<PAGE>
NOS. 33-91174
811-9022
As filed with the Securities and Exchange Commission on June 28, 1996
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. _____
POST-EFFECTIVE AMENDMENT NO. 5
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 8
----
(CHECK APPROPRIATE BOX OR BOXES)
WITH RESPECT TO COMMON STOCK:
AIG ALL AGES FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
70 PINE STREET, NEW YORK, NEW YORK 10270
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(800) 862-3984
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH RESPECT TO GUARANTEE: WITH RESPECT TO SUPPORT AGREEMENT:
AIG CAPITAL MANAGEMENT CORP. AMERICAN INTERNATIONAL GROUP, INC.
(EXACT NAME OF CO-REGISTRANT AS (EXACT NAME OF CO-REGISTRANT AS
SPECIFIED IN CHARTER) SPECIFIED IN CHARTER)
70 PINE STREET, NEW YORK, 70 PINE STREET, NEW YORK,
NEW YORK 10270 NEW YORK 10270
(ADDRESS OF PRINCIPAL (ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES) EXECUTIVE OFFICES)
(212) 770-7000 (212) 770-7000
(CO-REGISTRANT'S TELEPHONE (CO-REGISTRANT'S TELEPHONE
NUMBER, INCLUDING AREA CODE) NUMBER, INCLUDING AREA CODE)
ELIZABETH M. TUCK KATHLEEN E. SHANNON, ESQ.
AIG CAPITAL MANAGEMENT CORP. AMERICAN INTERNATIONAL GROUP, INC.
70 PINE STREET, NEW YORK, 70 PINE STREET, NEW YORK,
NEW YORK 10270 NEW YORK 10270
(NAME AND ADDRESS OF AGENT (NAME AND ADDRESS OF AGENT
FOR SERVICE) FOR SERVICE)
COPIES TO:
ALLAN MOSTOFF, ESQ. DAVID HARTMAN, ESQ.
DECHERT PRICE & RHOADS AMERICAN INTERNATIONAL GROUP, INC.
1500 K STREET, WASHINGTON, DC 20005 70 PINE STREET, NEW YORK, NEW YORK 10270
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[X] immediately upon filing pursuant to [_] on (date) pursuant to
paragraph (b) of Rule 485. paragraph (b) of Rule 485
[_] 60 days after filing pursuant to [_] on (date) pursuant to
paragraph (a)(1) of Rule 485. paragraph (a)(1) of Rule 485.
[_] 75 days after filing pursuant to [_] on (date) pursuant to
paragraph (a)(2) of Rule 485. paragraph (a)(2) of Rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
REGISTRANT AIG ALL AGES FUNDS, INC. HAS REGISTERED UNDER THE SECURITIES ACT OF
1933 AN INDEFINITE AMOUNT OF SECURITIES PURSUANT TO RULE 24F-2(A)(1) UNDER THE
INVESTMENT COMPANY ACT OF 1940. REGISTRANT INTENDS TO FILE THE NOTICE REQUIRED
BY RULE 24F-2 WITHIN THE TIME PERIOD REQUIRED BY SUCH RULE.
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<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 5 is being filed to comply with an
undertaking to include the financial statements of the AIG Children's
World Fund - 2005 series of the Registrant (the "Fund") and the First
Global Equity Portfolio, a registered open-end management investment
company in which the Fund invests, reflecting an initial period of
operations. This Amendment incorporates by reference the Prospectus and
Statement of Additional Information for the AIG Retiree Fund -- 2003
series of the Registrant, each dated April 12, 1996, from Registrant's
filing of definitive copies under Rule 497(c).
<PAGE>
CROSS REFERENCE SHEET REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Item No. in Part A of Form N-1A Location in Prospectus
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<S> <C>
1. Cover Page Cover Page
2. Synopsis Not applicable
3. Condensed Financial Information Not applicable
4. General Description of Registrant Investment Objectives and Management
Policies; American International Group,
Inc.
