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 GOVERNMENT INCOME FUND

[COVER IMAGE]

[AIM LOGO APPEARS HERE]

INVEST WITH DISCIPLINE-Registered Trademark-

<PAGE>

[COVER IMAGE]

THE PARLIAMENT OF LONDON BY CLAUDE MONET

IN ORDER TO PROVIDE A STEADY FLOW OF INCOME AND GROWTH OF CAPITAL FOR OUR
SHAREHOLDERS, AIM GLOBAL GOVERNMENT INCOME FUND INVESTS IN GOVERNMENT DEBT
SECURITIES OF THE HIGHEST QUALITY AND SAFETY. THE PARLIAMENT OF LONDON,
PICTURED HERE, IS REPRESENTATIVE OF THE INHERENT STABILITY OF THE COUNTRIES
IN WHICH THE FUND INVESTS.

AIM Global Government Income Fund is for shareholders who primarily seek a
high level of current income, and secondarily seek capital appreciation and
protection of principal. The Fund invests primarily in high-quality U.S. and
foreign government debt obligations.

ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:

- - AIM Global Government Income Fund (formerly GT Global Government Income
Fund) performance figures are historical and reflect reinvestment of all
distributions and changes in net asset value. Unless otherwise indicated,
the Fund's performance is computed at net asset value without a sales
charge.

- - During the fiscal year ended October 31, 1998, the Fund paid distributions
of $0.510 per Class A share and $0.456 per Class B share.

- - When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The performance of the Fund's Class B shares will differ from that of
Class A shares due to differences in sales charge structure and Fund
expenses.

- - Advisor Class shares are not sold directly to the general public and are
available only through certain employee benefit plans, financial
institutions, and other entities that have entered into specific agreements
with the Fund's Distributor. Please see the Fund's prospectus for more
complete information.

- - The Fund's average annual total returns, including sales charges, for
periods ended 9/30/98 (the most recent calendar quarter end), are as
follows. For Class A shares, one year, 6.16%; five years, 3.76%; 10 years,
7.54%. For Class B shares, one year, 5.76%; 5 years, 3.81%; since
inception, 6.32%. For Advisor Class shares, 1 year, 12.31%; since
inception, 7.52%.

- - The Fund's annualized distribution rate reflects the Fund's most recent
monthly dividend distribution multiplied by 12 and divided by the most
recent month-end maximum offering price. The Fund's distribution rate and
30-day SEC yield will differ.

- - The 30-day yield is calculated on the basis of a formula defined by the
Securities and Exchange Commission (SEC). The formula is based on the
portfolio's potential earnings from dividends, interest, yield-to-maturity
or yield-to-call of its holdings, net of all expenses and expressed on
an annualized basis.

- - Government securities, such as U.S. Treasury bills, notes, and bonds, offer
a high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured and
their value and yield will vary with market conditions.

- - 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.

- - Past performance cannot guarantee comparable future results.

- - International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to the values of
other currencies, the custody arrangements made for the Fund's foreign
holdings, differences in accounting, political risks, and the lesser degree
of public information required to be provided by non-U.S. companies.

ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:

- - The J.P. Morgan Global Government Bond Index is a market value-weighted
average of government bonds from 13 major developed bond markets. It
includes the effect of reinvested coupons and is measured in U.S. dollars.

- - 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 GOVERNMENT INCOME 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. In a global display of lost confidence, investors flocked to
securities perceived as safe and liquid, especially U.S. Treasury issues. Even
high-quality corporate bonds went out of favor. Debt securities issued by
emerging market nations plummeted in value.

THE ABRUPT REVERSALS OF SENTIMENT DURING THIS FISCAL YEAR REINFORCE OUR
CONVICTION THAT MARKETS ARE UNPREDICTABLE IN THE SHORT TERM.

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.) Investors responded favorably, and by the close of the fiscal year,
many bond markets were regaining equilibrium.

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

AIM GLOBAL GOVERNMENT INCOME FUND

<PAGE>

ANNUAL REPORT / MANAGERS' OVERVIEW

FUND PROVIDES STABILITY IN WAKE OF
GLOBAL TURMOIL

HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?

Despite tumultuous events in the global marketplace, the Fund stayed in line
with its primary objective of preserving capital while providing a steady flow
of income. The Fund's total return for the year ended October 31, 1998 was
10.20% for Class A shares and 9.65% for Class B shares. Comparatively, the J.P.
Morgan Global Government Bond Index, the Fund's benchmark, had a return of
12.98% over the 12-month period.

The Fund continued to provide a high level of current income during the year
covered by this report. As of October 31, 1998, the Fund's 30-day distribution
rate at net asset value was 5.69% for Class A shares and 5.08% for Class B
shares. The Fund's 30-day SEC yield at maximum offering price was 4.75% for
Class A shares and 4.30% for Class B shares.

WHAT EVENTS INFLUENCED FUND PERFORMANCE?

Problems in Asia at the start of the reporting period left us cautious as we
approached the new year. As a result, the majority of our portfolio was
allocated toward high-grade government debt offered by more industrialized
countries. While the Fund can allocate a limited portion of its assets to
lower-rated bonds of foreign governments and corporations, instability in
Asia and other emerging markets kept our exposure to this area limited.
Paring our exposure to emerging markets proved to be a prudent strategy as
Asia's economic problems re-emerged again in May after a quiet hiatus from
market activity in the first quarter of 1998.

By August, the effects of the Asian crisis had spread to Russia, Eastern
Europe, and Latin America. Investor aspirations for positive returns were
replaced with the goal of preserving capital. The result was a global
sell-off as investors retreated from all forms of investment risk and
invested in relatively safer government bonds of industrialized countries.

As the Fund was already heavily weighted in lower-risk U.S. and European
government securities, this surge in demand proved very beneficial for the
Fund. At the same time, the Fund had limited exposure to the lesser developed
countries hurt by this flight from risk, and performance was left largely
unhindered by the negative events in the global marketplace.

HOW DID EVENTS IN THE CURRENCY MARKETS AFFECT FUND PERFORMANCE?

