AIM INVESTMENT FUNDS, N-30D, 1999-01-08

AIM INVESTMENT FUNDS
N-30D, 1999-01-08

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<PAGE>

ANNUAL REPORT / OCTOBER 31 1998

AIM GLOBAL TELECOMMUNICATIONS FUND

[Cover IMAGE]

[AIM Logo APPEARS HERE]

INVEST WITH DISCIPLINE-Registered Trademark-

<PAGE>

[COVER IMAGE] ACCENT IN PINK BY WASSILY KANDINSKY
BOTH AS AN ARTIST AND AS A THEORIST,
KANDINSKY PLAYED A PIVOTAL ROLE IN THE
DEVELOPMENT OF ABSTRACT ART. HIS EXPLORATION
OF THE POSSIBILITIES OF ABSTRACTION MADE HIM
ONE OF THE MOST IMPORTANT INNOVATORS IN
MODERN ART. MANY OF THE COMPANIES IN WHICH
THIS FUND INVESTS ARE ON THE CUTTING EDGE OF
TECHNOLOGY IN THE TELECOMMUNICATIONS
INDUSTRY, MAKING THEM INNOVATORS AS WELL.

AIM Global Telecommunications Fund is for shareholders seeking long-term growth
of capital by investing primarily in equity securities of companies throughout
the world engaged in the development, manufacture or sale of telecommunications
services or equipment.

ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
- - Aim Global Telecommunications Fund (formerly GT Global Telecommunications
Fund) performance figures are historical and reflect reinvestment of all
distributions and changes in net asset value. Unless otherwise indicated,
the fund's performance is computed at net asset value without a sales
charge.
- - During the fiscal year ended 10/31/98 the fund paid distributions of $1.20
per share for Class A shares and Class B shares.
- - 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 and Advisor Class shares will
differ from that of Class A shares due to differences in sales charge
structure and fund expenses.
- - Advisor Class shares are not sold directly to the general public and are
available only through certain employee benefit plans, financial
institutions, and other entities that have entered into specific agreements
with the fund's distributor. Please see the fund's prospectus for more
complete information.
- - The fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.

- - International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to the values of
other currencies, the custody arrangements made for the Fund's foreign
holdings, differences in accounting, political risks, and the lesser degree
of public information required to be provided by non-U.S. companies.
- - Investing in a single-sector mutual fund involves greater risk and
potential reward than investing in a more diversified fund.

ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
- - The EAFE-Registered Trademark- (Europe, Australasia, and the Far East)
Index is a group of unmanaged foreign securities tracked by Morgan Stanley
Capital International.

- - The MSCI World Index is a group of unmanaged global securities listed on
major world stock exchanges tracked by Morgan Stanley Capital
International.
- - The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general. Results shown assume the reinvestment of
dividends.
- - 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 GLOBAL TELECOMMUNICATIONS FUND

<PAGE>

ANNUAL REPORT / CHAIRMAN'S LETTER

[PHOTO OF CHARLES T. BAUER, CHAIRMAN OF THE BOARD OF THE FUND, APPEARS HERE]

DEAR FELLOW SHAREHOLDER:

Throughout the fiscal year covered by this report, markets worldwide vacillated
between optimism that the woes in Asia would be contained and worry that they
would become a major economic drag on the U.S. and the rest of the world. As a
result, markets worldwide were especially volatile.

We understand how unnerving this year's level of volatility can be. Many of you
undoubtedly were tempted simply to exit the markets completely. Our reaction, of
course, is that you should not. The abrupt reversals of sentiment during this
fiscal year reinforce our conviction that markets are unpredictable in the short
term. Since even the best money managers cannot know when to enter and exit a
market, we think the wisest strategy is to stay fully invested despite
volatility and short-term disappointment.

MARKET RECAP

Even in a year as unsettling as this one, August was particularly difficult. A
variety of events converged to produce harsh market conditions around the globe:
the seemingly intractable downturn in Japan, Russia's default on much of its
foreign debt, and fear that Latin America could be engulfed by the world's
difficulties. Even European stocks, which had been world market leaders, were
shaken. In a global display of lost confidence, investors flocked to securities
perceived as safe and liquid. Even blue-chip stocks went out of favor.

Fortunately, the U.S. Federal Reserve Board (the Fed) intervened. For most
of the fiscal year, the Fed had focused on the potential for inflation in the
U.S. economy. Shortly before the fiscal year ended, it shifted direction,
lowering interest rates twice to pump liquidity and confidence into the markets
and demonstrate that it would intervene to forestall a recession. Numerous
interest rate cuts in other countries followed. (After the fiscal year closed,
as this report was being written, the Fed lowered rates a third time.)

THE FISCAL YEAR CLOSED WITH INTERNATIONAL EQUITIES RALLYING AND BONDS LOSING
SOME OF THEIR MOMENTUM.

Investors responded favorably. The fiscal year closed with international
equities rallying and bonds losing some of their momentum. In just the two weeks
between the Fed's second interest rate move on October 15 and the October 31
close of the fiscal year, the EAFE Index gained 5.04% and the MSCI World Index
rose 4.93%. The U.S. participated strongly in the rally, with the S&P 500 up
4.93% during the same two-week period.
However difficult this fiscal year has been, the fundamental principles of
investing remain unchanged:
- broad portfolio diversification;
- realistic expectations, recognizing that the potential for downturns
is always present; and
- as always, long-term thinking.
Your financial consultant is your best resource for helping you construct a
diversified portfolio and weather turbulent markets.

YOUR FUND MANAGERS' COMMENTS

We are pleased to send you this report on your Fund's fiscal year. On the pages
that follow, your Fund's management team offers more detailed discussion of how
markets behaved, how they managed the portfolio, and what they foresee for your
Fund and the markets where it invests. We hope you find their discussion
informative. If you have any questions or comments, please contact our Client
Services department at 800-959-4246 or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
AIM Investor Line at 800-246-5463 or on our Web site, www.aimfunds.com. We often
post market updates on our Web site.

We thank you for your continued participation in The AIM Family of
Funds-Registered Trademark-.

Sincerely,

/s/ CHARLES T. BAUER

Charles T. Bauer
Chairman

<PAGE>

ANNUAL REPORT / MANAGERS' OVERVIEW

AIM GLOBAL TELECOMMUNICATIONS FUND
WEATHERS TURBULENT TIMES

IT WAS AN UNSETTLING YEAR IN THE STOCK MARKET. HOW DID AIM GLOBAL
TELECOMMUNICATIONS FUND PERFORM?

Despite an extremely volatile market and much concern among investors, the Fund
overcame earlier setbacks and finished the fiscal year near positive territory.

For the fiscal year ended October 31, 1998, the Fund posted a total return
of -3.16% and -3.67% for Class A and Class B shares, respectively.
Comparatively, the MSCI World Index had a return of 15.26% for the fiscal year.
World markets had a particularly difficult third quarter, and the Fund's
recovery has been rather extraordinary considering that Class A and B shares
were down 23.98% and 24.02% respectively at one point.

WHAT WERE THE MAJOR INFLUENCES ON THE FUND'S PORTFOLIO DURING THE FISCAL YEAR?

A first wave of anxiety about the continuing financial crises in Asia and their
potential effects worldwide dampened stock performance late in 1997. After
setting records in April and July of 1998, markets succumbed to a second wave of
the "Asian contagion" in July, casting doubts on the sustainability of the long
economic expansion in the U.S. and the boom in Europe's stock markets. Russia's
bond default in August contributed to a market downturn that eventually involved
even the very large, very liquid stocks that were chiefly responsible for the
U.S. market's earlier rise. European markets were not immune to the decline, and
many overseas markets were devastated.