5. Management of Fund Investment Advisory Services
5a. Managers' Discussion of
Fund Performance Not applicable
6. Capital Stock and Other
Securities Organization and Capitalization;
Dividends and Distributions; Taxes;
Investment Objectives and Management
Policies -- The Manager's Guarantee
7. Purchase of Securities Being
Offered Cover Page; Purchase of Shares
8. Redemption or Repurchase Redemption or Repurchase of Shares
9. Pending Legal Proceedings Not applicable
<CAPTION>
Location in Statement of Additional
Item No. in Part B of Form N-1A Information
- ------------------------------- -----------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information
13. Investment Objectives and Investment Objectives and
Policies Policies
14. Management of the Registrant Management and Expenses
15. Control Persons and Principal Directors and Officers
Holders of Securities
16. Investment Advisory and Other Management and Expenses; Other
Services Information
17. Brokerage Allocation Portfolio Transactions and
Brokerage
18. Capital Stock and Other Other Information -- Capital
Securities Stock
</TABLE>
<PAGE>
<TABLE>
<S> <C>
19. Purchase, Redemption and Pricing Purchase and Redemption of Fund Shares;
of Securities Being Offered Valuation
20. Tax Status Taxes
21. Underwriters Distribution Services
22. Calculation of Performance Data Not applicable
23. Financial Statements Not applicable
</TABLE>
<PAGE>
PART A
<PAGE>
AIG CHILDREN'S WORLD FUND -- 2005
A SERIES OF
AIG ALL AGES FUNDS, INC.
505 CARR ROAD . WILMINGTON, DELAWARE 19809 . (800) 862-3984
----------------
This prospectus describes the AIG Children's World Fund -- 2005 (the
"Fund"). The Fund is a diversified series of AIG All Ages Funds, Inc., an
open-end management investment company. The Fund has two investment
objectives. The first objective is to provide a guaranteed return, on or after
November 15, 2005, of the full amount originally invested (including any sales
charge 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 the
balance of its assets primarily 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.
The Fund is primarily intended for shareholders who seek to invest for the
longer term for the benefit of children. Consistent with that goal, the Fund
intends to provide shareholders with ongoing reports and educational
materials, some of which will be specifically written for children.
(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 September 21, 1995, as supplemented through
June 28, 1996.
<PAGE>
Shares of the Fund will be offered to investors only from November 15, 1995
through December 31, 1996 (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 seeks to achieve the investment objective of total return on
capital by investing a portion of its investable assets in the First Global
Equity Portfolio (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 AIG Capital Management Corp. and investment
advice is provided by affiliated companies. By investing 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 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, under the terms of the Manager's guarantee,
shareholders who desire to be certain of receiving the full amount of their
original investment from the Fund on or after November 15, 2005 must reinvest
all dividends and distributions in additional shares and hold all their shares
until November 15, 2005. 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. 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, 2005 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 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 and capital
losses prior to November 15, 2005 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 "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.
2
<PAGE>
THE FUND'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.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EX-
PENSES(1)
Maximum sales load imposed
on purchases (as a percent-
age 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 Privi-
lege(2).................. 1.00%
All other shares.......... None
Redemption fees (as a per-
centage of amount re-
deemed).................... None
Exchange fee................ None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management fees (assuming
50% of the Fund's assets
are invested directly in
Treasury Securities and 50%
in the Equity Portfolio):
Treasury
Securities0.20% X 50% = .. 0.10%
Equity
Portfolio1.20% X 50% = .. 0.60%
----
Estimated total management
fees..................... 0.70%(3)
12b-1 fees (DURING OFFERING
PERIOD ONLY)............... 0.50%
Other expenses(4)........... 1.30%
----
Total Fund Operating Ex-
penses:
Before Manager's expense
reimbursement............ 2.50%
====
After Manager's expense
reimbursement during the
Offering Period.......... 2.00%
====
</TABLE>
"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 as described under
"Periodic and Other Reports and Services" 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 $80,000,000. The Manager has agreed to
reimburse the Fund's expenses (or to waive its management fee) to the extent
Total Fund Operating Expenses during the Offering Period exceed 2.00% 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.