For the past several years, we had witnessed a strengthening of the U.S.
dollar relative to the German deutschmark. As a weaker European currency can
erode the level of income from our foreign investments, Fund management took
steps to preserve income by hedging the majority of the Fund's foreign income
back to the U.S., thus negating currency risk. Growth, inflation, and
interest rate differentials that had solely been favoring the U.S. dollar for
several years now began to favor the European currencies as growth finally
took hold this year.

Management was able to detect this trend early and remove its dollar hedges
to structure the currency in the portfolio in favor of the deutschmark. As
the Asian crisis began to spread to countries outside the Pacific Rim into
regions like Eastern Europe, Mexico, and South America, the dollar continued
to weaken allowing the Fund to capture the benefit of an appreciating
deutschmark.

WE WILL STAY TRUE TO OUR DISCIPLINE AND ENDEAVOR TO PROVIDE STABILITY AND A
STEADY STREAM OF INCOME FOR OUR SHAREHOLDERS.

WHAT COUNTRIES PROVIDED THE BEST VALUE FOR THE FUND?

We have found excellent value in our holdings in Europe this year. At the
close of the reporting period, we maintained substantial portions of the
portfolio in Denmark and Italy. Both countries maintained a high interest
rate policy to contain inflation and to protect the values of their
currencies against the deutschmark. Our analysis indicated, however, that
interest rates were too high and were due for a cut. As we expected, both
countries reduced rates toward the end of the reporting period to the benefit
of the Fund. We expect further interest rate reductions in these countries in
the near term.

We have also recently enjoyed success with our holdings in the United
Kingdom. For the last two years, the Central Bank of England has been raising
interest rates in an effort to combat inflation. However, we felt that with
the advent of the economic crises spawning in Asia, that the Central Bank was
overcompensating. Our analysis was correct as the Central Bank cut rates from
7.50% to 7.25% in October, and then again from 7.25% to 6.75% shortly after
the end of the reporting period. These lowered rates substantially increased
the value of our holdings in the U.K. As the Fund had allocated a substantial
portion of its assets to the U.K. for a better part of a year, we were able
to benefit greatly from the recent interest rate cuts.

SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.

AIM GLOBAL GOVERNMENT INCOME FUND

<PAGE>
ANNUAL REPORT/MANAGERS' OVERVIEW

PORTFOLIO COMPOSITION
As of 10/31/98, based on total net assets
<TABLE>
<CAPTION>
TOP FIVE COUNTRIES TOP FIVE BOND HOLDINGS
Coupon Maturity %
<S> <C> <C> <C> <C> <C>
1. United States 33.0% 1. U.S. Treasury 6.375% 08/2027 19.3%
2. United Kingdom 15.7 2. U.K Treasury 9.000 10/2008 8.6
3. Italy 12.7 3. Denmark-Bullet 6.000 11/2009 8.3
4. Denmark 12.3 4. Italy 7.250 11/2026 7.7
5. Germany 11.8 5. SBC Jersey (U.K.) 8.750 06/2005 7.1
</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.

WHAT EFFECTS WILL THE EUROPEAN ECONOMIC AND MONETARY UNION (EMU) AND THE EURO
HAVE ON THE FUND'S PERFORMANCE?

While the EMU was finalized as recently as May of this year, we are already
seeing its effects on the European marketplace. Interest rates have begun to
converge toward the German benchmark and currency volatility between
countries in the EMU has been substantially reduced. This convergence was
required as each country tried to fulfill the Maastricht criteria for entry
into EMU. The fulfillment of this criteria has led to lower budget deficits,
low inflation, and unified fiscal and monetary policies among member
countries.

With the introduction of the euro, management will certainly have to adjust
its investment approach. In the past, our strategy has been to focus on each
individual country's macroeconomic fundamentals when determining the value of
its government's bonds. Key to this analysis was our ability to judge the
expected direction of interest rates relative to those in surrounding
countries.

With the formation of the EMU, however, interest rate trends will be
correlated among member countries, thus changing the investment landscape
substantially. With more uniform interest rates and economic policies,
individual country analysis will no longer serve the same purpose in
determining our investment strategy. Instead of judging the direction of
interest rates in each individual country, we will forecast interest rates
for the region as a whole and now focus on an individual country's ability to
service its debt when making investment decisions.

WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?

Equity and non-industrialized fixed-income markets around the world suf fered
serious setbacks in the months leading up to the close of the reporting
period. However, in the final weeks of October, a series of rate cuts in the
United States and Europe reliquified the markets, instilling a newfound
confidence in the global marketplace. While the rate cuts are providing
temporary relief, we believe the economic crises stemming from the Asian
markets require more complicated solutions.

It has been encouraging, however, to see many of the affected countries
using this window of opportunity to restructure
<TABLE>
<CAPTION>
GLOBAL ASSET ALLOCATION

DEBT SECURITIES CURRENCY EXPOSURE
<S> <C>
OTHER 3.3% OTHER 0.1%
DOLLAR BLOC 32% DOLLAR BLOC 39.4%
EUROPE 64.7% EUROPE 60.5%

PIE CHART PIE CHART
INFORMATION INFORMATION
</TABLE>

SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.

AIM GLOBAL GOVERNMENT INCOME FUND

<PAGE>
ANNUAL REPORT / MANAGERS' OVERVIEW

their economies. Japan, in particular, whose economic struggles have impacted
the world economy more than most, has finally begun taking active steps to
address the problems such as bank reform that have landed them in the midst
of a seven-year recession.

WHAT IS YOUR STRATEGY FOR THE FUND?

U.S. government securities will most likely continue to be a staple of the
Fund's portfolio. However, positive growth and inflationary trends are making
Europe an increasingly attractive realm for asset allocation. We will
continue to limit our exposure to the emerging market sectors. While the Fund
may invest in those regions, their recent instability make most investment
opportunities there unsuitable for the Fund. Ultimately, we will stay true to
our discipline and endeavor to provide stability and a steady stream of
income for our shareholders.

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 the 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 should 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.

