AIG ALL AGES FUNDS INC, 497, 1996-04-12

AIG ALL AGES FUNDS INC
497, 1996-04-12

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<PAGE>

AIG RETIREE FUND -- 2003

A SERIES OF
AIG ALL AGES FUNDS, INC.

505 CARR ROAD, WILMINGTON, DELAWARE 19809 . (800) 862-3984

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

This prospectus describes the AIG Retiree Fund -- 2003 (the "Fund"). The
Fund is a diversified series of AIG All Ages Funds, Inc., an open-end
management investment company (the "Company"). The Fund has two investment
objectives. The first objective is to provide a guaranteed return, on or after
November 15, 2003 (the "Maturity Date"), of the full amount originally
invested (including any front-end sales charges paid) by each shareholder who
has reinvested all dividends and distributions. The Fund pursues its first
objective by investing a portion of its assets in zero coupon securities that
are the direct obligations of the United States Treasury ("Treasury
Securities"), combined with further assurance from a guarantee (the "Manager's
Guarantee") by AIG Capital Management Corp., the Fund's investment adviser
(the "Manager"). The Manager's obligations under its guarantee will be backed
by its parent, American International Group, Inc. ("AIG").

The Fund's second objective is to achieve total return on capital through
both capital growth (realized and unrealized) and income. The Fund seeks to
achieve this objective by investing the balance of its assets in the First
Global Equity Portfolio (the "Equity Portfolio"), an open-end management
investment company that invests in a globally diversified portfolio of equity
securities. There can be no assurance that this second objective of total
return on capital will be achieved.
(Continued on Page 2)
----------------

SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

This prospectus sets forth concisely the information a prospective investor
should know about the Fund and the Equity Portfolio before investing. Please
read it carefully before you invest and keep it for future reference.
Additional information about the Fund, including a Statement of Additional
Information, has been filed with the Securities and Exchange Commission. The
Statement of Additional Information is available upon request and without
charge by calling or writing the Fund at the telephone number or the address
set forth above. The Statement of Additional Information is dated the same
date as this Prospectus and is incorporated herein by reference in its
entirety.

The date of this prospectus is February 15, 1996,
as supplemented on April 12, 1996.
<PAGE>

Shares of the Fund will be offered to investors only from April 12, 1996
through April 30, 1997 (as such period may be extended or shortened by the
Fund, the "Offering Period"). During this limited period the shares will be
offered at their net asset value plus the applicable sales charge, if any. The
Fund does not expect that its shares will be offered after the end of the
Offering Period.

The Fund is intended for shareholders who are not seeking current income,
but rather are looking for an investment vehicle that offers total return
potential, plus the return of principal. Return of principal is accomplished
through investment in zero coupon Treasury Securities coupled with the
additional assurance of the Manager's Guarantee. The Manager's Guarantee
operates such that an investor who has reinvested all dividends and
distributions (an "Eligible Investor") and who has not redeemed any shares
prior to the Maturity Date will be able to demand the return of the full
amount of his or her original investment in the Fund (including any front-end
sales charges paid) on or after the Maturity Date. A shareholder who has
reinvested all dividends and distributions and has redeemed some shares prior
to the Maturity Date is still an Eligible Investor with respect to the shares
not redeemed. Investors who do not reinvest all dividends and distributions
will not be Eligible Investors and will not be certain to receive the full
benefits of the Manager's Guarantee. However, the Manager's Guarantee operates
such that non-Eligible Investors may benefit to some extent from any payment
made by the Manager to the Fund pursuant to the Manager's Guarantee. See
"Investment Objectives and Management Policies -- The Manager's Guarantee" and
"The Manager's Guarantee" in the Statement of Additional Information.

The Fund seeks to achieve the investment objective of total return on
capital by investing a portion of its investable assets in the Equity
Portfolio, a diversified open-end management investment company with the same
investment objective. Both the Fund and the Equity Portfolio are managed by
the Manager and investment advice is provided by affiliated companies. By
investing a portion of its assets in the Equity Portfolio, the Fund differs
from those mutual funds that directly acquire and manage their own portfolio
of securities. The Fund and the Equity Portfolio constitute a two-tier master-
feeder structure. The two-tier structure permits the Equity Portfolio to offer
its shares to other investors and thus is intended to reduce certain expenses
that would otherwise be payable entirely by the Fund. The Fund will directly
acquire and manage its portfolio of zero coupon Treasury Securities. See
"Special Information Concerning the Two-Tier Structure."

The Fund is an open-end fund, which means that shareholders may elect to
receive dividends and distributions in cash and may redeem some or all of
their shares at any time. However, the Fund is intended for long-term
investors and is not appropriate for investors seeking current income or
investors who do not intend to reinvest dividends and distributions.
Shareholders are urged to consult their tax advisers concerning the effect of
federal, state, and local income taxes in their individual circumstances. See
"Taxes." In addition, the Fund may not be appropriate for investors who expect
to redeem all or a portion of their shares prior to November 15, 2003 because
there can be no assurance of the amount that will be received upon early
redemption. The net asset value of a share of the Fund can be expected to
fluctuate substantially owing to changes in prevailing interest rates that
will affect the current value of the Fund's holdings of zero coupon Treasury
Securities, as well as changes in the value of the Fund's other holdings.
Although the two-tier structure permits the Equity Portfolio to offer its
shares to other investors and thus is intended to reduce certain expenses that
would otherwise be payable entirely by the Fund, the Fund itself does not
expect to offer its shares after the end of the Offering Period and will not
benefit from an inflow of new capital investments. In addition, the Fund may
experience redemptions

2
<PAGE>

and capital losses prior to November 15, 2003 and will pay dividends and
distributions in cash to shareholders who so elect. Losses, redemptions and
dividends and distributions paid in cash will reduce the Fund's assets and its
ability to meet the total return objective. See "Investment Objectives and
Management Policies -- Proposed Operations of the Fund" and "Risk Factors --
Zero Coupon Securities."

The Fund is sold through financial intermediaries by individual account
representatives who recommend and sell mutual funds, stocks, bonds and other
securities. Account representatives provide a wide array of services to their
clients. An important service is assisting clients in their financial planning
and in choosing investment products that fit their risk and investment
profiles. There can be no assurance that an account representative's
recommendations will be suitable or that, if purchased, they will result in
the anticipated financial benefits. Their responsibility to their clients is
to offer advice based on their knowledge of the products they are recommending
and understanding their clients' needs, for which they receive a fee or
commission paid by their clients. If you do not fully understand the shares
that are offered by this Prospectus, you may wish to consult your account
representative.

3
<PAGE>

THE FUND'S AND THE EQUITY PORTFOLIO'S EXPENSES

The following table lists the costs and expenses that an investor will pay
as a shareholder of the Fund, based upon the sales charge that may be incurred
at the time of purchase and upon the projected annual operating expenses of
the Fund and the Equity Portfolio, as a percentage of average net assets of
the Fund, for the current fiscal year. THE DIRECTORS OF THE FUND BELIEVE THAT
THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE EQUITY PORTFOLIO WILL BE
LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES THAT THE FUND WOULD INCUR IF
THE ASSETS OF THE FUND THAT ARE INVESTED IN THE EQUITY PORTFOLIO WERE INSTEAD
INVESTED DIRECTLY BY THE FUND IN THE TYPE OF SECURITIES HELD BY THE EQUITY
PORTFOLIO.

SHAREHOLDER TRANSACTION EXPENSES(1)
<TABLE>
<S> <C>
Maximum sales load imposed on purchases (as a percentage of offering
price)............................................................. 4.75%
Maximum sales load imposed on reinvested dividends
(as a percentage of offering price)................................ None
Deferred sales load
(as a percentage of original purchase price or redemption proceeds,
as applicable):
Shares acquired under Large Purchase Privilege(2)................. 1.00%
All other shares.................................................. None
Redemption fees (as a percentage of amount redeemed)................ None
Exchange fee........................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management fees (assuming 65% of the Fund's assets are invested di-
rectly in Treasury Securities and 35% in the
Equity Portfolio):.................................................
Treasury Securities 0.20% X 65% = ................................ 0.13%
Equity Portfolio 1.20% X 35% = ................................. 0.42%
----
Estimated total management fees................................... 0.55%(3)
12b-1 fees (DURING OFFERING PERIOD ONLY)............................ 0.50%
Other expenses(4)................................................... 1.00%
----
Total Fund Operating Expenses:
Before Manager's assumption of the Fund's expenses(5)............. 2.05%
----
After Manager's assumption of the Fund's expenses during the Of-
fering Period....................................................
1.95%
====
</TABLE>
- --------
(1) Investment dealers and other firms may independently charge additional
fees for shareholder transactions or for advisory services; please see
their materials for details. Reduced sales charges apply to purchases of
$100,000 or more. See "Purchase of Shares."
(2) The redemption within one year of shares purchased at net asset value
under the Large Purchase Privilege (available for purchases in amounts of
$1 million or more) may be subject to a 1% contingent deferred sales
charge. See "Purchase of Shares."
(3) The management fee would be 0.55% if 65% of the Fund's assets were
invested directly in zero coupon Treasury Securities and 35% in the Equity
Portfolio. However, this allocation will fluctuate with changes in market
conditions. See "Investment Objectives and Management Policies -- Proposed
Operations of the Fund." The Manager estimates that, under normal market
conditions, the portion of the Fund's assets invested in zero coupon
Treasury Securities will not be less than 50% or more than 80% during the
current fiscal year. Thus the total management fee is estimated to vary
between 0.40% and 0.70% during this period. However, in extreme market
conditions, the percentage of zero coupon Treasury Securities could be
less than 50% or more than 80%, with the result that the total management
fee would fall outside the indicated range.
(4) Comprises expenses payable directly by the Fund plus the Fund's pro rata
share of expenses incurred by the Equity Portfolio.
(5) The Manager's assumption of the Fund's expenses is subject to
reimbursement by the Fund in subsequent years under certain circumstances,
as described below.

4
<PAGE>

"Other expenses" in the above table include, among other things, fees for
transfer agent services, custodial fees, directors' and trustees' fees, legal
fees and accounting fees, printing costs, registration fees, costs of
preparing and distributing reports to shareholders and the fee for shareholder
servicing described under "Shareholder Servicing Agreement," and is based on
estimated amounts for the current fiscal year, assuming that the average
assets of the Fund during such year are $83,300,000. The Manager has agreed to
limit the Fund's expenses to the extent Total Fund Operating Expenses during
the Offering Period exceed 1.95% of average daily net assets, subject to
reimbursement by the Fund in subsequent years under certain circumstances. See
"Investment Advisory Services -- The Manager." RULE 12B-1 FEES WILL BE PAYABLE
ONLY DURING THE OFFERING PERIOD.

The following example is intended to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment as-
suming
(1) 5% annual return and (2) redemption at the end of each
time period:.................................................. $66 $106
</TABLE>

The example is intended to assist you in comparing expenses of the Fund with
those of other funds over varying investment periods. All mutual funds are
required to present this information based on an assumed return of 5%. This
makes the comparison of various funds simpler. However, the Fund's actual
return will vary and may be greater or less than 5%. Also, if you redeem your
shares before November 15, 2003 or if you do not reinvest all dividends and
distributions, your proceeds may be less than the amount you originally
invested. This example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

IN GENERAL

The Fund has two investment objectives. The first is to provide a guaranteed
return at any time on or after the Maturity Date of the full amount originally
invested (including any front-end sales charges paid) by each shareholder who
has reinvested all dividends and distributions, which the Fund pursues through
investment of a portion of its assets in zero coupon Treasury Securities, with
additional assurance provided by the Manager's Guarantee, backed by its parent
AIG. The Fund's second objective is to achieve total return on capital through
both capital gains (realized and unrealized) and income. The Fund seeks to
achieve this objective by investing the balance of its assets in the Equity
Portfolio, an open-end management investment company that invests in a
globally diversified portfolio of equity securities. See "-- Proposed
Operations of the Fund." The investment objectives of the Fund are fundamental
and cannot be changed without the approval of the holders of a majority of the
outstanding voting securities of the Fund, as defined under the Investment
Company Act of 1940, as amended (the "1940 Act").

5
<PAGE>

The Fund's investment strategy with respect to zero coupon Treasury
Securities, together with the Manager's Guarantee, ensures that shareholders
who reinvest all dividends and distributions will receive the full amount of
their original investment when they redeem their shares on or after the
Maturity Date. In addition, the Manager believes that the Equity Portfolio's
investment strategies should be sufficient to accomplish the Fund's investment
objective of total return, but there can be no assurance that this objective
will be achieved. The Fund is structured as an open-end investment company and
shareholders may redeem their shares at any time and may elect to receive
dividends and distributions in cash. However, pursuant to the terms of the
Manager's Guarantee, shareholders who wish to be certain of receiving the full
amount of their original investment must reinvest all dividends and
distributions in additional shares and hold all their shares until the
Maturity Date. There can be no assurance that shareholders who elect to
receive distributions in cash will receive the full amount of their original
investment on or after the Maturity Date. In addition, while the amount sought
to be returned on or after the Maturity Date to shareholders may equal or
exceed the amount originally invested, the present value of that amount may be
substantially less. The Manager's Guarantee is discussed in further detail in
"-- The Manager's Guarantee" and in "The Manager's Guarantee" in the Statement
of Additional Information.

Shareholders also should be aware that a portion of the amount returned on
or after the Maturity Date represents accretion of interest on the Fund's zero
coupon Treasury Securities. The annual accretion will be taxable to
shareholders as ordinary income each year over the term of the Fund, even for
shareholders who reinvest all dividends and distributions. Shareholders are
urged to consult their tax advisers concerning the effect of federal, state,
and local income taxes in their individual circumstances. See "Taxes."

When the zero coupon Treasury Securities in the Fund's portfolio mature on
or about the Maturity Date, the Fund will reinvest the principal amount in
short-term, highly liquid obligations of the U.S. Government. The value of
these securities is not expected to fluctuate significantly, so shareholders
who reinvest all dividends and distributions and who have held all of their
shares until the Maturity Date, and who redeem their shares at any time on or
after the Maturity Date should expect to receive the amount of their initial
investment (from the liquidation of the Fund's zero coupon Treasury
Securities) plus the value (if any) of their proportionate share of the Fund's
interest in the Equity Portfolio. After the Maturity Date, the Board of
Directors may, in its sole discretion and without shareholder approval, cause
the Fund to redeem all of its outstanding shares at their net asset value and
distribute the proceeds to shareholders if the Board determines that
continuing the existence of the Fund is not in the best interests of the Fund.
Pursuant to the terms of the Manager's Guarantee, shareholders who have
reinvested all dividends and distributions will be certain to receive at least
the full amount of their original investment in the event of such redemption.

ZERO COUPON SECURITIES

A zero coupon security is a debt obligation that entitles the holder to a
specified sum at maturity but does not provide for any periodic payments of
interest prior thereto. Such a security is therefore issued and traded at a
discount from its amount due at maturity (the "face value"). Zero coupon
securities may be created by separating the interest and principal components
of securities issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities or issued by private corporate issuers. The
Fund, however, will invest in zero coupon securities only if they are direct
obligations of the U.S. Treasury. The discount from face value at which zero
coupon securities are purchased varies depending on the time remaining to
maturity, prevailing interest rates and the liquidity of the security. Because
the discount from face value is known at the time of investment, investors
holding zero coupon securities until maturity know the total amount of their
investment return at the time of investment.

6
<PAGE>

In contrast to zero coupon securities, a portion of the total realized
return from conventional interest-paying obligations comes from the
reinvestment of periodic interest. Because the rate to be earned on these
reinvestments may be higher or lower than the rate quoted on the interest-
paying obligations at the time of the original purchase, the investor's return
on reinvestments is uncertain even if the securities are held to maturity.
This uncertainty is commonly referred to as reinvestment risk. With zero
coupon securities, however, there are no cash distributions to reinvest, so
investors bear no reinvestment risk if they hold the zero coupon securities to
maturity; holders of zero coupon securities, however, forego the possibility
of reinvesting at a higher yield than the rate paid on the originally issued
security. For a discussion of risks associated with the sale of zero coupon
securities prior to maturity, see "Risk Factors -- Zero Coupon Securities."

FIRST GLOBAL EQUITY PORTFOLIO

The Fund seeks to achieve its investment objective of total return on
capital by investing the portion of its assets not invested in zero coupon
Treasury Securities in the Equity Portfolio, which is also managed by the
Manager. The investment objective of the Equity Portfolio is to achieve total
return on capital through both capital growth (realized and unrealized) and
income. This objective is identical to the objective of the Fund with respect
to those assets invested in the Equity Portfolio. The Equity Portfolio seeks
to achieve its objective by making global investments in securities of issuers
from around the world. This investment objective is a fundamental policy and
cannot be changed without approval of the owners of beneficial interests in
the Equity Portfolio (which include the Fund and other investors in the Equity
Portfolio). There can be no assurance that the Equity Portfolio will achieve
its investment objective of total return on capital.

Under normal conditions at least 80% of the Equity Portfolio's assets will
be invested in securities of issuers organized in one or more of the following
countries: the United States, the United Kingdom, Canada, Australia, Japan,
France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Hong
Kong, Singapore and Malaysia. The Manager has selected the securities markets
of these 15 countries because they are among the largest in the world. The
Equity Portfolio may, however, invest in securities of issuers incorporated or
organized in any country. Under normal conditions, the assets of the Equity
Portfolio will be invested in securities of issuers organized in at least
three countries; no more than 30% of the Equity Portfolio's assets may be
invested in securities of issuers organized in any one country, except that
for temporary defensive purposes, substantially all of such assets may be
invested in securities of issuers organized in the United States. Securities
may be included in the Equity Portfolio without regard to minimum
capitalization of their issuers. For a discussion of the risks associated with
investment in securities of foreign issuers, see "Risk Factors -- Foreign
Investment."

In allocating investments among geographic regions and individual countries,
the Manager will normally consider such factors as the relative economic
growth potential of the various economies and securities markets; expected
levels of inflation; financial, social and political conditions influencing
the investment opportunities; and the outlook for currency relationships.

The Equity Portfolio may invest in all types of securities (subject to the
limitations discussed below and in the Statement of Additional Information),
many of which will be denominated in currencies other than the U.S. dollar.
The Equity Portfolio will normally invest its assets in equity securities,
including common stock, securities convertible into common stock, depositary
receipts for these securities, and warrants. (A brief description of these
securities is provided in the next paragraph.) The Equity Portfolio will not
ordinarily invest

7
<PAGE>

in nonconvertible debt securities. The Equity Portfolio, may, however, invest
up to 25% of its assets in preferred stock. Dividends may also be considered
in selecting securities when the Manager believes that such income will
favorably influence the market value of a security in light of the Equity
Portfolio's objective of total return. Equity securities in which the Equity
Portfolio will invest may be listed on a U.S. or foreign stock exchange or
traded in U.S. or foreign over-the-counter markets, although the Equity
Portfolio may also invest in securities for which there is no active trading
market (subject to the limitations discussed below and in the Statement of
Additional Information).

Common Stock is capital stock of a corporation which denotes ownership and
provides the means to control the corporation, but which is inferior to other
classes of securities with respect to payment of dividends and distribution of
assets upon dissolution of the corporation. Preferred Stock is capital stock
usually entitled by a corporation's charter to priority over common stock in
payment of dividends and in the distribution of assets upon dissolution of the
corporation. A Convertible Security is any security capable of being
converted, at the election of the holder, into another security of the same
issuer (for example, a bond that is convertible into a specified number of
shares of common stock). A Warrant is a security issued by a corporation that
gives the warrant holder the right to purchase capital stock or another
security of the corporation at a stated price.

