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 LATIN AMERICAN GROWTH FUND

[COVER IMAGE]

[A I M logo APPEARS HERE]

INVEST WITH DISCIPLINE-REGISTERED TRADEMARK-

<PAGE>

[COVER IMAGE]

NATURALEZA MUERTA BY FERNANDO BOTERO

FERNANDO BOTERO'S PAINTINGS ARE INSTANTLY RECOGNIZABLE BY THEIR VOLUMINOUS
SHAPES AND SMOOTHLY-FINISHED SURFACES. HIS USE OF MONUMENTAL PROPORTIONS
TRANSFORMS EVERYDAY OBJECTS AND ORDINARY PEOPLE INTO ICONS OF SERENITY AND
STRENGTH. LIKE MANY OF HIS WORKS, THE COVER PAINTING WAS INSPIRED BY THE
ARTIST'S MEMORIES OF SMALL-TOWN LIFE IN COLOMBIA.

AIM Latin American Growth Fund is for shareholders who seek long-term growth
of capital. The Fund primarily invests in securities of a broad range of
Latin American issuers.

ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT
THIS REPORT:

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

- - During the fiscal year ended October 31, 1998, Class A shares paid
distributions of $0.03 per share, and Advisor Class shares paid distributions
of $0.15 per share.

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

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

- - The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.

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

ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:

- - The IFC Investable Latin America index is a market value-weighted
average of the performance of securities listed in seven countries. It
includes the effect of reinvested dividends and is measured in U.S. dollars.

- - The MSCI Emerging Latin America Index is a group of unmanaged
securities from emerging Latin American markets tracked by Morgan Stanley
Capital International.

- - 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 LATIN AMERICAN GROWTH FUND
<PAGE>

ANNUAL REPORT / CHAIRMAN'S LETTER

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

DEAR FELLOW SHAREHOLDER:

During the fiscal year covered by this report, a variety of events converged
to produce harsh market conditions in several sectors and geographic areas:
fallout from currency devaluations in Southeast Asia, the seemingly
intractable downturn in Japan, Russia's default on much of its foreign debt,
fear that Latin America could be engulfed by the world's difficulties, and
the virtual collapse of commodity prices as worldwide economic growth
faltered and many nations slipped into recession.

We understand how unnerving it is to have an investment lose value. While the
difficult market environment helps explain much of your Fund's poor
performance, it is not the whole story. When we added the former GT Global
funds to our fund family, we understood that several of them needed to
bolster their performance substantially. We also recognized their significant
long-term potential, and now that we are the funds' investment adviser, we
will strive to see that potential realized. Where necessary, we have begun to
make the changes in management and investment strategy we believe will
enhance your Fund's performance. We intend to continue managing your Fund
with the careful oversight and disciplined investment strategy used in all
AIM funds, and we hope you will share our patience as investors while we work
to improve your Fund's performance.

On the pages that follow, your Fund's management team offers more detailed
discussion of how markets behaved, how they managed the portfolio during the
fiscal year, and what they foresee for your Fund and the markets where it
invests. We hope you find their discussion informative.

INVESTING FUNDAMENTALS UNCHANGED

The abrupt reversals of market sentiment during this reporting period
reinforce our conviction that markets are unpredictable in the short term.
Since even the best money managers cannot know exactly when to enter and exit
a market, we remain convinced that the wisest strategy is to stay fully
invested despite volatility and short-term disappointment.

However difficult many markets have been this fiscal year, the fundamental
principles of investing are unchanged:

- - broad portfolio diversification, in which this Fund is part of a
complete investment strategy designed with your personal financial goals in
mind;

- - realistic expectations, recognizing that the potential for downturns
is always present; and

- - as always, long-term thinking.

Your financial consultant is your best resource for helping you construct a
diversified portfolio, weather turbulent markets, and keep your eye on your
long-term goals.

We are pleased to send you this report on your Fund's fiscal year. If you
have any questions or comments, please contact our Client Services department
at 800-959-4246 or e-mail your inquiry to us at [email protected]. You can
access information about your account through our AIM Investor Line at
800-246-5463 or on our Web site, www.aimfunds.com. We often post market
updates on our Web site.

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

Sincerely,

/s/ CHARLES T. BAUER

Charles T. Bauer
Chairman

WE INTEND TO CONTINUE MANAGING YOUR FUND WITH THE CAREFUL OVERSIGHT AND
DISCIPLINED INVESTMENT STRATEGY USED IN ALL AIM FUNDS.

AIM LATIN AMERICAN GROWTH FUND

<PAGE>

ANNUAL REPORT / MANAGERS' OVERVIEW

FUND SHAKEN BY GLOBAL FINANCIAL CRISES

GLOBAL MARKET VOLATILITY DOMINATED FINANCIAL NEWS IN 1998. HOW DID THE FUND
PERFORM IN THIS ENVIRONMENT?

Since last October, investors in emerging markets have endured a very
difficult and volatile year, worsened by a major correction in world equity
markets during August. Global economic difficulties hurt the Fund's return
significantly. For the fiscal year ended October 31, 1998, total return for
Class A shares was -39.86% and -40.19% for Class B shares.

In comparison, the MSCI Emerging Latin America index had a total return of
- -30.58% for the same period.

HOW HAVE THE MARKETS CHANGED OVER THE LAST YEAR?

The Asian crisis was the biggest influence on Latin American markets late in
1997. The Fund took advantage of a market recovery early in 1998, but the
upward trend was quickly reversed during the summer as a result of the
Russian government's debt problems.

As the Asian and Russian crises spread, investors began to re-evaluate the
riskiness of emerging markets, and many exited them completely. The risk
perception for the region improved slightly in the third quarter, thanks to
Brazil's new fiscal reform package.

A recovery in U.S. equity markets, moves by the G7 to settle international
markets, and Japan's progress in addressing banking system problems helped
many Latin American markets swing into positive territory in October. The
MSCI Latin America index was up 7.73% for the month.

HOW HAVE INDIVIDUAL COUNTRIES RESPONDED TO THE DOWNTURN?

Argentina, Chile and Mexico have tightened their fiscal and monetary
policies, which will slow their economies rapidly as we enter 1999. Consumer
and infrastructure development stocks, which thrive in a growing economy,
were hurt by this move. However, stocks that act defensively in a falling
market, such as utilities, have benefited.

In Brazil, the financial crisis struck during the final months of key
elections. The country's officials were slow to act, fearing political
fallout. Utility stocks were quite volatile during this time because they are
susceptible to political interference. After the elections, a reform package
was passed, and there appears to be multilateral support for the effort.