THE NETHERLANDS
IRELAND
BELGIUM
FINLAND
GERMANY
AUSTRIA
LUXEMBOURG
FRANCE
PORTUGAL
SPAIN
ITALY

COUNTRIES IN THE MAP OF EUROPE

AIM GLOBAL GOVERNMENT INCOME FUND

<PAGE>

ANNUAL REPORT / PERFORMANCE HISTORY

YOUR FUND'S LONG-TERM PERFORMANCE

RESULTS OF A $10,000 INVESTMENT
AIM GLOBAL GOVERNMENT INCOME FUND VS. BENCHMARK INDEX
3/29/88 - 10/31/98

In thousands

<TABLE>
<CAPTION>
AIM Global Government
Income Fund, Class A J.P. Morgan Global
Shares Government Bond Index

Past performance cannot guarantee comparable future results.

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

<TABLE>
<S> <C>
CLASS A SHARES
10 years 7.22%
5 years 3.24
1 year 4.97*

CLASS B SHARES
Inception (10/22/92) 6.22%
5 years 3.28
1 year 4.65**

ADVISOR CLASS SHARES***
Inception (6/1/95) 7.14%
1 year 11.18
</TABLE>

* 10.20% excluding sales charge
** 9.65% excluding sales charge
*** Sales charges not applicable

Source: Bloomberg, Towers Data Systems HYPO-Registered Trademark-.

Your Fund's total return includes applicable sales charges, expenses, and
management fees. The performance of Class B and Advisor Class shares will
differ from that of Class A shares due to differing fees and expenses. For
Fund 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.

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

ABOUT THIS CHART

The chart above compares your Fund to its benchmark index. It is intended to
give you a general idea of how your fund compared to the bond market over the
period 3/29/88-10/31/98. It is important to understand differences between your
Fund and these indexes.

Your Fund's total return is shown with a sales charge and includes Fund
expenses and management fees. An index measures performance of a hypothetical
portfolio, in this case the J.P. Morgan Global Government Bond Index. Unlike
your Fund, an index is not managed, incurring no sales charges, expenses, or
fees. But if you could buy all the securities that make up a market index,
you would incur expenses that would affect the return on your investment.

AIM GLOBAL GOVERNMENT INCOME FUND

<PAGE>

ANNUAL REPORT / FOR CONSIDERATION

AIM PREPARES FOR THE YEAR 2000

THE YEAR 2000. THE WORDS STIR THE IMAGINATION, MAKING US WONDER WHAT THE NEXT
MILLENNIUM WILL BRING. BUT THE WORDS ARE ALSO STARTING TO MAKE SOME PEOPLE
WORRY, SINCE THERE'S BEEN SO MUCH TALK LATELY ABOUT A COMPUTER GLITCH CALLED
"THE YEAR 2000 PROBLEM." BECAUSE THIS IS A PROBLEM THAT COULD AFFECT MOST
AMERICAN INDUSTRIES, INCLUDING THE MUTUAL FUND INDUSTRY, WE WANT TO BRING YOU
THIS UPDATE TO LET YOU KNOW HOW AIM IS GETTING READY.

WHAT IS THE YEAR 2000 PROBLEM?

It has to do with the way that computers understand dates. Most computers
were programmed to recognize only the last two digits of a four-digit date
("98" for 1998). When the year 2000 hits, the computer will read "00"--but it
may interpret that as the year 1900. So, if the computer makes a calculation
involving a date of January 1, 2000, or later, it could be processed
incorrectly. Date-sensitive calculations are found in all kinds of
places--from elevators to air traffic control systems--but they are
especially prevalent in the financial services industry.

AIM'S YEAR 2000 COMPLIANCE

AIM's technology team has been addressing Year 2000 issues for some time now.
Our internal team, together with an independent technology consultant, are
implementing a comprehensive Year 2000 Compliance Project for A I M
Management Group Inc. and its subsidiaries.

So far, we've inventoried all software applications that we rely on, and
we've identified the applications that might need adjustments to function
properly when the year 2000 arrives. We are now in the final phase of the
project, making corrections and testing applications that need adjustment. We
plan to complete this phase during the fourth quarter of 1998.

AN INDUSTRY-WIDE TEST

In the spring of 1999, AIM intends to participate in industry-wide testing that
should simulate the arrival of the year 2000. This should allow mutual fund
companies, banks, exchanges, and other players in the financial community to
test various kinds of transactions and to determine if any further adjustments
need to be made before the end of the year.

We believe our plans are quite comprehensive, and we're committed to
monitoring all software applications through the critical period, extending as
far as needed into the 21st century.

AIM GLOBAL GOVERNMENT INCOME FUND

<PAGE>

ANNUAL REPORT / FOR CONSIDERATION

FIVE STEPPING STONES TO A
MORE PROSPEROUS RETIREMENT

A comfortable retirement is within your reach. But you will need a practical
investment plan to get there. Consider the five steps described here and talk
them over with your financial consultant. He or she can help you devise a
plan and choose investments suited to your unique circumstances.

I. IF YOU HAVE A 401(k) PLAN, CONTRIBUTE TO IT--AND MAKE THE MOST OF
EMPLOYER MATCHING. If your employer matches 401(k) contributions, contribute
at least enough to maximize the company's contribution. If the company match
is 5% of your salary, contribute at least 5% of your pay yourself. From your
standpoint, the employer contribution is "free" money.

2. CONTRIBUTE TO AN IRA TOO. Even if you cannot deduct an IRA contribution,
you can enjoy an IRA's tax-deferred compounding. And, don't forget the added
advantage of the new spousal IRA.

3. DIVERSIFY! Asset diversification helps manage risk because different
types of assets behave differently. If you put your retirement assets into
mutual funds, consider buying more than one type of fund.

4. IF YOU HAVE TIME, INVEST AGGRESSIVELY. Historically, small-company
stocks have provided the highest returns. They can be volatile in the short
term, but if you can be patient, consider including aggressive small-company
growth funds in your portfolio.

5. START EARLY AND DON'T STOP! The advantages of an early start are hard to
overstate, as you can see in the chart below.