The Equity Portfolio may invest in securities represented by Depositary
Receipts, including European Depositary Receipts ("EDRs"), American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs"). ADRs are receipts
generally issued by a domestic bank or trust company that represent the
deposit of a security of a foreign issuer. EDRs are typically issued by
foreign banks or trust companies and traded in Europe. GDRs may be issued by a
domestic or foreign bank or trust company and may be traded in several
markets. For purposes of the Equity Portfolio's investment policies, an
investment in Depositary Receipts will be deemed to be an investment in the
underlying security.

The Fund or the Equity Portfolio may make certain negotiated investments
with AIG and/or its affiliates, subject to obtaining any necessary regulatory
approvals.

As a matter of fundamental policy, the Equity Portfolio will not engage in
transactions intended to hedge foreign exchange risk. See "Risk Factors --
Foreign Currencies." The Equity Portfolio is also subject to an operating
policy which prohibits it from borrowing any amount more than 5% of its total
assets. This effectively limits the ability of the Equity Portfolio to
"leverage" its assets by borrowing money and investing in additional
securities. Additional information about the Equity Portfolio has been
included in the Equity Portfolio's registration statement filed with the
Securities and Exchange Commission, a copy of which is available upon request
and without charge by calling or writing the Fund at the telephone number and
address set forth on the cover page of this Prospectus.

PROPOSED OPERATIONS OF THE FUND

As noted above, the Fund will invest directly in zero coupon Treasury
Securities and, through its investment in the Equity Portfolio, in a globally
diversified portfolio of equity securities in pursuing its objectives. Shares
of the Fund will be offered to investors only from April 12, 1996 through
April 30, 1997 (which period may be extended or shortened by the Fund at its
discretion). During this Offering Period the shares will be offered at their
net asset value plus the applicable sales charge, if any. The Fund does not
expect that its shares will be

8
<PAGE>

offered after the end of the Offering Period. See "Purchase of Shares." The
zero coupon Treasury Securities that the Fund acquires with the proceeds of
the sale of its shares during the Offering Period will be selected so as to
mature at a specific face value on or about the Maturity Date. The Manager
will continually review and adjust where necessary the proportion of the
Fund's assets that are invested in zero coupon Treasury Securities so that the
value of the zero coupon Treasury Securities on the Maturity Date (i.e., the
aggregate face value of the zero coupon Treasury Securities held by the Fund)
will be at least sufficient to enable investors who reinvest all dividends and
hold their entire investment in the Fund until the Maturity Date to receive on
or after the Maturity Date the full amount of their original investment,
including any front-end sales charges paid (the "Repayment Objective"). After
the Offering Period, the Fund anticipates adjustments in its portfolio of zero
coupon Treasury Securities solely to meet requests for redemption and, if
required, to make payments of dividends and distributions. Thus, the minimum
face value of the zero coupon Treasury Securities per Fund share necessary to
provide for the Fund's Repayment Objective will be continually determined and
maintained.

The portion of the Fund's assets that will be allocated to the purchase of
zero coupon Treasury Securities will fluctuate during the Offering Period.
This is because the market value of the zero coupon Treasury Securities and
the shares of the Equity Portfolio, and therefore the offering price of the
Fund's shares, will fluctuate with changes in interest rates and other market
value fluctuations. If the offering price of the Fund's shares increases
during the Offering Period, the minimum par value of zero coupon Treasury
Securities per Fund share necessary to provide for the Fund's Repayment
Objective will increase. The Fund may hold zero coupon Treasury Securities in
an amount in excess of the amount necessary to provide for the Fund's
Repayment Objective at the discretion of the Manager. During the first year of
operations, under normal market conditions, the proportion of the Fund's
portfolio invested in zero coupon Treasury Securities may be expected to range
from 50% to 80%; but a greater or lesser percentage is possible.

During the Offering Period, if the percentage of zero coupon Treasury
Securities in the Fund's portfolio increases, the portion of the Fund's assets
invested in the Equity Portfolio will necessarily decrease. This will result
in less potential for total return from the Equity Portfolio. In order to help
ensure shareholders at least a minimum level of initial investment in the
global equity markets, the Fund will cease offering its shares if their
continued offering would cause more than 80% of its assets to be allocated to
zero coupon Treasury Securities. After the Offering Period is over, it is not
anticipated that any additional assets will be allocated to the purchase of
zero coupon Treasury Securities. However, since the market values of the zero
coupon Treasury Securities and the net asset value of interests in the Equity
Portfolio are often affected in different ways by changes in interest rates
and other market conditions and will often fluctuate independently, the
percentage of the Fund's net asset value represented by zero coupon Treasury
Securities will continue to fluctuate after the end of the Offering Period.
Zero coupon Treasury Securities may be liquidated before the Maturity Date to
meet redemptions and pay cash dividends, provided that the minimum amount of
zero coupon Treasury Securities necessary to provide for the Fund's Repayment
Objective is maintained.

9
<PAGE>

After the Maturity Date, the Board of Directors of the Company (the "Board")
may, at its sole discretion and without shareholder approval, cause the Fund
to redeem all of its outstanding shares at their net asset value and
distribute the proceeds to shareholders if the Board determines that
continuing the existence of the Fund is not in the best interests of the Fund.
In such event, the Fund's Treasury Securities will be liquidated and the
Fund's interest in the Equity Portfolio shall be sold or otherwise reduced to
cash, the liabilities of the Fund will be discharged or otherwise provided
for, the Fund's outstanding shares will be mandatorily redeemed at the net
asset value per share determined on the date of redemption and, within three
business days thereafter, the Fund's net assets will be distributed to
shareholders and the Fund shall be thereafter terminated. Termination of the
Fund may require disposition of the Fund's interest in the Equity Portfolio at
a time when it is otherwise disadvantageous to do so and may involve selling
such interest at a substantial loss. The estimated expenses of liquidation and
termination of the Fund are not expected to affect materially the net asset
value of the Fund. In the event of termination of the Fund as noted above, the
redemption of shares effected in connection with such termination would for
income tax purposes constitute a sale upon which gain or loss will be realized
depending upon whether the net asset value of the shares being redeemed is
more or less than the shareholder's adjusted cost basis.

Subject to shareholder approval, other alternatives may be pursued by the
Fund after the Maturity Date. For instance, the Board may consider the
possibility of a reorganization between the Fund and another registered open-
end management investment company or any other series of the Company. In the
event of the liquidation or reorganization of the Fund after the Maturity
Date, all Eligible Investors will be deemed to have tendered their shares for
redemption, and, if the Manager's Guarantee is triggered by such redemption,
the Manager will make any required payment. Any such payment will take into
account any known liabilities in connection with the liquidation or
reorganization, and, therefore, Eligible Investors will in such event be
assured to receive from the Fund at least their original investment (including
any front-end sales charges paid). The Board has not made any determinations
about the continued operation of the Fund after the Maturity Date.

The Fund is structured as an open-end investment company and shareholders
may redeem their shares at any time and may elect to receive dividends and
distributions in cash. However, pursuant to the terms of the Manager's
Guarantee, shareholders who wish to be certain of receiving the full amount of
their original investment must reinvest all dividends and distributions in
additional shares and hold all their shares until the Maturity Date.
Shareholders who elect to receive dividends in cash are in effect withdrawing
a portion of the accreted income on the zero coupon Treasury Securities that
are held to protect their original principal investment at the Maturity Date.
These shareholders will receive the same net asset value per share for any
Fund shares redeemed at the Maturity Date as shareholders who reinvest
dividends, but they will have fewer shares to redeem than shareholders
similarly situated who had reinvested all dividends. Thus there can be no
assurance that such shareholders will receive the full amount of their
original investment on or after the Maturity Date. Investors are encouraged to
reinvest dividends and to evaluate their need to receive some or all of their
investments prior to the Maturity Date before making an investment in the
Fund. See "-- The Manager's Guarantee" below.

THE MANAGER'S GUARANTEE

In order to ensure the return of the full amount of an Eligible Investor's
original investment (including any front-end sales charges paid), the Company
and the Manager have entered into a Guarantee Agreement with

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<PAGE>

respect to the Fund, dated February 15, 1996. The Manager's Guarantee operates
such that an Eligible Investor will be able to demand the return of the full
amount of his or her original investment in the Fund (including any front-end
sales charges paid) on or after the Maturity Date. An Eligible Investor who
has redeemed some shares prior to the Maturity Date is still an Eligible
Investor with respect to the shares not redeemed.

In determining the amount to be paid by the Manager to the Fund in the event
that the Manager's Guarantee is triggered, a "Reinvestment Ratio" is employed.
The Reinvestment Ratio is the number of shares that would be owned on a
particular date by a person who acquired one share during the Offering Period
and continuously reinvested all dividends and distributions. Due to
reinvestment of dividends and distributions, that person would own more than
one share at the Maturity Date. Dividends and distributions paid by the Fund
during the Offering Period will be taken into account in the calculation of
the Reinvestment Ratio such that an Eligible Investor who purchases shares
after the date of such dividend or distribution will still be ensured of the
full benefits of the Manager's Guarantee. Shares acquired therefrom will not,
however, be considered shares acquired during the Offering Period for purposes
of determining the amount of an Eligible Investor's original investment. The
Manager's Guarantee is triggered when an Eligible Investor tenders shares for
redemption and the then current net asset value per share multiplied times the
Reinvestment Ratio is less than the highest net asset value per share of the
Fund attained during the Offering Period plus the maximum front-end sales
charge of 4.75%. In such event, the Manager will promptly pay to the Fund an
amount sufficient to ensure that the total value of the shares then held by an
Eligible Investor who has not redeemed any of his or her shares (including
shares received through the reinvestment of dividends and distributions) is
equal to the amount of such investor's original investment in the Fund during
the Offering Period plus the maximum front-end sales charge and assuming that
such investor bought his or her shares at the highest net asset value attained
during the Offering Period.

Any payment made by the Manager pursuant to the Manager's Guarantee will be
to the Fund and will cause the net asset value of all outstanding shares to
increase by the same amount. Thus, a shareholder who has not reinvested all
dividends and distributions may benefit to some extent from any payment under
the Manager's Guarantee. However, a shareholder who has not reinvested will
own fewer shares on or after the Maturity Date than a shareholder who invested
the same amount during the Offering Period but has reinvested continuously.
Moreover, such shareholder will not be entitled to make a demand for payment
under the Manager's Guarantee.

The benefits of the Manager's Guarantee will not be available with respect
to shares redeemed prior to the Maturity Date, nor will they be available
after the Maturity Date if no shareholder of the Fund has reinvested all of
his or her dividends and distributions or if no Eligible Investor has yet
tendered his or her shares for redemption. The availability of the Manager's
Guarantee will not be affected by the termination or amendment of the Fund's
Management Agreement with the Manager.

The Manager's obligations under the Manager's Guarantee are backed by its
parent, AIG, pursuant to a Support Agreement, dated February 15, 1996. AIG is
a holding company which through its subsidiaries is primarily engaged in a
broad range of insurance and insurance-related activities in the United States
and abroad. Other significant activities of AIG are financial services and
agency and service fee operations. See "American International Group, Inc."
The Manager is an indirect wholly owned subsidiary of AIG. Under the Support
Agreement, AIG has agreed that, if the Manager is unable to make full payment
of any amount required under the Manager's Guarantee, AIG will make a capital
contribution or a loan to the Manager to the extent of the

11
<PAGE>

Manager's inability to pay. The Support Agreement provides that the full
amount of such capital contribution or loan will be paid directly to the Fund.

OTHER INVESTMENT POLICIES

Except where specifically noted below, the following investment policies of
the Fund and the Equity Portfolio are not fundamental and the Board, or the
Trustees of the Equity Portfolio, as relevant, may change such policies
without the vote of a majority of outstanding voting securities of the Fund or
the Equity Portfolio, as relevant. A more detailed description of the Fund's
and the Equity Portfolio's investment policies, including a list of those
restrictions of the Fund's and the Equity Portfolio's investment activities
which cannot be changed without such a vote, appears in the Statement of
Additional Information. Under the 1940 Act, a "vote of a majority of the
outstanding securities" of either the Fund or the Equity Portfolio means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares
of the Fund or beneficial interests in the Equity Portfolio, as relevant, or
(2) 67% or more of the shares of the Fund or beneficial interests in the
Equity Portfolio present at a meeting of holders, if more than 50% of the
outstanding shares of the Fund or the beneficial interests in the Equity
Portfolio are represented at the meeting in person or by proxy.

Borrowing. The Equity Portfolio and the Fund may from time to time borrow
money from banks for extraordinary or emergency purposes, but may not invest
borrowed funds in additional securities. Such borrowing will not exceed 5% of
the total assets of the Equity Portfolio or the Fund, as applicable, and will
be made at prevailing interest rates. This policy is fundamental and may not
be changed without the vote of a majority of the outstanding voting securities
of the Fund or the Equity Portfolio, as relevant.

Repurchase Agreements. The Equity Portfolio may enter into repurchase
agreements with commercial banks or broker/dealers under which the Equity
Portfolio acquires a U.S. Government security subject to resale at a mutually
agreed upon price and time. The resale price reflects an agreed upon interest
rate effective for the period the Equity Portfolio holds the instrument that
is unrelated to the interest rate on the instrument.

The Equity Portfolio's repurchase agreements will at all times be fully
collateralized by U.S. Government securities, and the Equity Portfolio will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of its custodian. Repurchase agreements
could involve certain risks in the event of bankruptcy or other default of the
seller, including possible delays and expenses in liquidating the underlying
security, decline in the value of the underlying security and loss of
interest.

The Fund may not enter into repurchase agreements in respect of zero coupon
Treasury Securities allocated to the Repayment Objective. In all other
respects, the Fund is subject to the same restrictions on repurchase
agreements as the Equity Portfolio. The Fund's and the Equity Portfolio's
policies concerning repurchase agreements are fundamental and may not be
changed without the vote of a majority of outstanding voting securities of the
Fund or the Equity Portfolio, as relevant.

Illiquid Securities. The Equity Portfolio may invest up to 15% of its net
assets in illiquid securities, including restricted securities (i.e.,
securities not readily marketable without registration under the Securities
Act of 1933 (the "1933 Act")) and other securities that are not readily
marketable, such as repurchase agreements

12
<PAGE>

of more than one week's duration. The Equity Portfolio may purchase restricted
securities that may be offered and sold only to "qualified institutional
buyers" under Rule 144A of the 1933 Act, and the Equity Portfolio's Trustees
may determine, when appropriate, that specific Rule 144A securities are liquid
and not subject to the 15% limitation on illiquid securities. Should the
Equity Portfolio's Trustees make this determination, it will carefully monitor
the security (focusing on such factors, among others, as trading activity and
availability of information) to determine that the Rule 144A security
continues to be liquid. It is not possible to predict with assurance exactly
how the market for Rule 144A securities will further evolve. This investment
practice could have the effect of increasing the level of illiquidity in the
Equity Portfolio to the extent that qualified institutional buyers become for
a time uninterested in purchasing Rule 144A securities.

The Fund may not invest in illiquid securities (except that it may invest in
beneficial interests in the Equity Portfolio).

Short Sales. The Equity Portfolio may sell securities short only "against-
the-box." A short sale "against-the-box" is a short sale in which the Equity
Portfolio owns an equal amount of the securities sold short or securities
convertible into or exchangeable without payment or further consideration for
securities of the same issue as, and equal in amounts to, the securities sold
short.

The Fund may not make short sales of securities. The Fund's and the Equity
Portfolio's policies on short sales are fundamental.

Temporary Investments. When the Manager believes that market conditions
warrant a temporary defensive position, the Equity Portfolio may invest up to
100% of its assets in short-term instruments such as commercial paper, bank
certificates of deposit, bankers' acceptances, or repurchase agreements for
such securities and securities of the U.S. Government and its agencies and
instrumentalities, as well as cash and cash equivalents denominated in foreign
currencies. Investments in domestic bank certificates of deposit and bankers'
acceptances will be limited to banks that have total assets in excess of $500
million and are subject to regulatory supervision by the U.S. Government or
state governments. The Equity Portfolio's investments in commercial paper of
U.S. issuers will be limited to (a) obligations rated Prime-1 by Moody's
Investors Service ("Moody's") or A-1 by Standard & Poor's Ratings Group
("Standard & Poor's") or (b) unrated obligations issued by companies having an
outstanding unsecured debt issue currently rated A or better by Standard &
Poor's. A description of various commercial paper ratings and debt securities
appears in Appendix A to the Statement of Additional Information. The Equity
Portfolio's investments in foreign short-term instruments will be limited to
those that, in the opinion of the Manager, equate generally to the standards
established for U.S. short-term instruments.

RISK FACTORS

Zero Coupon Securities. Zero coupon securities of the type held by the Fund
can be sold prior to their due date in the secondary market at their then
prevailing market value which, depending on prevailing levels of interest
rates, the time remaining to maturity and liquidity (i.e., relative levels of
supply and demand for the particular zero coupon security), may be more or
less than the securities' "accreted value", that is, their value based solely
on the amount due at maturity and accretion of interest from the date of
purchase. The market prices of zero coupon securities are generally more
volatile than the market prices of securities that pay interest

13
<PAGE>

periodically and, accordingly, are likely to respond to a greater degree to
changes in interest rates than do non-zero coupon securities having similar
maturities and yields. The current net asset value of the Fund attributable to
zero coupon securities and other debt instruments generally will increase as
prevailing interest rates decrease, and they will decrease as such rates
increase. For example, during the Offering Period, an increase in prevailing
interest rates of one-half of one percent could be expected to cause the
market value of the Fund's zero coupon securities to decrease by more than
four percent, and a one-half percent decrease in such rates could be expected
to cause the market value of such securities to increase by more than four
percent. Such fluctuations may be larger or smaller depending on, among other
things, the level of current rates and the time remaining to maturity. As a
result, the net asset value of shares of the Fund may fluctuate over a greater
range than shares of other mutual funds that invest in Treasury Securities
having similar maturities and yields but that make current distributions of
interest.

As an open-end investment company, the Fund is required to redeem its shares
upon the request of any shareholder at the net asset value next determined
after receipt of the request. However, because of the price volatility of zero
coupon Treasury Securities prior to maturity, if it is assumed that the value
of the Fund's assets invested in the Equity Portfolio remains constant, a
shareholder who redeems shares prior to the Maturity Date may realize an
amount that is greater than or less than the purchase price of those shares,
including any front-end sales charges paid. Even if the market value of the
zero coupon securities does not fluctuate substantially, any increase in their
value may be more than offset by declines in the value of the Equity
Portfolio, so that a shareholder redeeming shares prior to the Maturity Date
could receive less than the amount originally invested.

Each year the Fund will be required to accrue an increasing amount of income
on its zero coupon Treasury securities utilizing a constant interest rate
method which takes into account the compounding of accrued interest. To
maintain its tax status as a regulated investment company and also to avoid
imposition of excise taxes, however, the Fund will be required to distribute
dividends equal to substantially all of its net investment income, including
the accrued income on its zero coupon Treasury Securities for which it
receives no payments in cash prior to their maturity. Dividends of the Fund's
net investment income and distributions of its short-term capital gains will
be taxable to shareholders as ordinary income for income tax purposes, whether
received in cash or reinvested in additional shares. See "Taxes." However, a
shareholder who elects to receive dividends and distributions in cash, instead
of reinvesting these amounts in additional shares of the Fund, may realize an
amount on or after the Maturity Date that is less than the entire amount
originally invested. ACCORDINGLY, THE FUND MAY NOT BE APPROPRIATE FOR
INVESTORS WHO WOULD REQUIRE CASH DISTRIBUTIONS FROM THE FUND IN ORDER TO MEET
THEIR CURRENT TAX OBLIGATIONS RESULTING FROM THEIR INVESTMENT. Shareholders
are urged to consult their tax advisers concerning the effect of federal,
state and local income taxes in their individual circumstances.

Two-Tier Structure. The two-tier master-feeder structure pursuant to which
the Fund invests in the Equity Portfolio involves certain risks to investors
in the Fund that would not arise in a conventional single-tier fund. See
"Special Information Concerning the Two-Tier Structure."