ACCORDINGLY, AFTER THE OFFERING PERIOD, TOTAL FUND OPERATING EXPENSES ARE
ESTIMATED TO BE 2.00%.
- --------
(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 will be 0.70% if 50% of the Fund's assets are invested
directly in Treasury Securities and 50% 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 Treasury Securities will not be
less than 40% or more than 65% during the Offering Period. Thus the total
management fee is estimated to vary between 0.55% and 0.80% during this
period. However, in extreme market conditions, the percentage of Treasury
Securities could be less than 40% or more than 65%, 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.
3
<PAGE>
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
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<S> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming
(1) 5% annual return and (2) redemption at the end of each
time period:.................................................. $67 $107
</TABLE>
The example is intended to assist you in comparing expenses of the Fund with
those of other funds over varying investment periods. All 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, 2005 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.
FINANCIAL HIGHLIGHTS
The table of Financial Highlights below supplements the Fund's unaudited
financial statements contained in the Statement of Additional Information and
sets forth certain information regarding the investment operations of the Fund
for the period presented.
AIG ALL AGES FUNDS, INC.
AIG CHILDREN'S WORLD FUND - 2005
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM DECEMBER 15, 1995* TO MAY 31, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............................. $ 9.15
------
Income (loss) from investment operations:
Net investment income.......................................... 0.04
Net realized and unrealized loss on investments................ (0.03)
------
Total income from investment operations...................... 0.01
------
Net asset value, end of period................................... $ 9.16
======
TOTAL RETURN..................................................... 0.11% (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................ $2,090
Ratio to average net assets--
Expenses....................................................... 2.00% (a)(b)
Net investment income.......................................... 2.42% (a)(b)
Portfolio turnover rate.......................................... 0.00%
</TABLE>
- --------
* Commencement of Operations.
(a) Net of fee waivers and expense reimbursements which had the effect of
reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 49.60 percentage
points (annualized).
(b) Annualized.
(c) Calculated without deduction of sales charges.
4
<PAGE>
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 November 15, 2005 (the "Maturity Date") of the
full amount originally invested (including any sales charge paid) by each
shareholder who has reinvested all dividends and distributions, which the Fund
pursues through investment of a portion of its assets in U.S. Government zero
coupon securities, with additional assurance provided by the guarantee (the
"Manager's Guarantee") of the Manager, backed by its parent AIG. The second
objective is to achieve total return on capital through both capital gains
(realized and unrealized) and income, by investing the balance of its assets
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 Fund's investment strategy with respect to zero coupon 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.
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 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.
When the zero coupon 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 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
5
<PAGE>
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 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 United States 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 United States Treasury ("Treasury Securities"). 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 Treasury Securities
until maturity know the total amount of their investment return at the time of
investment. (The investment community generally assumes that the U.S. Treasury
will not default on payments of interest or principal.)
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 managed by the same
Manager as the Fund. 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,
6
<PAGE>
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 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
7
<PAGE>
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 November 15, 1995 through
December 31, 1996 (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 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
securities so that the value of the zero coupon securities on the Maturity
Date (i.e., the aggregate face value of the zero coupon 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 sales charge (the "Repayment Objective"). After the
Offering Period, the Fund anticipates adjustments in its portfolio of zero
coupon 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 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 securities will fluctuate during the Offering Period. This is
because the market value of the zero coupon 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 securities per Fund share
necessary to provide for the Fund's Repayment Objective will increase. The
Fund may hold zero coupon securities in an amount in excess of the amount
necessary to provide for the Fund's Repayment Objective in the discretion of
the Fund's investment manager. During the first year of operations, under
normal market conditions, the proportion of the Fund's
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portfolio invested in zero coupon securities may be expected to range from 40%
to 65%; but a greater or lesser percentage is possible.
During the Offering Period, if the percentage of zero coupon 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 65% of its assets to be allocated to zero
coupon securities. After the Offering Period is over, it is not anticipated
that any additional assets will be allocated to the purchase of zero coupon
securities. However, since the market values of the zero coupon 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 securities will continue to fluctuate after
the end of the Offering Period. Zero coupon securities may be liquidated
before the Maturity Date to meet redemptions and pay cash dividends, provided
that the minimum amount of zero coupon securities necessary to provide for the
Fund's Repayment Objective is maintained.