AN EARLY START PAYS OFF
FOR 401(k) OR IRA INVESTORS

INVESTOR A

- - Starts Early: at Age 25

- - Invests Less: $2,000 a year for a total of $80,000

- - Accumulates More by Age 65: $885,185

INVESTOR B

- - Starts Late: at Age 40

- - Invests More: $4,000 a year for a total of $100,000

- - Accumulates Less by Age 65: $393,388

[GRAPH]
<TABLE>
<S> <C> <C>
2,000 91,198 4,000
4,200 102,318 8,400
6,620 114,550 13,240
9,282 128,005 18,564
12,210 142,805 24,420
15,431 159,086 30,862
18,974 176,994 37,949
22,872 196,694 45,744
27,159 218,363 54,318
31,875 242,199 63,750
37,062 268,419 74,125
42,769 297,261 85,537
49,045 328,987 98,091
55,950 363,886 111,900
63,545 402,275 127,090
71,899 444,502 143,799
81,089 490,952 162,179
542,048 182,397
598,252 204,637
660,78 229,100
728,085 256,010
802,894 285,611
885,183 318,172
353,989
393,388

</TABLE>

Assumes annual return of 10% based on the 13.11% average annual total return
of the Standard & Poor's Composite Index of 500 Stocks (S&P 500) for the 50-year
period 12/31/47-12/31/97. The S&P 500 is a group of unmanaged securities widely
regarded as representative of the stock market in general. Income taxes will be
due when you make withdrawals from your 401(k) or IRA.

AIM GLOBAL GOVERNMENT INCOME FUND

<PAGE>
REPORT OF
INDEPENDENT ACCOUNTANTS

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

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

PRICEWATERHOUSECOOPERS LLP

BOSTON, MASSACHUSETTS
DECEMBER 18, 1998

8
<PAGE>
PORTFOLIO OF INVESTMENTS

October 31, 1998

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

<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (78.2%)
Belgium (3.5%)
Kingdom of Belgium, 5.75% due 3/28/08 ................ BEF 232,900,000 $ 7,545,046 3.5
Canada (2.4%)
Canadian Government, 6% due 6/1/08 ................... CAD 7,520,000 5,208,179 2.4
Denmark (8.3%)
Kingdom of Denmark Bullet, 6% due 11/15/09 ........... DKK 101,100,000 17,700,334 8.3
Germany (10.8%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 13,050,000 8,807,232 4.1
6% due 7/4/07 ...................................... DEM 10,980,000 7,479,880 3.5
6.5% due 7/4/27 .................................... DEM 9,550,000 6,854,235 3.2
Greece (4.7%)
Hellenic Republic:
9.2% due 3/21/02 ................................... GRD 2,210,000,000 7,815,135 3.7
8.8% due 6/19/07 ................................... GRD 550,000,000 2,029,877 1.0
Italy (12.7%)
Italian Buoni Poliennali del Tesoro (BTPS):
7.25% due 11/1/26 .................................. ITL 21,280,000,000 16,349,744 7.7
8.5% due 1/1/04 .................................... ITL 14,480,000,000 10,643,419 5.0
Sweden (4.2%)
Swedish Government, 6.5% due 10/25/06 ................ SEK 62,700,000 9,056,166 4.2
United Kingdom (8.6%)
United Kingdom Treasury, 9% due 10/13/08 ............. GBP 8,380,000 18,289,627 8.6
United States (21.6%)
United States Treasury, 6.375% due 8/15/27{./} ....... USD 35,800,000 41,317,535 19.3
Federal National Mortgage Association, 6.375% due
8/15/07 ............................................. AUD 7,300,000 4,827,718 2.3
Uruguay (1.4%)
Republic of Uruguay, 7.875% due 7/15/27 - 144A{.} .... USD 3,000,000 3,045,000 1.4
------------
Total Government & Government Agency Obligations (cost
$165,756,751) ........................................... 166,969,127
------------
Corporate Bonds (12.7%)
Germany (1.0%)
Kredit Fuer Wiederaufbau International Finance, 7.25%
due 7/16/07 ......................................... AUD 3,100,000 2,155,469 1.0
South Africa (0.1%)
Development Bank of South Africa, due 12/31/27{=} .... ZAR 39,300,000 133,929 0.1
Tunisia (1.8%)
Banque Centrais de Tunisie, 8.25% due 9/19/27 ........ USD 4,750,000 3,852,075 1.8
United Kingdom (7.1%)
SBC Jersey, 8.75% due 6/20/05 ........................ GBP 8,200,000 15,234,375 7.1
United States (2.7%)
Ford Motor Credit Corp., 5.25% due 6/16/08 ........... DEM 5,370,000 3,295,521 1.5
Merrill Lynch & Co., 7.25% due 5/2/02 ................ USD 2,410,000 $ 2,508,497 1.2
------------
Total Corporate Bonds (cost $27,498,907) ................. 27,179,866
------------
</TABLE>

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

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

October 31, 1998

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Mortgage Backed (8.8%)
Denmark (4.0%)
Realkredit Danmark, 6% due 10/1/26 ................... DKK 54,018,000 $ 8,441,627 4.0
United States (4.8%)
Government National Mortgage Association TBA Pass Thru
Pool, 6% due 11/15/28{*} ............................ USD 8,500,000 8,425,625 3.9
Federal Home Loan Mortgage Association Pool #E62449,
8.5% due 3/1/10 ..................................... USD 1,712,183 1,832,973 0.9
------------
Total Mortgage Backed (cost $18,186,905) ................. 18,700,225
------------ -----

TOTAL FIXED INCOME INVESTMENTS (cost $211,442,563) ....... 212,849,218 99.7
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (3.9%)
United States (3.9%)
Ford Motor Credit, effective yield 5.09%, due 11/18/98
(cost $8,473,997) ................................... USD 8,500,000 8,473,997 3.9
------------ -----

TOTAL INVESTMENTS (cost $219,916,560) * ................. 221,323,215 103.6
Other Assets and Liabilities ............................. (7,782,870) (3.6)
------------ -----

NET ASSETS ............................................... $213,540,345 100.0
------------ -----
------------ -----
</TABLE>

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

{=} Zero coupon bond.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for securities purchased on a forward commitment
basis. See Note 1 to the Financial Statements.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $220,204,720 and
appreciation (depreciation) is as follows:

<TABLE>
<S> <C>
Unrealized appreciation: $ 4,586,885
Unrealized depreciation: (3,468,390)
-------------
Net unrealized appreciation: $ 1,118,495
-------------
-------------
</TABLE>

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

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>
Canadian Dollars........................ 5,186,883 1.54785 3/18/99 $(18,424)
Italian Lira............................ 8,888,408 1619.00000 3/18/99 67,738
------------- ---------------
Total Contracts to Sell (Receivable
amount $14,124,605).................. 14,075,291 $ 49,314
------------- ---------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 6.59%.
Total Open Forward Foreign Currency
Contracts............................ $ 49,314
---------------
---------------
</TABLE>

- ----------------
See Note 1 of Notes to the Financial Statements.