Liquidity. In order to generate sufficient cash to meet distribution
requirements and other operational needs and to redeem its shares on request,
the Fund may be required to limit reinvestment of capital on the disposition

14
<PAGE>

of its interest in the Equity Portfolio and may be required to liquidate some
or all of its interest in the Equity Portfolio over time. The Fund may be
required to effect these liquidations at a time when it is otherwise
disadvantageous to do so. If the Fund realizes capital losses on dispositions
of interests in the Equity Portfolio that are not offset by capital gains on
the disposition of other interests in the Equity Portfolio, the Fund may be
required to liquidate a disproportionate amount of its zero coupon securities
or borrow money, in an amount not exceeding 5% of the Fund's total assets, to
satisfy the distribution and redemption requirements described above. The
liquidation of zero coupon Treasury Securities and the expenses associated
with borrowing money in these circumstances could render the Fund unable to
meet its Repayment Objective. Under the terms of the Manager's Guarantee,
however, Eligible Investors who hold all of their shares until the Maturity
Date will be certain of receiving at least the full amount of their original
investment in the Fund.

Foreign Investment. Investments in securities of foreign issuers may involve
risks that are not associated with domestic investments, and the Equity
Portfolio's foreign investments may present more risk than a portfolio of
domestic securities. Foreign issuers may lack uniform accounting, auditing and
financial reporting standards, practices and requirements, and there is
generally less publicly available information about foreign issuers than there
is about U.S. issuers. Governmental regulation and supervision of foreign
stock exchanges, brokers and listed companies may be less pervasive than is
customary in the United States. Securities of some foreign issuers are less
liquid, and their prices are more volatile, than securities of comparable
domestic issuers. Foreign securities settlements may in some instances be
subject to delays and related administrative uncertainties which could result
in temporary periods when assets of the Equity Portfolio are uninvested and no
return is earned thereon and may involve a risk of loss to the Equity
Portfolio. Foreign securities markets may have substantially less volume than
U.S. markets and far fewer traded issues. Fixed brokerage commissions on
foreign securities exchanges are generally higher than in the United States
and transaction costs with respect to smaller capitalization companies may be
higher than those of larger capitalization companies. Income from foreign
securities may be reduced by tax withheld at source or other foreign taxes. In
some countries, there may also be the possibility of expropriation or
confiscatory taxation (in which case the Equity Portfolio could lose its
entire investment in a certain market), limitations on the removal of moneys
or other assets of the Equity Portfolio, political or social instability or
revolution, or diplomatic developments that could affect investments in those
countries. In addition, it may be difficult to obtain and enforce a judgment
in a court outside the United States.

Some of the risks described in the preceding paragraph may be more severe
for investments in emerging or developing countries. By comparison with the
United States and other developed countries, emerging or developing countries
may have relatively unstable governments. Companies in emerging markets may
generally be smaller, less experienced and more recently organized than many
domestic companies. Prices of securities traded in the securities markets of
emerging or developing countries tend to be volatile. Furthermore, foreign
investors are subject to many restrictions in emerging or developing
countries. These restrictions may require, among other things, governmental
approval prior to making investments or repatriating income or capital, or may
impose limits on the amount or type of securities held by foreigners or on the
companies in which the foreigners may invest.

The economies of individual emerging countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, currency depreciation, capital

15
<PAGE>

reinvestment, resource self-sufficiency and balance of payment position and
may be based on a substantially less diversified industrial base. Further, the
economies of developing countries generally are heavily dependent on
international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. These economies also have
been, and may continue to be, adversely affected by economic conditions in the
countries with which they trade.

Depositary Receipts. The Equity Portfolio may invest in ADRs, EDRs and GDRs.
ADRs may be publicly traded on exchanges or over-the-counter in the United
States and are quoted and settled in dollars at a price that generally
reflects the dollar equivalent of the home country share price. EDRs are
typically issued by foreign banks or trust companies and traded in Europe.
GDRs may be issued by a domestic or foreign bank or trust company and may be
traded in several markets. Depositary Receipts may be issued as sponsored or
unsponsored programs. In sponsored programs, the issuer has made arrangements
to have its securities traded in the form of a Depositary Receipt. In
unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although the regulatory requirements with respect to sponsored
and unsponsored programs are generally similar, the issuers of unsponsored
Depositary Receipts are not obligated to disclose material information in the
United States and, therefore, the import of such information may not be
reflected in the market value of such securities.

Foreign Currencies. As a matter of fundamental policy, neither the Fund nor
the Equity Portfolio will engage in transactions intended to hedge foreign
exchange risk. The Equity Portfolio may, however, enter into forward foreign
currency contracts to provide for its obligations at the time of settlement of
securities transactions. Investments in foreign securities will usually be
denominated in foreign currency, and the Equity Portfolio may temporarily hold
funds in foreign currencies. The value of the Equity Portfolio's investments
denominated in foreign currencies may be affected, favorably or unfavorably,
by the relative strength of the U.S. dollar, changes in foreign currency and
U.S. dollar exchange rates and exchange control regulations. The Equity
Portfolio may incur costs in connection with conversions between various
currencies. The Equity Portfolio's net asset value will be affected by changes
in currency exchange rates. Changes in foreign currency exchange rates may
also affect the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains, if
any, to be distributed by the Equity Portfolio to owners of beneficial
interests. The rate of exchange between the U.S. dollar and other currencies
is determined by the forces of supply and demand in the foreign exchange
markets (which in turn are affected by interest rates, trade flow and numerous
other factors, including, in some countries, local government intervention).

SPECIAL INFORMATION CONCERNING THE TWO-TIER STRUCTURE

The Fund is an open-end management investment company which seeks to achieve
its investment objectives by investing a portion of its investable assets in
the Equity Portfolio, a separate registered investment company that is taxable
as a partnership for Federal tax purposes, and investing the remainder of its
assets directly in zero coupon Treasury Securities. Both the Fund and the
Equity Portfolio are managed by AIG Capital Management

16
<PAGE>

Corp. By investing in the Equity Portfolio, the Fund differs from mutual funds
that directly acquire and manage their entire portfolio of securities. The
Fund has adopted this two-tier structure because the Equity Portfolio, by
offering interests to other investors in addition to the Fund, may be able to
allocate certain expenses over a larger asset base than the Fund would be able
to if it were to invest all its assets directly. For this reason the Board
believes that the aggregate per share expenses of the Fund (including its
proportionate share of the expenses of the Equity Portfolio) will be less than
or approximately equal to the expenses that the Fund would incur if the assets
of the Fund that are invested in the Equity Portfolio were instead invested
directly by the Fund in the type of securities held by the Equity Portfolio,
although there can be no assurance that this will be the case. See "Investment
Objectives and Management Policies -- First Global Equity Portfolio" and "--
Other Investment Policies."

The investment objectives of the Fund may be changed only with the approval
of a majority, as defined in the 1940 Act, of the holders of the outstanding
shares of the Fund. The investment objective of the Equity Portfolio may be
changed only with the approval of a majority, as defined in the 1940 Act, of
the holders of the outstanding beneficial interests of the Equity Portfolio.
Due to the two-tier structure of the Fund, the overall investment objectives
of the Fund differ from those of the Equity Portfolio. Beneficial interests in
the Equity Portfolio are held by the Fund and may be held by other investors,
including other open-end investment companies. The Fund has agreed that, if
any matter is put to a vote of the holders of the Equity Portfolio's
beneficial interests, the Fund will vote its interest in the Equity Portfolio
in accordance with instructions received from the holders of the Fund's
shares. Shareholders of the Fund will be provided with at least 30 days'
written notice of any proposed changes to the investment objectives of the
Fund or the Equity Portfolio.

The members of the Board of Directors of the Company are the same as the
Trustees of the Equity Portfolio. Both the Board and the Trustees have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest that may arise as a result. For information about the Board and the
Trustees, see the Statement of Additional Information.

In addition to selling a beneficial interest to the Fund, the Equity
Portfolio may sell beneficial interests to other mutual funds or institutional
investors. Beneficial interests may be offered and sold only in transactions
exempt from the registration requirements of the 1933 Act. The Equity
Portfolio's Declaration of Trust prohibits it from selling beneficial
interests to individuals, S corporations (as defined in the Internal Revenue
Code (S) 1361 et seq.), partnerships and grantor trusts. All investors will
invest in the Equity Portfolio on the same terms and conditions and will bear
a proportionate share of the Equity Portfolio's expenses. However, the other
mutual funds that may in the future invest in the Equity Portfolio may sell
their own shares with sales charges and expenses different from those of the
Fund. Such different pricing structures may result in differences in returns
experienced by investors in other funds that invest in the Equity Portfolio.
Such differences in return are not uncommon and are present in other mutual
fund structures. As of the date of this Prospectus, there is only one other
registered investment company that invests in the Equity Portfolio, the AIG
Children's World Fund -- 2005. In the future, information concerning the AIG
Children's World Fund -- 2005 and other funds sold by your broker that invest
in the Equity Portfolio may be obtained from your broker, or by calling the
Fund's principal underwriter, AIG Equity Sales Corp. (the "Distributor") at
(800) 862-3984.

17
<PAGE>

The Fund is a series of the Company. The Company may withdraw the investment
of the Fund from the Equity Portfolio at any time if the Board determines that
it is in the best interest of the Fund to do so and a majority of the
shareholders of the Fund, as defined in the 1940 Act, approve such action.
Upon any such withdrawal, the Board would consider what action might be taken,
including the investment of all the assets of the Fund in another pooled
investment entity with investment objectives and restrictions consistent with
the Fund's objectives and restrictions or the retaining of a new investment
adviser to manage the Fund's assets in accordance with the investment policies
described herein.

Certain changes in the Equity Portfolio's investment objectives, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Equity Portfolio's investment objectives or restrictions, may require
withdrawal of the Fund's interest in the Equity Portfolio. Any such withdrawal
could result in a distribution of the Equity Portfolio's securities to the
Fund in kind (as opposed to a cash distribution). In this case, the securities
received by the Fund may or may not be readily marketable. The distribution in
kind may result in the Fund having a less diversified portfolio of investments
or adversely affect the Fund's liquidity and the Fund could incur brokerage,
tax or other charges in converting the securities to cash. Notwithstanding the
above, there are other means for meeting shareholder redemption requests such
as borrowing.

Smaller funds investing in the Equity Portfolio may be materially affected
by the actions of larger funds investing in the Equity Portfolio. For example,
if a large fund withdraws from the Equity Portfolio, the remaining funds may
subsequently experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, because the Equity Portfolio would become
smaller, it may become less diversified, resulting in potentially increased
portfolio risk (however, these possibilities also exist for traditionally
structured funds which have large or institutional investors who may redeem
their shares). Also, funds with a greater pro rata ownership in the Equity
Portfolio could have effective voting control of the operations of the Equity
Portfolio. Whenever the Fund is requested to vote on matters pertaining to the
Equity Portfolio (other than a vote by the Fund to continue the operation of
the Equity Portfolio upon the withdrawal of another investor in the Equity
Portfolio), the Company will hold a meeting of shareholders of the Fund and
will cast all of its votes proportionately as instructed by the Fund's
shareholders. The Company will vote the shares held by the Fund shareholders
who do not give voting instructions in the same proportion as the shares of
Fund shareholders who do give voting instructions. Shareholders of the Fund
who do not vote will have no effect on the outcome of such matters.

INVESTMENT ADVISORY SERVICES

THE MANAGER

The Manager, an investment adviser registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), is an indirect wholly owned
subsidiary of AIG. AIG is a holding company which through its subsidiaries is
primarily engaged in a broad range of insurance and insurance-related
activities in the United States and abroad. At December 31, 1995, members of
the Manager's Investment Committee and their teams of investment professionals
supervised the management of assets in excess of $64 billion, of which
approximately $11 billion represented third party funds. See "-- The
Investment Process" and "-- The Subadvisors" below.

18
<PAGE>

The Manager also manages the AIG Children's World Fund--2005, another series
of the Company, and the AIG Money Market Fund, a separate money market
investment portfolio of a registered investment company. The principal
business address of the Manager is 70 Pine Street, New York, New York 10270.

The Manager serves as the Fund's and the Equity Portfolio's investment
adviser, is responsible for the management of the assets of the Fund and the
Equity Portfolio and continually reviews and supervises the Fund's and the
Equity Portfolio's investment program, subject to the supervision of, and
policies established by, the Board and the Trustees of the Equity Portfolio.
The Manager is assisted in the performance of these services by certain
affiliated Subadvisors. See "-- The Subadvisors" below. The Manager is
entitled to a fee, which is calculated daily and paid monthly, at an annual
rate of 0.20% of the average daily net assets of the Fund (other than its
interest in the Equity Portfolio) and 1.20% of the average daily net assets of
the Equity Portfolio. The Fund and the Equity Portfolio will be responsible
for all expenses other than those assumed by the Manager including those for
necessary professional and brokerage services, costs of regulatory compliance,
costs associated with maintaining corporate existence, custody, shareholder
relations and insurance costs.

The Manager has agreed that, in the event that the total expenses of the
Fund during the Offering Period, including the Fund's proportional share of
the expenses of the Equity Portfolio, but excluding interest, taxes, brokerage
commissions and extraordinary expenses, should exceed 1.95% of the average
daily net assets of the Fund, the Manager will limit the Fund's expenses to
the extent of any such excess, subject to reimbursement by the Fund as
described below. The total amount of any excess so limited by the Manager is
referred to as the "Refunded Amount." The Manager has no obligation to waive
its fee or reimburse any expenses of the Fund after the end of the Offering
Period. The Fund and the Manager have also agreed that, for the thirty-six
months following the end of the Offering Period, if the Fund's total expenses
(calculated as described above) are less than 1.95% per annum of average daily
net assets of the Fund, the Fund will pay to the Manager an expense
reimbursement fee, computed and paid monthly, such that after such
reimbursement the aggregate expenses of the Fund will not exceed 1.95% per
annum. The total amount of such expense reimbursement fees will not exceed the
Refunded Amount plus the Manager's related financing costs. The Board of
Directors of the Fund has agreed that any related financing costs would be
calculated at an interest rate of prime rate plus 1%.

THE INVESTMENT PROCESS

The Manager has established a committee (the "Investment Committee") that is
responsible for the asset allocation of the Fund and the Equity Portfolio and
carrying out their respective investment policies. The members of the
Investment Committee are officers of the Manager, affiliated investment
advisors (see "-- The Subadvisors" below) or regional affiliates of the
Manager to whom the Manager or Subadvisors have access under service
arrangements. The members of the Investment Committee meet monthly, and meet
in person quarterly, to determine collectively the allocation of the assets of
the Fund between zero coupon Treasury Securities and the Equity Portfolio, as
well as the allocation of the assets of the Equity Portfolio on a regional
basis. Members of the Investment Committee, assisted by a team of investment
professionals, are primarily responsible for the Equity Portfolio's country
and stock selection within their respective global region. Currently the
members of the Investment Committee are:

IAN P. BUTTER. Mr. Butter has been a Director of AIG Global Investment Corp.
(Europe) Ltd ("AIG Global Europe") in London since January 1992, where he also
served in a trading capacity since 1988. In

19
<PAGE>

January 1996, Mr. Butter transferred to AIG Global Europe's Japanese affiliate
where he currently serves as Chief Investment Officer to AIG Global Investment
Corp. (Japan).

PATRICK DEMPSEY. Mr. Dempsey is Managing Director, Fixed Income, of AIG
Global Europe in London. He has been a Director of AIG Global Europe since he
joined it at its inception in 1988 as a founding Director.

BRIAN MCCARTHY. Mr. McCarthy is Vice President, International Fixed Income,
of AIG Global Investment Corp. ("AIG Global"), which he joined in March 1994.
Prior to joining AIG Global, he was Vice President, International Fixed Income
Research, of Alliance Capital.

WIN J. NEUGER. Mr. Neuger, who acts as Chairman of the Investment Committee,
is Chief Investment Officer of AIG, which he joined in February 1995, and
Chief Investment Officer of the Manager, which he joined in August 1995. Mr.
Neuger has been a Director, Chairman of the Board and President of AIG Global
since March 1995 and has served as a Director of AIG Global Europe since April
1995. Prior to joining these companies, Mr. Neuger was with Bankers Trust
Company, where he was a Senior Vice President and, since October 1991, a
Managing Director in the investment management area.

YUKIHIRO NISHIMIYA. Mr. Nishimiya has been a portfolio manager for AIG
Global Investment Corp. (Japan) since October 1990.

HARRY P. REKAS. Mr. Rekas is Vice President and Portfolio Manager (U.S.
Equities) of AIG Global, which he joined in April 1993. Prior to joining AIG
Global, he was a portfolio manager for Citibank in New York.

PETER SOO. Mr. Soo is Regional Director, Fund Management, of AIG Global
Investment Corp. (Asia), Limited, which does business in Asia as AIG
Investment Corporation (Asia), Limited, and which he joined in 1989.

PETER WIGNALL. Mr. Wignall is Managing Director and Chief Executive Officer
of AIG Global Europe in London, which he joined as an Executive Director in
April 1992. Prior to April 1992 he acted as a portfolio manager for Citicorp
Investment Management in London and in Sydney, Australia.

A member of the Investment Committee will be responsible for the day-to-day
implementation of the Investment Committee's strategy. The minimum percentage
of the Fund's assets that must be allocated to zero coupon Treasury Securities
in order to provide for the Repayment Objective can be mathematically
determined on any given day from the yield on the zero coupon Treasury
Securities and the amount then entitled to the benefit of the Repayment
Objective. When shares are purchased, any adjustment to the portion of the
proceeds to be allocated to zero coupon Treasury Securities required by
variations in bond yield between Investment Committee meetings will be
determined under guidelines set down by the Investment Committee. The balance
of the purchase price will be invested in the Equity Portfolio. After the
Offering Period, the Fund anticipates adjustments in its holding of zero
coupon Treasury Securities solely to meet requests for redemption and, if
required, to make payments of dividends and distributions. See "Proposed
Operations of the Fund."

When shares are redeemed, the Manager will ordinarily redeem the
proportional interest of those shares in the Fund's zero coupon Treasury
Securities and in the Equity Portfolio, determined on the basis of current net

20
<PAGE>

asset value. The Manager may elect to take a greater proportion of a
redemption from the Equity Portfolio if it deems it more prudent to do so.
Should a shareholder elect to have dividends paid by the Fund in cash rather
than reinvested in additional shares of the Fund, the amount required to be
paid will be taken from the Fund's zero coupon Treasury Securities and the
Equity Portfolio in the same proportion that the dividend income was
generated, provided that the amount of zero coupon Treasury Securities to be
sold for this purpose will be reduced (and the interest in the Equity
Portfolio to be redeemed correspondingly increased) to the extent necessary to
protect the Repayment Objective for those shareholders who reinvest all
dividends and distributions. Pursuant to the terms of the Manager's Guarantee,
shareholders who wish to be certain of receiving at least the full amount of
their original investment must reinvest all dividends and distributions in
additional shares and hold all their shares until the Maturity Date.

Generally, the regional allocations within the Equity Portfolio will be
managed between the regular meetings in accordance with the policy established
at the most recent meeting; however, in exceptional circumstances, such as
subsequent market developments of a material nature, an ad hoc meeting will be
called to review policy.

THE SUBADVISORS

The Manager has entered into subadvisory agreements with AIG Global
Investment Corp. ("AIG Global"), which is a wholly owned subsidiary of AIG and
registered under the Advisers Act. Pursuant to its subadvisory agreements, AIG
Global provides investment advisory services to the Manager in respect of the
management of the Fund's zero coupon Treasury Securities and in respect of the
management of the assets of the Equity Portfolio and officers of AIG Global
provide representation on the Investment Committee (see "The Investment
Process"). Under the subadvisory agreements with AIG Global, the Manager pays
AIG Global a fee which is calculated daily and paid monthly at an annual rate
of 0.0825% of the average daily net assets of the Fund (other than the Fund's
interest in the Equity Portfolio) and 0.15% of the average daily net assets of
the Equity Portfolio. These fees are all paid from the management fee paid to
the Manager. The principal office of AIG Global is 200 Liberty Street, New
York, New York 10281.