Tumbling commodity prices significantly damaged the smaller markets of
Colombia and Venezuela, but internal politics have been an obstacle to
effective response. Currencies remain vulnerable.

LATIN AMERICA

The map below identifies Latin American countries mentioned in this report.

LATIN AMERICAN MAP

Mexico
Colombia
Peru
Chile
Argentina
Brazil
Venezuela
Panama

THE RISK PERCEPTION FOR THE REGION IMPROVED SLIGHTLY IN THE THIRD QUARTER,
THANKS TO BRAZIL'S NEW FISCAL REFORM PACKAGE.

WHAT IS YOUR OVERALL INVESTMENT STRATEGY FOR THE FUND?

First we determine the portfolio's target country allocations through a
top-down process that takes into account a country's economic growth,
monetary cycle, government policy, and overall earnings growth. We apply a
more detailed industry by industry economic analysis to each country, then
adjust our sector allocations. Finally, we identify stocks demonstrating
growth, but at a reasonable price.

We adjust our top-down allocation depending on the availability of stocks
suitable for investment in a particular country or sector.

WHICH COUNTRIES DID THE FUND FAVOR AT THE END OF THE REPORTING PERIOD?

Our largest allocation was to Brazil, but we moved from an overweight to a
neutral position in response to increased market risks. We focused on oil and
natural resource stocks because they benefit from U.S. dollar revenues and
from privatization efforts.

We also liked Brazil's utility companies such as Companhia Energetica de
Minas Gerais (CEMIG), provider of electric power to the Brazilian state of
Minas Gerais. With political uncertainties now reduced, such stocks have
attracted investor interest once again.

Our second largest country allocation was in Mexico, where we are slightly
overweight. We've become more comfort-

SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.

AIM LATIN AMERICAN GROWTH FUND

<PAGE>

able with stocks that stand to benefit from the large devaluation of the
peso. Although earnings will certainly be affected this year by the monetary
correction, the competitive position of Mexico's exporters has been protected
by it.

The devaluation should help companies like Desc; Sanluis Corporacion; and
Grupo Carso, companies that produce auto parts for the NAFTA region. Domestic
demand is still good, and Mexico appears to be relatively immune to the
Brazilian contagion. For example, soft-drink producer Fomento Economico
Mexicano has benefited from strong domestic demand.

We also ended the reporting period overweight in Chile, partly because we
believe the outlook has improved for Pacific Rim demand and partly because we
expect interest rates to continue falling, which could act as an incentive
for economic growth. We've focused on retail food and beverages, since they
are at less risk from economic slowdown, as well as electric companies and
natural resource producers. We are more cautious on cyclical sectors such as
banks and construction.

IN WHICH COUNTRIES WERE YOU UNDERWEIGHT?

We were slightly underweight in Argentina. Although Argentina's prospects
looked good from a top-down point of view, there were few attractive choices
in the country's very narrow stock market. Oil stocks, which have been poor
performers, make up around 40% of the market. In addition, the industrial
sector is at considerable risk because of the economic slowdown and
competition from Brazil. Although investor confidence in Argentina has been
somewhat shaky, falling interest rates and a fundamentally sound government
administration are positive signs. Our investments in this country were
primarily in banks, telecommunications companies, and real estate.

We're underweight in Peru and Venezuela as well. The El Nino weather pattern
may have abated, but Peru's economy has been slow to recover from its
effects. The fishing industry's recovery and government
reconstruction-spending both have been slow to materialize. Venezuela has
been very hard hit by the global economic downturn due to its dependence on
oil prices. Devaluation has long been expected; it's really just a matter of
time. Finally, we had no exposure to Colombia, where markets are extremely
illiquid and the macroeconomic outlook is unclear.

WHAT IS YOUR OUTLOOK FOR LATIN AMERICA AND FOR THE FUND IN THE NEAR TERM?

We have not lost hope for the region. In fact, we believe that Latin America
has a more positive outlook than either Russia or Asia. However, the near- to
mid-term outlook depends very much on global events and trends. The overall
level of world economic growth, and the impact it has on commodity prices,
will be extremely important.

It's also essential for emerging markets as a whole to begin recovery and win
back investor confidence. The success of reform efforts and the support that
emerging markets receive from more developed nations will all have an impact.
Domestically, Brazil's constitutional reform will play a large role in
shaping sentiment toward the region. The re-elected Brazilian government has
already restored some stability to regional markets, but much remains to be
done.

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

TOP 10 EQUITY HOLDINGS
<S> <C>
1. Petroleo Brasileiro S.A. (Petrobras) Preferred (Brazil) 4.9%
2. Telecomunicacoes Brasileiras S.A. (Telebras) - ADR (Brazil) 4.5
3. Fomento Economico Mexicano, S.A. de C.V. - ADR (Mexico) 4.0
4. Nortel Invesora ADR (Argentina) 3.9
5. Carso Global Telecommunications "A1" (Mexico) 3.1
6. Sociedad Quimica y Miniera de Chile, S.A. - ADR (Chile) 2.9
7. Grupo Carso, S.A. de C.V. "A1" (Mexico) 2.8
8. Grupo Televisa, S.A. de C.V. - GDR (Mexico) 2.7
9. Uniao de Bancos Brasileiros, S.A. (Unibanco) Units (Brazil) 2.4
10. Companhia Energetica de Minas Gerais (Cemig) - ADR (Brazil) 2.3
</TABLE>

TOP FIVE INDUSTRIES
<S> <C>
1. Services 28.0%
2. Energy 20.3
3. Finance 12.8
4. Materials/Basic Industry 12.7
5. Consumer Non-Durables 12.5
</TABLE>

TOP FIVE COUNTRIES
<S> <C>
1. Brazil 36.2%
2. Mexico 30.2
3. Chile 12.6
4. Argentina 11.7
5. United States 5.4
</TABLE>

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

SEE IMPORTANT FUND AND INDEX DISCLOSURES INSIDE FRONT COVER.