Fortunately, an October rally in the U.S. stock market halted the
third-quarter downturn, buoyed by better-than-expected earnings reports from
some companies and two back-to-back interest rate reductions by the Federal
Reserve Board (the Fed). Many stocks that had experienced losses earlier in
the year were able to recover and even post slight gains because of the late
upswing.

WE CONTINUE TO BELIEVE THAT GLOBAL DEREGULATION AND INNOVATIONS IN TECHNOLOGY
FAVOR A NEW GENERATION OF TELECOMMUNICATIONS COMPANIES.

HOW WAS EUROPE AFFECTED BY THE MARKET'S DOWNTURN?

The golden child of world markets earlier this year, Europe suffered during the
summer's global downturn along with everyone else. Still, the major long-term
themes driving growth in Europe sheltered it somewhat from the extreme losses
felt in other parts of the world. The strict budgets and tough financial
standards required for admittance to the European Economic and Monetary Union
(EMU) have helped Europe's governments clean up their books. Interest rates have
dropped and inflation has lessened. The coming economic and monetary union is
also prodding European companies toward more competitive practices, and the
results are starting to impact the bottom line.

We increased our portfolio holdings in Europe from 34.8% as of April 30,
1998 to 41.5% as of the end of the fiscal year. Many of the continent's
telephone markets are now open to competition, and we believe this will lead to
continued growth as new companies face less risk in going head-to-head with
former monopolies.

DID YOUR INVESTMENT STRATEGY CHANGE, GIVEN THE MARKET'S VOLATILITY?

Because of the ongoing difficulties in the emerging markets and investors'
shunning of investments in smaller growth companies, we put a greater emphasis
on conservative, established telecommunications service and equipment companies.
We redirected the Fund from smaller growth companies and emerging-market stocks
toward larger-cap growth stocks and large-cap, dividend-paying telephone stocks
such as GTE. We continue to believe, however, that global deregulation and
innovations in technology favor a new generation of telecommunications companies
because there will be an increase in competition via new products and services.

HAS THE MAKE-UP OF THE FUND'S PORTFOLIO CHANGED?

Holdings in wireless services and equipment, especially in Europe, were
increased to take advantage of ongoing positive earnings in that industry. Lower
calling prices and increased competition continue to help drive domestic and
international growth in wireless communications. According to Yankee Group, a
Boston consulting firm, 25% of all U.S. telephone users will have wireless
phones by the end of 1998. That number is expected to double in the next seven
or eight years with technological innovations and a broadening range of services
and price options.

Holdings in Russia and Latin America were reduced because of economic
difficulties there, while increases were made in holdings in the U.K., Spain,
and France. The Fund currently invests about 86% of its portfolio in Europe and
the U.S. for

SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.
AIM GLOBAL TELECOMMUNICATIONS FUND

<PAGE>

ANNUAL REPORT / MANAGERS' OVERVIEW

greater stability following the recent volatility in global markets. A complete
list of all the countries represented in the portfolio can be found in the
financial pages of this report.

WHAT HOLDINGS IN THE FUND WERE THE BEST PERFORMERS?

Finland's Nokia, one of the world's top mobile phone makers, reported a 62%
increase in earnings for the third quarter of 1998, compared to the same period
a year ago. Other top Fund holdings include Texas-based SBC Communications,
which provides cellular phone service to 5.5 million people in 78 markets and
reported a 19.6% increase in third-quarter earnings over the same period a year
ago. Germany's digital cellular operator Mannesmann is poised for continued
growth in the next couple of years as it expands its market penetration. And MCI
WorldCom, the new long-distance company formed by the merger of MCI
Communications and WorldCom, is now second in size only to AT&T in the U.S.

WHAT IS YOUR OUTLOOK FOR THE FUTURE?

The stock market as a whole continues to recover from its August-September
slump. News that Japan's government plans to inject money into that country's
troubled banking sector and strong gains in markets overseas have contributed to
the U.S. market's comeback, as has anticipation of future interest rate cuts by
the Fed. The possibility of a recession in the U.S. has faded in the minds of
many as a result, and investors seem to be making their way back into equities
following their "flight to quality" of a few months ago.

Currently, the Fund is focusing on two principal areas of investment: (1)
conservative well-established global telephone companies, and (2) dominant
equipment and technology market leaders with a proven ability to increase
earnings, even in difficult times. We remain optimistic that wireless services,
especially in Europe, will continue to see upside surprises in subscriber
additions and revenues. We will also be watching Europe as the euro (see below)
is introduced in 1999 to see how European companies perform in the wake of
increased competition and tougher financial standards.

PORTFOLIO COMPOSITION
As of October 31, 1998, based on total net assets

Top 10 Equity Holdings

<TABLE>
<S> <C>
1. Telecom Italia S.p.A. (Italy) 4.2%
2. SBC Communications Inc. (U.S.) 4.1
3. MCI WorldCom, Inc. (U.S.) 4.0
4. Nokia Corp. (Finland) 3.6
5. Mannesmann AG (Germany) 3.2
6. ECI Telecom Ltd. (Israel) 3.0
7. GTE Corp. (U.S.) 3.0
8. Vivendi (France) 2.9
9. Cable & Wireless 2.8
Communications (U.K.)
10. NTL Inc. (U.K.) 2.7
</TABLE>

Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.

WELCOME THE EURO

Starting January 1, 1999, Europe will launch a brand new currency--the euro. At
first, only 11 countries will adopt it: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. These
countries have met the financial and economic criteria required for membership
in the European Economic and Monetary Union (EMU), and they have agreed to
follow certain monetary, exchange rate, and budgetary policies.

The changeover to euro will take place gradually. New coins and paper
currency will not be introduced until January 2002. Until then, Spanish shoppers
will still use pesetas and the French will still use francs, but these will be
thought of simply as denominations of the euro the same way that a quarter is a
denomination of a dollar.

A NEW BUSINESS ENVIRONMENT

The euro is expected to bring greater unity to the European business world:
price comparison of goods, services, and labor across Europe should be much
easier.

Because of this price transparency, European companies may be forced to
become more competitive. An increase in merger and acquisition activity is
expected.

The equity markets are likely to become broader and more liquid, since
European companies may find it easier to attract capital across borders.

Europe's fixed-income markets could also be transformed. Since currency
risk should be reduced, Europe's investors can focus on credit risk.
Eventually, the euro-denominated debt market could be as large and liquid as
that of the U.S.

The introduction of a new currency can present unique risks and
uncertainties for investors. Please see your prospectus for more information
about these risk factors.

SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.

AIM GLOBAL TELECOMMUNICATIONS FUND

<PAGE>

ANNUAL REPORT / PERFORMANCE HISTORY

YOUR FUND'S LONG-TERM PERFORMANCE

RESULTS OF A $10,000 INVESTMENT AIM GLOBAL TELECOMMUNICATIONS FUND VS. BENCHMARK
INDEX

1/27/92-10/31/98

[GRAPH]

<TABLE>
<CAPTION>
AIM GLOBAL TELECOMMUNICATIONS FUND,
CLASS A SHARES MSCI WORLD INDEX
<S> <C> <C>
1/27/92 $9,525.00 $10,000.00
4/30/92 9,608.00 10,159.00
7/31/92 9,467.00 10,519.00
10/31/92 9,300.00 10,082.00
1/31/93 10,266.00 10,936.00
4/30/93 10,865.00 11,559.00
7/31/93 12,258.00 12,425.00
10/31/93 14,284.00 13,511.00
1/31/94 15,399.00 13,624.00
4/30/94 14,257.00 12,774.00
7/31/94 14,480.00 13,225.00
10/31/94 15,287.00 13,601.00
1/31/95 13,400.00 12,991.00
4/30/95 13,572.00 13,484.00
7/31/95 15,653.00 14,330.00
10/31/95 14,848.00 15,439.00
1/31/96 16,011.00 16,405.00
4/30/96 17,601.00 16,651.00
7/31/96 15,173.00 15,437.00
10/31/96 15,887.00 16,121.00
1/31/97 17,031.00 17,672.00
4/30/97 15,601.00 17,610.00
7/31/97 20,348.00 19,948.00
10/31/97 18,700.00 19,782.00
1/31/98 18,487.00 23,256.00
4/30/98 22,289.00 26,110.00
7/31/98 22,545.00 28,827.00
10/31/98 18,109.00 22,785.00
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98, including sales charges

<TABLE>
<CAPTION>
Class A Shares
<S> <C>
Inception (1/27/92) 9.18%
5 years 3.85
1 year -7.76*
</TABLE>

<TABLE>
<CAPTION>
Class B Shares
<S> <C>
Inception (4/1/93) 9.20%
5 years 4.02
1 year -8.15**
</TABLE>

$18,109

<TABLE>
<CAPTION>
Advisor Class Shares
<S> <C>
Inception (6/1/95) 8.57%
3 years 7.41
1 year -2.59
</TABLE>

*-3.16%, excluding sales charges
**-3.67%, excluding sales charges

Sources: Towers Data Systems HYPO-Registered Trademark-, 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.

MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.

Past performance cannot guarantee comparable future results.

ABOUT THIS CHART
The chart compares your Fund's Class A shares to a benchmark index. Your Fund's
total return is shown with a sales charge and includes Fund expenses and
management fees. It is important to understand differences between your Fund and
an index. An index measures performance of a hypothetical portfolio. A market
index such as the MSCI World Index is not managed, incurring no sales charges,
expenses, or fees. (Please note that the results for this index are from
1/31/92-10/31/98.) If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return. Use
of this index is intended to give you a general idea of how your Fund performed
compared to the stock market.

Previously, this report compared the Fund to the Salomon Brothers Global
Telecommunications Index and the MSCI Telecommunications Index. However, both of
these indexes have a substantially lower weighting in emerging markets and do
not include any technology stocks, so they were dropped.

AIM GLOBAL TELECOMMUNICATIONS FUND

<PAGE>

ANNUAL REPORT / FOR CONSIDERATION

WHY STAYING FULLY INVESTED
HAS BEEN THE WISEST COURSE

When the stock market turns volatile, many investors feel the impulse to pull
their money out of mutual funds. The question then becomes when to get back
in. Trying to guess the answer could be very costly.

No one, not even expert market watchers, can consistently predict what
the market will do next. That's why AIM funds stay fully invested even in a
down market, and we encourage investors to do the same.

For long-term investing, the stock market historically has offered the
highest returns. For example, the Standard & Poor's Composite Index of 500
Stocks (S&P 500) has reported an annualized total return of 13.15% for the 50
years ending October 31, 1998. Those were five decades of wars, recessions,
and political upheaval.

If you pull your money out whenever markets decline, you could miss some
of the market's best days. In August 1998, investors withdrew $11 billion
from U.S. mutual funds. Chances are, many of those investors did not put
their money back into the market in time for the October rally. In fact,
October 1998 turned out to be the strongest month for the Dow Jones
Industrial Average in 11 years.

For international investors, here's another way to look at market
timing: If you had invested a hypothetical $10,000 in the Europe,
Australasia, and Far East Index tracked by Morgan Stanley Capital
International on October 31, 1978, your money would have grown to $103,110 by
October 31, 1998. That's an average annual total return of 12.37%. But
suppose that during that 20-year period, there were times when you decided to
get out of the market. If you missed the market's two best months, your
return would have fallen to 10.83%, and your investment would be worth
$78,214. If you had missed the market's five best months, your return would
have dropped to 9.01% and your investment would be worth $56,149.

The more you try to time the market, the greater your chances of missing
its biggest single-day gains. Keep focused on your financial goals and
remember that time, not timing, is key to successful investing. Now may be a
good time to visit your financial adviser to talk about your portfolio.
Remember:

- think long-term
- diversify your investments
- avoid market timing
- maintain realistic expectations

PENALTY FOR MISSING THE MARKET

MSCI EAFE INDEX
Average annual total returns, 20 years ended 10/31/98

Chart
<S> <C>
Fully Invested 240 Months 12.37
Miss the 2 Best Months 10.83
Miss the 5 Best Months 9.01
Miss the 7 Best Months 7.89
Miss the 9 Best Months 6.81
Miss the 14 Best Months 4.38

</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

INVESTMENT & DIVIDENDS VALUE OF SHARES
Cumulative Total From From
Period Cumulative Income Cap Gain From Dividends Capital Gains Total Shares Annual
From To Investment Dividends Distribution Investment Reinvested Reinvested Value Held Return
---- -- ---------- --------- ------------ ---------- ---------- ---------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/87-12/31/88 10,000 0 0 12,859 0 0 12,859 7.003 28.59%
12/31/88-12/31/89 10,000 0 0 11,080 0 0 11,080* 5.446 10.80%
12/31/89-12/31/90 10,000 0 0 7,680 0 0 7,680- 4.916 23.20%
12/31/90-12/31/91 10,000 0 0 11,250 0 0 11,250 6.400 12.50%
12/31/91-12/31/92 10,000 0 0 8,815 0 0 8,815 5.689 11.85%
12/31/92-12/31/93 10,000 0 0 13,294 0 0 13,294+ 6.454 32.94%
12/31/93-12/31/94 10,000 0 0 10,806 0 0 10,806 4.855 8.06%
12/31/94-12/31/95 10,000 0 0 11,155 0 0 11,155 4.492 11.55%
12/31/95-12/31/96 10,000 0 0 10,636 0 0 10,636 4.027 6.36%
12/31/96-12/31/97 10,000 0 0 10,206 0 0 10,206 3.786 2.06%
</TABLE>
+ Best Period * Median Period - Worst Period

<TABLE>
<CAPTION>
1-Year 5-Year 10-Year
------ ------ -------
<S> <C> <C> <C>
Average Annual Total Returns 6.38% 10.34% 7.10%
for Periods Ending 6/30/98
at Net Asset Value
</TABLE>

The EAFE-Registered Trademark- (Europe, Australasia, and the Far East) Index
is a group of unmanaged foreign securities. The index is compiled by Morgan
Stanley Capital International. Source: Lipper Analytical Services, Inc.

SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER

AIM GLOBAL TELECOMMUNICATIONS FUND

<PAGE>

ANNUAL REPORT / FOR CONSIDERATION

WHY STAYING FULLY INVESTED
HAS BEEN THE WISEST COURSE

No one, not even expert market watchers, can consistently predict what the
market will do next. That's why AIM funds stay fully invested even in a down
market, and we encourage investors to do the same.

If you pull your money out whenever markets decline, you could miss some of
the market's best days. In August 1998, investors withdrew $11 billion from
U.S. mutual funds. Chances are, many of those investors did not put their
money back into the market in time for the October rally. In fact, October
1998 turned out to be the strongest month for the Dow Jones Industrial
Average in 11 years.

FOr international investors, here's another way to look at market timing: If
you had invested a hypothetical $10,000 in the Europe, Australasia, and Far
East Index tracked by Morgan Stanley Capital Internal on October 31, 1978,
your money would have grown to $103,110 by October 31, 1998. That's an
average annual total return of 12.37%. But suppose that during that 20-year
period, there were times when you decided to get out of the market. If you
missed the market's two best months, your return would have fallen to
10.83%, and your investment would be worth $78,214. If you had missed the
market's five best months, your return would have dropped to 9.01% and your
investment would be worth $56,149.