The Manager has also entered into subadvisory agreements with AIG Global
Europe, which is a wholly owned subsidiary of AIG and registered under the
Advisers Act. AIG Global Europe is also a member of the Investment Management
Regulatory Organization Limited, a United Kingdom self-regulatory
organization. Pursuant to its subadvisory agreements, AIG Global Europe
provides investment advisory services to the Manager in respect of the
management of the Fund's Treasury Securities and in respect of the management
of the assets of the Equity Portfolio in their respective regions, and certain
of its officers provide representation on the Investment Committee (see "The
Investment Processs"). Under the subadvisory agreements with AIG Global
Europe, the Manager pays AIG Global Europe a fee which is calculated daily and
paid monthly at an annual rate of 0.0175% of the average daily net assets of
the Fund (other than the Fund's interest in the Equity Portfolio) and 0.24% of
the average daily net assets of the Equity Portfolio. AIG Global Europe's fees
are all paid from the management fees paid to the Manager. AIG Global Europe
has advised the Manager that it intends to terminate its registration under
the Advisers Act. Concurrently with such termination, the Manager's
subadvisory agreements with AIG Global Europe will terminate. However, it is
anticipated that personnel of AIG

21
<PAGE>

Global Europe will continue to provide certain services to the Manager
pursuant to a service arrangement. The principal office of AIG Global Europe
is Birchin Court, 20 Birchin Lane, London EC3V 9LN, England.

AIG Global and AIG Global Europe are referred to in this prospectus as the
"Subadvisors."

PORTFOLIO TRANSACTIONS. The agreements of the Fund and the Equity Portfolio
with the Manager recognize that in the purchase and sale of portfolio
securities, the Manager and the Subadvisors will seek the most favorable price
and execution and, consistent with that policy, may give consideration to the
research, statistical and other services furnished by brokers or dealers to
the Manager or a Subadvisor. The use of brokers who provide investment and
market research and securities and economic analysis may result in higher
brokerage charges than the use of brokers selected solely on the basis of the
most favorable brokerage commission rates, and research and analysis received
may be useful to the Manager and the Subadvisors in connection with their
services to other clients as well as the Fund and the Equity Portfolio. In
over-the-counter markets, orders are placed with primary market-makers unless
a more favorable execution price is believed to be obtainable.

Consistent with the rules of the National Association of Securities Dealers,
Inc., and subject to seeking the most favorable price and execution available
and such other policies as the Board and the Trustees of the Equity Portfolio
may determine, the Manager and the Subadvisors may consider sales of shares of
other mutual funds managed by the Manager as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Fund or the
Equity Portfolio.

PORTFOLIO TURNOVER. A change in securities held by the Fund or the Equity
Portfolio is known as "portfolio turnover," which may result in the payment by
the Fund or the Equity Portfolio of dealer spreads or underwriting commissions
and other transaction costs on the sale of securities as well as on the
reinvestment of the proceeds in other securities. Although it is the policy of
both the Fund and the Equity Portfolio to hold securities for investment,
changes will be made from time to time when the Manager or a Subadvisor
believes such changes will strengthen the investments of the Fund or the
Equity Portfolio. After the Offering Period, the Manager does not expect any
portfolio turnover in the Fund's zero coupon Treasury Securities except for
turnover related to redemptions or the non-reinvestment of dividends. The
portfolio turnover of the Equity Portfolio is not expected to exceed 100% per
annum.

VALUATION. The net asset value of the shares of the Fund is determined each
day, Monday through Friday, as of the close of regular trading on the New York
Stock Exchange ("NYSE") (usually 4:00 p.m. New York City time) on each day
that the NYSE is open. During the Offering Period, zero coupon Treasury
Securities will be valued at the average of the last reported bid and ask
prices; thereafter, in order to ensure that an adequate amount of zero coupon
Treasury Securities is maintained to achieve the Repayment Objective when
shares of the Fund are redeemed, zero coupon Treasury Securities will be
valued at the last reported bid. Securities traded on a foreign exchange or
over-the-counter market are valued at the last sales price on the primary
exchange or market in which they are traded. Securities for which there are no
recent sales transactions are valued based on quotations provided by primary
market makers in such securities. Any securities for which recent market
quotations are not readily available are valued at fair value determined in
accordance with procedures approved by the Board and by the Trustees of the
Equity Portfolio. Short-term holdings maturing in 60 days or less are
generally valued at amortized cost if their original maturity was 60 days or
less. Short-term holdings with more

22
<PAGE>

than 60 days remaining to maturity will be valued at current market value
until the 61st day prior to maturity, and will then be valued on an amortized
cost basis based on the value as of such date unless the Board or the Trustees
of the Equity Portfolio determines that this amortized cost value does not
represent fair market value.

AMERICAN INTERNATIONAL GROUP, INC.

AIG is a Delaware corporation which through its subsidiaries is primarily
engaged in a broad range of insurance and insurance-related and financial
services activities in the United States and abroad. AIG's primary activities
include both general and life insurance operations. Other significant
activities of AIG are financial services and agency and service fee
operations. AIG's general insurance subsidiaries are multiple line companies
writing substantially all lines of property and casualty insurance; one or
more of these companies is licensed to write substantially all of these lines
in all states of the United States and in approximately 130 foreign countries
and jurisdictions. AIG's life insurance subsidiaries offer a wide range of
traditional insurance and financial and investment products; one or more of
these subsidiaries is licensed to write life insurance in all states in the
United States and in over 70 foreign countries. At December 31, 1995, AIG and
its consolidated subsidiaries had total assets of approximately $134 billion
and capital funds of approximately $19.8 billion; consolidated net income for
the year then ended was $2.51 billion. The Statement of Additional Information
incorporates by reference AIG's financial statements and certain other
information about AIG. At December 31, 1995, AIG and its consolidated
subsidiaries had more than 32,000 employees. The principal executive offices
of AIG are located at 70 Pine Street, New York, New York 10270 and its
telephone number is (212) 770-7000.

DIVIDENDS AND DISTRIBUTIONS

Dividends consisting of substantially all of the Fund's net investment
income, if any, are declared and paid annually. The Fund may also declare an
additional dividend of net investment income and net realized capital gains in
a given year to the extent necessary to avoid the imposition of federal excise
taxes on the Fund. Distributions consisting of substantially all the realized
net capital gains for the Fund are declared and paid on an annual basis,
except that an additional capital gain distribution may be made in a given
year to the extent necessary to avoid the imposition of federal excise tax on
the Fund. Declared dividends and distributions are payable to the shareholder
of record on the record date.

Dividends and capital gain distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
mailed by check or are wire transferred in accordance with the shareholder's
instructions. Pursuant to the terms of the Manager's Guarantee, shareholders
who wish to be certain of receiving at least the full amount of their original
investment must reinvest all dividends and distributions in additional shares
and hold all their shares until the Maturity Date.

TAXES

The following is a summary of some of the tax considerations relating to the
Fund. This discussion is general in nature and should not be regarded as an
exhaustive presentation. Additional tax information is included in the
Statement of Additional Information, which shareholders may request.

23
<PAGE>

The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). For each year it so
qualifies, the Fund will generally not be subject to federal income taxes on
its net investment income and realized net capital gains, if any, which it
timely distributes to its shareholders, provided that at least 90% of the sum
of its net investment income and net short-term capital gains are distributed
to shareholders each year.

Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to the shareholders, whether
received in cash or reinvested in additional shares.

The zero coupon Treasury Securities will be treated as bonds that were
issued to the Fund at an original issue discount. Original issue discount is
treated as interest for federal income tax purposes and the amount of original
issue discount generally will be the difference between the bond's purchase
price and its stated redemption price at maturity. The Fund will be required
to include in gross income for each taxable year the daily portions of
original issue discount attributable to the zero coupon Treasury Securities
held by the Fund as such original issue discount accrues. Dividends derived
from such original issue discount that accrues for such year will be taxable
to shareholders as ordinary income. In general, original issue discount
accrues daily under a constant interest rate method which takes into account
the compounding of accrued interest. In the case of zero coupon Treasury
Securities, this method will generally result in an increasing amount of
income to the Fund each year.

Distributions by a regulated investment company from net capital gains,
i.e., the excess of net long-term capital gains over any net short-term
capital losses, designated by the Fund as capital gain dividends are taxable
as long-term capital gain, whether received in cash or invested in additional
shares, regardless of how long shares have been held by the shareholders.

Any gain or loss realized upon a sale or redemption of shares of the Fund by
a shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. However, if shares on
which a capital gain dividend has been received are subsequently sold or
redeemed and such shares have been held for six months or less, any loss
realized will be treated as long-term capital loss to the extent of the
capital gain dividend received. In addition, no loss will be allowed on the
sale or other disposition of shares of the Fund if, within a period beginning
30 days before the date of such sale or disposition and ending 30 days after
such date, the holder acquires (such as through dividend reinvestment)
securities that are substantially identical to the shares of the Fund.

The Fund will generally be subject to an excise tax of 4% on the amount of
any income or capital gains, above certain permitted levels, not distributed
to shareholders in accordance with a calendar year distribution requirement.
Furthermore, dividends declared in October, November or December payable to
shareholders of record on a specified date in such a month and paid in the
following January will be treated as having been paid by the Fund and received
by each shareholder in December. Under this rule, therefore, shareholders may
be taxed in one year on dividends or distributions actually received in
January of the following year.

Portions of the Fund's investment income may be subject to foreign income
taxes withheld at source. The Fund does not expect to qualify to "pass
through" to its shareholders credit for such foreign taxes paid. If, however,
the Fund does qualify to pass through foreign tax credits, the Fund will elect
to do so.

24
<PAGE>

Investors should carefully consider the tax implications of purchasing
shares of the Fund just prior to the declaration of a dividend or capital gain
distribution, which would be subject to taxation as described above
notwithstanding that it is in effect a return of investment.

UNLESS A SHAREHOLDER INCLUDES A CERTIFIED TAXPAYER IDENTIFICATION NUMBER
(SOCIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND
CERTIFIES THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND
IS REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF
DISTRIBUTIONS AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF
BACKUP WITHHOLDING IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER
REGULATIONS PROMULGATED BY THE INTERNAL REVENUE SERVICE, THE FUND MAY BE FINED
$100 ANNUALLY FOR EACH ACCOUNT FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION
NUMBER IS NOT PROVIDED. IN THE EVENT THAT SUCH A FINE IS IMPOSED, THE FUND MAY
CHARGE A SERVICE FEE OF UP TO $100 ANNUALLY THAT MAY BE DEBITED FROM THE
SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY UNDISTRIBUTED DIVIDENDS AND
CAPITAL GAIN DISTRIBUTIONS. THE FUND ALSO RESERVES THE RIGHT TO CLOSE ANY
ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER IDENTIFICATION NUMBER.

Shareholders are urged to consult their tax advisers concerning the effect
of federal, state and local income taxes on the Fund and in their individual
circumstances.

THE ADMINISTRATOR

PFPC International Ltd. will serve as the Fund's and serves as the Equity
Portfolio's administrator and accounting agent. PFPC International Ltd.'s
principal business address is 80 Harcourt Street, Dublin, Ireland. Pursuant to
the administration and accounting agreements with the Fund and the Equity
Portfolio, it will assist the Fund and assists the Equity Portfolio in all
aspects of their administration and operations, including matters relating to
the maintenance of financial records and Fund and Equity Portfolio accounting.

THE TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

PFPC Inc. will serve as the Fund's transfer agent and dividend disbursing
agent. Some services may be provided by sub-transfer agents. PFPC Inc.'s
principal business address is 400 Bellevue Parkway, Wilmington, Delaware
19809.

CUSTODIAN

PNC Bank, National Association ("PNC Bank"), Airport Business Center,
International Court 2, 200 Stevens Drive, Lester, Pennsylvania 19113, will
serve as custodian of the assets of the Fund. State Street Bank and Trust
Company ("State Street"), 1776 Heritage Drive, Quincy, Massachusetts 02171
serves as custodian of the assets of the Equity Portfolio. State Street is
authorized to establish and has established separate accounts in foreign
currencies and is authorized to cause securities of the Equity Portfolio to be
held in separate accounts outside the United States in the custody of non-U.S.
banks. Rules adopted under the 1940 Act permit the Fund and the Equity
Portfolio to maintain their securities and cash in the custody of certain
eligible foreign banks and securities depositories. Pursuant to those rules,
the Equity Portfolio's securities and cash, when invested in

25
<PAGE>

securities of foreign countries, are held by subcustodians who are approved by
the Board and by the Trustees of the Equity Portfolio in accordance with the
rules of the Securities and Exchange Commission. Selection of the
subcustodians is made by the Board and the Trustees following a consideration
of a number of factors, including, but not limited to, the reliability and
financial stability of an institution, the ability of the institution to
capably perform custodial services for the Equity Portfolio, the reputation of
the institution in its national market, and the political and economic
stability of the countries in which the subcustodians will be located. In
addition, the 1940 Act requires that foreign subcustodians, among other
things, have stockholders' equity in excess of $200 million, have no lien on
the assets of the Fund or the Equity Portfolio, and maintain adequate and
accessible records.

SHAREHOLDER SERVICING AGREEMENT

Under the Shareholder Servicing Agreement, the Distributor provides
information and administrative services for Fund shareholders. The Distributor
enters into related arrangements with various financial services firms, such
as broker-dealer firms or banks (which may be affiliated with the
Distributor), that provide services and facilities for their customers or
clients who are shareholders of the Fund. Such administrative services and
assistance may include, but are not limited to, establishing and maintaining
shareholder accounts and records, processing purchase and redemption
transactions and answering routine shareholder inquiries regarding the Fund
and its special features. The Distributor bears all its expenses for providing
services pursuant to the Shareholder Servicing Agreement, including the
payment of any service fees. For services under the Shareholder Servicing
Agreement, the Fund pays the Distributor a fee, payable monthly, at the annual
rate of up to 0.25% of average daily net assets of those accounts in the Fund
that it maintains and services. A broker-dealer or bank becomes eligible for
the service fee from the time of purchase based on assets in the accounts
serviced by it, and the fee continues until terminated by the Distributor or
the Fund. The fees payable to financial services firms are calculated monthly
and paid quarterly by the Distributor.

The Distributor also may provide some of the above shareholder services and
may retain any portion of the fee under the Shareholder Servicing Agreement
not paid to broker-dealers or banks to compensate itself for shareholder
servicing functions performed for the Fund's shareholders. Currently, the
shareholder servicing fee payable to the Distributor is based only upon Fund
assets in accounts for which there is a broker-dealer or bank listed on the
Fund's records and it is intended that the Distributor will pay all the
shareholder servicing fees that it receives from the Fund to broker-dealers or
banks in the form of service fees. The effective shareholder servicing fee
rate to be charged against all assets of the Fund while this procedure is in
effect would depend upon the proportion of the Fund's shares that are in
accounts for which there is a broker-dealer or bank of record.

RULE 12b-1 PLAN

Under a plan of distribution adopted by the Board pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), the Fund may pay the Distributor a
distribution fee during the Offering Period at the annualized rate of up to
0.50% of the average daily net assets of the Fund. As described below, the
Offering Period is scheduled to terminate on April 30, 1997, but may be
extended or shortened by the Fund at its discretion. The Plan will terminate
on the last day of the Offering Period (including any extension thereof). The
Plan is intended to reimburse the Distributor for expenses it incurs in
connection with the distribution of the shares of the Fund. Distribution
expenses of the Distributor that are reimbursable under the Plan include the
payment of commissions

26
<PAGE>

to broker-dealers and interest on any unreimbursed amounts carried forward
thereunder, the cost of any additional compensation paid by the Distributor to
broker-dealers, the costs of printing and mailing to prospective investors
prospectuses and other materials relating to the Fund, the costs of
developing, printing, distributing and publishing advertisements and other
sales literature, and allocated costs relating to the Distributor's
distribution activities, including, among other things, employee salaries,
bonuses and other overhead expenses. Rules adopted by the National Association
of Securities Dealers, Inc. effectively limit the total amount of Rule 12b-1
fees and sales charges that may be charged to a shareholder of the Fund to
6.25% of the amount invested plus the Distributor's associated financing
costs.

PURCHASES OF SHARES

Shares of the Fund may be purchased from investment dealers during the
Offering Period at the public offering price, which is the net asset value
next determined plus a sales charge that is a percentage of the public
offering price and varies as shown below. You may also purchase shares
directly from the Fund's transfer agent, PFPC Inc., by completing the Account
Application attached to this Prospectus and mailing it to AIG Retiree Fund --
2003, PO Box 8935, Wilmington, Delaware 19899-8935. The minimum investment is
$2,500, and the minimum subsequent investment is $100. However, you may choose
to make an initial investment of as little as $1,000 and reach the $2,500
minimum with several additional investments during the Offering Period. The
minimum investment for an Individual Retirement Account ("IRA") or employee
benefit plan account is $2,000, and the minimum subsequent investment is $50;
for these accounts you may choose to make an initial investment of as little
as $250 and reach the $2,000 minimum with several additional investments
during the Offering Period. To do this you must indicate on the Account
Application your intent to invest at least the $2,500 minimum (or $2,000 for
IRAs and employee benefit plans) by the end of the Offering Period. If you
have not invested at least the minimum amount by the end of the Offering
Period, the Fund may redeem your shares (which may occur at a time when the
net asset value is less than when you invested) or the Fund may impose an
annual account keeping fee of $10. This fee may be changed at any time in
management's discretion. The investment minimums may be waived by the
Distributor in instances where the Distributor determines that it is necessary
or appropriate to do so.

INVESTMENT SALES LOAD SCHEDULE
<TABLE>
<CAPTION>
SALES LOAD AS A
PERCENTAGE OF REGULAR
----------------- DEALER
NET DISCOUNT
AMOUNT AS A % OF
OFFERING INVESTED OFFERING
AMOUNT OF PURCHASE PRICE (NAV)* PRICE
- ------------------ -------- -------- ---------
<S> <C> <C> <C>
Less than $100,000.................................. 4.75% 4.99% 4.25%
$100,000 up to $249,999............................. 4.00 4.17 3.60
$250,000 up to $499,999............................. 3.00 3.09 2.70
$500,000 up to $999,999............................. 2.00 2.04 1.80
$1 million and above................................ 0.00** 0.00** ***
</TABLE>
- --------
* Rounded to the nearest one-hundredth of one percent.
**Redemption of shares may be subject to a contingent deferred sales charge,
as discussed below.
***Commission may be payable by the Distributor as discussed below.

27
<PAGE>

Shares of the Fund will be offered to investors only during the Offering
Period, which is currently scheduled to commence on April 12, 1996 and end on
April 30, 1997. The Fund may at its option extend or shorten the Offering
Period. During the Offering Period the shares will be offered at their net
asset value plus the applicable sales charge, if any, as shown in the table
above. The Fund does not expect that its shares will be offered after the end
of the Offering Period. The offering of shares of the Fund shall be subject to
suspension or termination as provided under "Investment Objectives and
Management Policies -- Proposed Operations of the Fund." In addition, the
offering of shares may be suspended from time to time during the Offering
Period at the discretion of the Manager. During any period in which the public
offering of shares is suspended or terminated, shareholders will still be
permitted to reinvest dividends and distributions in shares of the Fund.

Certificates representing the Fund's shares will not be issued. PFPC Inc.,
the Fund's transfer agent, maintains a record of each shareholder's ownership.
Shareholders receive confirmations of all transactions in Fund shares and
periodic statements reflecting share balances and dividends.