AIM LATIN AMERICAN GROWTH FUND

<PAGE>

ANNUAL REPORT / PERFORMANCE HISTORY

YOUR FUND'S LONG-TERM PERFORMANCE

RESULTS OF A $10,000 INVESTMENT
AIM LATIN AMERICAN GROWTH FUND VS. BENCHMARK INDEXES

8/13/91--10/31/98

<TABLE>
<CAPTION>
AIM Latin American IFC Investable MSCI Emerging
Growth Fund, Latin America Index Latin America Index
Class A
<S> <C> <C> <C>
8/13/91 $10,000 $10,000
8/31/91 $9,924
10/31/91 10,967 12,344 10,028
4/30/92 13,896 16,937 15,720
10/31/92 10,476 13,052 12,534
4/30/93 11,630 14,100 13,398
10/31/93 14,360 18,302 17,904
4/30/94 15,591 21,117 20,551
10/31/94 19,257 25,754 23,274
4/30/95 12,486 16,506 16,583
10/31/95 12,101 16,123 16,331
4/30/96 13,864 18,844 19,317
10/31/96 14,221 19,330 19,958
4/30/97 16,304 23,903 26,567
10/31/97 15,433 23,731 25,341
4/30/98 16,436 25,255 23,076
10/31/98 9,281 16,523 17,591
</TABLE>

Past performance is no guarantee of comparable future results.

AVERAGE ANNUAL TOTAL RETURNS

For periods ended October 31, 1998, including sales charges

CLASS A SHARES
<S> <C>
Inception (8/13/91) -1.03%
5 years -9.25
1 year -42.71*
</TABLE>

CLASS B SHARES
<S> <C>
Inception (4/1/93) -4.81%
5 years -9.14
1 year -43.18**
</TABLE>

ADVISOR CLASS SHARES
(sales charges do not apply)
<S> <C>
Inception (6/1/95) -8.16
1 year -39.67
</TABLE>

*-39.86, excluding sales charge
**-40.19, excluding sales charges

Sources: Towers Data Systems Hypo-Registered Trademark- and Bloomberg.

Your Fund's total return includes sales charges, expenses, and management
fees. The performance of the Fund's Class B and Advisor Class shares will
differ from Class A shares due to differing fees and expenses. For Fund data
performance calculations and descriptions of indexes cited on this page,
please refer to the inside front cover.

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

ABOUT THIS CHART

The chart above compares your Fund's Class A shares to benchmark indexes. Use
of these indexes is intended to give you a general idea of your Fund's
comparative performance. It is important to understand the differences
between your Fund and these indexes. An index measures performance of a
hypothetical portfolio.

A market index such as the MSCI Emerging Latin American Index is not managed
and incurs no sales charges, expenses, or fees. If you could buy all the
securities that make up a market index, you would incur expenses that would
affect your investment's return. Please note that the MSCI Emerging Latin
American Index results given above are for the period August 31, 1991 to
October 31, 1998.

Since the last reporting period, AIM Latin American Growth Fund has elected
to use the MSCI Emerging Latin America Index as its benchmark. This index
more closely reflects the performance of the securities in which the Fund
invests.

The Fund will no longer measure its performance against the IFC Investable
Latin America Index, the index published in previous reports to shareholders.
Because this is the first reporting period since we have adopted the new
index, SEC guidelines require that we compare the Fund's performance to both
the old and the new index.

AIM LATIN AMERICAN GROWTH FUND
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

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

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

PRICEWATERHOUSECOOPERS LLP

BOSTON, MASSACHUSETTS
DECEMBER 18, 1998

5
<PAGE>
PORTFOLIO OF INVESTMENTS

October 31, 1998

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

<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (28.0%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............. BRZL -- -- 4.5
TELEPHONE NETWORKS
ADR{\/} ................................................. -- 64,040 $ 4,863,038 --
Common .................................................. -- 86,027,027 8,655 --
Nortel Inversora S.A. - ADR{\/} ........................... ARG 187,700 4,176,325 3.9
TELEPHONE NETWORKS
Carso Global Telecom "A1" ................................. MEX 1,227,000 3,339,850 3.1
TELEPHONE NETWORKS
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................ MEX 105,600 2,864,400 2.7
BROADCASTING & PUBLISHING
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP ................................................... BRZL 26,766,622 2,154,255 2.0
BUSINESS & PUBLIC SERVICES
Telecomunicacoes de Sao Paulo S.A. (TELESP): .............. BRZL -- -- 1.9
TELEPHONE - REGIONAL/LOCAL
Common-/- ............................................... -- 18,256,100 1,982,183 --
Preferred ............................................... -- 715,813 120,022 --
Telefonica de Argentina S.A. - ADR{\/} .................... ARG 56,200 1,858,113 1.7
TELEPHONE NETWORKS
Telesp Participacoes S.A.-/- .............................. BRZL 86,027,027 1,543,409 1.4
TELEPHONE - REGIONAL/LOCAL
Controladora Comercial Mexicana, S.A. de C.V. - UBC[.] .... MEX 2,110,000 1,336,633 1.2
RETAILERS-FOOD
Supermercados Unimarc S.A. - ADR (Chile){\/} .............. CHLE 207,200 712,249 0.7
RETAILERS-FOOD
Companhia Brasileira de Distribuicao Grupo Pao de Acucar -
ADR{\/} .................................................. BRZL 42,978 693,020 0.6
RETAILERS-FOOD
Embratel Participacoes S.A.-/- ............................ BRZL 86,027,027 663,522 0.6
TELEPHONE - LONG DISTANCE
Telesp Celulars S.A.: ..................................... BRL -- -- 0.6
WIRELESS COMMUNICATIONS
Preferred "B" ........................................... -- 6,373,727 315,267 --
Common .................................................. -- 12,531,500 273,155 --
Tele Norte Leste Participacoes S.A.-/- .................... BRZL 86,027,027 483,217 0.5
TELEPHONE - REGIONAL/LOCAL
Grupo Posadas S.A.: ....................................... MEX -- -- 0.5
LEISURE & TOURISM
"L"-/- .................................................. -- 752,300 275,513 --
"A"-/- .................................................. -- 471,000 177,155 --
Telerj Celular S.A. "B" Preferred-/- ...................... BRZL 14,509,681 450,082 0.4
WIRELESS COMMUNICATIONS
Tele Centro Sul Participacoes S.A.-/- ..................... BRZL 86,027,027 396,671 0.4
TELEPHONE - REGIONAL/LOCAL
El Puerto de Liverpool, S.A. de C.V. ...................... MEX 283,200 364,407 0.3
RETAILERS-OTHER
Telesp Celular Participacoes S.A.-/- ...................... BRZL 86,027,027 280,554 0.3
WIRELESS COMMUNICATIONS
Cintra S.A. ............................................... MEX 393,300 233,574 0.2
TRANSPORTATION - AIRLINES
Santa Isabel S.A. - ADR{\/} ............................... CHLE 36,684 213,226 0.2
RETAILERS-FOOD
</TABLE>