The more you try to time the market, the greater your chances of missing its
biggest single-day gains. Keep focused on your financial goals and remember
that time, not timing, is key to successful investing. Now may be a good time
to visit your financial adviser to talk about your portfolio. Remember:

- think long-term
- diversify your investments
- avoid market timing
- maintain realistic expectations

PENALTY FOR MISSING THE MARKET
MSCI EAFE INDEX
Average annual total returns, 20 years ended 10/31/98

[Chart]

<TABLE>

<S> <C>
Fully invested 240 Months 12.37
Miss the 2 Best Months 10.83
Miss the 5 Best Months 9.01
Miss the 7 Best Months 7.89
Miss the 9 Best Months 6.81
Miss the 14 Best Months 4.38

</TABLE>

6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

- --------------------------------------------------------------------------------

To the Shareholders of AIM Global Telecommunications Fund (formerly GT Global
Telecommunications 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 Global Telecommunications
Fund at October 31, 1998, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

BOSTON, MASSACHUSETTS
DECEMBER 18, 1998
<PAGE>
PORTFOLIO OF INVESTMENTS

October 31, 1998

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telephone Networks (32.9%)
Telecom Italia S.p.A.: .................................. ITLY -- -- 4.2
Di Risp ............................................... -- 9,326,517 $ 47,241,821 --
Common ................................................ -- 1,263,333 9,136,412 --
MCI WorldCom, Inc.-/- ................................... US 976,718 53,963,670 4.0
GTE Corp. ............................................... US 675,000 39,614,063 3.0
NTL, Inc.-/- {\/} ....................................... UK 755,418 36,212,826 2.7
Telefonica de Espana .................................... SPN 787,666 35,576,704 2.7
SPT Telecom-/- .......................................... CZCH 1,948,398 29,501,433 2.2
Nippon Telegraph & Telephone Corp. ...................... JPN 3,400 26,648,333 2.0
Swisscom AG-/- .......................................... SWTZ 61,203 20,738,356 1.6
Deutsche Telekom AG ..................................... GER 644,000 17,556,208 1.3
Helsingin Puhelin Oyj (Helsinki Telephone Corp.) ........ FIN 307,001 16,849,215 1.3
BCE, Inc. ............................................... CAN 463,025 15,699,324 1.2
Carso Global Telecom "A1" ............................... MEX 5,654,982 15,392,656 1.2
Koninklijke KPN N.V. .................................... NETH 348,000 13,526,502 1.0
British Telecommunications PLC .......................... UK 1,005,000 12,980,760 1.0
France Telecom S.A. ..................................... FR 175,000 12,210,328 0.9
Magyar Tavkozlesi Rt. - ADR{\/} ......................... HGRY 448,350 12,049,406 0.9
Esat Telecom Group PLC - ADR-/- {\/} .................... IRE 335,300 10,142,825 0.8
Telecom Corporation of New Zealand Ltd. - Installment
Receipts ............................................... NZ 3,495,700 6,807,883 0.5
Equant N.V.-/- {\/} ..................................... NETH 54,700 2,393,125 0.2
Russian Telecommunications Development Corp.: ........... RUS -- -- 0.2
Non-Voting(.) -/- {\/} (::) ........................... -- 453,000 1,114,380 --
Voting(.) -/- {\/} (::) ............................... -- 331,000 814,260 --
--------------
436,170,490
--------------
Wireless Communications (20.1%)
Mannesmann AG ........................................... GER 436,000 42,938,795 3.2
Millicom International Cellular S.A.-/- {\/} {::} ....... LUX 1,035,000 34,543,125 2.6
Vodafone Group PLC ...................................... UK 1,882,000 25,189,895 1.9
Nextel Communications, Inc. "A"-/- ...................... US 1,190,700 21,581,438 1.6
Orange PLC-/- ........................................... UK 2,160,800 20,082,389 1.5
NTT Mobile Communications ............................... JPN 434 15,702,475 1.2
Western Wireless Corp. "A"-/- ........................... US 750,300 15,193,575 1.1
Smartone Telecommunications ............................. HK 5,048,000 14,339,983 1.1
WinStar Communications, Inc.-/- ......................... US 502,500 13,567,500 1.0
Securicor PLC ........................................... UK 1,550,007 11,462,324 0.9
Grupo Iusacell S.A. "L" - ADR-/- {\/} ................... MEX 1,663,700 11,437,938 0.9
Netcom ASA-/- ........................................... NOR 295,732 9,084,604 0.7
AirTouch Communications, Inc.-/- ........................ US 158,800 8,892,800 0.7
Advanced Info. Service - Foreign ........................ THAI 993,150 7,304,563 0.5
ICO Global Communications (Holdings) Ltd. ............... US 620,200 5,039,125 0.4
Bell Canada International, Inc.-/- ...................... CAN 393,800 4,110,327 0.3
Clearnet Communications, Inc. "A"-/- {\/} ............... CAN 451,200 3,299,400 0.2
STET Hellas Telecommunications S.A. - ADR-/- {\/} ....... GREC 108,650 2,852,063 0.2
Microcell Telecommunications, Inc. "B"-/- {\/} .......... CAN 296,400 1,537,575 0.1
Telesp Celular Participacoes S.A.-/- .................... BRZL 51,800,000 168,932 --
</TABLE>

The accompanying notes are an integral part of the financial statements.

7
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1998

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Wireless Communications (Continued)
Tele Sudeste Celular Participacoes S.A.-/- .............. BRZL 51,800,000 $ 99,883 --
Tele Celular Sul Participacoes S.A.-/- .................. BRZL 51,800,000 33,005 --
Tele Centro Oeste Celular Participacoes S.A.-/- ......... BRZL 51,800,000 32,570 --
Telemig Celular Participacoes S.A.-/- ................... BRZL 51,800,000 31,702 --
Tele Nordeste Celular Participacoes S.A.-/- ............. BRZL 51,800,000 19,542 --
Tele Leste Celular Participacoes S.A.-/- ................ BRZL 51,800,000 16,068 --
Tele Norte Celular Participacoes S.A.-/- ................ BRZL 51,800,000 10,423 --
Telecommunicacoes Brasileiras S.A. (Telebras).-/- ....... BRZL 51,800,000 5,211 --
--------------
268,577,230
--------------
Telecom Equipment (10.6%)
Nokia Oyj "A" ........................................... FIN 533,320 48,642,599 3.6
ECI Telecommunications Ltd.{\/} ......................... ISRL 1,213,000 40,180,625 3.0
Tekelec-/- .............................................. US 1,297,800 23,279,288 1.7
Tellabs, Inc.-/- ........................................ US 290,000 15,950,000 1.2
ANTEC Corp.-/- .......................................... US 605,900 10,073,088 0.8
Orckit Communications Ltd.-/- {\/} ...................... ISRL 225,000 2,896,875 0.2
Netas Northern Electric Telekomunikayson AS: ............ TRKY -- -- 0.1
Tradeable Receipts-/- ................................. -- 74,844,000 1,664,182 --
Common-/- ............................................. -- 17,358,300 385,968 --
--------------
143,072,625
--------------
Telephone - Regional/Local (8.7%)
SBC Communications ...................................... US 1,193,834 55,289,437 4.1
Bell Atlantic Corp. ..................................... US 350,000 18,593,750 1.4
ICG Communications, Inc.-/- ............................. US 706,200 14,609,513 1.1
Intermedia Communications of Florida, Inc.-/- ........... US 681,100 12,600,350 0.9
BellSouth Corporation ................................... US 115,000 9,178,438 0.7
MetroNet Communications Corp. "B"-/- {\/} ............... CAN 146,200 3,362,600 0.3
Telesp Participacoes S.A.-/- ............................ BRZL 51,800,000 929,343 0.1
ING Barings Russian Regional Telecommunications Basket
Bridge Certificates-/- {=} {\/} ........................ RUS 1,749 802,039 0.1
Tele Norte Leste Participacoes S.A.-/- .................. BRZL 51,800,000 290,962 --
Tele Centro Sul Participacoes S.A.-/- ................... BRZL 51,800,000 238,850 --
--------------
115,895,282
--------------
Cable Television (4.5%)
Comcast Corp. "A" ....................................... US 604,300 29,837,313 2.2
Tele-Communications, Inc. "A"-/- ........................ US 604,100 25,447,713 1.9
United International Holdings, Inc. "A"-/- .............. US 365,800 4,755,400 0.4
--------------
60,040,426
--------------
Multi-Industry (2.9%)
Vivendi ................................................. FR 168,500 38,501,630 2.9
--------------
Telecom - Other (2.8%)
Cable & Wireless Communications PLC-/- .................. UK 5,009,945 37,719,178 2.8
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1998