The Fund receives the entire net asset value of all shares sold. The
Distributor retains the sales charge from which it allows discounts from the
applicable public offering price to investment dealers, which discounts are
uniform for all dealers in the United States and its territories. The normal
discount allowed to dealers is set forth in the above table. Upon notice to
all dealers with whom it has sales agreements, the Distributor may reallow up
to the full applicable sales charge, as shown in the above table, during
periods and for transactions specified in such notice and such reallowances
may be based upon attainment of minimum sales levels. During periods when 90%
or more of the sales charge is reallowed, such dealers may be deemed to be
underwriters as that term is defined in the 1933 Act.

Banks and other financial services firms may provide administrative services
related to order placement and payment to facilitate transactions in shares of
the Fund for their clients, and the Distributor may pay them a transaction fee
up to the level of the discount or other concession allowable to dealers as
described above. Banks currently are prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant
to state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what
action, if any, would be appropriate. Management does not believe that
termination of a relationship with a bank would result in any material adverse
consequences to the Fund.

In addition to the discounts or commissions described above, the Distributor
or the Manager may, from time to time, pay or allow additional concessions or
promotional incentives, in the form of cash or other compensation, to firms
that sell shares of the Fund. In some instances, such discounts or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Fund or other funds underwritten by the Distributor. Such concessions may be
paid as a lump sum or be periodic and may be up to 0.25% of the value of
shares sold by a dealer, plus additional compensation for continuing due
diligence or other services.

Shares of the Fund may be purchased at net asset value by a participant-
directed qualified retirement plan described in Code Section 401(a) or a
participant-directed non-qualified deferred compensation plan described in
Code Section 457 provided in either case that such plan has not less than 200
eligible employees.

Shares of the Fund may also be purchased at net asset value by any purchaser
provided that the amount invested in the Fund or certain other funds totals at
least $1,000,000, including purchases pursuant to the "Letter

28
<PAGE>

of Intent" and "Cumulative Discount" features described under "Special
Features" (the "Large Purchase Privilege"). The other funds for which the
Large Purchase Privilege is available will vary from time to time because they
are generally offered only for limited periods. As of the date of this
Prospectus, the Large Purchase Privilege is available only with respect to the
Fund and the AIG Children's World Fund -- 2005. In the future, you may obtain
a list of the funds for which the Large Purchase Privilege is available and
request a prospectus by telephoning (800) 862-3984.

A contingent deferred sales charge of 1% may be imposed upon redemption of
shares of the Fund that are purchased under the Large Purchase Privilege if
they are redeemed within one year of purchase. The charge will not be imposed
upon redemption of reinvested dividends or share appreciation. The charge is
applied to the value of the shares redeemed less the above exclusions. The
contingent deferred sales charge will be waived in the event of redemption of
shares of a shareholder (including a registered joint owner) who has died or
who, after purchase of the shares being redeemed, becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration).

Shares of the Fund purchased under the Large Purchase Privilege may be
exchanged for shares of certain other funds managed by the Manager under the
exchange privilege described under "Special Features -- Exchange Privilege"
without paying any contingent deferred sales charge at the time of exchange.
If the shares received in exchange are redeemed thereafter, a contingent
deferred sales charge may be imposed in accordance with the foregoing
requirements provided that the shares redeemed will retain their original cost
and purchase date for purposes of the contingent deferred sales charge.

The Distributor may in its discretion compensate investment dealers or other
financial services firms in connection with the sale of shares of the Fund to
employer sponsored employee benefit plans at net asset value up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up
to $5 million during the Offering Period, 0.50% on the next $5 million and
0.25% on amounts over $10 million during the Offering Period. The Distributor
may in its discretion compensate investment dealers or other financial service
firms in connection with the sale of shares of the Fund in accordance with the
Large Purchase Privilege up to the following amounts: 1.00% of the net asset
value of shares sold on amounts up to $3 million, .50% on the next $2 million
and .25% on amounts over $5 million. For purposes of determining the
appropriate commission percentage to be applied to a particular sale under the
foregoing schedule, the Distributor will consider the cumulative amount
invested by the purchaser in the Fund and other funds eligible for the Large
Purchase Privilege.

Shares may be sold to officers, trustees, directors, employees (including
retirees) and sales representatives of the Fund, its investment manager, its
subadvisors, its principal underwriter or certain affiliated companies, for
themselves or members of their families, or to any trust, pension, profit-
sharing or other benefit plan for only such persons at net asset value in any
amount. Shares may be sold at net asset value in any amount to registered
representatives and employees of broker-dealers having selling group
agreements with the Distributor and officers, directors and employees of
service agents of the Fund, for themselves or their spouses or dependent
children, or to any trust or pension, profit-sharing or other benefit plan for
only such persons. Shares may be sold at net asset value in any amount to
officers, trustees, directors and employees of banks and other financial
services firms that provide administrative services related to order placement
and payment to facilitate transactions in shares of the Fund for their clients
pursuant to an agreement with the Distributor or one of its

29
<PAGE>

affiliates, for themselves or members of their families, or to any trust,
pension or profit-sharing or other benefit plan for only such persons.
Additionally, shares may be sold at net asset value in any amount to officers,
trustees, directors and employees of certain other firms that provide services
for the benefit of the Fund and their affiliates, for themselves or members of
their families, or to any trust, pension, profit-sharing or other benefit plan
for only such persons.

Shares of the Fund may be sold at net asset value through certain investment
advisers registered under the Advisers Act and other financial services firms
that adhere to certain standards established by the Distributor, including a
requirement that such shares be sold for the benefit of their clients
participating in a "wrap account" or similar program under which such clients
pay a fee to the investment adviser or other firm. Such shares are sold for
investment purposes and on the condition that they will not be resold except
through redemption or repurchase by the Fund. The Fund may also issue shares
at net asset value in connection with the acquisition of the assets of or
merger or consolidation with another investment company, or to shareholders in
connection with the investment or reinvestment of income and capital gain
dividends.

The sales charge scale is applicable to purchases made at one time by any
"purchaser," which includes an individual, or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account, or an organization exempt from
federal income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to
qualify for a lower sales charge, all orders from an organized group will have
to be placed through a single investment dealer or other firm and identified
as originating from a qualifying purchaser.

Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for
such services, which charges would reduce the clients' return. Firms also may
hold Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no
information with respect to or control over accounts of specific shareholders.
Such shareholders may obtain access to their accounts and information about
their accounts only from their firm. Certain of these firms may receive
compensation from the Fund through the Distributor for recordkeeping and other
expenses relating to these nominee accounts. See "Shareholder Servicing
Agreement." In addition, certain privileges with respect to the purchase and
redemption of shares or the reinvestment of dividends may not be available
through such firms. Some firms may participate in a program allowing them
access to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may perform
functions such as generation of confirmation statements and disbursement of
cash dividends. Such firms, including affiliates of the Distributor, may
receive compensation from the Fund through the Distributor for these services.
This prospectus should be read in conjunction with such firms' material
regarding their fees and services.

Orders for the purchase of shares of the Fund will be confirmed at a price
based on the net asset value next determined after receipt by the Distributor
of the order accompanied by payment. However, orders received by

30
<PAGE>

dealers or other firms prior to the determination of net asset value (see
"Investment Advisory Services -- Valuation") and received by the Distributor
prior to the close of its business day will be confirmed at a price based on
the net asset value effective on that day. Dealers and other financial
services firms are obligated to transmit orders promptly. Payment for purchase
orders must be made by check (a check drawn on a foreign bank will not be
accepted) or Federal Reserve Draft or by wiring Federal Funds to the Fund's
Transfer Agent. Checks should be made payable to AIG Retiree Fund--2003. See
"Purchase and Redemption of Shares" in the Statement of Additional
Information.

The Fund reserves the right to withdraw all or any part of the offering made
by this prospectus and to reject purchase orders.

Shareholders should direct their inquiries to the Distributor or to the firm
from which they received this prospectus.

REDEMPTION OR REPURCHASE OF SHARES

GENERAL

Any shareholder may require the Fund to redeem his or her shares. However,
as explained more fully in "Investment Objectives and Management Policies --
The Manager's Guarantee", shareholders who redeem some or all of their shares
before the Maturity Date will not be certain to receive the full amount of
their original investment (including any front-end sales charges paid) on or
after the Maturity Date. As noted previously, pursuant to the terms of the
Manager's Guarantee, shareholders who wish to be certain of receiving at least
the full amount of their original investment must reinvest all dividends and
distributions in additional shares and hold all their shares until the
Maturity Date.

When shares are held for the account of a shareholder by the Fund's Transfer
Agent, the shareholder may redeem them by making a written request with
signatures guaranteed to AIG Retiree Fund -- 2003, PO Box 8935, Wilmington,
Delaware 19899-8935. Written redemption instructions, indicating the name of
the Fund and the number of shares to be redeemed, must be received by the
Transfer Agent in proper form and signed exactly as the shares are registered.
All signatures must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Stock Exchanges Medallion
Program and the Securities Transfer Agents Medallion Program ("STAMP"). Such
guarantees must be signed by an authorized signatory thereof with "Signature
Guaranteed" appearing with the shareholder's signature. If the signature is
guaranteed by a broker or dealer, such broker or dealer must be a member of a
clearing corporation and maintain net capital of at least $100,000. Signature-
guarantees may not be provided by notaries public. Redemption requests by
corporate and fiduciary shareholders must be accompanied by appropriate
documentation establishing the authority of the person seeking to act on
behalf of the account. Investors may obtain from the Fund or the Transfer
Agent forms of resolutions and other documentation which have been prepared in
advance to assist in compliance with the Fund's procedures.

31
<PAGE>

The redemption price will be the net asset value next determined following
receipt by the Distributor of a properly executed request with any required
documents. Payment for shares redeemed will be made in cash as promptly as
practicable but in no event later than three business days after receipt of a
properly executed request in proper form for transfer. When the Fund is
requested to redeem shares for which it may not have yet received good
payment, it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 15 days from the purchase date. The redemption
within one year of shares purchased at net asset value under the Large
Purchase Privilege may be subject to a 1% contingent deferred sales charge
(see "Purchase of Shares").

Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and exchange transactions for individual and
institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges
on the account application or by contacting the Distributor or the Transfer
Agent for appropriate instructions. Please note that the telephone exchange
privilege is automatic unless the shareholder refuses it on the account
application. Neither the Fund nor its agents will be liable for any loss,
expense or cost arising out of any telephone request pursuant to these
privileges, including any fraudulent or unauthorized request, and THE
SHAREHOLDER WILL BEAR THE RISK OF LOSS, so long as the Fund or its agent
reasonably believes, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The verification procedures include
recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.

If the proceeds of the redemption are $25,000 or less and the proceeds are
payable to the shareholder of record at the address of record, normally a
telephone request or a written request by all registered account holders
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders may exercise this special privilege of redeeming
shares by telephone request or written request without signature guarantee
subject to the same conditions as individual account holders and subject to
the limitations on liability described above, provided that this privilege has
been pre-authorized by the institutional account holder by written instruction
to the Distributor with signatures guaranteed. Telephone requests may be made
by calling (800) 862-3984. Shares purchased by check may not be redeemed under
this privilege of redeeming shares by telephone request until such shares have
been owned for at least 15 days. This privilege of redemption of shares by
telephone request or by written request without a signature guarantee may not
be used if the shareholder's account has had an address change within 30 days
of the redemption request. During periods when it is difficult to contact the
Distributor by telephone, it may be difficult to use the telephone redemption
privilege, although investors can still redeem by mail. The Fund reserves the
right to terminate or modify this privilege at any time.

REPURCHASES (CONFIRMED REDEMPTIONS)

A request for repurchase may be communicated by a shareholder through a
securities dealer or other financial services firm to the Distributor, which
the Fund has authorized to act as its agent. There is no charge by the
Distributor with respect to repurchases; however, dealers or other firms may
charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The

32
<PAGE>

repurchase price will be the net asset value next determined after receipt of
a request by the Distributor. However, requests for repurchases received by
dealers or other firms prior to the determination of net asset value (see
"Investment Advisory Services -- Valuation") and received by the Distributor
prior to the close of the Distributor's business day will be confirmed at the
net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.

EXPEDITED WIRE TRANSFER REDEMPTIONS

If the account holder has given authorization for expedited wire redemption
to the account holder's brokerage or bank account, shares can be redeemed and
proceeds sent by federal wire transfer to a single previously designated
account. Requests received by the Distributor prior to the determination of
net asset value will result in shares being redeemed that day at the net asset
value effective on that day and normally the proceeds will be sent to the
designated account the following business day. Delivery of the proceeds of a
wire redemption request of $250,000 or more may be delayed by the Fund for up
to seven days if the Distributor deems it appropriate under then current
market conditions. Once authorization is on file, the Distributor will honor
requests by telephone at (800) 862-3984 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge
the account holder for wire transfers. The account holder is responsible for
any charges imposed by the account holder's firm or bank. There is a $5,000
wire redemption minimum. To change the designated account to receive wire
redemption proceeds, send a written request to the Distributor with signatures
guaranteed as described above or contact the firm through which shares of the
Fund were purchased. Shares purchased by check may not be redeemed by wire
transfer until such shares have been owned for at least 15 days. During
periods when it is difficult to contact the Distributor by telephone, it may
be difficult to use the expedited redemption privilege. The Fund reserves the
right to terminate or modify this privilege at any time.

REINSTATEMENT PRIVILEGE

A shareholder who has redeemed shares of the Fund or certain other funds may
reinstate up to the full amount redeemed at net asset value at the time of the
reinstatement in shares of the Fund (but only prior to the end of the Offering
Period) or, if available, in shares of certain other funds managed by the
Manager. A shareholder of the Fund who redeems shares purchased under the
Large Purchase Privilege (see "Purchase of Shares") and incurs a contingent
deferred sales charge may reinstate up to the full amount redeemed at net
asset value at the time of the reinstatement in shares of the Fund (but only
prior to the end of the Offering Period) or, if available, in shares of
certain other funds managed by the Manager. The amount of any contingent
deferred sales charge also will be reinstated. The funds for which these
privileges are available will vary from time to time because they are
generally offered only for limited periods. As of the date of this Prospectus,
the Reinstatement Privilege is not available for any other funds. In the
future, you may obtain a list of the funds for which these privileges are
available and request a prospectus by telephoning (800) 862-3984. These
reinstated shares will retain their original cost and purchase date for
purposes of the contingent deferred sales charge. Purchases through the
Reinstatement Privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for funds
available for sale in the shareholder's state of

33
<PAGE>

residence as listed under "Special Features -- Exchange Privilege." The
Reinstatement Privilege can be used only once as to any specific shares and
reinstatement must be effected within six months of the redemption. If a loss
is realized on the redemption of Fund shares, the reinstatement may be subject
to the "wash sale" rules if made within 30 days of the redemption, resulting
in the postponement of the recognition of such loss for federal income tax
purposes. The Reinstatement Privilege may be terminated or modified at any
time and is subject to the limited Offering Period of the Fund.

SPECIAL FEATURES

LETTER OF INTENT

By signing a Letter of Intent form, available from your broker or the
Transfer Agent, you may become eligible for the reduced sales load applicable
to the total number of shares of the Fund and shares of certain other funds
managed by the Manager purchased during the Offering Period pursuant to the
terms and under the conditions set forth in the Letter of Intent. A minimum
initial purchase of $1,000 is required. The Transfer Agent will hold in escrow
5% of the amount indicated in the Letter of Intent for payment of a higher
sales load if you do not purchase the full amount indicated in the Letter of
Intent. The escrow will be released when you fulfill the terms of the Letter
of Intent by purchasing the specified amount. If your purchases qualify for a
further sales load reduction, the sales load will be adjusted to reflect the
total purchase at the end of the Offering Period. If total purchases are less
than the amount specified, you will be requested to remit an amount equal to
the difference between the sales load actually paid and the sales load
applicable to the aggregate purchases actually made. If such remittance is not
received within 20 days, the Transfer Agent, as attorney-in-fact pursuant to
the terms of the Letter of Intent, will redeem an appropriate number of shares
held in escrow to realize the difference. Signing a Letter of Intent does not
bind you to purchase the full amount indicated at the sales load in effect at
the time of the signing, but you must complete the intended purchase to obtain
the reduced sales load. At the time you purchase shares of any of the eligible
funds, you must indicate your intention to do so under a Letter of Intent. The
other funds that may be purchased under a Letter of Intent will generally
include the various series of the Company and will vary from time to time
because some funds will be offered only for limited periods, as described in
the applicable prospectus. For a list of the funds for which the Letter of
Intent is available and to request a prospectus, telephone (800) 862-3984.

RIGHT OF ACCUMULATION

YOU MAY QUALIFY FOR A REDUCED SALES CHARGE. Pursuant to the Right of
Accumulation, certain investors are permitted to purchase shares of the Fund
at the sales charge applicable to the total of (a) the dollar amount then
being purchased plus (b) the current public offering price of all shares of
the Fund, shares of the other series of AIG All Ages Funds, Inc. and shares of
certain other funds managed by the Manager, then held by that investor. The
following purchases may be aggregated for the purposes of determining the
amount of purchase and the corresponding sales load: (a) individual purchases
on behalf of a single purchaser, the purchaser's spouse and their children
under the age of 21 years including shares purchased in connection with a
retirement account exclusively for the benefit of such individual(s), such as
an IRA, and purchases made by a company controlled by such individual(s); (b)
individual purchases by a trustee or other fiduciary account, including an
employee benefit plan (such as employer-sponsored pension, profit-sharing and
stock bonus plans, including plans under Section 401(k) of the Code, and
medical, life and disability insurance trusts); or (c) individual purchases by
a trustee or other fiduciary purchasing shares concurrently for two or more
employee benefit plans of a single

34
<PAGE>

employer or of employers affiliated with each other. Subsequent purchases made
under the conditions set forth above will be subject to the minimum subsequent
investment of $250 and will be entitled to the Right of Accumulation.

EXCHANGE PRIVILEGE

Subject to the following limitations, shares of the Fund and certain other
funds may be exchanged for each other at their relative net asset values.
Shares purchased by check may not be exchanged until they have been owned for
at least 15 days. In addition, shares acquired by such an exchange may not be
exchanged thereafter until they have been owned for 15 days. The funds for
which this privilege is available will vary from time to time because some
funds will be offered only for limited periods, as described in the applicable
prospectus. As of the date of this Prospectus, the Exchange Privilege is not
available between the Fund and any other funds. For a list of the funds for
which the Exchange Privilege is available in the future, and to request a
prospectus, telephone (800) 862-3984. Exchanges may be made only for funds
that are available for sale in the shareholder's state of residence. The
Manager's Guarantee relates only to the Fund and will have no effect on shares
that are exchanged for shares of another fund.

The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in
the exchange. There is no service fee for an exchange; however, dealers or
other firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and
purchase of shares of the other fund. For federal income tax purposes, any
such exchange constitutes a sale upon which a gain or loss may be realized,
depending upon whether the value of the shares being exchanged is more or less
than the shareholder's adjusted cost basis. Shareholders interested in
exercising the exchange privilege may obtain prospectuses of the other funds
from dealers, other firms or the Distributor. Exchanges may be accomplished by
a written request to the Distributor, or by telephone if the shareholder has
given authorization. Once the authorization is on file, the Distributor will
honor requests by telephone at (800) 862-3984 or in writing, subject to the
limitations on liability under "Redemption or Repurchase of Shares--General."
During periods when it is difficult to contact the Distributor by telephone,
it may be difficult to use the telephone exchange privilege. The exchange
privilege is not a right and may be suspended, terminated or modified at any
time. Except as otherwise permitted by applicable regulations, 60 days' prior
written notice of any termination or material change will be provided.

AUTOMATIC INVESTMENT PROGRAM

The Automatic Investment Program enables you to authorize checks to be drawn
on your checking account at regular monthly or quarterly intervals during the
Offering Period for fixed amounts of $100 or more to purchase shares of the
Fund. This Program permits you to use the dollar-cost-averaging method to
invest in the Fund. The Automatic Investment Program will typically terminate
on the last day of the Offering Period. See the terms and conditions on the
Account Application.