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

6
<PAGE>
PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1998

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Tele Sudeste Celular Participacoes S.A.-/- ................ BRZL 86,027,027 $ 165,880 0.2
WIRELESS COMMUNICATIONS
Tele Celular Sul Participacoes S.A.-/- .................... BRZL 86,027,027 54,813 0.1
WIRELESS COMMUNICATIONS
Tele Centro Oeste Celular Participacoes S.A.-/- ........... BRZL 86,027,027 54,091 --
WIRELESS COMMUNICATIONS
Telemig Celular Participacoes S.A.-/- ..................... BRZL 86,027,027 52,649 --
WIRELESS COMMUNICATIONS
Tele Nordeste Celular Participacoes S.A.-/- ............... BRZL 86,027,027 32,455 --
WIRELESS COMMUNICATIONS
Tele Leste Celular Participacoes S.A.-/- .................. BRZL 86,027,027 26,685 --
WIRELESS COMMUNICATIONS
Tele Norte Celular Participacoes S.A.-/- .................. BRZL 86,027,027 17,309 --
WIRELESS COMMUNICATIONS
------------
30,182,377
------------
Energy (20.3%)
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 41,660,500 5,238,996 4.9
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} .... BRZL 130,006 2,518,863 2.3
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................... CHLE 93,200 1,945,550 1.8
ELECTRICAL & GAS UTILITIES
Companhia Paranaense de Energia - Copel ................... BRZL -- -- 1.8
ELECTRICAL & GAS UTILITIES
"ADR"{\/} ............................................... -- 162,200 1,257,050 --
Common-/- ............................................... -- 103,347,000 633,356 --
Gener S.A. - ADR{\/} ...................................... CHLE 102,819 1,657,956 1.5
ELECTRICAL & GAS UTILITIES
Companhia de Eletricidade do Estado da Bahia - COELBA ..... BRZL 51,530,000 1,641,633 1.5
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ........... CHLE 115,900 1,151,756 1.1
ELECTRICAL & GAS UTILITIES
Harken Energy Corp.-/- .................................... US 334,670 1,150,428 1.1
OIL
C.A. La Electricidad de Caracas ........................... VENZ 3,991,353 1,134,107 1.1
ELECTRICAL & GAS UTILITIES
Eletropaulo Metropolitana Preferred ....................... BRZL 30,003,180 1,011,174 0.9
ELECTRICAL & GAS UTILITIES
Companhia Brasileira de Petroleo Ipiranga S.A.
Preferred ................................................ BRZL 173,785,000 932,448 0.9
GAS
Light - Servicos de Electricidade S.A. .................... BRZL 6,310,000 782,931 0.7
ELECTRICAL & GAS UTILITIES
Companhia Paulista de Forca e Luz ......................... BRZL -- -- 0.4
ELECTRICAL & GAS UTILITIES
Common-/- ............................................... -- 5,030,000 421,697 --
Preferred-/- ............................................ -- 21,438 1,258 --
Centrais Geradoras do Sul do Brasil S.A. (Gerasul): ....... BRZL -- -- 0.2
ELECTRICAL & GAS UTILITIES
Preferred-/- ............................................ -- 108,069,830 122,312 --
Common-/- ............................................... -- 87,753,000 89,754 --
</TABLE>

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

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

October 31, 1998

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Empresa Bandeirante de Energia S.A.-/- .................... BRZL 14,986,180 $ 145,615 0.1
ELECTRICAL & GAS UTILITIES
------------
21,836,884
------------
Finance (12.8%)
Uniao de Bancos Brasileiros S.A. (Unibanco) Units{=} ...... BRZL 80,014,700 2,626,237 2.4
BANKS-MONEY CENTER
Banco Rio de La Plata S.A. - ADR{\/} ...................... ARG 247,200 2,224,800 2.1
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} .................................................. CHLE 117,400 1,665,613 1.5
INVESTMENT MANAGEMENT
Banco de Galicia y Buenos Aires, S.A. de C.V. - ADR{\/} ... ARG 94,520 1,612,748 1.5
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} .................................................. PAN 57,597 1,249,135 1.2
OTHER FINANCIAL
Grupo Financiero Banorte, S.A. de C.V. "B"-/- ............. MEX 1,898,671 1,157,657 1.1
BANKS-SUPER REGIONAL
Grupo Financiero Banamex Accival, S.A. de C.V. "B"-/- ..... MEX 906,700 942,329 0.9
BANKS-MONEY CENTER
Inversiones y Representaciones S.A. (IRSA) - GDR{\/} ...... ARG 32,700 846,113 0.8
REAL ESTATE
Credicorp Ltd. - ADR{\/} .................................. PERU 94,682 639,104 0.6
BANKS-MONEY CENTER
Banco de A. Edwards - ADR{\/} ............................. CHLE 59,880 538,920 0.5
BANKS-MONEY CENTER
Banco Wiese - ADR{\/} ..................................... PERU 131,400 238,163 0.2
BANKS-MONEY CENTER
------------
13,740,819
------------
Materials/Basic Industry (12.7%)
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ......... CHLE 95,100 3,162,075 2.9
CHEMICALS
Companhia Vale do Rio Doce "A" Preferred .................. BRZL 160,703 2,425,096 2.2
METALS - STEEL
Industrias Penoles S.A. (CP) .............................. MEX 634,600 1,940,922 1.8
METALS - NON-FERROUS
Apasco, S.A. de C.V. ...................................... MEX 523,000 1,915,372 1.8
CEMENT
Grupo Cementos de Chihuahua, S.A. de C.V. "B" ............. MEX 1,362,500 730,946 0.7
CEMENT
Compania de Minas Buenaventura S.A. - ADR{\/} ............. PERU 51,300 628,425 0.6
GOLD
Siderca S.A. "A" .......................................... ARG 443,400 620,946 0.6
METALS - STEEL
Grupo Mexico S.A. "B" ..................................... MEX 235,824 599,889 0.6
METALS - NON-FERROUS
Votorantim Celulose e Papel S.A. .......................... BRZL 57,900,000 509,683 0.5
PAPER/PACKAGING
Usinas Siderurgicas de Minas Gerais S.A. - USIMINAS ....... BRZL 160,300 505,305 0.5
METALS - STEEL
</TABLE>

