- 860,752
SERVICE AND DISTRIBUTION EXPENSES - CLASS B 1,576 871,360 -- 872,936
INTEREST EXPENSE 359,635 447,556 -- 807,191
PRINTING AND POSTAGE EXPENSES 312,740 219,000 -- 531,740
CUSTODIAN FEES 155,690 160,000 -- 315,690
REGISTRATION AND FILING FEES 96,900 74,900 -- 171,800
FUND ACCOUNTING FEES 53,782 45,603 -- 99,385
AMORTIZATION OF ORGANIZATION COSTS 70,755 -- -- 70,755
TRUSTEES' FEES AND EXPENSES 30,660 13,870 -- 44,530
OTHER 17,000 10,950 -- 27,950
------------ ------------ ------------- -------------
TOTAL EXPENSES 4,192,530 5,101,795 -- 9,294,325
------------ ------------ ------------- -------------
LESS: REIMBURSED BY THE ADVISOR (691,157) (821,992) -- (1,513,149)
LESS: EXPENSE REDUCTIONS (41,663) (39,255) -- (80,918)
------------ ------------ ------------- -------------
NET EXPENSES 3,459,710 4,240,548 -- 7,700,258
------------ ------------ ------------- -------------
NET INVESTMENT INCOME 6,869,096 896,754 -- 7,765,850
------------ ------------ ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
AND FOREIGN CURRENCIES:
NET REALIZED LOSS ON INVESTMENT (81,224,308) (72,668,661) -- (153,892,969)
NET REALIZED LOSS ON FOREIGN CURRENCY TRANSACTIONS (2,134,815) (2,512,849) -- (4,647,664)
NET CHANGE IN UNREALIZED APPRECIATION ON TRANSACTION
OF ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 197,153 601,285 -- 798,438
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 13,544,276 5,031,551 -- 18,575,827
------------ ------------ ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (69,617,694) (69,548,674) -- (139,166,368)
------------ ------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $(62,748,598) $(68,651,920) $(131,400,518)
============ ============ ============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS.
<PAGE> 76
Notes to Fin Stmts
AIM DEVELOPING MARKETS FUND
AIM EMERGING MARKETS FUND
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
OCTOBER 31, 1998
(AUDITED)
NOTE 1 - BASIS OF PRO FORMA PRESENTATION
THE PRO FORMA FINANCIAL STATEMENTS AND THE ACCOMPANYING PRO FORMA SCHEDULE OF
INVESTMENTS GIVE EFFECT TO THE PROPOSED AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN AIM DEVELOPING MARKETS FUND AND AIM EMERGING MARKETS FUND AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREIN TO BE ACCOUNTED FOR AS A
TAX-FREE REORGANIZATION OF INVESTMENT COMPANIES. THE AGREEMENT AND PLAN OF
REORGANIZATION WOULD BE ACCOMPLISHED BY AN EXCHANGE OF SHARES OF AIM EMERGING
MARKETS FUND FOR THE NET ASSETS OF AIM DEVELOPING MARKETS FUND AND THE
DISTRIBUTION OF AIM EMERGING MARKETS FUND SHARES TO AIM DEVELOPING MARKETS FUND
SHAREHOLDERS.
Page 1
<PAGE> 77
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
STATE THE GENERAL EFFECT OF ANY CONTRACT, ARRANGEMENTS OR STATUTE UNDER
WHICH ANY DIRECTOR, OFFICER, UNDERWRITER OR AFFILIATED PERSON OF THE REGISTRANT
IS INSURED OR INDEMNIFIED IN ANY MANNER AGAINST ANY LIABILITY WHICH MAY BE
INCURRED IN SUCH CAPACITY, OTHER THAN INSURANCE PROVIDED BY ANY DIRECTOR,
OFFICER, AFFILIATED PERSON OR UNDERWRITER FOR THEIR OWN PROTECTION.
The Registrant's Agreement and Declaration of Trust dated May
7, 1998 provides, among other things, (1) that a Trustee
shall not be liable for any act, omission, or obligation of
the Registrant or any Trustee (except for liability to the
Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence, or reckless
disregard of the Trustee's duties); (2) that the Trustees and
Officers shall be indemnified by the Registrant to the
fullest extent permitted by the Delaware Business Trust Act
and other applicable law; and (3) that the shareholders and
former shareholders of the Registrant shall be held harmless
by the Registrant (or applicable portfolio or class) from
personal liability arising from their status as such, and
shall be indemnified by the Registrant (or applicable
portfolio or class) against all loss and expense arising from
such personal liability in accordance with the Registrant's
By-Laws and applicable law.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
(1) - Agreement and Declaration of Trust of the Registrant was filed as an Exhibit to Post-
Effective Amendment No. 55 to the Registration Statement on Form N-1A, filed August
26, 1998, and is hereby incorporated by reference.