TOTAL EQUITY INVESTMENTS (cost $911,835,870) .............. 1,174,514,001 88.1
-------------- -----
<CAPTION>

PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (4.3%)
United States (4.3%)
United States Strip Principal due 8/15/20 (cost
$60,068,002) ......................................... USD 199,000,000 57,556,300 4.3
-------------- -----
<CAPTION>

NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
American Satellite Network Warrants, expire 1/1/99 (cost
$0)(.) (::) ............................................ US 65,825 -- --
-------------- -----
WIRELESS COMMUNICATIONS
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1998

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENTS (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 5.3%,
collateralized by $47,040,000 U.S Treasury Notes,
6.375% due 8/15/02 (market value of collateral is
$51,003,590, including accrued interest). ............ $ 50,000,000 3.7
Dated October 30, 1998, with State Street Bank & Trust
Co.,
due November 2, 1998, for an effective yield of 5.3%,
collateralized by $24,860,000 U.S. Treasury Notes,
5.375% due 1/31/00 (market value of collateral is
$25,505,067, including accrued interest). ............ 25,000,000 1.9
Dated October 30, 1998, with State Street Bank & Trust
Co.,
due November 2, 1998, for an effective yield of 5.3%,
collateralized by $19,640,000 U.S. Treasury Notes,
5.25% due 1/31/01 (market value of collateral is
$20,315,400, including accrued interest). ............ 19,915,000 1.5
-------------- -----

TOTAL REPURCHASE AGREEMENTS (cost $94,915,000) ............ 94,915,000 7.1
-------------- -----

TOTAL INVESTMENTS (cost $1,066,818,872) * ................ 1,326,985,301 99.5
Other Assets and Liabilities .............................. 6,390,559 0.5
-------------- -----

NET ASSETS ................................................ $1,333,375,860 100.0
-------------- -----
-------------- -----
</TABLE>

- --------------

{\/} U.S. currency denominated.
-/- Non-income producing security.
{=} Issued by ING Barings, the value of which is linked to the
underlying value of a basket of shares issued by Russian regional
telephone companies.
(::) Valued in good faith at fair value using procedures approved by the
Board of Trustees (See Note 1 of Notes to Financial Statements).
{::} See Note 6 of Notes to Financial Statements.
(.) Restricted Securities: At October 31, 1998 the Fund owned the
following restricted securities constituting less than .2% of net
assets which may not be publicly sold without registration under
the Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:

<TABLE>
<CAPTION>
VALUE
ACQUISITION PER SHARE
DESCRIPTION DATE SHARES COST (NOTE 1)
- ------------------------------------------------------------ ----------- ------- ---------- ---------
<S> <C> <C> <C> <C>
American Satellite Network Warrants, expire 1/1/99.......... 12/31/93 65,825 -- --
Russian Telecommunications Development Corp.:
Non-voting................................................ 12/22/93 453,000 $4,530,000 $2.46
Voting.................................................... 12/22/93 331,000 3,310,000 2.46
</TABLE>

* For Federal income tax purposes, cost is $1,071,126,276 and
appreciation (depreciation) is as follows:

<TABLE>
<S> <C>
Unrealized appreciation: $ 331,853,916
Unrealized depreciation: (75,994,891)
-------------
Net unrealized appreciation: $ 255,859,025
-------------
-------------
</TABLE>

Abbreviation:
ADR--American Depositary Receipt

The accompanying notes are an integral part of the financial statements.

10
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1998

- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1998, was concentrated in the
following countries:

<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Brazil (BRZL/BRL) .................... 0.1 0.1
Canada (CAN/CAD) ..................... 2.1 2.1
Czech Republic (CZCH/CSK) ............ 2.2 2.2
Finland (FIN/FIM) .................... 4.9 4.9
France (FR/FRF) ...................... 3.8 3.8
Germany (GER/DEM) .................... 4.5 4.5
Greece (GREC/GRD) .................... 0.2 0.2
Hong Kong (HK/HKD) ................... 1.1 1.1
Hungary (HGRY/HUF) ................... 0.9 0.9
Ireland (IRE/IEP) .................... 0.8 0.8
Israel (ISRL/ILS) .................... 3.2 3.2
Italy (ITLY/ITL) ..................... 4.2 4.2
Japan (JPN/JPY) ...................... 3.8 3.8
Luxembourg (LUX/LUF) ................. 2.6 2.6
Malaysia (MAL/MYR) ................... 0.1 0.1
Mexico (MEX/MXN) ..................... 2.1 2.1
Netherlands (NETH/NLG) ............... 1.2 1.2
New Zealand (NZ/NZD) ................. 0.5 0.5
Norway (NOR/NOK) ..................... 0.7 0.7
Russia (RUS/SUR) ..................... 0.3 0.3
Spain (SPN/ESP) ...................... 2.7 2.7
Switzerland (SWTZ/CHF) ............... 1.6 1.6
Thailand (THAI/THB) .................. 0.5 0.5
Turkey (TRKY/TRL) .................... 0.1 0.1
United Kingdom (UK/GBP) .............. 10.8 10.8
United States (US/USD) ............... 33.1 4.3 7.6 45.0
------ --- --- -----
Total ............................... 88.1 4.3 7.6 100.0
------ --- --- -----
------ --- --- -----
</TABLE>

- --------------

{d} Percentages indicated are based on net assets of $1,333,375,860.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1998

<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------- ----------- -------- ---------------
<S> <C> <C> <C> <C>
British Pounds.......................... 41,628,230 0.60131 11/30/98 $ (51,980)
Italian Liras........................... 25,888,897 1601.49000 12/21/98 586,448
Japanese Yen............................ 9,023,719 134.95500 11/12/98 (1,243,348)
Japanese Yen............................ 8,164,318 130.86250 11/12/98 (904,789)
Japanese Yen............................ 7,304,916 118.69000 11/12/98 (143,403)
Japanese Yen............................ 2,148,504 134.52000 11/12/98 (290,045)
------------- ---------------
Total Contracts to Sell (Receivable
amount $92,111,467).................. 94,158,584 (2,047,117)
------------- ---------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 7.06%.
Total Open Forward Foreign Currency
Contracts............................ $ (2,047,117)
---------------
---------------
</TABLE>

- ----------------
See Note 1 to the financial statements.

The accompanying notes are an integral part of the financial statements.