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

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

October 31, 1998

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Caemi Mineracao e Metalurgia S.A. Preferred ............... BRZL 12,750,000 $ 272,573 0.2
METALS - STEEL
Venezolana de Cementos, S.A.C.A.: ......................... VENZ -- -- 0.2
CEMENT
"A" ..................................................... -- 521,635 156,261 --
"B" ..................................................... -- 344,828 94,182 --
Companhia Cimento Portland Itau Preferred ................. BRZL 650,000 87,190 0.1
CEMENT
------------
13,648,865
------------
Consumer Non-Durables (12.5%)
Fomento Economico Mexicano, S.A. de C.V. - ADR{\/} ........ MEX 165,450 4,312,041 4.0
BEVERAGES - NON-ALCOHOLIC
Kimberly-Clark de Mexico, S.A. de C.V. "A" ................ MEX 825,600 2,418,862 2.3
PERSONAL CARE/COSMETICS
Compania Cervecerias Unidas S.A. - ADR{\/} ................ CHLE 105,400 1,897,200 1.8
BEVERAGES - ALCOHOLIC
Companhia de Tecidos Norte de Minas Preferred ............. BRZL 11,622,000 1,344,598 1.2
TEXTILES & APPAREL
Quilmes Industrial S.A. - ADR{\/} ......................... ARG 126,098 1,158,525 1.1
BEVERAGES - ALCOHOLIC
Grupo Industrial Maseca, S.A. de C.V. "B" ................. MEX 1,298,000 1,053,509 1.0
FOOD
Pepsi-Gemex S.A. - GDR{\/} ................................ MEX 122,800 798,200 0.7
BEVERAGES - NON-ALCOHOLIC
Embotelladora Andina S.A. "B" - ADR{\/} ................... CHLE 37,800 444,150 0.4
BEVERAGES - NON-ALCOHOLIC
Sudamtex de Venezuela "B" - ADR{\/} ....................... VENZ 34,764 34,764 --
TEXTILES & APPAREL
Cerveceria Backus & Johnston S.A. "T" ..................... PERU 87,469 31,086 --
BEVERAGES - ALCOHOLIC
------------
13,492,935
------------
Multi-Industry/Miscellaneous (7.9%)
Grupo Carso, S.A. de C.V. "A1" ............................ MEX 879,800 3,047,907 2.8
MULTI-INDUSTRY
Itausa Investimentos Itau S.A. Preferred .................. BRZL 3,749,289 1,980,258 1.8
MULTI-INDUSTRY
Alfa, S.A. de C.V. "A" .................................... MEX 645,100 1,724,013 1.6
CONGLOMERATE
Desc, S.A. de C.V. - ADR{\/} .............................. MEX 83,440 1,574,930 1.5
CONGLOMERATE
Quinenco S.A. - ADR{\/} ................................... CHLE 29,900 216,775 0.2
CONGLOMERATE
------------
8,543,883
------------
</TABLE>

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

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

October 31, 1998

TOTAL EQUITY INVESTMENTS (cost $166,683,412) ................ 103,073,412 95.7
------------ -----
<CAPTION>

NO. OF VALUE % OF NET
RIGHTS RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Companhia Paulista de Forca e Luz Preferred Rights, expire
November 5, 1998 (cost $0) .............................. 12,350 147 --
------------ -----
<CAPTION>

PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (0.0%)
Brazil (0.0%)
Companhia Vale do Rio Doce - Non Convertible (cost
$0) .................................................... BRL 276,400 -- --
------------ -----
<CAPTION>

VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 30, 1998, with State Street Bank & Trust Co.,
due November 2, 1998, for an effective yield of 5.30%,
collateralized by $200,000 U.S. Treasury Notes, 9.125% due
5/15/99 (market value of collateral is $213,250, including
accrued interest). (cost $205,000) ....................... 205,000 0.2
------------ -----

TOTAL INVESTMENTS (cost $166,888,412) * .................... 103,278,559 95.9
Other Assets and Liabilities ................................ 4,405,348 4.1
------------ -----

NET ASSETS .................................................. $107,683,907 100.0
------------ -----
------------ -----
</TABLE>

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

-/- Non-income producing security.
{\/} U.S. currency denominated.
[.] Each unit represents 3 "B" shares and 1 "C" share.
{=} Each unit represents one preferred share of Unibanco and one
preferred "B" share of Unibanco Holdings.
* For Federal income tax purposes, cost is $169,023,946 and
appreciation (depreciation) is as follows:

<TABLE>
<S> <C>
Unrealized appreciation: $ 1,252,923
Unrealized depreciation: (66,998,310)
-------------
Net unrealized depreciation: $ (65,745,387)
-------------
-------------
</TABLE>

Abbreviation:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt

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

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

October 31, 1998

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

<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Argentina (ARG/ARS) .................. 11.7 11.7
Brazil (BRZL/BRL) .................... 36.2 36.2
Chile (CHLE/CLP) ..................... 12.6 12.6
Mexico (MEX/MXN) ..................... 30.2 30.2
Panama (PAN/PND) ..................... 1.2 1.2
Peru (PERU/PES) ...................... 1.4 1.4
United States (US/USD) ............... 1.1 4.3 5.4
Venezuela (VENZ/VEB) ................. 1.3 1.3
------ --- -----
Total ............................... 95.7 4.3 100.0
------ --- -----
------ --- -----
</TABLE>

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

{d} Percentages indicated are based on net assets of $107,683,907.

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

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

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

<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $166,888,412) (Note 1)................................. $103,278,559
U.S. currency.................................................................................... 593
Receivable for Fund shares sold.................................................................. 5,053,642
Dividends receivable............................................................................. 796,039
Receivable for securities sold................................................................... 294,094
Interest receivable.............................................................................. 60
------------
Total assets................................................................................... 109,422,987
------------
Liabilities:
Payable for Fund shares repurchased.............................................................. 937,281
Payable for investment management and administration fees (Note 2)............................... 395,486
Payable for service and distribution expenses (Note 2)........................................... 164,858
Payable for transfer agent fees (Note 2)......................................................... 100,718
Payable for professional fees.................................................................... 47,847
Payable for registration and filing fees......................................................... 35,645
Payable for printing and postage expenses........................................................ 23,375
Payable for custodian fees....................................................................... 22,360
Payable for Trustees' fees and expenses (Note 2)................................................. 1,483
Payable for fund accounting fees (Note 2)........................................................ 100
Other accrued expenses........................................................................... 9,927
------------
Total liabilities.............................................................................. 1,739,080
------------
Net assets......................................................................................... $107,683,907
------------
------------
Class A:
Net asset value and redemption price per share ($60,719,898 DIVIDED BY 5,191,631 shares
outstanding)...................................................................................... $ 11.70
------------
------------
Maximum offering price per share (100/95.25 of $11.70) *........................................... $ 12.28
------------
------------
Class B:+
Net asset value and offering price per share ($46,599,065 DIVIDED BY 4,055,494 shares
outstanding)...................................................................................... $ 11.49
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($364,944 DIVIDED BY
31,167 shares outstanding)........................................................................ $ 11.71
------------
------------
Net assets consist of:
Paid in capital.................................................................................. $204,122,934
Undistributed net investment income.............................................................. 831,995
Accumulated net realized loss on investments and foreign currency transactions................... (33,630,013)
Net unrealized depreciation on translation of assets and liabilities in foreign currencies....... (31,156)
Net unrealized depreciation of investments....................................................... (63,609,853)
------------
Total -- representing net assets applicable to capital shares outstanding.......................... $107,683,907
------------
------------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>