When the zero coupon 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, with the result that
the full principal amount of Treasury Securities held by the Fund on the
Maturity Date should continue to be available to redeeming shareholders after
the Maturity Date.
After the Maturity Date, the Board of Directors of AIG All Ages Funds, Inc.
(the "Board") 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.
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, and, because of the Manager's Guarantee, shareholders who
reinvest all dividends and distributions will be certain to receive the full
amount of their original investment in the event of such a liquidation. In the
event of termination of the Fund as noted above, the redemption of shares
effected in connection with such termination would for current federal 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
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registered open-end management investment company or any other series of AIG
All Ages Funds, Inc. 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 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.
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 sales charge paid) on or after the Maturity Date. Under the
terms of the Manager's Guarantee, the amount a shareholder is certain to
receive will be reduced in proportion to the number of shares redeemed divided
by the number of shares originally purchased during the Offering Period. Thus,
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.
THE MANAGER'S GUARANTEE
In order to ensure the return of the full amount of a shareholder's original
investment (including any sales charge paid) on or after the Maturity Date,
AIG All Ages Funds, Inc. and the Manager have entered into a Guarantee
Agreement with respect to the Fund, dated September 15, 1995 (the "Manager's
Guarantee"). The Manager's obligations under the Manager's Guarantee are
backed by its parent, AIG, pursuant to a Support Agreement, dated September
15, 1995. 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
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.
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) 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
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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 purchased 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 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).
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.
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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 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 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.
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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 the 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 or A-
1 by 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 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 1/2 of 1 percent could be expected to cause the market value
of the Fund's zero coupon securities to decrease by more than 4 percent, and a
1/2 of 1 percent decrease in such rates could be expected to cause the market
value of such securities to increase by more than 4 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 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
sales charge 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.
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Each year the Fund will be required to accrue an increasing amount of income
on its zero coupon 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 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.
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
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 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,
shareholders who reinvest all dividends and other distributions and who hold
all of their shares until the Maturity Date will be certain of receiving the
full amount of their original investment.
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
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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
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 U.S.
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 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
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<PAGE>
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).
PERIODIC AND OTHER REPORTS AND SERVICES
The Fund will provide to shareholders semi-annual and annual reports as
required by the 1940 Act. In connection with those reports, consistent with
the Fund's intention to make sales of Fund shares primarily to investors who
seek to invest for the longer term benefit of children, the Fund expects to
provide supplemental information appropriate in content and form to the
educational and informational needs of parents and children in understanding
money, investments, and financial products and services. The Fund also intends
on an occasional basis to provide special reports to shareholders on these
topics, or to make them aware of services and other materials that are
consistent with them. The Fund's intention to provide these supplemental
materials and special reports differs from the practices of most investment
companies and their sponsors and will involve costs and expenses to the Fund
not ordinarily incurred by investment companies. Such costs may include, in
addition to printing and mailing, the expenses or fees of consultants and for
the development of the specialized materials appropriate to their educational
purpose. The Board has carefully considered the Fund's proposed activities and
believes that they are in the best interests of shareholders. In addition, the
Board will carefully monitor the expenses involved in preparing and
distributing these materials.
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 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. See "Investment
Objectives and Management Policies -- First Global Equity Portfolio" and " --
Other Investment Policies."
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The investment objectives of the Fund may be changed only with the approval
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 the holders
of the outstanding beneficial interests 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 AIG All Ages Funds, Inc. (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 (as supplemented), there is
only one other registered investment company that invests in the Equity
Portfolio, the AIG Retiree Fund -- 2003. In the future, information concerning
the AIG Retiree Fund -- 2003 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.
The Fund is a series of AIG All Ages Funds, Inc. 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 the
shareholders of the Fund 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
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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 advisor registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), is an indirect wholly owned
subsidiary of American International Group, Inc. ("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.
The Manager also manages the AIG Retiree Fund -- 2003, 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 and 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 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.