11
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1998

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $1,066,818,872) (Note 1)........................ $1,326,985,301
U.S. currency................................................................ $ 638
Foreign currencies (cost $12,115,289)........................................ 12,098,850 12,099,488
-----------
Receivable for securities sold............................................................ 4,998,458
Receivable for Fund shares sold........................................................... 1,108,983
Dividends and dividend withholding tax reclaims receivable................................ 928,347
Interest receivable....................................................................... 27,947
--------------
Total assets............................................................................ 1,346,148,524
--------------
Liabilities:
Payable for Fund shares repurchased....................................................... 5,144,176
Payable for open forward foreign currency contracts, net (Note 1)......................... 2,047,117
Payable for service and distribution expenses (Note 2).................................... 1,857,913
Payable for transfer agent fees (Note 2).................................................. 1,354,901
Payable for investment management and administration fees (Note 2)........................ 992,645
Payable for forward foreign currency contracts -- closed (Note 1)......................... 689,048
Payable for custodian fees................................................................ 287,512
Payable for printing and postage expenses................................................. 168,175
Payable for registration and filing fees.................................................. 60,980
Payable for professional fees............................................................. 57,782
Payable for fund accounting fees (Note 2)................................................. 31,491
Payable for Trustees' fees and expenses (Note 2).......................................... 23,244
Other accrued expenses.................................................................... 57,680
--------------
Total liabilities....................................................................... 12,772,664
--------------
Net assets.................................................................................. $1,333,375,860
--------------
--------------
Class A:
Net asset value and redemption price per share ($713,903,569 DIVIDED BY 43,840,500 shares
outstanding)............................................................................... $ 16.28
--------------
--------------
Maximum offering price per share (100/95.25 of $16.28) *.................................... $ 17.09
--------------
--------------
Class B:+
Net asset value and offering price per share ($614,715,460 DIVIDED BY 39,008,010 shares
outstanding)............................................................................... $ 15.76
--------------
--------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($4,756,831
DIVIDED BY 286,313 shares outstanding)..................................................... $ 16.61
--------------
--------------
Net assets consist of:
Paid in capital (Note 4).................................................................. $1,003,778,129
Undistributed net investment income....................................................... 5,534
Accumulated net realized gain on investments and foreign currency transactions............ 71,483,704
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (2,057,936)
Net unrealized appreciation of investments................................................ 260,166,429
--------------
Total -- representing net assets applicable to capital shares outstanding................... $1,333,375,860
--------------
--------------
<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.

12
<PAGE>
STATEMENT OF OPERATIONS

Year ended October 31, 1998

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $859,719)............................... $ 9,991,960
Interest income............................................................................ 3,702,326
Securities lending income.................................................................. 1,645,390
------------
Total investment income.................................................................. 15,339,676
------------
Expenses:
Investment management and administration fees (Note 2)..................................... 15,344,878
Service and distribution expenses:(Note 2)
Class A.................................................................... $ 4,293,131
Class B.................................................................... 7,582,290 11,875,421
------------
Transfer agent fees (Note 2)............................................................... 4,714,560
Printing and postage expenses.............................................................. 761,235
Custodian fees............................................................................. 641,305
Fund accounting fees (Note 2).............................................................. 437,627
Professional fees.......................................................................... 207,125
Registration and filing fees............................................................... 106,215
Trustees' fees and expenses (Note 2)....................................................... 34,900
Other expenses............................................................................. 113,524
------------
Total expenses before reductions......................................................... 34,236,790
------------
Expense reductions (Note 5)............................................................ (109,953)
------------
Total net expenses....................................................................... 34,126,837
------------
Net investment loss.......................................................................... (18,787,161)
------------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 71,036,101
Net realized gain on foreign currency transactions........................... 112,098
------------
Net realized gain during the year........................................................ 71,148,199
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... 689,850
Net change in unrealized appreciation of investments......................... (65,785,548)
------------
Net unrealized depreciation during the year.............................................. (65,095,698)
------------
Net realized and unrealized gain on investments and foreign currencies....................... 6,052,501
------------
Net decrease in net assets resulting from operations......................................... $(12,734,660)
------------
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- ----------------
<S> <C> <C>
Increase/(decrease) in net assets
Operations:
Net investment loss...................................................... $ (18,787,161) $ (23,856,621)
Net realized gain on investments and foreign currency transactions....... 71,148,199 120,426,746
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ 689,850 (7,132,389)
Net change in unrealized appreciation (depreciation) of investments...... (65,785,548) 217,773,979
---------------- ----------------
Net increase (decrease) in net assets resulting from operations........ (12,734,660) 307,211,715
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (59,979,418) (95,676,425)
Class B:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (54,057,223) (83,596,023)
Advisor Class:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (239,075) (176,806)
---------------- ----------------
Total distributions.................................................... (114,275,716) (179,449,254)
---------------- ----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 2,274,548,973 1,783,734,946
Decrease from capital shares repurchased................................. (2,535,281,796) (2,403,405,013)
---------------- ----------------
Net decrease from capital share transactions........................... (260,732,823) (619,670,067)
---------------- ----------------
Total decrease in net assets............................................... (387,743,199) (491,907,606)
Net assets:
Beginning of year........................................................ 1,721,119,059 2,213,026,665
---------------- ----------------
End of year *............................................................ $ 1,333,375,860 $ 1,721,119,059
---------------- ----------------
---------------- ----------------
* Includes undistributed net investment income of:........................ $ 5,534 $ 5,534
---------------- ----------------
---------------- ----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.

CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.04 $ 16.69 $ 16.42 $ 17.80 $ 16.92
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.17) (0.17) (0.13) (0.09) (0.01)
Net realized and unrealized gain
(loss) on investments................ (0.39) 2.93 1.22 (0.43) 1.17
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (0.56) 2.76 1.09 (0.52) 1.16
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- -- (0.01)
From net realized gain on
investments.......................... (1.20) (1.41) (0.82) (0.86) (0.27)
---------- ---------- ---------- ---------- ----------
Total distributions..................... (1.20) (1.41) (0.82) (0.86) (0.28)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 16.28 $ 18.04 $ 16.69 $ 16.42 $ 17.80
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Total investment return (c)............. (3.16)% 17.70% 7.00% (2.88)% 7.02%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 713,904 $ 910,801 $1,204,428 $1,353,722 $1,644,402
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 5)..... (0.92)% (1.01)% (0.84)% (0.49)% (0.02)%
Without expense reductions............ (0.93)% (1.06)% (0.89)% (0.55)% N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 5)..... 1.87% 1.79% 1.74% 1.77% 1.80%
Without expense reductions............ 1.88% 1.84% 1.79% 1.83% N/A
Portfolio turnover rate++............... 75% 35% 37% 62% 57%
</TABLE>

- ----------------

(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates 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.

15
<PAGE>
FINANCIAL HIGHLIGHTS (cont'd)

CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.58 $ 16.37 $ 16.20 $ 17.66 $ 16.87
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.25) (0.25) (0.23) (0.17) (0.10)
Net realized and unrealized gain
(loss) on investments................ (0.37) 2.87 1.22 (0.43) 1.17
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (0.62) 2.62 0.99 (0.60) 1.07
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- -- (0.01)
From net realized gain on
investments.......................... (1.20) (1.41) (0.82) (0.86) (0.27)
---------- ---------- ---------- ---------- ----------
Total distributions..................... (1.20) (1.41) (0.82) (0.86) (0.28)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.76 $ 17.58 $ 16.37 $ 16.20 $ 17.66
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Total investment return (c)............. (3.67)% 17.15% 6.46% (3.37)% 6.50%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 614,715 $ 805,535 $1,007,654 $1,111,520 $1,184,081
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 5)..... (1.42)% (1.51)% (1.34)% (0.99)% (0.52)%
Without expense reductions............ (1.43)% (1.56)% (1.39)% (1.05)% N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 5)..... 2.37% 2.29% 2.24% 2.27% 2.30%
Without expense reductions............ 2.38% 2.34% 2.29% 2.33% N/A
Portfolio turnover rate++............... 75% 35% 37% 62% 57%
</TABLE>

- ----------------

The accompanying notes are an integral part of the financial statements.