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

12
<PAGE>
STATEMENT OF OPERATIONS

Year ended October 31, 1998

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

<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $574,241)............................... $ 5,834,403
Securities lending income.................................................................. 196,393
Interest income............................................................................ 133,008
------------
Total investment income.................................................................. 6,163,804
------------
Expenses:
Investment management and administration fees (Note 2)..................................... 2,036,326
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 560,118
Class B.................................................................... 959,894 1,520,012
------------
Transfer agent fees (Note 2)............................................................... 800,000
Interest expense........................................................................... 350,276
Printing and postage expenses.............................................................. 193,815
Professional fees.......................................................................... 124,425
Custodian fees............................................................................. 105,785
Registration and filing fees............................................................... 90,950
Fund accounting fees (Note 2).............................................................. 55,950
Trustees' fees and expenses (Note 2)....................................................... 10,585
Other expenses............................................................................. 20,281
------------
Total expenses before reimbursement...................................................... 5,308,405
------------
Expenses reimbursed by A I M Advisors, Inc............................................. (297,829)
------------
Total net expenses....................................................................... 5,010,576
------------
Net investment income........................................................................ 1,153,228
------------
Net realized and unrealized loss on investments and foreign currencies:
Net realized loss on investments............................................. (18,439,149)
Net realized loss on foreign currency transactions........................... (276,597)
------------
Net realized loss during the year........................................................ (18,715,746)
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... (24,435)
Net change in unrealized depreciation of investments......................... (54,450,981)
------------
Net unrealized depreciation during the year.............................................. (54,475,416)
------------
Net realized and unrealized loss on investments and foreign currencies....................... (73,191,162)
------------
Net decrease in net assets resulting from operations......................................... $(72,037,934)
------------
------------
</TABLE>

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

13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS

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

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- ----------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income..................................................... $ 1,153,228 $ 1,116,958
Net realized gain (loss) on investments and foreign currency
transactions............................................................. (18,715,746) 84,545,615
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................. (24,435) 25,640
Net change in unrealized depreciation of investments...................... (54,450,981) (47,707,162)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations......... (72,037,934) 37,981,051
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................................................ (219,544) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................................................ (5,514) --
---------------- ----------------
Total distributions..................................................... (225,058) --
---------------- ----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.......................... 771,991,302 1,267,100,757
Decrease from capital shares repurchased.................................. (885,624,465) (1,327,093,718)
---------------- ----------------
Net decrease from capital share transactions............................ (113,633,163) (59,992,961)
---------------- ----------------
Total decrease in net assets................................................ (185,896,155) (22,011,910)
Net assets:
Beginning of year......................................................... 293,580,062 315,591,972
---------------- ----------------
End of year *............................................................. $ 107,683,907 $ 293,580,062
---------------- ----------------
---------------- ----------------
* Includes undistributed net investment income of:......................... $ 831,995 $ 219,672
---------------- ----------------
---------------- ----------------
</TABLE>

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

14
<PAGE>
FINANCIAL HIGHLIGHTS

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

CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.13* 0.11 0.09 0.15 (0.08)
Net realized and unrealized gain
(loss) on investments................ (7.90) 1.44 2.59 (9.28) 6.75
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (7.77) 1.55 2.68 (9.13) 6.67
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.03) -- (0.08) -- (0.19)
From net realized gain on
investments.......................... -- -- -- (1.60) (0.15)
In excess of net investment income.... -- -- (0.03) -- --
---------- ---------- ---------- ---------- ----------
Total distributions..................... (0.03) -- (0.11) (1.60) (0.34)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 11.70 $ 19.50 $ 17.95 $ 15.38 $ 26.11
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Total investment return (c)............. (39.86)% 8.52% 17.52% (37.16)% 34.10%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 60,720 $ 159,496 $ 177,373 $ 182,462 $ 336,960
Ratio of net investment income (loss) to
average net assets:
With expense reductions and/or
reimbursement (Note 2)............... 0.78% 0.52% 0.46% 0.86% (0.29)%
Without expense reductions and/or
reimbursement........................ 0.64% 0.42% 0.39% 0.85% N/A
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and/or
reimbursement (Note 2)............... 2.00% 1.96% 2.03% 2.11% 2.04%
Without expense reductions and/or
reimbursement........................ 2.14% 2.06% 2.10% 2.12% N/A
Ratio of interest expenses to average
net assets++........................... 0.17% N/A N/A N/A N/A
Portfolio turnover rate++............... 39% 130% 101% 125% 155%
</TABLE>

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

(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Before reimbursement the net investment income per share would have
been reduced by $0.02 for Class A, B, and Advisor.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.

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

15
<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.... $ 19.23 $ 17.78 $ 15.21 $ 25.94 $ 19.75
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.04* 0.01 (0.00) 0.06 (0.22)
Net realized and unrealized gain
(loss) on investments................ (7.78) 1.44 2.59 (9.19) 6.74
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (7.74) 1.45 2.59 (9.13) 6.52
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- (0.01) -- (0.18)
From net realized gain on
investments.......................... -- -- -- (1.60) (0.15)
In excess of net investment income.... -- -- (0.01) -- --
---------- ---------- ---------- ---------- ----------
Total distributions..................... -- -- (0.02) (1.60) (0.33)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 11.49 $ 19.23 $ 17.78 $ 15.21 $ 25.94
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Total investment return (c)............. (40.19)% 8.04% 17.02% (37.42)% 33.33%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 46,599 $ 133,448 $ 137,400 $ 134,527 $ 211,673
Ratio of net investment income (loss) to
average net assets:
With expense reductions and/or
reimbursement (Note 2)............... 0.28% 0.02% (0.04)% 0.36% (0.79)%
Without expense reductions and/or
reimbursement........................ 0.14% (0.08)% (0.11)% 0.35% N/A
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and/or
reimbursement (Note 2)............... 2.50% 2.46% 2.53% 2.61% 2.54%
Without expense reductions and/or
reimbursement........................ 2.64% 2.56% 2.60% 2.62% N/A
Ratio of interest expenses to average
net assets++........................... 0.17% N/A N/A N/A N/A
Portfolio turnover rate++............... 39% 130% 101% 125% 155%
</TABLE>