(2) - Bylaws of the Registrant were filed as an exhibit to Post-Effective Amendment No. 55
to the Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) - A copy of the form of Plan of Reorganization and Termination is attached as Appendix I
to the Prospectus contained in the Registration Statement.
(5) - Provisions of instruments defining the rights of holders of Registrant's securities are
contained in the Declaration of Trust Articles II, VI, VII, VIII and IX and By-laws
Articles IV, V, VI, VII and VIII, which were filed as an Exhibit to Post-Effective
Amendment No. 55 to the Registration Statement on Form N-1A, filed August 26, 1998,
and are hereby incorporated by reference.
(6) (a) - Investment Management and Administration Contract between Registrant and A I M
Advisors, Inc. was filed as an exhibit to Post-Effective Amendment No. 55 to the
Registration Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated
by reference.
(b) - Administration Contract between Registrant and A I M Advisors, Inc. was filed as an
</TABLE>
<PAGE> 78
<TABLE>
<S> <C>
exhibit to Post-Effective Amendment No. 55 to the Registration Statement on Form
N-1A, filed August 26, 1998, and is hereby incorporated by reference.
(c) - Sub-Administration Contract between A I M Advisors, Inc. and INVESCO (NY), Inc.
with respect to Registrant was filed as an exhibit to Post-Effective Amendment No. 55
to the Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(d) - Sub-Advisory and Sub-Administration Contract, dated September 8, 1998 between A I M
Advisors, Inc. and INVESCO (NY), Inc. with respect to Registrant was filed as an
exhibit to Post-Effective Amendment No. 55 to the Registration Statement on Form
N-1A, dated August 26, 1998, and is hereby incorporated by reference.
(e) - Fund Accounting and Pricing Agreement between Registrant and INVESCO (NY), INC. is
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(7) (a) - Distribution Agreement between Registrant and A I M Distributors, Inc. with respect to
Class A shares was filed as an exhibit to Post-Effective Amendment No. 55 to the
Registration Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated
by reference.
(b) - Distribution Agreement between Registrant and A I M Distributors, Inc. with respect
to Class B shares was filed as an exhibit to Post-Effective Amendment No. 55 to the
Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(c) - Distribution Agreement between Registrant and A I M Distributors, Inc. with respect
to Advisor Class shares was filed as an exhibit to Post-Effective Amendment No. 55
to the Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(8) - Agreements Concerning Officers and Directors/Trustees Benefits - None.
(9) (a) - Custodian Agreement between Registrant and State Street Bank and Trust Company was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration Statement
on Form N-1A, filed August 26, 1998, and is hereby incorporated by reference.
(b) - Transfer Agency and Service Agreement between Registrant and A I M Fund Services,
Inc. was filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(c) - Remote Access and Related Services Agreement, dated as of December 23, 1994,
between the Registrant and First Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an exhibit to Post-Effective Amendment
No. 55 to the Registration Statement on Form N-1A, filed August 26, 1998, and is
hereby incorporated by reference.
(d) - Amendment No. 1, dated October 4, 1995, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, between Registrant and First Data
</TABLE>
<PAGE> 79
<TABLE>
<S> <C>
Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.) was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(e) - Addendum No. 2, dated October 12, 1995, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.) was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(f) - Amendment No. 3, dated February 1, 1997, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.) was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(g) - Exhibit 1, effective as of August 4, 1997, to the Remote Access and Related
Services Agreement, dated as of December 23, 1994, between Registrant and First
Data Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.)
was filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(h) - Preferred Registration Technology Escrow Agreement, dated September 10, 1997,
between Registrant and First Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an exhibit to Post-Effective Amendment
No. 55 to the Registration Statement on Form N-1A, filed August 26, 1998, and is
hereby incorporated by reference.
(10) (a) - Form of Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class A shares
was filed as an Exhibit to Post-Effective Amendment No. 53 to the Registration
Statement on Form N-1A, dated May 29, 1998, and is hereby incorporated by reference.