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

10
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1998

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

<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $219,916,560) (Note 1)......................... $221,323,215
U.S. currency................................................................. $ 322
Foreign currencies (cost $2,095,895).......................................... 2,071,055 2,071,377
---------
Receivable for securities sold........................................................... 8,554,453
Interest and interest withholding tax reclaims receivable................................ 4,535,164
Receivable for Fund shares sold.......................................................... 172,045
Receivable for open forward foreign currency contracts (Note 1).......................... 49,314
Miscellaneous receivable................................................................. 26,512
------------
Total assets........................................................................... 236,732,080
------------
Liabilities:
Payable for securities purchased......................................................... 17,120,859
Payable for Fund shares repurchased (Note 2)............................................. 2,828,414
Payable for loan outstanding (Note 1).................................................... 1,939,000
Distribution payable..................................................................... 438,754
Payable for service and distribution expenses (Note 2)................................... 262,791
Payable for transfer agent fees (Note 2)................................................. 202,273
Payable for investment management and administration fees (Note 2)....................... 140,295
Payable for printing and postage expenses................................................ 115,614
Payable for professional fees............................................................ 53,507
Payable for custodian fees............................................................... 28,702
Payable for registration and filing fees................................................. 27,856
Payable for Trustees' fees and expenses (Note 2)......................................... 13,163
Payable for fund accounting fees (Note 2)................................................ 5,504
Other accrued expenses................................................................... 15,003
------------
Total liabilities...................................................................... 23,191,735
------------
Net assets................................................................................. $213,540,345
------------
------------
Class A:
Net asset value and redemption price per share ($121,268,155 DIVIDED BY 13,513,210 shares
outstanding).............................................................................. $ 8.97
------------
------------
Maximum offering price per share (100/95.25 of $8.97) *.................................... $ 9.42
------------
------------
Class B:+
Net asset value and offering price per share ($91,851,644 DIVIDED BY 10,240,967 shares
outstanding).............................................................................. $ 8.97
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($420,546 DIVIDED
BY 46,726 shares outstanding)............................................................. $ 9.00
------------
------------
Net assets consist of:
Paid in capital (Note 4)................................................................. $338,619,386
Accumulated net realized loss on investments and foreign currency transactions........... (126,623,779)
Net unrealized appreciation on translation of assets and liabilities in foreign
currencies.............................................................................. 138,083
Net unrealized appreciation of investments............................................... 1,406,655
------------
Total -- representing net assets applicable to capital shares outstanding.................. $213,540,345
------------
------------
<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.

11
<PAGE>
STATEMENT OF OPERATIONS

Year ended October 31, 1998

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

<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income................................................................................... $ 19,476,296
Securities lending income......................................................................... 331,980
------------
Total investment income......................................................................... 19,808,276
------------
Expenses:
Investment management and administration fees (Note 2)............................................ 1,823,161
Service and distribution expenses: (Note 2)
Class A.......................................................................... $ 499,194
Class B.......................................................................... 1,084,595 1,583,789
-----------
Interest expense.................................................................................. 728,255
Transfer agent fees (Note 2)...................................................................... 561,120
Custodian fees.................................................................................... 148,655
Printing and postage expenses..................................................................... 138,525
Professional fees................................................................................. 120,840
Fund accounting fees (Note 2)..................................................................... 67,657
Registration and filing fees (Note 1)............................................................. 59,130
Trustees' fees and expenses (Note 2).............................................................. 19,125
Other expenses.................................................................................... 13,315
------------
Total expenses.................................................................................... 5,263,572
------------
Net investment income............................................................................... 14,544,704
------------
Net realized and unrealized gain (loss) on investments and foreign currencies: (Note
1)
Net realized gain on investments................................................... 5,403,124
Net realized gain on foreign currency transactions................................. 5,779,913
-----------
Net realized gain during the year............................................................... 11,183,037
Net change in unrealized depreciation on translation of assets and liabilities in
foreign currencies................................................................ (3,771,120)
Net change in unrealized appreciation of investments............................... 1,354,647
-----------
Net unrealized depreciation during the year..................................................... (2,416,473)
------------
Net realized and unrealized gain on investments and foreign currencies.............................. 8,766,564
------------
Net increase in net assets resulting from operations................................................ $ 23,311,268
------------
------------
</TABLE>

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

12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS

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

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income.................................................... $ 14,544,704 $ 19,128,003
Net realized gain on investments and foreign currency transactions....... 11,183,037 246,114
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (3,771,120) 5,553,094
Net change in unrealized appreciation (depreciation) of investments...... 1,354,647 (11,452,067)
-------------- --------------
Net increase in net assets resulting from operations................... 23,311,268 13,475,144
-------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (3,426,511) (6,827,721)
In excess of net investment income....................................... (5,024,245) (4,449,488)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... (2,258,151) (4,503,257)
In excess of net investment income....................................... (3,311,095) (2,934,682)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (9,025) (4,070)
In excess of net investment income....................................... (13,232) (2,653)
-------------- --------------
Total distributions.................................................... (14,042,259) (18,721,871)
-------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,018,940,689 667,541,828
Decrease from capital shares repurchased................................. (1,096,778,831) (787,794,141)
-------------- --------------
Net decrease from capital share transactions........................... (77,838,142) (120,252,313)
-------------- --------------
Total decrease in net assets............................................... (68,569,133) (125,499,040)
Net assets:
Beginning of year........................................................ 282,109,478 407,608,518
-------------- --------------
End of year *............................................................ $ 213,540,345 $ 282,109,478
-------------- --------------
-------------- --------------
* Includes undistributed net investment income............................ $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>