RETIREMENT PLANS

An investment in shares of the Fund may be appropriate for certain
Individual Retirement Accounts ("IRAs"), self-employed retirement plans and
corporate plans. In view of the limited Offering Period of the

35
<PAGE>

Fund (see "Purchase of Shares"), the Fund may not be appropriate for periodic
contribution plans. Investors who are considering establishing, or purchasing
shares of the Fund for, any retirement plan should consult with their own tax
advisers before doing so.

The Fund sponsors IRAs which may also be used as Simplified Employee Pension
Plan ("SEP") IRA accounts. Eligible investors may establish an IRA, or a SEP-
IRA with their employer, to invest in the Fund.

PNC Bank, N.A. serves as custodian for the IRAs and SEP-IRAs sponsored by
the Fund. the current fees payable to PNC Bank, N.A. for its services as IRA
custodian are available upon request. Neither PNC Bank, N.A. nor the Fund
administers the SEP-IRAs and therefore no assurance can be given that a
particular SEP-IRA is properly administered.

PERFORMANCE

The Fund may advertise several types of performance information, including
"average annual total return" and "total return." Each of these figures is
based upon historical results and is not necessarily representative of the
future performance of the Fund.

Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in the Fund's
portfolio for the period referenced, assuming the reinvestment of all
dividends. Thus, these figures reflect the change in the value of an
investment in the Fund during a specified period. Average annual total return
will be quoted for at least the one, five and ten year periods ending on a
recent calendar quarter (or if such periods have not yet elapsed, at the end
of a shorter period corresponding to the life of the Fund). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.

The Fund's performance may be compared to that of the Consumer Price Index
or various unmanaged indexes including the Dow Jones Industrial Average, the
Standard & Poor's 500 Stock Index, the Europe Australia Far East ("EAFE")
Index and other indexes prepared by Morgan Stanley Capital International. The
Fund's performance may also be compared to the performance of other mutual
funds or mutual fund indexes as reported by independent mutual fund reporting
services such as Lipper Analytical Services, Inc. and Micropal, Ltd. Such
performance calculations are generally based upon changes in net asset value
with all dividends reinvested.

The Fund may quote information from publications such as Morningstar, Inc.,
The Wall Street Journal, Money Magazine, Forbes, Barron's, Fortune, The New
York Times, The Washington Post, The International Herald Tribune, USA Today,
Institutional Investor, Registered Representative and other consumer journals
and publications by the U.S. government and its agencies. Also, investors may
want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds, and U.S.
Treasury obligations. Bank product performance may be based upon, among other
things, the BANK RATE MONITOR National Index (TM) or various certificate of
deposit indexes. Money market fund performance may be based upon, among other
things, the IBC/Donoghue Money Fund Report (R) or Money Fund Insight (R),
reporting services on money market

36
<PAGE>

funds. Performance of U.S. Treasury obligations may be based upon, among other
things, various U.S. Treasury bill indexes. Certain of these alternative
investments may offer fixed rates of return and guaranteed principal and may
be insured.

The Fund may depict the historical performance of the securities in which
the Fund and the Equity Portfolio may invest over periods reflecting a variety
of market or economic conditions either alone or in comparison with
alternative investments, performance indexes of those investments or economic
indicators. The Fund may also describe its portfolio holdings (including those
of the Equity Portfolio) and depict its size or relative size compared to
other mutual funds, the number and make-up of its shareholder base and other
descriptive factors concerning the Fund.

The Fund's shares are sold at net asset value plus a maximum sales charge of
4.75% of the offering price. While the maximum sales charge is normally
reflected in the Fund's performance figures, certain total return calculations
may not include such charge and those results would be reduced if it were
included. The Fund's returns and net asset value will fluctuate. Except in
limited cases described in "Purchases of Shares," shares of the Fund are
redeemable by an investor at the then current net asset value, which may be
more or less than original cost. Additional information concerning the Fund's
performance and concerning the historical performance of various types of
investments that may be used to provide for retirement needs appears in the
Statement of Additional Information. Additional information about the Fund's
performance also appears in its Annual Report to Shareholders, which will be
available without charge from the Fund.

ORGANIZATION AND CAPITALIZATION

The Fund is a series of the Company, an open-end management investment
company incorporated under the laws of the State of Maryland on April 4, 1995.
The Board of Directors is authorized to issue, create and classify shares of
capital stock in separate series and classes thereof without further action by
shareholders. To date, shares in the AIG Retiree Fund--2003 described herein
and the AIG Children's World Fund--2005 are the only shares authorized. Shares
of capital stock have a par value of $.001. Each share of the Company is given
one vote. Matters affecting a certain series of the Company, such as approval
of new investment advisory agreements and changes in the fundamental policies
of a series of the Company, will require the affirmative vote of the
shareholders of that series. All shares have non-cumulative voting rights for
the election of directors. Each outstanding share is fully paid and non-
assessable, and each is freely transferable. There are no liquidation,
conversion or preemptive rights. The Company will furnish without charge to
each shareholder upon request a full statement of (1) the designations and any
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the stock of each class that the Company is authorized to issue;
and (2)(a) the differences in the relative rights and preferences between the
shares of each series of preferred or special class and (b) the authority of
the Board to set the relative rights and preferences of subsequent series. The
Company does not presently intend to hold annual shareholder meetings, but
will do so if requested by the holders of at least ten percent of its
outstanding shares for the purpose of voting upon the removal of a director or
directors and to assist in communications with other shareholders as required
by the 1940 Act.

The Equity Portfolio is an open-end management investment company, organized
under the laws of Delaware on June 23, 1995 as a trust with limited liability.

37
<PAGE>

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

AIG RETIREE FUND -- 2003

A SERIES OF
AIG ALL AGES FUNDS, INC.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND'S AND THE EQUITY PORTFOLIO'S EXPENSES............................. 4
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES.............................. 5
RISK FACTORS............................................................... 13
SPECIAL INFORMATION CONCERNING THE
TWO-TIER STRUCTURE........................................................ 16
INVESTMENT ADVISORY SERVICES............................................... 18
AMERICAN INTERNATIONAL GROUP, INC.......................................... 23
DIVIDENDS AND DISTRIBUTIONS................................................ 23
TAXES...................................................................... 23
THE ADMINISTRATOR.......................................................... 25
THE TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT.......................................................... 25
CUSTODIAN.................................................................. 25
SHAREHOLDER SERVICING AGREEMENT............................................ 26
RULE 12b-1 PLAN............................................................ 26
PURCHASES OF SHARES........................................................ 27
REDEMPTION OR REPURCHASE OF SHARES......................................... 31
SPECIAL FEATURES........................................................... 34
PERFORMANCE................................................................ 36
ORGANIZATION AND CAPITALIZATION............................................ 37
</TABLE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.

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

AIG
RETIREE FUND
-- 2003

FEBRUARY 15, 1996,
AS SUPPLEMENTED ON APRIL 12, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

AIG RETIREE FUND - 2003
A Series of AIG All Ages Funds, Inc.

Statement of Additional Information
February 15, 1996, as supplemented on April 12, 1996

505 Carr Road
Wilmington, DE 19809
(800) 862 - 3984

AIG Retiree Fund -- 2003 (the "Fund") is a diversified series of AIG
All Ages Funds, Inc. (the "Company"). The Fund has two investment objectives.
The first objective is to provide a guaranteed return, on or after November 15,
2003, of the full amount originally invested (including any front-end sales
charges paid) by each shareholder who has reinvested all dividends and
distributions. The Fund pursues its first objective by investing a portion of
its assets in U.S. Treasury zero coupon securities, combined with further
assurance from a guarantee by AIG Capital Management Corp., the Fund's
investment adviser (the "Manager"). The Manager's obligations under its
guarantee will be backed by its parent, American International Group, Inc.
("AIG").

The Fund's second objective is to achieve total return on capital
through both capital growth (realized and unrealized) and income by investing a
portion of its investable assets in the First Global Equity Portfolio (the
"Equity Portfolio"), a diversified open-end management investment company that
invests in a globally diversified portfolio of equity securities. There can be
no assurance that the Fund's investment objective of total return on capital
will be achieved. The Fund will directly acquire and manage its portfolio of
zero coupon securities. Both the Fund and the Equity Portfolio are managed by
AIG Capital Management Corp. and investment advice is provided by affiliated
companies.

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of the Fund, dated February
15, 1996, as supplemented on April 12, 1996, and as further amended or
supplemented from time to time, a copy of which may be obtained from the Fund
upon request. This Statement of Additional Information is incorporated by
reference in its entirety into the Prospectus.
<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS

<S> <C>
GENERAL INFORMATION.................................... 3

INVESTMENT OBJECTIVES AND POLICIES..................... 3

THE MANAGER'S GUARANTEE................................ 8

DIRECTORS, TRUSTEES AND OFFICERS....................... 10

MANAGEMENT AND EXPENSES................................ 14

RULE 12b-1 PLAN........................................ 15

SHAREHOLDER SERVICING AGREEMENT........................ 16

PORTFOLIO TRANSACTIONS AND BROKERAGE................... 16

PURCHASE AND REDEMPTION OF FUND SHARES................. 17

DISTRIBUTION SERVICES.................................. 18

VALUATION.............................................. 18

TAXES.................................................. 19

PERFORMANCE INFORMATION................................ 20

OTHER INFORMATION...................................... 22

FINANCIAL STATEMENTS OF FIRST GLOBAL EQUITY PORTFOLIO.. 22

INFORMATION WITH RESPECT TO AIG........................ 23
</TABLE>

- 2 -
<PAGE>

GENERAL INFORMATION

The Fund is a newly organized, diversified series of AIG All Ages
Funds, Inc. (the "Company"), an open-end management investment company, and
therefore has no prior history.

INVESTMENT OBJECTIVES AND POLICIES

OVERVIEW

The Fund has two investment objectives. The first is to provide a
guaranteed return, at any time on or after November 15, 2003 (the "Maturity
Date"), of the full amount originally invested (including any front-end sales
charges paid) by each shareholder who has reinvested all dividends and
distributions (the "Repayment Objective"). The Fund pursues its first objective
by investing a portion of its assets in zero coupon securities that are the
direct obligations of the U.S. Treasury ("Treasury Securities"), combined with
further assurance from a guarantee by the Manager (the "Manager's Guarantee").
The Manager's obligations under the Manager's Guarantee will be backed by its
parent, AIG. The Fund's second objective is to provide total return on capital
through both capital growth (realized and unrealized) and income. Unlike other
mutual funds that directly acquire and manage their own portfolio of securities,
the Fund seeks to achieve this objective by investing the balance of its assets
in the First Global Equity Portfolio (the "Equity Portfolio"), an open-end
diversified management investment company that invests in a globally diversified
portfolio of equity securities. The investment objectives of the Fund are
fundamental and cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of the Fund, as defined under the
Investment Company Act of 1940, as amended (the "1940 Act"). The following
information regarding the Fund's and the Equity Portfolio's investment policies
supplements the information contained in the Prospectus.

Zero Coupon Securities. There are currently two basic types of zero
coupon securities, those created by separating the interest and principal
components of a previously issued interest-paying security and those originally
issued in the form of a face amount only security paying no interest. Zero
coupon securities of the U.S. Government and certain of its agencies and
instrumentalities and of private corporate issuers are currently available,
although the Fund will purchase only those that are direct obligations of the
U.S. Treasury.

Zero coupon securities of the U.S. Government that are currently
available are called STRIPS (Separate Trading of Registered Interest and
Principal of Securities). STRIPS are issued under a program introduced by the
U.S. Treasury and are direct obligations of the U.S. Government. The U.S.
Government does not issue zero coupon securities directly. The STRIPS program,
which is ongoing, is designed to facilitate the secondary market stripping of
selected Treasury notes and bonds into individual interest and principal
components. Under the program, the U.S. Treasury continues to sell its shares
and bonds through its customary auction process. However, a purchaser of those
notes and bonds who has access to a book-entry account at a Federal Reserve bank
may separate the specified Treasury notes and bonds into individual interest and
principal components. The

- 3 -
<PAGE>

selected Treasury Securities may thereafter be maintained in the book-entry
system operated by the Federal Reserve in a manner that permits the separate
trading and ownership of the interest and principal payments. The Federal
Reserve does not charge a fee for this service; however, the book-entry transfer
of interest and principal components is subject to the same fee schedule
generally applicable to the transfer of Treasury Securities.

Under the program, in order for a book-entry Treasury Security to be
separated into its component parts, the face amount of the security must be an
amount which, based on the stated interest rate of the security, will produce a
semi-annual interest payment of $1,000 or a multiple of $1,000. Once a book-
entry security has been separated, each interest and principal component may be
maintained and transferred in multiples of $1,000 regardless of the face amount
initially required for separation or the resulting amount required for each
interest payment.

Investment banks may also strip Treasury Securities and sell them
under proprietary names. These securities may not be as liquid as STRIPS and
the Fund has no present intention of investing in these instruments.

STRIPS are purchased at a discount from $1,000. Absent a default by
the U.S. Government, a purchaser will receive face value for each of the STRIPS
provided the STRIPS are held to their due dates. While STRIPS can be purchased
on any business day, they all currently come due on February 15, May 15, August
15 or November 15.

Foreign Currency Transactions. The Equity Portfolio may enter into
forward foreign currency exchange contracts to fix the U.S. dollar value of a
security it has agreed to buy or sell for the period between the date the trade
was entered into and the date the security is delivered and paid for. A forward
foreign currency exchange contract is an agreement to purchase or sell a
specific currency at a future date and at a price set at the time the contract
is entered into.

The Equity Portfolio is not required to enter into forward contracts
with regard to settlement of its foreign currency-denominated securities and
will not do so unless deemed appropriate by the Manager, AIG Global Investment
Corp. ("AIG Global") or AIG Global Investment Corp. (Europe) Ltd. ("AIG Global
Europe") (AIG Global and AIG Global Europe are referred to as the
"Subadvisors"). Forward foreign currency exchange contracts do not eliminate
fluctuations in the underlying price of the securities. They simply establish a
rate of exchange at a future date. Additionally, although such contracts tend
to minimize the risk of loss due to fluctuations in the value of the currency
being traded, at the same time, they tend to limit any potential gain which
might result from an increase in the value of that currency.

Investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Equity Portfolio at one rate, while offering a lesser
rate of exchange should the Equity Portfolio desire to resell that currency to
the dealer.

- 4 -
<PAGE>

Borrowing. The Fund or the Equity Portfolio may from time to time
borrow money for extraordinary or emergency purposes in an amount up to 5% of
its total assets from banks at prevailing interest rates. This policy is
fundamental. Should the Fund or the Equity Portfolio, for any reason, have
borrowings that do not meet this test, then within three business days, it must
reduce such borrowings so as to meet the foregoing test. Under these
circumstances, the Fund or the Equity Portfolio may have to liquidate its
holdings at a time when it is disadvantageous to do so. Gains made with
additional funds borrowed will generally cause the net asset value of the Fund
or the Equity Portfolio, as relevant, to rise faster than could be the case
without borrowings. Conversely, if investment results fail to cover the cost of
borrowings, the net asset value of the Fund or Equity Portfolio, as relevant,
could decrease faster than if there had been no borrowings.

Lending of Portfolio Securities. Neither the Fund nor the Equity
Portfolio may lend its holdings of securities. These are fundamental policies
of the Fund and the Equity Portfolio.

Except as noted above, the foregoing investment policies of the Fund
and the Equity Portfolio are not fundamental and the Board of Directors of the
Company or the Trustees of the Equity Portfolio, as relevant, may change such
policies without the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund or the Equity Portfolio, as relevant.

Portfolio Turnover. The Equity Portfolio may generally change its
portfolio investments at any time in accordance with the Manager's or the
Subadvisors' appraisal of factors affecting any particular issuer or the market
economy in general. The Equity Portfolio anticipates that the annual rate of
portfolio turnover will not exceed 100% per annum. After the Offering Period,
the Fund does not anticipate any portfolio turnover in its holding of zero
coupon securities except as necessary to meet requests for redemption and in
connection with the non-reinvestment of dividends.

ADDITIONAL INVESTMENT RESTRICTIONS FOR THE FUND AND THE EQUITY PORTFOLIO

Except as expressly indicated otherwise, the following additional
restrictions are fundamental policies which cannot be changed without the
approval of the holders of a majority of the outstanding voting securities of
the Fund or the Equity Portfolio, as relevant. Under the 1940 Act, a "vote of a
majority of the outstanding voting securities" means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares, or (2) 67% or more of the
shares present at a shareholder's meeting, if more than 50% of the outstanding
shares are represented at the meeting in person or in proxy.

The Fund may not:

(1) Issue senior securities (i.e., any security evidencing
indebtedness or any stock of a class having priority over any
other class as to distribution of assets or payment of
dividends), provided that the Fund may borrow money as described
in clause (5) below.

(2) Make short sales of securities.

- 5 -
<PAGE>

(3) Purchase securities on margin, except for such short-term credits
as are necessary for the clearance of purchases and sales of its
Treasury Securities.

(4) Write put or call options on securities.

(5) Borrow money, except from banks for extraordinary or emergency
purposes, or invest borrowed funds in additional securities.
Such borrowing may not exceed 5% of the Fund's total assets.

(6) Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of
1933, as amended (the "Securities Act") in disposing of a
portfolio security.

(7) Purchase, sell or hold any real estate or real estate mortgage
loans.

(8) Purchase or sell any commodities or commodity contracts,
including futures contracts.

(9) Make loans or lend the Treasury Securities it holds in
furtherance of the Repayment Objective.

(10) Invest in any securities other than (i) Treasury Securities and
(ii) beneficial interests in the Equity Portfolio or of another
issuer that has investment objectives, policies and limitations
substantially similar to those of the Equity Portfolio. Should
the Directors determine that investment in the Equity Portfolio
or a similar issuer is no longer in the best interest of the
Fund's shareholders, they will hold a vote of shareholders to
consider possible alternatives.

(11) Except for investments in (i) Treasury Securities and (ii)
beneficial interests in the Equity Portfolio or of another issuer
that has investment objectives, policies and limitations
substantially similar to those of the Equity Portfolio, purchase
any security if, as a result, more than 25% of the market value
of its total assets would be invested in securities of issuers
principally engaged in the same industry (except Treasury
Securities). This investment policy is not fundamental.

The Equity Portfolio may not:

(1) Issue senior securities (i.e., any security evidencing
indebtedness or any stock of a class having priority over any
other class as to distribution of assets or payment of
dividends), provided that the Equity Portfolio may borrow money
as described in clause (5) below.

(2) Make short sales of securities except short sales against the
box.

(3) Purchase securities on margin, except for such short-term credits
as are necessary for the clearance of purchases and sales of its
portfolio securities.

(4) Write put or call options on securities.

- 6 -
<PAGE>

(5) Borrow money, except from banks for extraordinary or emergency
purposes, or invest borrowed funds in additional securities. Such
borrowing may not exceed 5% of the Equity Portfolio's total
assets.

(6) Engage in the underwriting of securities, except insofar as the
Equity Portfolio may be deemed an underwriter under the
Securities Act in disposing of a portfolio security.

(7) Purchase, sell or hold any real estate, real estate mortgage
loans or real estate limited partnerships, provided that the
Equity Portfolio may invest in the securities of companies that
are engaged in businesses related to real estate and real estate
mortgage loans.

(8) Purchase or sell any commodities or commodity contracts,
including commodities futures contracts, provided that the Equity
Portfolio may enter into forward foreign currency contracts to
provide for its obligations at the time of settlement of
securities transactions.

(9) Make loans or lend portfolio securities except as described in
the Prospectus under "Other Investment Policies - Repurchase
Agreements."