(b) - Form of Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class B
shares was filed as an Exhibit to Post-Effective Amendment No. 53 to the
Registration Statement on Form N-1A, dated May 29, 1998, and is hereby incorporated
by reference.
(c) - Rule 18f-3 Multiple Class Plan was filed as an Exhibit to Post-Effective Amendment
No. 55 to the Registration Statement on Form N-1A, dated August 26, 1998, and is
hereby incorporated by reference.
(11) (a) - Opinion and Consent of Kirkpatrick & Lockhart LLP as to the legality of the
securities being registered was filed electronically as an Exhibit to the Registration
Statement on Form N-14 on November 30, 1998, and is hereby incorporated by reference.
(b) - Opinion and Consent of Delaware Counsel was filed electronically as an exhibit to the
Registration Statement on Form N-14 on November 30, 1998, and is hereby incorporated
by reference.
(12) - Opinion and Consent of Kirkpatrick &Lockhart LLP supporting the tax matters and
consequences to shareholders discussed in the prospectus will be filed in an amendment
to this Registration Statement.
(13) (a) - Selected Dealer Agreement was filed as an Exhibit to Post-Effective Amendment No.
53 to the Registration Statement on Form N-1A, dated May 29, 1998, and is hereby
incorporated by reference.
</TABLE>
<PAGE> 80
<TABLE>
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(b) - Bank Sales Contract was filed as an Exhibit to Post-Effective Amendment No. 53 to
the Registration Statement on Form N-1A, dated May 29, 1998, and is hereby
incorporated by reference.
(c) - Shareholder Service Agreement was filed as an Exhibit to Post-Effective Amendment
No. 53 to the Registration Statement on Form N-1A, dated May 29, 1998, and is
hereby incorporated by reference.
(d) - Bank Shareholder Service Agreement was filed as an Exhibit to Post-Effective
Amendment No. 53 to the Registration Statement on Form N-1A, dated May 29, 1998, and
is hereby incorporated by reference.
(e) - Service Agreement for Bank Trust Department and for Broker is filed as an exhibit
to Post-Effective Amendment No. 55 to the Registration Statement on Form N-1A,
filed August 26, 1998, and is hereby incorporated by reference.
(14) - Consent of PricewaterhouseCoopers LLP is filed herewith electronically.
(15) - Financial Statements - None.
(16) - Powers of Attorney - None.
(17) (a) - Form of Proxy was filed electronically as an Exhibit to the Registration
Statement on Form N-14 on November 30, 1998, and is hereby incorporated by reference.
(b) - Prospectus of AIM Emerging Markets Fund was filed electronically as an Exhibit to the
Registration Statement on Form N-14 on November 30, 1998, and is hereby incorporated
by reference.
</TABLE>
ITEM 17. UNDERTAKINGS.
None.
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Pre-Effective Amendment to the
Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Houston, and the State
of Texas, on the 15th day of December, 1998.
AIM INVESTMENT FUNDS
Registrant
By: /s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham
President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registration Statement on Form N-14 has been
signed below by the following persons in the capacities indicated on the 15th
day of December, 1998.
/s/ ROBERT H. GRAHAM
- ----------------------------------
Robert H. Graham President, Trustee and
Chairman of the Board
(Principal Executive Officer)
/s/ KENNETH W. CHANCEY Senior Vice President and Chief
- ---------------------------------- Financial Officer
Kenneth W. Chancey
/s/ C. DEREK ANDERSON
- ----------------------------------
C. Derek Anderson Trustee
/s/ ARTHUR C. PATTERSON
- ----------------------------------
Arthur C. Patterson Trustee
/s/ FRANK S. BAYLEY
- ----------------------------------
Frank S. Bayley Trustee
/s/ RUTH H. QUIGLEY
- ----------------------------------
Ruth H. Quigley Trustee
<PAGE> 82
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
14 Consent of PricewaterhouseCoopers LLP
<PAGE> 1
EXHIBIT 14
[PRICEWATERHOUSECOOPERS LOGO]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of AIM Investment Funds:
RE: AIM Developing Markets Fund (formerly GT Global Developing Markets Fund)
AIM Emerging Markets Fund (formerly GT Global emerging Markets Fund)
We hereby consent to the inclusion of our reports dated December 11, 1998
on our audits of the financial statements and financial highlights of the
above referenced funds as of October 31, 1998 included in the Pre Effective
Amendment No. 1 to AIM Investment Funds' Registration Statement on Form N-14
under the Securities Act of 1933, as amended.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 15, 1998