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

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

16
<PAGE>
FINANCIAL HIGHLIGHTS (cont'd)

<TABLE>
<CAPTION>
ADVISOR CLASS+
----------------------------------------------------
YEAR YEAR ENDED OCTOBER 31, JUNE 1, 1995
ENDED TO
OCTOBER 31, ------------------------ OCTOBER 31,
1998 (d) 1997 (d) 1996 (d) 1995
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 19.57 $ 17.94 $ 15.40 $ 15.95
----------- ----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.21* 0.19 0.17 0.09
Net realized and unrealized gain
(loss) on investments................ (7.92) 1.44 2.58 (0.64)
----------- ----------- ----------- -------------
Net increase (decrease) from
investment operations.............. (7.71) 1.63 2.75 (0.55)
----------- ----------- ----------- -------------
Distributions to shareholders:
From net investment income............ (0.15) -- (0.14) --
From net realized gain on
investments.......................... -- -- -- --
In excess of net investment income.... -- -- (0.07) --
----------- ----------- ----------- -------------
Total distributions..................... (0.15) -- (0.21) --
----------- ----------- ----------- -------------
Net asset value, end of period.......... $ 11.71 $ 19.57 $ 17.94 $ 15.40
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------

Total investment return (c)............. (39.67)% 8.91% 18.16% (3.45)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 365 $ 636 $ 818 $ 369
Ratio of net investment income (loss) to
average net assets:
With expense reductions and/or
reimbursement (Note 2)............... 1.28% 1.02% 0.96% 1.36%(a)
Without expense reductions and/or
reimbursement........................ 1.14% 0.92% 0.89% 1.35%(a)
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and/or
reimbursement (Note 2)............... 1.50% 1.46% 1.53% 1.61%(a)
Without expense reductions and/or
reimbursement........................ 1.64% 1.56% 1.60% 1.62%(a)
Ratio of interest expenses to average
net assets++........................... 0.17% N/A N/A N/A
Portfolio turnover rate++............... 39% 130% 101% 125%
</TABLE>

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

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

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

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

1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Latin American Growth Fund ( the "Fund"), formerly GT Global Latin American
Growth Fund, is a separate series of AIM Investment Funds (the "Trust"),
formerly GT Investment Funds, Inc. The Trust is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended
("1940 Act"), as a non-diversified, open-end management investment company. The
Trust has thirteen series of shares in operation, each series corresponding to a
distinct portfolio of investments.

The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.

(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.

Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or 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 maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.

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

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

(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.

The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.

(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.

(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

18
<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. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the fund hold the underlying securities
and, for a put, requires the Fund to maintain in a segregated account 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 or bond 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 or bond
market and to fluctuations in currency values or interest rates. At October 31,
1998, the fund had no open futures contracts.

(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. Interest income is recorded on the
accrual basis. Where a high level of uncertainty exists as to its collection,
income is recorded net of all withholding tax with any rebate recorded when
received. The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.

(H) PORTFOLIO SECURITIES LOANED
At October 31, 1998, stocks with an aggregate value of approximately $12,106,364
were on loan to brokers. The loans were secured by cash collateral of
$12,196,698. For the year ended October 31, 1998, the Fund received $196,393 of
income from securities lending.

For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a

19
<PAGE>
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.

(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carry forward of
$31,494,478, of which $8,211,998 expires in 2003, $6,727,327 expires in 2004 and
$16,555,153 expires in 2006.

(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.

(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.

(L) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.

(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the year, restricted
securities, if any, (excluding 144A issues), are shown at the end of the Fund's
Portfolio of Investments.

(N) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with each of BankBoston and State Street Bank and
Trust Company. The arrangements with the banks allow the Fund and certain other
Funds to borrow, on a first come, first serve basis, an aggregate maximum amount
of $250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of
the Fund's total assets. On October 31, 1998, the Fund had no loans outstanding.

For the year ended October 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $7,732,934, with a weighted average interest rate of 6.28%.
Interest expense for the Fund for the year ended October 31, 1998, was $329,369.
Other interest expense charges amounted to $20,907.

2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator and INVESCO
(NY), Inc., (formerly, Chancellor LGT Asset Management, Inc.) is the Fund's
investment sub-advisor and sub-administrator. As of the close of business on May
29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT")
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, is the Fund's distributor as of the close of business
on May 29, 1998. The Trust was reorganized from a Maryland corporation into a
Delaware business trust on September 8, 1998. Finally, as of the close of
business on September 4, 1998, A I M Fund Services, Inc. ("AFS"), an affiliate
of the Manager and AIM Distributors, replaced GT Global Investor Services, Inc.
("GT Services") as the transfer agent of the Fund.

The Fund pays investment management and administration fees to the Manager at
the annualized rate of 0.975% of the first $500 million of average daily net
assets of the Fund; 0.95% of the next $500 million; 0.925% of the next $500
million and 0.90% on amounts thereafter. These fees are computed daily and paid
monthly.

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

Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended October 31, 1998, AIM Distributors and GT
Global retained $10,956 and $16,513, respectively. Purchases of Class A shares
exceeding $1,000,000 may be subject to a contingent deferred sales charge
("CDSC") upon redemption, in accordance with the Fund's current prospectus. AIM
Distributors and GT Global collected CDSCs in the amount of $0 and $74,
respectively. AIM Distributors also makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class A shares.

20
<PAGE>
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors, from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended October 31, 1998, AIM Distributors and GT
Global collected CDSCs in the amount of $205,097 and $586,137, respectively. In
addition, AIM Distributors makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.

For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Class A Plan would
have been incurred within one year of such reimbursement.

For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continued in effect.

Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.50% of the average
daily net assets of the Fund's Class A shares. Under the Class B Plan, the Fund
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares.

The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial institutions are calculated at the annual rate of
0.25% of the average daily net asset value of those Fund shares that are held in
such institution's customers' accounts that were purchased on or after a
prescribed date set forth in the Plans.

The Manager and AIM Distributors voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.