(10) Invest more than 25% of the market value of its total assets in
securities of issuers principally engaged in the same industry
(except Treasury Securities).

(11) As to 75% of the value of its total assets, invest more than 5%
of its total assets, at market value, in the securities of any
one issuer (except Treasury Securities).

(12) Own more than 10% of the outstanding voting securities of any
issuer, or more than 10% of any class of securities of one
issuer.

(13) Invest more than 5% of the value of its total assets, at market
value, in the securities of issuers which, with their
predecessors, have been in business less than three years,
provided that securities guaranteed by a company that has been in
operation at least three continuous years shall be excluded from
this limitation, or in equity securities the resale of which is
restricted by law. This policy is not fundamental.

(14) Purchase securities of open-end or closed-end investment
companies, except as permitted by the 1940 Act, and only in open
market purchases where no commission or profit to a sponsor or
dealer results other than customary brokers' commissions.

(15) Invest in warrants if, at the time of acquisition, the investment
in warrants, valued at the lower of cost or market value, would
exceed 5% of the Equity Portfolio's total assets. For purposes
of this restriction, warrants acquired by the Equity Portfolio in
units attached to securities or distributed as dividends on
another security may be deemed to have been purchased without
cost. This policy is not fundamental.

- 7 -
<PAGE>

(16) Invest in companies for the purpose of exercising control or
management.

(17) Purchase or retain securities of any issuer if those officers and
trustees of the Equity Portfolio and the officers and directors
of the Manager or any Subadvisor who individually own
beneficially more than 1/2 of 1% of the outstanding securities of
such issuer, together own beneficially more than 5% of such
outstanding securities. This policy is not fundamental.

(18) Invest in oil, gas or other mineral exploration or development
programs or leases.

The Prospectus states that the Equity Portfolio may invest up to 15%
of its assets in illiquid securities and that the Trustees of the Equity
Portfolio (the "Trustees") may determine that certain securities sold under Rule
144A of the 1933 Act are not subject to this 15% limitation. However, certain
state securities laws require that all Rule 144A securities and also securities
of certain unseasoned issuers be subject to the 15% limitation. So long as
these laws remain in effect, the Equity Portfolio will include all Rule 144A
securities and securities of such unseasoned issuers when determining the
percentage of illiquid securities in its portfolio.

With respect to limitation (5) of the Fund and the Equity Portfolio,
the directors of the Fund (the "Directors") and the Trustees have only
authorized the Fund and the Equity Portfolio to borrow money to meet
requirements for redemptions and to meet nonrecurring operating expenses.

With respect to limitation (15) above, certain state securities laws
require that no more than 2% of the net assets of the Equity Portfolio may be
invested in warrants not listed on either the New York Stock Exchange or the
American Stock Exchange. So long as these laws remain in effect, the Equity
Portfolio will be subject to this additional limitation.

THE MANAGER'S GUARANTEE

The Company and the Manager have entered into a Guarantee Agreement,
dated February 15, 1996 (the "Manager's Guarantee"). The Manager's Guarantee
operates such that an investor who has reinvested all dividends and
distributions (an "Eligible Investor") will be able to demand the return of the
full amount of his or her original investment in the Fund (including any front-
end sales charges paid) after the Maturity Date. An Eligible Investor who has
redeemed some shares prior to the Maturity Date is still an Eligible Investor
with respect to the shares not redeemed.

- 8 -
<PAGE>

purchases shares after the date of such dividend or distribution will still be
ensured of the benefits of the Manager's Guarantee. Shares acquired therefrom
will not, however, be considered shares acquired during the Offering Period for
purposes of determining the amount of an Eligible Investor's original
investment. The Manager's Guarantee is triggered when an Eligible Investor
tenders shares for redemption and the then current net asset value per share
multiplied times the Reinvestment Ratio is less than the highest net asset value
per share of the Fund attained during the Offering Period plus the maximum
front-end sales charge of 4.75%.

Any payment made by the Manager pursuant to the Manager's Guarantee
will be to the Fund and will cause the net asset value of all outstanding shares
to increase by the same amount. Thus, all shareholders may benefit to some
extent from any payment under the Manager's Guarantee. However, a shareholder
who has not reinvested all dividends and distributions will own fewer shares on
or after the Maturity Date than a shareholder who invested the same amount
during the Offering Period but has reinvested continuously. Moreover, such
shareholder will not be entitled to make a demand for payment under the
Manager's Guarantee. The benefits of the Manager's Guarantee will not be
available with respect to shares redeemed prior to the Maturity Date, nor will
they be available after the Maturity Date if no shareholder of the Fund has
reinvested all of his or her dividends and distributions or no Eligible Investor
has yet tendered shares for redemption. The availability of the Manager's
Guarantee will not be affected by the termination or amendment of the Fund's
Management Agreement with the Manager.

In the event of the liquidation or reorganization of the Fund after
the Maturity Date, all Eligible Investors will be deemed to have tendered their
shares for redemption, and, if the Manager's Guarantee is triggered by such
redemption, then the Manager will make any required payment. Any such payment
will take into account any known liabilities in connection with the liquidation
or reorganization, and, therefore, Eligible Investors will in such event be
assured to receive from the Fund at least their original investment (including
any front-end sales charges paid).

The Manager's obligations under the Manager's Guarantee are backed by
its parent, AIG, pursuant to a Support Agreement, dated February 15, 1996. AIG
is a holding company which through its subsidiaries is primarily engaged in a
broad range of insurance and insurance-related activities in the United States
and abroad. Other significant activities of AIG are financial services and
agency and service fee operations. Under the Support Agreement, AIG has agreed
that, if the Manager is unable to make full payment of any amount required under
the Manager's Guarantee, AIG will make a capital contribution or a loan to the
Manager to the extent of the Manager's inability to pay. The Support Agreement
provides that the full amount of such capital contribution or loan will be paid
directly to the Fund.

Payment obligations under the Manager's Guarantee and the Support
Agreement will be solely the obligations of the Manager and AIG, respectively.
No other affiliate of the Fund, the Manager, AIG or any other party has
undertaken any obligation to the Fund or its shareholders with respect to the
Manager's Guarantee.

- 9 -
<PAGE>

The foregoing is only a summary of the terms of the Manager's
Guarantee and the Support Agreement and is qualified in its entirety by
reference to such agreements, copies of which have been filed as exhibits to the
registration statement of which this Statement of Additional Information forms a
part.

DIRECTORS, TRUSTEES AND OFFICERS

Directors and officers of the Company, and Trustees and officers of
the Equity Portfolio, together with information as to their principal business
occupations during the past five years, are shown below. Each Director/Trustee
who is an "interested person" of the Fund and/or the Equity Portfolio, as
defined in the 1940 Act, is indicated by an asterisk.

<TABLE>
<CAPTION>
POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- --------------------- ------- --------- ---------------------
<S> <C> <C> <C>
Roger T. Wickers (60) Chairman Chairman Director, Keystone; Retired
339 Forest Road of the of the General Counsel, Keystone.
Wolfeboro, New Board Board
Hampshire 03894 and and
Director Trustee

Robert L. Ash* (50) Director Trustee Director, AIG Capital
70 Pine Street Management Corp.; Director
New York, New York and President, AIG Asset
10270 Management Services, Inc.;
Director, AIG Asset Management
Inc.; formerly Chairman, Kemper
Sales Co.; Senior Vice
President, Keystone; Vice
President, Alliance Capital.

Paul H. Friedman (41) Director Trustee Partner, Arter & Hadden, law
1801 K Street N.W., Suite firm.
400k
Washington, D.C 20006-
1301
</TABLE>
- --------------
* "Interested" person, as defined in the 1940 Act, by reason of affiliation
with the Manager.

- 10 -
<PAGE>

<TABLE>
<CAPTION>
POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- --------------------- ------- --------- ---------------------
<S> <C> <C> <C>
Linda-Ann S. Director Trustee Executive Vice President, AIG
Goodwin* (47) Capital Management Corp.;
70 Pine Street Senior Vice President, Asset
New York, New York Management Services, Inc.;
10270 formerly Marketing Executive,
Kemper Financial; Marketing
Executive, Coca Cola, USA.

Charles Vinick (48) Director Trustee Independent Consultant;
214 South Venice Blvd. Director, SMR Natural Gas
Venice, California 90291 Income Fund 1995; Director,
Passage International
Incorporated; Advisory Board
Member, SMR Energy, Inc.;
formerly Vice President, The
Cousteau Society.

Gary M. Gardner (44) Secretary Secretary Chief Counsel, PNC Bank, N.A.;
400 Bellevue Parkway formerly Attorney, Federated
Wilmington, Delaware Investors, Inc., Sun America
19809 Asset Management Corp. and
the Boston Company.

David T. Goss (48) Vice Vice Executive Vice President, AIG
70 Pine Street President President Asset Management Services,
New York, New York Inc.; Director and Vice
10270 Chairman, AIG Capital
Management Corp.; Director
and Chairman, AIG Asset
Management Ltd. and AIG Asset
Management Services, Ltd.;
Formerly Director, Equitilink
Australia; Director, Equitilink,
Ltd; Chairman, Equitilink Pacific,
Ltd; President, Equitilink USA,
Inc.; and Director, Valufi (Pty),
Ltd.
</TABLE>

- 11 -
<PAGE>

<TABLE>
<CAPTION>
POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- --------------------- ------- --------- ---------------------
<S> <C> <C> <C>
Daniel K. Kingsbury (37) President President President, AIG Asset
70 Pine Street Management, Inc.; President,
New York, New York AIG Capital Management Corp.;
10270 Senior Vice President, AIG Asset
Management Services, Inc.; Vice
President, AIG Equity Sales
Corp.; Executive Director, AIG
Asset Management Ltd. and AIG
Asset Management Services,
Ltd.; formerly Director of
Strategy and Business Development,
AIG Investment Corporation;
formerly Director of Strategy,
AIG Asset Management
International Ltd.

J. Fergus McKeon (34) Treasurer Treasurer General Manager, PFPC
80 Harcourt Street International; formerly Chief
Dublin, Ireland Accountant, SBC-ISL; Director,
Emerging Markets Fixed Income
Fund.

David Hartman (31) Assistant --- Assistant General Counsel, AIG;
70 Pine Street Secretary formerly Associate, Simpson
New York, New York Thacher & Bartlett.
10270

Walter Josiah (35) Assistant --- Manager, Investor Services Unit
505 Carr Road Secretary of AIG Equity Sales Corp.;
Wilmington, Delaware formerly Assistant Vice
19809 President, Mutual Fund
Operations, Kidder, Peabody &
Co.

Elizabeth M. Tuck (40) Assistant Assistant Assistant Secretary, AIG;
70 Pine Street Secretary Secretary Corporate Secretary for various
New York, New York domestic affiliates and
10270 subsidiaries of AIG.

Jay F. Nusblatt (34) Assistant Assistant Vice President and Director of
103 Bellevue Parkway Treasurer Treasurer Fund Accounting and
Wilmington, Delaware Administration, PFPC Inc.;
19809 formerly Assistant Vice President
of Fund/Plan Services, PFPC
Inc.

=======================================================================================
</TABLE>

- 12 -
<PAGE>

Pursuant to the terms of the Management Agreement with the Fund, the
Manager pays all compensation of officers and employees of the Fund as well as
the fees and expenses of all Directors of the Company who are affiliated persons
of the Manager.

The following table sets forth the aggregate compensation the Company
expects to pay to each Director and the aggregate compensation paid to each
Director for service on the Company's Board and boards of other companies in the
family of funds sponsored by the Manager or its affiliates for the fiscal year
ending on November 30, 1996.

COMPENSATION TABLE
(NOVEMBER 30, 1996)
<TABLE>
<CAPTION>
PENSION
RETIREMENT
BENEFITS TOTAL
ACCRUED COMPENSATION
AGGREGATE AS PART ESTIMATED FROM COMPANY
COMPENSATION OF ANNUAL AND FUND
FROM FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION COMPANY* EXPENSES RETIREMENT TO DIRECTORS*
----------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Roger T. Wickers $15,000 None N/A $30,000
Director
Robert L. Ash 0 None N/A 0
Director
Paul H. Friedman $15,000 None N/A $30,000
Director
Linda-Ann S. Goodwin 0 None N/A 0
Director
Charles Vinick $15,000 None N/A $30,000
Director
</TABLE>

As of April 11, 1996, the directors and officers of the Company, as a
group, owned no shares of common stock of the Fund.

As of April 11, 1996, all of the outstanding shares of the Fund were
owned by AIG Asset Management Services, Inc., a Delaware corporation and a
subsidiary of AIG ("AIGAM Services"). The address of AIGAM Services is 70 Pine
Street, New York, NY 10270. The Fund does not expect that AIGAM Services will
own a significant percentage of its shares once the Offering Period commences.

* The amount shown is maximum compensation payable by the Company and by any
unregistered investment companies that may invest in the Equity Portfolio. To
the extent that unregistered investment companies that invest in the Equity
Portfolio and the individuals listed above serve as directors or trustees of
such entities, these companies will bear a portion of the aggregate
compensation payable to such individuals, allocated

- 13 -
<PAGE>

on the basis of relative net assets of the individual funds, or such other
basis as the Directors may deem appropriate.

MANAGEMENT AND EXPENSES

As indicated in the Prospectus, under the Fund's agreement with the
Manager dated February 15, 1996 and the Equity Portfolio's Agreement with the
Manager dated September 15, 1995, subject to the control of the Board of
Directors of the Fund and the Trustees of the Equity Portfolio, the Manager
administers the business and other affairs of the Fund and the Equity Portfolio.
The Manager provides both the Fund and the Equity Portfolio with such office
space, administrative and other services and executive and other personnel as
are necessary for the operations of the Fund and the Equity Portfolio. The
Manager pays all of the compensation of those Directors and Trustees who are
employees, consultants and/or directors of the Manager and of the officers and
employees of the Fund and the Equity Portfolio. The Fund pays the Manager a
management fee for its services, calculated daily and payable monthly equal to
0.20% per annum of the average daily net assets of the Fund (other than its
interest in the Equity Portfolio). Similarly, the Equity Portfolio pays the
Manager a management fee, calculated daily and payable monthly equal to 1.20%
per annum of the average daily net assets of the Equity Portfolio. As described
in the Prospectus, the Manager has agreed to waive or reimburse certain expenses
subject to reimbursement under certain circumstances by the Fund in later years.
Assuming that 65% of the Fund's assets are invested in zero coupon Treasury
Securities and 35% in the Equity Portfolio, the combined management fee paid by
the Fund (which includes fees paid by the Equity Portfolio for assets of the
Fund held by the Equity Portfolio) would be equal to 0.55% per annum of the
average total assets of the Fund. Assuming an allocation of 50% to 80% of the
Fund's assets to zero coupon Treasury Securities the combined management fee
paid by the Fund will range between 0.40% and 0.70% per annum of the average
total assets of the Fund. Fees paid by the Manager to the Subadvisors (which do
not affect the fees paid by the Fund) are described in the Prospectus.

The Fund and the Equity Portfolio pay all of their respective expenses
other than those assumed by the Manager and the Subadvisors, including brokerage
commissions; administration, shareholder services and distribution fees; fees
and expenses of independent auditors and counsel; taxes and governmental fees,
including fees and expenses of qualifying the Fund and its shares under federal
and state securities laws; cost of stock certificates and expenses of repurchase
or redemption of shares; expenses of printing and distributing reports, notices
and proxy materials to shareholders; expenses of printing and filing reports and
other documents with governmental agencies; expenses of shareholders' meetings;
expenses of corporate data processing and related services; shareholder
recordkeeping and shareholder account services fees and disbursements of
custodians; expenses of distributing dividends and distributions; fees and
expenses of those Directors or Trustees not employed by (or serving as a
director of) the Manager or its affiliates; insurance premiums; and
extraordinary expenses such as litigation expenses. The Company's expenses will
be allocated among the Fund and any other series in a manner determined by the
Board of Directors to be fair and equitable.

The Fund and the Equity Portfolio will be subject to certain state
expense limitations, the most stringent of which currently requires
reimbursement of total expenses (including the management fee, but excluding
interest, taxes, brokerage commissions, distribution

- 14 -
<PAGE>

fees and extraordinary expenses) in any year that they exceed 2 1/2% of the
first $30 million of average net assets, 2% of the next $70 million of average
net assets and 1 1/2% thereafter.

The Fund's and the Equity Portfolio's agreements with the Manager provide
that the Manager will not be liable to the Fund or the Equity Portfolio, as
relevant, for any error of judgment or mistake of law, or for any loss arising
out of any investment, or for any act or omission in performing its duties under
any of these agreements, except for willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations and duties under these
agreements.

The Fund's management agreement and the subadvisory agreement with each
Subadvisor were approved by the Board of Directors of the Fund at a meeting held
on December 18, 1995 and by the sole shareholder on March 22, 1996. The Equity
Portfolio's management agreement and subadvisory agreements were approved by the
Trustees of the Equity Portfolio at a meeting held on June 29, 1995 and by the
sole owner of a beneficial interest in the Equity Portfolio on June 29, 1995.
These agreements shall continue in effect for a period of more than two years
from the date they were entered into only so long as such continuance is
approved in the manner required by the 1940 Act (i.e., by a vote of the majority
of the Board of Directors or Trustees, as relevant, or of the outstanding voting
securities of the Fund or the Equity Portfolio, as relevant, and by a vote of a
majority of the Board of Directors or Trustees who are not parties to the
agreement being voted upon or interested persons (as defined in the 1940 Act) of
any such party). The Fund, the Equity Portfolio, the Manager, or the
Subadvisors, as relevant, can terminate any of these agreements to which it is a
party, without penalty, on 60 days' written notice to the relevant counterparty
and each of these agreements will terminate automatically in the event of its
assignment.

RULE 12b-1 PLAN

As indicated in the Prospectus, the Fund has adopted a Plan of
Distribution (the "Plan") in accordance with Section 12(b) of the 1940 Act and
Rule 12b-1 thereunder.

The Plan was originally approved on December 18, 1995 by the Board of
Directors of the Company, including a majority of the directors who are not
interested persons (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Fund (the "Qualified
Directors"). An amendment to the Plan was approved on March 21, 1996 by the
Board of Directors of the Company, including the Qualified Directors. The Plan
was approved by the sole shareholder of the Fund on March 22, 1996. The Plan
will terminate on the last day of the Offering Period (including any extension
thereof).

The Plan requires the Treasurer of the Fund to provide the Directors, and
that the Directors review at least quarterly, a written report of the amounts
expended (and purposes therefor) under the Plan. Rule 12b-1 also requires that
the selection and nomination of Directors who are not interested persons of the
Fund be made by such disinterested Directors. The Rule 12b-1 Plan may not be
amended to increase materially the amounts payable to the Distributor without
the approval of a majority of the outstanding voting securities (as defined in
the 1940 Act) of the Fund and no material amendment to the Rule 12b-1 Plan may
be made except by a

- 15 -
<PAGE>

majority of both the Directors and the Directors who are not interested persons
of the Fund (as defined in the 1940 Act).

SHAREHOLDER SERVICING AGREEMENT

As indicated in the Prospectus, the Fund has entered into a Shareholder
Servicing Agreement with AIG Equity Sales Corp. (the "Distributor") pursuant to
which the Fund pays the Distributor a fee, payable monthly at the annual rate of
up to 0.25% of net assets of accounts in the Fund that it maintains and
services, in exchange for shareholder services. The Shareholder Servicing
Agreement was originally approved on June 29, 1995 by the Board of Directors of
the Fund, including a majority of the directors who are not interested persons
(as defined in the 1940 Act). The addition of the Fund to the Shareholder
Servicing Agreement was approved on December 18, 1995 by the Board of Directors
of the Fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Fund's and the Equity Portfolio's agreements with the Manager and the
Subadvisors recognize that in the purchase and sale of portfolio securities, the
Manager and Subadvisors will seek the most favorable price and execution and,
consistent with that policy, may give consideration to the research, statistical
and other services furnished by brokers or dealers to the Manager or Subadvisors
for their use. Such services include supplemental investment research, analysis
and reports concerning issuers, industries and securities deemed by the Manager
and Subadvisors to be beneficial to the Fund or the Equity Portfolio. In
addition, the Manager and the Subadvisors are authorized to place orders with
brokers who provide supplemental investment and market research and statistical
and economic analysis through the use of such brokers selected solely on the
basis of seeking the most favorable price and execution, although such research
and analysis may be useful to the Manager and the Subadvisors in connection with
their services to clients other than the Fund or the Equity Portfolio.