16
<PAGE>
FINANCIAL HIGHLIGHTS (cont'd)

<TABLE>
<CAPTION>
ADVISOR CLASS+
-----------------------------------------------------
YEAR ENDED OCTOBER 31, JUNE 1, 1995
----------------------------------- TO
1998 (d) 1997 (d) 1996 (d) OCTOBER 31, 1995
---------- ---------- ----------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.28 $ 16.81 $ 16.46 $ 15.24
---------- ---------- ----------- --------
Income from investment operations:
Net investment income (loss).......... (0.08) (0.09) (0.05) --
Net realized and unrealized gain
(loss) on investments................ (0.39) 2.97 1.22 1.22
---------- ---------- ----------- --------
Net increase (decrease) from
investment operations.............. (0.47) 2.88 1.17 1.22
---------- ---------- ----------- --------
Distributions to shareholders:
From net investment income............ -- -- -- --
From net realized gain on
investments.......................... (1.20) (1.41) (0.82) --
---------- ---------- ----------- --------
Total distributions..................... (1.20) (1.41) (0.82) --
---------- ---------- ----------- --------
Net asset value, end of period.......... $ 16.61 $ 18.28 $ 16.81 $ 16.46
---------- ---------- ----------- --------
---------- ---------- ----------- --------

Total investment return (c)............. (2.59)% 18.33% 7.49% 7.94 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 4,757 $ 4,783 $ 945 $ 681
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 5)..... (0.42)% (0.51)% (0.34)% 0.01 % (a)
Without expense reductions............ (0.43)% (0.56)% (0.39)% (0.05)% (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 5)..... 1.37% 1.29% 1.24% 1.27 % (a)
Without expense reductions............ 1.38% 1.34% 1.29% 1.33 % (a)
Portfolio turnover rate++............... 75% 35% 37% 62 %
</TABLE>

- ----------------

The accompanying notes are an integral part of the financial statements.

17
<PAGE>
NOTES TO
FINANCIAL STATEMENTS
October 31, 1998

- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Global Telecommunications Fund (the "Fund"), formerly, GT Global
Telecommunications 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.

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
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 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, 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, 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.

(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

18
<PAGE>
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. Forward Contracts
involve market risk in excess of the amount shown in the Fund's "Statement of
Assets and Liabilities". The Fund could be exposed to risk if a counter party is
unable to meet the terms of the 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 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 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 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 $131,247,071 were on loan
to brokers. The loans were secured by cash collateral of $135,796,495 received
by the Fund. For the year ended October 31, 1998, the Fund received fees of
$1,645,390.

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 the loan. The cash

19
<PAGE>
collateral is invested in a securities lending trust which consists 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 intended 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, unrealized appreciation of securities held, or excise tax on income and
capital gains.

(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 investment in emerging market
countries may involve greater risks than investments in more developed markets
and the price 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.

In addition, the Fund's policy of concentrating its investments in companies in
the telecommunications industry subject the Fund to greater risk than a fund
that is more diversified.

(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 and
Trust Company. The arrangements with the banks allow the Fund and certain other
Funds to borrow, on a first come, first serve basis, an aggregate maximum amount
of $250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of
the Fund's total assets. At 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 $11,141,844, with a weighted average interest rate of 6.30%. Interest
expense for the year ended October 31, 1998 was $62,397 and is included in
"Other Expenses" on the Statement of Operations.

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. 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. 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") 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 $36,792 and $44,312, 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 $1,565 and $28,868, respectively. AIM Distributors also
makes ongoing shareholder servicing and trail commission payments to dealers
whose clients hold Class A shares.

20
<PAGE>
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 $896,639 and $2,022,934, 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
expense) 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 paid 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 $5 billion.
An amount is allocated to and paid by each such fund based on its relative
average daily net assets.

21
<PAGE>
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 $948,232,105 and $1,382,868,876, respectively. For the
year ended October 31, 1998, purchases and sales of U.S. government obligations
aggregated $59,707,960 and $0, 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 Trust's 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 Trust's 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 YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------------ -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ ------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 108,008,301 $ 1,941,688,002 86,491,272 $ 1,449,735,933
Shares issued in connection with reinvestment of
distributions............................................. 3,004,072 49,839,899 4,872,560 77,134,577
------------- --------------- ------------ ---------------
111,012,373 1,991,527,901 91,363,832 1,526,870,510
Shares repurchased.......................................... (117,654,141) (2,131,610,935) (113,032,156) (1,893,258,359)
------------- --------------- ------------ ---------------
Net decrease................................................ (6,641,768) $ (140,083,034) (21,668,324) $ (366,387,849)
------------- --------------- ------------ ---------------
------------- --------------- ------------ ---------------

<CAPTION>
CLASS B
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 10,070,976 $ 179,810,719 9,249,969 $ 152,245,081
Shares issued in connection with reinvestment of
distributions............................................. 2,786,131 44,943,256 4,413,826 68,371,781
------------- --------------- ------------ ---------------
12,857,107 224,753,975 13,663,795 220,616,862
Shares repurchased.......................................... (19,680,426) (345,310,805) (29,383,147) (477,593,385)
------------- --------------- ------------ ---------------
Net decrease................................................ (6,823,319) $ (120,556,830) (15,719,352) $ (256,976,523)
------------- --------------- ------------ ---------------
------------- --------------- ------------ ---------------
<CAPTION>
ADVISOR CLASS
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 3,217,206 $ 58,029,142 2,029,510 $ 36,070,768
Shares issued in connection with reinvestment of
distributions............................................. 14,131 237,955 11,071 176,806
------------- --------------- ------------ ---------------
3,231,337 58,267,097 2,040,581 36,247,574
Shares repurchased.......................................... (3,206,646) (58,360,056) (1,835,151) (32,553,269)
------------- --------------- ------------ ---------------
Net increase (decrease)..................................... 24,691 $ (92,959) 205,430 $ 3,694,305
------------- --------------- ------------ ---------------
------------- --------------- ------------ ---------------
</TABLE>

22
<PAGE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended October 31, 1998, the Fund's
expenses were reduced by $109,953 under these arrangements.

6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
At October 31, 1998 the Fund owned no investments in affiliated companies.

Transactions with affiliated companies for the year are as follows:

<TABLE>
<CAPTION>
NET REALIZED
PURCHASES COST SALES PROCEEDS GAIN (LOSS) DIVIDEND INCOME
-------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Champion Technology Holdings Ltd.................. $ 3,417,731 $ 3,098,253 $ (13,662,219) $ 55,192
Echostar Communications Corp. "A"................. -- -- -- --
Millicom International Cellular S.A............... 5,887,008 6,681,341 2,990,814 --
Orbital Sciences Corp............................. -- 49,451,312 19,414,579 --
Three-Five Systems, Inc........................... -- 3,600,294 (6,737,052) --
</TABLE>

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, 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 SHARES..................................................................................................
CLASS B SHARES..................................................................................................
(4)(a) Modification of Fundamental Restriction on Portfolio Diversification............................................
(4)(b) Modification of Fundamental Restriction on Issuing Senior Securities and Borrowing Money........................
(4)(c) Modification of Fundamental Restriction on Making Loans.........................................................
(4)(d) Modification of Fundamental Restriction on Underwriting Securities..............................................
(4)(e) Modification of Fundamental Restriction on Real Estate Investments..............................................
(4)(f) Modification of Fundamental Restriction on Investing in Commodities.............................................
(4)(g) Elimination of Fundamental Restriction on Margin Transactions...................................................
(4)(h) Elimination of Fundamental Restriction on Pledging Assets.......................................................
(4)(i) Elimination of Fundamental Restriction on Investment in Oil, Gas and Mineral Leases and Programs................
(4)(j) Approval of New Fundamental Investment Policy Regarding Investment of All of Each Fund's Assets in an Open-End
Fund..........................................................................................................
(5) Approval of an agreement and plan of conversion and termination with respect to the Trust.......................
(6) Ratification of the selection of Coopers and Lybrand, now known as PricewaterhouseCoopers LLP, as the Trust's
Independent Public Accountants................................................................................