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

13
<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 (d) 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.54 0.52 0.57 0.62 0.65
Net realized and unrealized gain
(loss) on investments................ 0.32 (0.13) 0.03 0.15 (1.52)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.86 0.39 0.60 0.77 (0.87)
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.16) (0.31) (0.57) (0.59) (0.65)
From net realized gain on
investments.......................... -- -- (0.10) -- (0.27)
In excess of net investment income.... (0.35) (0.20) -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.55)
Return of capital..................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.51) (0.51) (0.67) (0.59) (1.57)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.97 $ 8.62 $ 8.74 $ 8.81 $ 8.63
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Total investment return (c)............. 10.20% 4.78% 7.11% 9.22% (8.87)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 121,268 $ 154,272 $ 240,945 $ 385,404 $ 502,094
Ratio of net investment income to
average net assets..................... 6.06% 6.04% 6.52% 6.98% 6.87%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions............... 1.52% 1.34% 1.34% 1.35% 1.33%
Without expense reductions............ 1.52% 1.51% 1.39% 1.38% N/A
Ratio of interest expense to average net
assets++............................... 0.29% N/A N/A N/A N/A
Portfolio turnover rate++............... 305% 241% 268% 385% 625%
</TABLE>

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

(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares.
N/A Not Applicable.

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

14
<PAGE>
FINANCIAL HIGHLIGHTS (cont'd)

CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.47 0.46 0.51 0.55 0.59
Net realized and unrealized gain
(loss) on investments................ 0.34 (0.12) 0.04 0.14 (1.52)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.81 0.34 0.55 0.69 (0.93)
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.11) (0.28) (0.51) (0.53) (0.59)
From net realized gain on
investments.......................... -- -- (0.10) -- (0.27)
In excess of net investment income.... (0.35) (0.18) -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.54)
Return of capital..................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.46) (0.46) (0.61) (0.53) (1.50)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.97 $ 8.62 $ 8.74 $ 8.80 $ 8.64
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Total investment return (c)............. 9.65% 4.00% 6.54% 8.22% (9.39)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 91,852 $ 127,722 $ 166,577 $ 235,481 $ 262,405
Ratio of net investment income to
average net assets..................... 5.41% 5.39% 5.87% 6.33% 6.22%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions............... 2.17% 1.99% 1.99% 2.00% 1.98%
Without expense reductions............ 2.17% 2.16% 2.04% 2.03% N/A
Ratio of interest expense to average net
assets++............................... 0.29% N/A N/A N/A N/A
Portfolio turnover rate++............... 305% 241% 268% 385% 625%
</TABLE>

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

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

15
<PAGE>
FINANCIAL HIGHLIGHTS (cont'd)

<TABLE>
<CAPTION>
ADVISOR CLASS+
---------------------------------------------------------
JUNE 1, 1995
YEAR ENDED OCTOBER 31, TO
------------------------------------- OCTOBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (D)
----------- ----------- ----------- ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.61 $ 8.73 $ 8.80 $ 8.98
----------- ----------- ----------- --------
Income from investment operations:
Net investment income................. 0.56 0.55 0.60 0.26
Net realized and unrealized gain
(loss) on investments................ 0.37 (0.13) 0.03 (0.19)
----------- ----------- ----------- --------
Net increase (decrease) from
investment operations.............. 0.93 0.42 0.63 0.07
----------- ----------- ----------- --------
Distributions to shareholders:
From net investment income............ (0.19) (0.33) (0.60) (0.25)
From net realized gain on
investments.......................... -- -- (0.10) --
In excess of net investment income.... (0.35) (0.21) -- --
In excess of net realized gain on
investments.......................... -- -- -- --
Return of capital..................... -- -- -- --
----------- ----------- ----------- --------
Total distributions................. (0.54) (0.54) (0.70) (0.25)
----------- ----------- ----------- --------
Net asset value, end of period.......... $ 9.00 $ 8.61 $ 8.73 $ 8.80
----------- ----------- ----------- --------
----------- ----------- ----------- --------

Total investment return (c)............. 11.18% 5.15% 7.49% 0.83 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 421 $ 116 $ 86 $ 131
Ratio of net investment income to
average net assets..................... 6.41% 6.39% 6.87% 7.33 %
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions............... 1.17% 0.99% 0.99% 1.00 % (a)
Without expense reductions............ 1.17% 1.16% 1.04% 1.03 % (a)
Ratio of interest expense to average net
assets++............................... 0.29% N/A N/A N/A
Portfolio turnover rate++............... 305% 241% 268% 385 %
</TABLE>

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

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

16
<PAGE>
NOTES TO
FINANCIAL STATEMENTS
October 31, 1998

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

1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Global Government Income Fund (the "Fund"), formerly GT Global Government
Income Fund, a non-diversified 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. 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 complete 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 with a maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.

Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.

Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.

(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, 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 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 period
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 fluctuates with changes in currency
exchange rates. The Forward

17
<PAGE>
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
counterparty 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 $13,148,319 were on loan
to brokers. The loans were secured by cash collateral of $14,832,250 received by
the Fund. For the year ended October 31, 1998, the Fund received fees of
$331,980.

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 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.

18
<PAGE>
(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, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The AIM Global Government Income Fund has a capital loss
carryforward of $126,354,043 of which $110,608,457 expires in 2002, and
$15,745,586 expires in 2003.

(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each 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.

(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. On October 31, 1998, the Fund had $1,939,000 in loans
outstanding.

For the year ended October 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $12,969,493, with a weighted average interest rate of 6.29%.
Interest expense for the year ended October 31, 1998 was $639,524. Other
interest expense charges amounted to $88,731.

(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD
COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has set aside sufficient cash or liquid securities as collateral for these
purchase commitments.

2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, became the Fund's investment manager and administrator and INVESCO
(NY), Inc., (formerly, Chancellor LGT Asset Management, Inc.) is the Fund's
investment sub-advisor and sub-administrator. As of the close of business on May
29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT")
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC.

A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned subsidiary of the
Manager, became the Fund's distributor as of the close of business on May 29,
1998. The Trust was reorganized from a Maryland corporation into a Delaware
business trust on September 8, 1998. Finally, as of the close of business on
September 4, 1998, A I M Fund Services, Inc. ("AFS"), an affiliate of the
Manager and AIM Distributors, replaced GT Global Investor Services, Inc. ("GT
Services") as the transfer agent of the Fund.