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

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

The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services paid to the Manager is a percentage, not to exceed 0.03%
annually, of a Fund's average daily net assets. The annual fee rate is derived
based on the aggregate net assets of the funds which comprise the following
investment companies: AIM Growth Series, AIM Investment Funds, AIM Investment
Portfolios, AIM Series Trust, G.T. Global Variable Investment Series and G.T.
Global Variable Investment Trust. The fee is calculated at the rate of 0.03% of
the first $5 billion of assets and 0.02% to the assets in excess of $5 billion.
An amount is allocated to and paid by each such fund based on its relative
average daily net assets.

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.

21
<PAGE>
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1998, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$80,756,729 and $185,978,861. There were no purchases or sales of U.S.
government obligations for the year ended October 31, 1998.

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
--------------------------- ---------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 31,480,158 $ 504,106,417 46,171,230 $ 937,785,689
Shares issued in connection with reinvestment of
distributions................................................ 8,770 183,909 -- --
------------ ------------- ------------ -------------
31,488,928 504,290,326 46,171,230 937,785,689
Shares repurchased............................................. (34,474,810) (565,877,892) (47,874,889) (980,118,186)
------------ ------------- ------------ -------------
Net decrease................................................... (2,985,882) $ (61,587,566) (1,703,659) $ (42,332,497)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------

<CAPTION>
CLASS B
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 14,533,097 $ 243,328,768 14,424,170 $ 299,346,687
Shares repurchased............................................. (17,417,330) (295,361,292) (15,210,392) (316,506,347)
------------ ------------- ------------ -------------
Net decrease................................................... (2,884,233) $ (52,032,524) (786,222) $ (17,159,660)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 1,261,470 $ 24,366,740 1,448,623 $ 29,968,381
Shares issued in connection with reinvestment of
distributions................................................ 261 5,468 -- --
------------ ------------- ------------ -------------
1,261,731 24,372,208 1,448,623 29,968,381
Shares repurchased............................................. (1,263,040) (24,385,281) (1,461,777) (30,469,185)
------------ ------------- ------------ -------------
Net decrease................................................... (1,309) $ (13,073) (13,154) $ (500,804)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>

5. 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.

22
<PAGE>
6. PROXY RESULTS (UNAUDITED)
The Special Meeting of Shareholders of 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................... 4,693,066 238,916 1,771,193*
(2)(b) Approval of sub-advisory and sub-administration contract........................ 4,637,262 272,743 1,793,170*
(3) Approval of replacement Rule 12b-1 plans of distribution
CLASS A SHARES.................................................................. 3,040,544 184,812 359,544
CLASS B SHARES.................................................................. 2,729,104 122,910 232,232
(4)(a) Modification of Fundamental Restriction on Concentration........................ 4,613,784 274,772 1,814,619*
(4)(b) Modification of Fundamental Restriction on Issuing Senior Securities and
Borrowing Money................................................................ 4,612,620 275,936 1,814,619*
(4)(c) Modification of Fundamental Restriction on Making Loans......................... 4,613,268 275,288 1,814,619*
(4)(d) Modification of Fundamental Restriction on Underwriting Securities.............. 4,613,784 274,772 1,814,619*
(4)(e) Modification of Fundamental Restriction on Real Estate Investments 4,613,315 275,241 1,814,619*
(4)(f) Modification of Fundamental Restriction on Investing in Commodities............. 4,608,943 279,613 1,814,619*
(4)(g) Elimination of Fundamental Restriction on Margin Transactions................... 4,610,509 278,047 1,814,619*
(4)(h) Elimination of Fundamental Restriction on Pledging Assets....................... 4,612,396 276,160 1,814,619*
(4)(i) Elimination of Fundamental Restriction on Investments in Oil, Gas and Mineral
Leases and Programs............................................................ 4,612,606 275,950 1,814,619*
(4)(j) Approval of New Fundamental Investment Policy Regarding Investment of All of
Each Fund's Assets in an Open-End Fund......................................... 4,613,154 275,402 1,814,619*
(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

FEDERAL TAX INFORMATION (UNAUDITED):

For the fiscal year ended October 31, 1998, the amount of income received by the
Fund from sources within foreign countries and possessions of the United States
was $.6907 per share (representing a total of $6,408,643). The amount of taxes
paid by the Fund to such countries for the fiscal year ended October 31, 1998
was $.0619 per share (representing a total of $574,241). The following table
provides a breakdown by country of ordinary income dividends and foreign taxes
paid by the Fund during the fiscal year ended October 31, 1998.

<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- -------------------------------------------------------------------------------- -------------- ------------------
<S> <C> <C>
Argentina....................................................................... 6.47 0.00
Brazil.......................................................................... 55.27 41.51
Chile........................................................................... 15.62 58.42
Mexico.......................................................................... 17.23 0.00
Various......................................................................... 3.38 0.07
------- -------
97.97 100.00
United States................................................................... 2.03 0.00
------- -------
100.00% 100.00%
------- -------
------- -------
</TABLE>

Information needed by shareholders to prepare their 1998 federal income tax
return will be provided with the annual 1099 information in January 1999.

23
<PAGE>

BOARD OF TRUSTEES

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

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

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

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

Ruth H. Quigley
Private Investor

OFFICERS

Robert H. Graham
Chairman and President

Helge K. Lee
Vice President & Secretary

Dana R. Sutton
Vice President & Assistant Treasurer

Kenneth W. Chancey
Vice President &
Principal Accounting Officer

John J. Arthur
Vice President

Melville B. Cox
Vice President

Gary T. Crum
Vice President

Carol F. Relihan
Vice President

David P. Hess
Assistant Secretary

Nancy L. Martin
Assistant Secretary

Ofelia M. Mayo
Assistant Secretary

Kathleen J. Pflueger
Assistant Secretary

Samuel D. Sirko
Assistant Secretary

Pamela Ruddock
Assistant Treasurer

Paul Wozniak
Assistant Treasurer

OFFICE OF THE FUND

11 Greenway Plaza
Suite 100
Houston, TX 77046

INVESTMENT MANAGER

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

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

24
<PAGE>

HOW AIM MAKES INVESTING
EASY FOR YOU

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

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

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

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

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

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

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

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

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

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

<PAGE>

THE AIM FAMILY OF FUNDS-REGISTERED TRADEMARK-

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

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

GROWTH FUNDS

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

GROWTH & INCOME FUNDS

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

INCOME FUNDS

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

TAX-FREE INCOME FUNDS

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

MONEY MARKET FUNDS

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

INTERNATIONAL GROWTH FUNDS

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

GLOBAL GROWTH FUNDS

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

GLOBAL GROWTH & INCOME FUNDS

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

GLOBAL INCOME FUNDS

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

THEME FUNDS

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

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

LAG-AR-1