In over-the-counter markets, the Fund and the Equity Portfolio deal with
primary market-makers unless a more favorable execution or price is believed to
be obtainable. The Fund and Equity Portfolio may buy securities from or sell
securities to dealers acting as principal, except dealers with which their
directors and/or officers are affiliated.

When two or more investment advisory clients of the Manager or a
Subadvisor desire to buy or sell the same security at the same time, the Manager
or said Subadvisor may aggregate the securities to be sold or purchased in order
to obtain the most favorable price or lower brokerage commissions and efficient
execution. The securities purchased or sold are allocated by the Manager and
the Subadvisors in a manner believed to be equitable to each client. There may
be possible advantages or disadvantages of such transactions with respect to
price or the size of positions readily obtainable or saleable.

- 16 -
<PAGE>

PURCHASE AND REDEMPTION OF FUND SHARES

PURCHASE OF SHARES

REDUCTIONS AVAILABLE. Shares of the Fund sold with a sales load will be
eligible for the following reductions, which are described in more detail in the
Prospectus:

VOLUME DISCOUNTS are provided if the total amount being invested in the
Fund alone, or in combination with shares of certain other mutual funds managed
by the Manager which are sold with a sales load, reaches levels indicated in the
sales load schedule set forth in the Prospectus. A contingent deferred sales
charge of 1% may be imposed upon redemption of shares of the Fund that are
purchased pursuant to a volume discount if they are redeemed within one year of
purchase.

THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in the Fund and shares of certain other mutual funds managed by the
Manager and sold with the same sales load to determine reduced sales loads in
accordance with the schedule in the Prospectus. The value of the shares owned
will be taken into account in orders placed through a dealer, however, only if
the Distributor is notified by the investor or dealer of the amount owned at the
time the purchase is made and is furnished sufficient information to permit
confirmation.

A LETTER OF INTENT allows an investor to purchase shares during the
Offering Period at reduced sales loads in accordance with the schedule in the
Prospectus, based on the total amount of shares of the Fund that the letter
states the investor intends to purchase plus the total net asset value of shares
of certain other mutual funds managed by the Manager purchased with a sales load
by the investor. Reduced sales loads also may apply to purchases made within
the Offering Period starting up to 90 days before the date of execution of a
letter of intent.

CERTAIN AFFILIATED PERSONS. Shares of the Fund may be sold at net asset
value to present and retired Directors, Trustees, officers, employees (and their
family members) of the Fund and to certain other persons, as more completely
described in the Fund's Prospectus under "Purchases of Shares".

PERSONS ENTITLED TO REDUCTIONS. Reductions in sales loads apply to
purchases by a "single person" including an individual; members of a family unit
comprising husband, wife and minor children; or a trustee or other fiduciary
purchasing for a single fiduciary account. Employee benefit plans qualified
under Section 401 or 457 of the Internal Revenue Code or 1986, as amended (the
"Code"), organizations tax exempt under Section 501(c)(3) or (13), and non-
qualified employee benefit plans that satisfy uniform criteria are considered
"single persons" for this purpose.

FURTHER TYPES OF REDUCTIONS. Shares of the Fund may be issued without a
sales load in connection with the acquisition of cash and securities owned by
other investment companies and other personal holding companies, to financial
institution trust departments, to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Fund shares,
or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in

- 17 -
<PAGE>

connection with the purchase of shares of the Fund, to separate accounts
established and maintained by an insurance company which are exempt from
registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with the Distributor and shareholders of
mutual funds with investment objectives and policies similar to the Fund who
purchase shares with redemption proceeds of such funds as described in the
Prospectus.

Shares of the Fund may be sold at net asset value to these persons since
such shares require less sales effort and lower sales related expenses as
compared with sales to the general public.

MORE ABOUT REDEMPTIONS. The procedures for redemption of shares of the
Fund under ordinary circumstances are set forth in the Prospectus. In unusual
circumstances, payment may be postponed, or the right of redemption postponed
for more than seven days, if the ordinary liquidation of securities held is
prevented by the closing of an exchange or market during periods of emergency,
or such other periods ordered by the Securities and Exchange Commission. Under
these circumstances, redemption proceeds may be made in securities, subject to
the review of some state securities commissions. If payment is made in
securities, a shareholder may incur brokerage expenses in converting these
securities to cash.

DISTRIBUTION SERVICES

The Distributor, an affiliate of the Manager, acts as general distributor
of the shares of the Fund and of other mutual funds in the family of funds
sponsored by the Manager or its affiliates. As general distributor of the
Fund's shares, the Distributor normally allows concessions to all dealers, as
indicated in the Prospectus, of up to 4.25% on purchases to which the 4.75%
sales load applies, but may allow the whole amount.

The Distributor is entitled to retain any contingent deferred sales load
imposed on certain redemptions occurring within one year of purchase of shares
purchased pursuant to a volume discount.

VALUATION

Net asset value per share is determined as of the close of the New York
Stock Exchange ("NYSE") (currently 4:00 p.m. New York City time), on each
business day that the NYSE is open. Currently, the NYSE is closed on New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

The net asset value per share is determined by dividing the market value
of the Fund's securities (including its interest in the Equity Portfolio) as of
the close of trading plus any cash or other assets (including dividends and
accrued interest receivable) less all liabilities (including accrued expenses),
by the number of shares outstanding. During the Offering Period, zero coupon
Treasury Securities will be valued at the average of the last reported bid and
ask prices; thereafter, in order to ensure that an adequate amount of zero
coupon Treasury Securities is maintained to achieve the Repayment Objective when
shares of the Fund are redeemed, zero

- 18 -
<PAGE>

coupon Treasury Securities will be valued at the last reported bid. Equity
Portfolio securities are valued at the last sales price on the securities
exchange or securities market on which such securities are primarily traded.
Securities for which there are not recent sales transactions are valued based on
quotations provided by primary market makers in such securities. Any securities
for which recent market quotations are not readily available are valued at fair
value determined in accordance with procedures approved by the Board of
Directors or the Trustees. Short-term obligations with less than sixty days
remaining to maturity are generally valued at amortized cost. Short-term
obligations with more than sixty days remaining to maturity will be valued at
current market value until the sixtieth day prior to maturity, and will then be
valued on an amortized cost basis based on the value on such date unless the
Board of Directors or the Trustees, as relevant, determines that this amortized
cost value does not represent fair market value. Expenses and fees, including
the investment management fee are accrued daily and taken into account for the
purpose of determining the net asset value of Fund shares.

Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of Fund shares are
determined at such times. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. Occasionally, events affecting the
value of such securities and such exchange rates may occur between the times at
which they are determined and the close of the NYSE, which otherwise would not
be reflected in the computation of net asset value. If during such periods
events occur which materially affect the value of such securities, the
securities will be valued at their fair market value as determined in accordance
with procedures approved by the Board of Directors or the Trustees, as relevant.

For purposes of determining the net asset value per share of the Fund,
all assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks.

TAXES

The Fund intends to qualify for the fiscal year ending November 30, 1996
as a "regulated investment company" under the Code. In order to qualify, the
Fund must, among other things, (i) derive at least 90% of its annual gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income (including but not limited to gains from options,
futures and forward contracts) derived with respect to the Fund's business of
investing in stocks, securities or foreign currencies; (ii) derive less than 30%
of its annual gross income from the sale or other disposition of stocks or
securities (or certain options, futures, forward contracts and foreign
currencies) held for less than three months; and (iii) diversify its holdings so
that, at the end of each fiscal quarter, (x) at least 50% of the value of the
Fund's assets is represented by cash, U.S. Government securities and other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund's assets and 10% of the outstanding voting
securities of such issuer and (y) not more than 25% of the value of the Fund's
assets is represented by securities of any one issuer (other than U.S.
Government securities).

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<PAGE>

The Fund and the Equity Portfolio are components of a so-called
"master-feeder" structure. Under this type of structure, management of the Fund
expects to take into account, for purposes of determining the Fund's status as a
regulated investment company, the Fund's proportionate share of the assets,
income, and deductions of the Equity Portfolio.

Income received by the Fund from sources within various foreign countries
may be subject to foreign income tax. If more than 50% of the value of the
Fund's assets at the close of its fiscal year consists of stocks or securities
of foreign corporations (which is not expected), the Fund may elect to "pass
through" to the Fund's shareholders the amount of foreign income taxes paid by
the Fund. In such a case, a shareholder of the Fund would be required to
include in income its share of such foreign income taxes but would be permitted
(subject to certain limitations) to either deduct such amounts in computing U.S.
taxable income or credit such amounts in computing U.S. tax payable.

If the Fund purchases shares in a foreign corporation that is a "passive
foreign investment company," the Fund itself might be subject to U.S. federal
income tax, and an additional charge in the nature of interest, on a portion of
any "excess distributions" from such corporation or on gain from the disposition
of such shares, even if the excess distribution is paid by the Fund as a
dividend to its shareholders. If the Fund were able and elected to treat the
passive foreign investment company as a "qualified electing fund," the foregoing
treatment would not apply and the Fund would instead be required to include in
income, and distribute to its shareholders in accordance with the Fund's
distribution requirements, the Fund's pro rata share of the ordinary earnings
and net capital gains of the qualified electing fund, whether or not distributed
to the Fund.

Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates that occur between the time the Fund or the
Equity Portfolio accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities are treated as
ordinary income or loss. Similarly, gains or losses on disposition of debt
securities denominated in a foreign currency attributable to fluctuations in the
value of the foreign currency between the dates of the acquisition and
disposition of the security are also treated as ordinary gain or loss. These
gains or losses increase or decrease the amount of the Fund's net investment
income available to be distributed to its shareholders as ordinary income.

Shareholders are urged to consult their tax advisers concerning the
effect of federal, state and local taxes on the Fund and in their individual
circumstances. There is a possibility that a portion of the Fund's dividends
may be exempt from state tax.

PERFORMANCE INFORMATION

The Fund may, from time to time, include "total return" in advertisements
or reports to shareholders or prospective investors. Quotations of average
annual total return will be expressed in terms of the average annual compounded
rate of return of a hypothetical investment in the Fund over periods of 1, 5 and
10 years (up to the life of the Fund), calculated pursuant to the following
formula which is prescribed by the Securities and Exchange Commission:

P(1 + T) to the nth power = ERV

where:
P = a hypothetical initial payment of $1,000,
T = the average annual total return,

- 20 -
<PAGE>

n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the period.

All total return figures assume that all dividends are reinvested when paid.

From time to time, the Fund may advertise its average annual total return
over various periods of time. These total return figures show the average
percentage change in value of an investment in the Fund from the beginning date
of the measuring period. These figures reflect changes in the price of the
Fund's shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the period were reinvested in shares of
the Fund. Figures will be given for one, five and ten year periods (if
applicable) and may be given for other periods as well (such as from
commencement of the Fund's operations, or on a year-by-year basis).

Additional Performance Quotations
- ---------------------------------

Advertisements of total return will always show a calculation that includes
the effect of the maximum sales charge but may also show total return without
giving effect to that charge. Because these additional quotations will not
reflect the maximum sales charge payable, these performance quotations will be
higher than the performance quotations that reflect the maximum sales charge.

Total returns are based on past results and are not necessarily a
prediction of future performance.

Performance Comparisons
- -----------------------

The Fund's performance may be compared to that of the Consumer Price Index
or various unmanaged indexes including the Dow Jones Industrial Average, the
Standard & Poor's 500 Stock Index, the Europe Australia Far East ("EAFE") Index
and other indexes prepared by Morgan Stanley Capital International. The Fund's
performance may also be compared to the performance of other mutual funds or
mutual fund indexes as reported by independent mutual fund reporting services
such as Lipper Analytical Services, Inc. and Micropal, Ltd. Such performance
calculations are generally based upon changes in net asset value with all
dividends reinvested.

The Fund may quote information from publications such as Morningstar, Inc.,
The Wall Street Journal, Money Magazine, Forbes, Barron's, Fortune, The New York
Times, The Washington Post, The International Herald Tribune, USA Today,
Institutional Investor, Registered Representative and other consumer journals
and publications by the U.S. government and its agencies. Also, investors may
want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds, and U.S. Treasury
obligations. Bank product performance may be based upon, among other things,
the BANK RATE MONITOR National Index/TM/ or various certificate of deposit
indexes. Money market fund performance may be based upon, among other things,
the IBC/Donoghue Money Fund Report/(R)/ or Money Fund Insight/(R)/, reporting
services on money market funds. Performance of U.S. Treasury obligations may be

- 21 -
<PAGE>

based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.

OTHER INFORMATION

CAPITAL STOCK. The Board of Directors is authorized to classify or
reclassify and issue any unissued capital stock of the Fund into any number of
series or classes without further action by the shareholders. To date, two
series of shares have been authorized, which shares constitute interests in AIG
Children's World Fund - 2005 and AIG Retiree Fund - 2003; however, the Board of
Directors may authorize further series or classes in the future. The 1940 Act
requires that where more than one series or class exists, each series or class
must be preferred over all other series or classes in respect of assets
specifically allocated to such series or class.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority (as defined in the 1940 Act) of the
outstanding shares of each class or series affected by such matter. Rule 18f-2
further provides that a class or series shall be deemed to be affected by a
matter unless it is clear that the interests of each class or series in the
matter are substantially identical or that the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of principal distributing contracts
and the election of directors from the separate voting requirements of the Rule.

CUSTODIAN AND ADMINISTRATOR. PNC Bank, National Association ("PNC Bank"),
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania, 19113, will serve as custodian of the Fund, and will maintain
direct custody of the assets of the Fund. State Street Bank and Trust Company
("State Street"), 1776 Heritage Drive, North Quincy, Massachusetts 02171, serves
as custodian of the assets of the Equity Portfolio. State Street is authorized
to establish and has established separate accounts in foreign currencies and is
authorized to cause securities of the Equity Portfolio to be held in separate
accounts outside the United States in the custody of non-U.S. banks. PFPC
International Ltd., 80 Harcourt Street, Dublin, Ireland, as Administrator,
maintains, under the general supervision of the Manager, certain accounting
records and determines the net asset value for the Fund. PFPC Inc., 400
Bellevue Parkway, Wilmington, Delaware 19809 acts as the Fund's Transfer Agent
and Dividend Disbursing Agent.

ACCOUNTANTS. Coopers & Lybrand L.L.P., independent auditors, have been
selected as auditors of the Fund. Their address is 1301 Avenue of the Americas,
New York, New York 10019.

FINANCIAL STATEMENTS OF FIRST GLOBAL EQUITY PORTFOLIO

The following pages include the Equity Portfolio's Statement of Assets and
Liabilities as of September 11, 1995 and the report of Coopers & Lybrand L.L.P.
thereon.

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<PAGE>

INFORMATION WITH RESPECT TO AIG

The following information with respect to AIG is incorporated herein by
reference. Copies of this information will be provided to any shareholder of
the Fund who requests a copy of this Statement of Additional Information.

From AIG's Report on Form 10-K for the fiscal year ended December 31, 1995:

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Audited Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheet at December 31, 1995 and 1994
Consolidated Statement of Income for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statement of Capital Funds for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Financial Statements

- 23 -
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES

September 11, 1995

<TABLE>
<S> <C>
Assets:
Cash......................................... $101,000
Deferred organization expenses............. 170,200
--------
Total assets.......................... 271,200
--------
Liabilities:
Organization expenses payable and accrued.. 170,200
--------
Net assets............................ $101,000
========
</TABLE>

NOTES:

(1) First Global Equity Portfolio (the "Portfolio") was organized as a Delaware
business trust on June 23, 1995 and has been inactive since that date except
for matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940, the sale of beneficial
interest therein at the purchase price of $100,000 to AIG All Ages Funds,
Inc. and the sale of a beneficial interest therein at the purchase price of
$1,000 to AIG Asset Management Services, Inc. ("AIGAM Services").

(2) Organization expenses are being deferred and will be amortized on a straight
line basis over a period not to exceed five years from the date that
operations commence. AIGAM Services and AIG All Ages Funds, Inc. will
reimburse the Portfolio for any unamortized organization expenses upon the
withdrawal of any initial beneficial interest. The amount to be reimbursed
will be determined by the proportion of the amount of initial beneficial
interest withdrawn to the initial beneficial interest of all holders after
taking into account any prior withdrawals of any of such initial beneficial
interest.

(3) The value of an investor's beneficial interest in the Portfolio is equal to
the product of (i) the aggregate net asset value of the Portfolio multiplied
by (ii) the percentage representing that investor's share of the aggregate
beneficial interest in the Portfolio effective for that day.

(4) The Portfolio will enter into a Management Agreement with AIG Capital
Management Corp. and an Administration and Accounting Services Agreement and
a Transfer Agency Agreement with PFPC International Ltd. ("PFPC") under
which PFPC provides administration accounting and transfer agency services
to the Portfolio pursuant to the Agreements.

- 24 -
<PAGE>

REPORT OF INDEPENDENT ACCOUNTS

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

To the Trustees of an Investors In First Global Equity Portfolio:

We have audited the accompanying statement of assets and liabilities of the
First Global Equity Portfolio as of September 11, 1995. This financial
statement is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Portfolio as of September 11, 1995, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
September 11, 1995

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<PAGE>

APPENDIX A
CORPORATE BOND AND COMMERCIAL PAPER RATINGS

CORPORATE BONDS. Bonds rated Aa by Moody's Investors Service, Inc.
("Moody's") are judged by Moody's to be of high quality by all standards.
Together with bonds rated Aaa (Moody's highest rating), they comprise what are
generally known as high-grade bonds. Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat larger
than those applicable to Aaa securities. Bonds which are rated A by Moody's
possess many favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.

Moody's Baa rated bonds are considered as medium-grade obligations, i.e., they
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are neither highly protected nor poorly secured. Interest payment and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Bonds which are rated Ba are judged to have speculative elements because their
future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments often may be very moderate and not well safeguarded.

Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

Bonds rated AAA by Standard & Poor's Ratings Group ("S&P") are considered by
S&P to be the highest grade obligations and possess the ultimate degree of
protection as to principal and interest. Bonds rated AA are judged by S&P to be
high-grade obligations and in the majority of instances differ only in small
degree from issues rated AAA (S&P's highest rating). Bonds rated A by S&P have
a strong capacity to pay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.

S&P's BBB rated bonds, or medium-grade category bonds, are between sound
obligations and those where the speculative elements begin to predominate.
Although these bonds have adequate asset coverage and normally are protected by
satisfactory earnings, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and principal.

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Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and principal
in accordance with the terms of the obligation. While such bonds may have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

COMMERCIAL PAPER. The Prime rating is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the relative strengths of
these factors.

Commercial paper rated A by S&P has the following characteristics: (i)
liquidity ratios are adequate to meet cash requirements; (ii) long-term senior
debt rating should be A or better, although in some cases BBB credits may be
allowed if other factors outweigh the BBB; (iii) the issuer should have access
to at least two additional channels of borrowing; (iv) basic earnings and cash
flow should have an upward trend with allowances made for unusual circumstances;
and (v) typically the issuer's industry should be well established and the
issuer should have a strong position within its industry and the reliability and
quality of management should be unquestioned. Issuers rated A are further
referred to by use of numbers 1, 2 and 3 to denote relative strength within this
highest classification.

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