The Fund pays the Manager investment management and administration fees at the
annualized rate of 0.725% on the first $500 million of the average daily net
assets of the Fund; 0.70% on the next $1 billion; 0.675% on the next $1 billion;
and 0.65% on amounts thereafter. These fees are computed daily and paid monthly.

AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the Fund's distributor. The Fund offers
Class A, Class B, and Advisor Class shares for purchase.

Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's

19
<PAGE>
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 the following sales charges: $4,354 and $1,842,
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 had no CDSCs for
the year ended October 31, 1998. AIM Distributors also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.

Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors, from its own resources, pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended October 31, 1998, AIM Distributors and GT
Global collected CDSCs in the amount of $236,027 and $506,058, 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 0.35% 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 0.35% 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 1.75%, 2.40%, and 1.40% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.

Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 per shareholder accounts that are open
during any monthly period (this fee includes all out-of-pocket expenses), and an
annualized fee of $0.70 per shareholder account that is closed during any
monthly period. Both fees shall be billed by AFS monthly in arrears on a
prorated basis of 1/12 of the annualized fee for all such accounts.

For the period November 1, 1997 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
also was reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.

The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of a Fund's average daily net assets. The

20
<PAGE>
annual fee rate is derived based on the aggregate net assets of the funds which
comprise the following investment companies:

AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios, AIM Series
Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee is calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount is
allocated to and paid by each such fund based on its relative average daily net
assets.

The Trust pays each Trustee who is not an employee, officer or director of the
Manager, or any other affiliated company, $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Trustee.

3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $358,167,758 and $372,654,300 respectively. For the year
ended October 31, 1998, purchases and sales of U.S. government obligations
aggregated $373,516,894 and $395,326,576, respectively.

4. CAPITAL SHARES
At October 31, 1998, there were 6,000,000,000 shares of the Trust's common stock
authorized, at $0.0001 par value. Of this amount, 400,000,000 were classified as
shares of the AIM Global Telecommunications Fund; 400,000,000 were classified as
shares of AIM Global Government Income Fund; 200,000,000 were classified as
shares of AIM Global Health Care Fund; 200,000,000 were classified as shares of
AIM Strategic Income Fund; 200,000,000 were classified as shares of AIM
Developing Markets Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of AIM Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of AIM Latin
American Growth Fund; 200,000,000 were classified as shares of AIM Emerging
Markets Fund; 200,000,000 were classified as shares of AIM Emerging Markets Debt
Fund; 200,000,000 were classified as shares of AIM Global Financial Services
Fund; 200,000,000 were classified as shares of AIM Global Resources Fund;
200,000,000 were classified as shares of AIM Global Infrastructure Fund;
200,000,000 were classified as shares of AIM Global Consumer Products and
Services Fund. The shares of each of the foregoing series of the Trusts were
divided equally into two classes, designated Class A and Class B common stock.
With respect to the issuance of Advisor Class shares, 100,000,000 shares were
classified as shares of each of the fifteen series of the Trusts and designated
as Advisor Class common stock. 1,100,000,000 shares remain unclassified.
Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
- ---------------------------------------------------------------
Shares sold.................................................... 82,946,586 $720,078,445 48,767,558 $419,503,866
Shares issued in connection with reinvestment of
distributions................................................ 537,397 4,673,843 741,916 6,372,599
----------- ------------ ----------- ------------
83,483,983 724,752,288 49,509,474 425,876,465
Shares repurchased............................................. (87,859,651) (762,718,816) (59,180,268) (509,133,563)
----------- ------------ ----------- ------------
Net decrease................................................... (4,375,668) $(37,966,528) (9,670,794) $(83,257,098)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------

<CAPTION>
CLASS B
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 33,203,356 $287,724,801 27,713,479 $237,734,254
Shares issued in connection with reinvestment of
distributions................................................ 342,811 2,983,470 452,575 3,886,536
----------- ------------ ----------- ------------
33,546,167 290,708,271 28,166,054 241,620,790
Shares repurchased............................................. (38,124,508) (330,880,174) (32,406,087) (278,645,805)
----------- ------------ ----------- ------------
Net decrease................................................... (4,578,341) $(40,171,903) (4,240,033) $(37,025,015)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 397,514 $ 3,461,130 4,551 38,769
Shares issued in connection with reinvestment of
distributions................................................ 2,169 19,000 680 5,804
----------- ------------ ----------- ------------
399,683 3,480,130 5,231 44,573
Shares repurchased............................................. (366,368) (3,179,841) (1,717) (14,773)
----------- ------------ ----------- ------------
Net increase................................................... 33,315 $ 300,289 3,514 $ 29,800
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>

21
<PAGE>
5. WRITTEN OPTIONS
The AIM Global Government Income Fund's written options contract activity for
the year ended October 31, 1998, was as follows:

<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AIM GLOBAL GOVERNMENT INCOME FUND AMOUNT IN USD PREMIUMS
- ------------------------------------------------------------ ----------------- ------------
<S> <C> <C>
Options outstanding at October 31, 1997 $ 4,840,000 $ 44,673
Options written 35,488,342 182,826
Options cancelled in closing purchase transactions -- --
Options expired prior to exercise (40,328,342) (227,499)
Options exercised -- --
----------------- ------------
Options outstanding at October 31, 1998 $ -- $ --
----------------- ------------
----------------- ------------
</TABLE>

6. SUBSEQUENT EVENT (UNAUDITED)
Effective December 14, 1998, sub-advisory and sub-administration responsibility
for the Fund was transferred from INVESCO (NY), Inc. to INVESCO Asset Management
Ltd., another indirect wholly-owned subsidiary of AMVESCAP PLC. A I M Advisors,
Inc. will continue to serve as the manager and administrator of the Fund. The
transfer will not change the fees paid by A I M Advisors, Inc. for sub-advisory
services and will not change the nature of the sub-advisory services provided to
the Fund or the personnel providing such services.