<CAPTION>
VOTES WITHHELD/
VOTES FOR AGAINST ABSTENTIONS
--------------- ------------ --------------
<S> <C> <C> <C>
(1) 191,685,088 N/A 13,123,292
191,766,811 N/A 13,041,568
191,828,959 N/A 12,979,420
191,845,270 N/A 12,963,109
191,869,887 N/A 12,938,492
(2)(a) 34,387,274 1,226,472 12,894,821*
(2)(b) 34,024,097 1,418,923 13,065,547*
(3)
22,543,757 917,090 2,176,036
20,212,179 746,999 1,830,786
(4)(a) 33,672,510 1,600,402 13,235,655*
(4)(b) 33,673,644 1,599,268 13,235,655*
(4)(c) 33,674,165 1,598,747 13,235,655*
(4)(d) 33,675,313 1,597,599 13,235,655*
(4)(e) 33,673,936 1,598,976 13,235,655*
(4)(f) 33,667,659 1,605,253 13,235,655*
(4)(g) 33,660,368 1,612,544 13,235,655*
(4)(h) 33,669,714 1,603,198 13,235,655*
(4)(i) 33,675,877 1,597,035 13,235,655*
(4)(j)
33,663,325 1,609,587 13,235,655*
(5) 190,027,469 6,362,084 94,055,040*
(6)
191,358,779 2,114,168 11,333,063
</TABLE>

- --------------
* Includes Broker Non-Votes

23
<PAGE>

BOARD OF TRUSTEES

C. Derek Anderson
President, Plantagenet Capital
Management, LLC (an investment
partnership); Chief Executive Officer,
Plantagenet Holdings, Ltd.
(an investment banking firm)

Frank S. Bayley
Partner, law firm of
Baker & McKenzie

Robert H. Graham
President and Chief Executive Officer,
A I M Management Group Inc.

Arthur C. Patterson
Managing Partner, Accel Partners
(a venture capital firm)

Ruth H. Quigley
Private Investor

OFFICERS

Robert H. Graham
Chairman and President

Helge K. Lee
Vice President & Secretary

Dana R. Sutton
Vice President & Assistant Treasurer

Kenneth W. Chancey
Vice President &
Principal Accounting Officer

John J. Arthur
Vice President

Melville B. Cox
Vice President

Gary T. Crum
Vice President

Carol F. Relihan
Vice President

David P. Hess
Assistant Secretary

Nancy L. Martin
Assistant Secretary

Ofelia M. Mayo
Assistant Secretary

Kathleen J. Pflueger
Assistant Secretary

Samuel D. Sirko
Assistant Secretary

Pamela Ruddock
Assistant Treasurer

Paul Wozniak
Assistant Treasurer

OFFICE OF THE FUND

11 Greenway Plaza
Suite 100
Houston, TX 77046

INVESTMENT MANAGER

A I M Advisors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046

TRANSFER AGENT

A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739

CUSTODIAN

State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

COUNSEL TO THE FUND

Kirkpatrick & Lockhart, LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800

COUNSEL TO THE TRUSTEES

Paul, Hastings, Janofsky & Walker LLP
Twenty Third Floor
555 South Flower Street
Los Angeles, CA 90071

DISTRIBUTOR

A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046

AUDITORS

PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109

FEDERAL TAX INFORMATION (UNAUDITED):

Pursuant to Section 852 of the Internal Revenue Code, the Fund
designates $143,100,716 as capital gain dividends for the fiscal year ended
October 31, 1998.

24
<PAGE>

HOW AIM MAKES INVESTING
EASY FOR YOU

- - LOW INITIAL INVESTMENT. You can get your investment program started
for as little as $500. Subsequent investments can be made for only $50.

- - AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS.
Distributions may be received in cash or reinvested in the Fund free of
charge. Over time, the power of compounding can significantly increase the
value of your assets.

- - AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.

- - EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset
value any day the New York Stock Exchange is open. The price of shares sold
may be more or less than their original cost, depending on market conditions.

- - SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at
least $50 monthly or quarterly through a systematic withdrawal plan.

- - EXCHANGE PRIVILEGE. As your goals change, you may exchange all or
part of your assets for those of other funds within the same share class of
The AIM Family of Funds-Registered Trademark-. The exchange privilege may be
modified or discontinued for any of the AIM funds. Certain restrictions apply.

- - RETIREMENT PLANS. You may purchase shares of an AIM fund for your
Individual Retirement Account (IRA), Roth IRA, or any other type of
retirement plan, and earn tax-deferred dollars for your retirement.

- - TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line
at 800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.

- - WWW.AIMFUNDS.COM. As a current shareholder, you can check account
balances 24 hours a day over the Internet. State-of-the-art encryption lets
you send us questions that include confidential information without the fear
of eavesdropping, tampering, or forgery.

CURRENT SHAREHOLDERS
CAN CALL OUR
AIM INVESTOR LINE AT
800-246-5463
FOR 24-HOUR-A-DAY
ACCOUNT INFORMATION.

<PAGE>

THE AIM FAMILY OF FUNDS-REGISTERED TRADEMARK-

A I M MANAGEMENT GROUP INC. HAS PROVIDED LEADERSHIP IN THE MUTUAL FUND
INDUSTRY SINCE 1976 AND MANAGED APPROXIMATELY $91 BILLION IN ASSETS FOR MORE
THAN 5.5 MILLION SHAREHOLDERS, INCLUDING INDIVIDUAL INVESTORS, CORPORATE
CLIENTS, AND FINANCIAL INSTITUTIONS, AS OF SEPTEMBER 30, 1998.

THE AIM FAMILY OF FUNDS-REGISTERED TRADEMARK- IS DISTRIBUTED NATIONWIDE, AND
AIM TODAY IS THE 11TH-LARGEST MUTUAL FUND COMPLEX IN THE U.S. IN ASSETS UNDER
MANAGEMENT, ACCORDING TO STRATEGIC INSIGHT, AN INDEPENDENT MUTUAL FUND
MONITOR.

GROWTH FUNDS

AIM Aggressive Growth Fund(1)
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Constellation Fund
AIM Mid Cap Equity Fund(2),(A)
AIM Select Growth Fund(3)
AIM Small Cap Growth Fund(2),(B)
AIM Small Cap Opportunities Fund
AIM Value Fund
AIM Weingarten Fund

GROWTH & INCOME FUNDS

AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Basic Value Fund(2),(C)
AIM Charter Fund

INCOME FUNDS

AIM Floating Rate Fund(2)
AIM High Yield Fund
AIM High Yield Fund II
AIM Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund

TAX-FREE INCOME FUNDS

AIM High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund

MONEY MARKET FUNDS

AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund

INTERNATIONAL GROWTH FUNDS

AIM Advisor International Value Fund
AIM Asian Growth Fund
AIM Developing Markets Fund(2)
AIM Emerging Markets Fund(2)
AIM Europe Growth Fund(2)
AIM European Development Fund
AIM International Equity Fund
AIM International Growth Fund(2)
AIM Japan Growth Fund(2)
AIM Latin American Growth Fund(2)
AIM New Pacific Growth Fund(2)

GLOBAL GROWTH FUNDS

AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Worldwide Growth Fund(2)

Global Growth & Income Funds

AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund

GLOBAL INCOME FUNDS

AIM Emerging Markets Debt Fund(2),(D)
AIM Global Government Income Fund(2)
AIM Global Income Fund
AIM Strategic Income Fund(2)

THEME FUNDS

AIM Global Consumer Products and Services Fund(2)
AIM Global Financial Services Fund(2)
AIM Global Health Care Fund(2)
AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2),(E)

(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998.
(2) Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former
GT Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select
Growth Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed
AIM Mid Cap Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund
was renamed AIM Small Cap Growth Fund. (C) On September 8, 1998, AIM America
Value Fund was renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM
Global High Income Fund was renamed AIM Emerging Markets Debt Fund. (E) On
September 8, 1998, AIM New Dimension Fund was renamed AIM Global Trends Fund.
For more complete information about any AIM Fund(s), including sales charges
and expenses, ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money.

GTL-AR-1