7. PROXY RESULTS (UNAUDITED)
The Special Meeting of Shareholders of the G.T. Investment Funds, Inc., now
known as AIM Investment Funds, (the "Trust") was held on May 20, 1998 at the
Trust's offices, 50 California Street, 26th Floor, San Francisco, California.
The meeting was held for the following purposes:

(1) To elect Trustees as follows: C. Derek Anderson, Frank S. Bayley, William J.
Guilfoyle, Arthur C. Patterson, Ruth H. Quigley.

(2) To approve a new Investment Management and Administration Contract and
Sub-Advisory and Sub-Administration Contract with respect to each series of
the Trust (each, a "Fund," and collectively, the "Funds").

(3) To approve replacement Rule 12b-1 plans of distribution with respect to
Class A and B Shares of the Fund.

(4) To approve changes to the fundamental investment restrictions of the Fund.

(5) To approve an agreement and plan of conversion and termination for the
Trust.

(6) To ratify the selection of Coopers & Lybrand L.L.P., now known as
PricewaterhouseCoopers LLP, as the Trust's independent public accountants.

The results of the proxy solicitation on the above matters were as follows:

<TABLE>
<CAPTION>
VOTES WITHHELD/
TRUSTEE/MATTER VOTES FOR AGAINST ABSTENTIONS
------------------------------------------------------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
(1) C. Derek Anderson........................................... 191,685,088 N/A 13,123,292
Frank S. Bayley............................................. 191,766,811 N/A 13,041,568
William J. Guilfoyle........................................ 191,828,959 N/A 12,979,420
Arthur C. Patterson......................................... 191,845,270 N/A 12,963,109
Ruth H. Quigley............................................. 191,869,887 N/A 12,938,492
(2)(a) Approval of investment management and administration
contract................................................... 11,536,408 331,113 2,991,833*
(2)(b) Approval of sub-advisory and sub-administration contract.... 11,395,925 369,943 3,093,486*
(3) Approval of replacement Rule 12b-1 plans of distribution
CLASS A SHARES.............................................. 7,719,511 270,134 779,922
CLASS B SHARES.............................................. 5,529,210 170,503 434,919
(4)(a) Modification of Fundamental Restriction on Concentration.... 11,334,807 411,566 3,112,981*
(4)(b) Modification of Fundamental Restriction on Issuing Senior
Securities and Borrowing Money............................. 11,332,764 413,609 3,112,981*
(4)(c) Modification of Fundamental Restriction on Making Loans..... 11,334,807 411,566 3,112,981*
(4)(d) Modification of Fundamental Restriction on Underwriting
Securities................................................. 11,334,807 411,566 3,112,981*
(4)(e) Modification of Fundamental Restriction on Real Estate
Investments................................................ 11,330,893 415,480 3,112,981*
(4)(f) Modification of Fundamental Restriction on Investing in
Commodities................................................ 11,330,902 413,716 3,112,981*
(4)(g) Elimination of Fundamental Restriction on Margin
Transactions............................................... 11,332,945 413,428 3,112,981*
(4)(h) Elimination of Fundamental Restriction on Investing in
Futures Contracts.......................................... 11,330,509 415,864 3,112,981*
(4)(i) Elimination of Fundamental Restriction on Investing in
Illiquid Securities........................................ 11,332,543 413,830 3,112,981*
(4)(j) Elimination of Fundamental Restriction on Pledging Assets... 11,334,799 411,574 3,112,981*
(4)(k) Elimination of Fundamental Restriction on Investments in
Oil, Gas and Mineral Leases and Programs................... 11,334,406 411,967 3,112,981*
(4)(l) Elimination of Fundamental Restriction on Investing for the
Purpose of Control......................................... 11,332,756 413,617 3,112,981*
</TABLE>

22
<PAGE>
<TABLE>
<CAPTION>
VOTES WITHHELD/
TRUSTEE/MATTER VOTES FOR AGAINST ABSTENTIONS
------------------------------------------------------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
(4)(m) Elimination of Fundamental Restriction on Purchasing
Securities of Issuers in Which Officers and Board Members
of Each Company and Its Affiliates Own Securities.......... 11,334,807 411,566 3,112,981*
(4)(n) Elimination of Fundamental Restriction on Investing in
Securities of Companies That Have Been in Operation for
Less than Three Years...................................... 11,334,807 411,566 3,112,981*
(4)(o) Elimination of Fundamental Restriction on Selling Securities
Short...................................................... 11,330,101 416,272 3,112,981*
(4)(p) Approval of New Fundamental Investment Policy Regarding
Investment of All of Each Fund's Assets in an Open-End
Fund....................................................... 11,334,799 411,574 3,112,981*
(5) Approval of an agreement and plan of conversion and
termination with respect to the Trust...................... 190,027,469 6,362,084 94,055,040*
(6) Ratification of the selection of Coopers and Lybrand L.L.P.,
now known as PricewaterhouseCoopers LLP, as the Trust's
independent public accountants............................. 191,358,779 2,114,168 11,333,063
</TABLE>

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

23
<PAGE>

TRUSTEES & OFFICERS

BOARD OF TRUSTEES

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

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

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

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

Ruth H. Quigley
Private Investor

OFFICERS

Robert H. Graham
Chairman and President

Helge K. Lee
Vice President & Secretary

Dana R. Sutton
Vice President & Assistant Treasurer

Kenneth W. Chancey
Vice President & Principal
Accounting Officer

John J. Arthur
Vice President

Melville B. Cox
Vice President

Gary T. Crum
Vice President

Carol F. Relihan
Vice President

David P. Hess
Assistant Secretary

Nancy L. Martin
Assistant Secretary

Ofelia M. Mayo
Assistant Secretary

Kathleen J. Pflueger
Assistant Secretary

Samuel D. Sirko
Assistant Secretary

Pamela Ruddock
Assistant Treasurer

Paul Wozniak
Assistant Treasurer

OFFICE OF THE FUND

11 Greenway Plaza
Suite 100
Houston, TX 77046

INVESTMENT MANAGER

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

SUB-ADVISOR

INVESCO Asset Management Ltd.
11 Devonshire Square
London EC2M 4YR
England

TRANSFER AGENT

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

CUSTODIAN

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

COUNSEL TO THE FUND

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

COUNSEL TO THE TRUSTEES

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

DISTRIBUTOR

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

AUDITORS

PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109

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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.

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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.

GGVI-AR-1