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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 2.00% of the average
daily net assets of the Fund, the Manager will waive its management fee or
reimburse the Fund to the extent of any such excess, subject to reimbursement
by the Fund as described below. The total amount of any excess so waived or
reimbursed 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 2.00%
per annum of average daily net assets of the Fund during such year, 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 2.00% per annum. The total amount of such expense
reimbursement fees will not exceed the Refunded Amount plus the Manager's
related financing costs.
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 to
determine collectively the allocation of the assets of the Fund between zero
coupon 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 AIGAM International Limited
("AIGAM International") in London since January 1992 and has served in a
trading capacity since 1988.
PATRICK DEMPSEY. Mr. Dempsey is Managing Director, Fixed Income, of AIGAM
International in London. He has been a Director of AIGAM International 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, 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 AIGAM International since
April 1995. Prior to joining these companies, Mr. Neuger was with Bankers
Trust, where he was a Senior Vice President and, since October 1991, a
Managing Director in the investment management area.
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<PAGE>
YUKIHIRO NISHIMIYA. Mr. Nishimiya has been a portfolio manager for AIG
Investment Corporation (Japan) since October 1990.
HARRY P. REKAS. Mr. Rekas is Managing Director, 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 Investment
Corporation (Asia), Limited, which he joined in 1989.
PETER WIGNALL. Mr. Wignall is Managing Director and Chief Executive Officer
of AIGAM International 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 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 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
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 Treasury Securities and the Equity
Portfolio in the same proportion that the dividend income was generated,
provided that the amount of 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 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.
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<PAGE>
THE SUBADVISORS
The Manager has entered into subadvisory agreements with AIG Global
Investors, Inc. ("AIG Global"), which is a wholly owned subsidiary of AIG and
registered under the Investment Advisers Act of 1940, as amended. Pursuant to
its subadvisory agreements, AIG Global 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 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 and they do not increase the Fund's or
the Equity Portfolio's expenses. The principal office of AIG Global is 200
Liberty Street, New York, New York 10281.
The Manager has also entered into subadvisory agreements with AIGAM
International Limited ("AIGAM International"), which is a wholly owned
subsidiary of AIG and registered under the Advisers Act. AIGAM International
is also a member of the Investment Management Regulatory Organization Limited,
a United Kingdom self-regulatory organization. Pursuant to its subadvisory
agreements, AIGAM International 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. Under the subadvisory agreements with AIGAM
International, the Manager pays AIGAM International 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. AIGAM
International's fees are all paid from the management fees paid to the Manager
and they do not increase the Fund's or the Equity Portfolio's expenses. AIGAM
International 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 AIGAM International will terminate.
However, it is anticipated that personnel of AIGAM International will continue
to provide investment advisory services to the Manager pursuant to a service
arrangement. The principal office of AIGAM International is Unit 1/11 Harbour
Yard, Chelsea Harbour, London SW10 OXD, England.
AIG Global and AIGAM International 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 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
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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 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 costs if their original maturity was 60 days or less. Short-term
holdings with more 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.
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
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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 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 Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). For each year so
qualified, the Fund will not be subject to federal income taxes on its net
investment income and realized net capital gains, if any, which it distributes
to its shareholders, provided that at least 90% 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 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 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 securities, this method will
generally result in an increasing amount of income to the Fund each year.
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Distributions from net capital gains, i.e., the excess of net long-term
capital gains over any net short-term capital losses, 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 long-term capital gain distribution 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 that it
offsets the long-term capital gain distribution. 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, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned. 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.
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
$50 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 $50 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 in their individual circumstances.
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THE ADMINISTRATOR
PFPC International Ltd. will serve as the Fund's and 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 the Equity Portfolio in all aspects of
their administration and operation, including matters relating to the
maintenance of financial records and Fund 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 and the Equity Portfolio. PNC
Bank has entered into a subcustodian agreement with State Street Bank and
Trust Company ("State Street"), 1776 Heritage Drive, Quincy, Massachusetts
02171, in respect of the assets of the Equity Portfolio. State Street is
authorized to establish and has established separate accounts in foreign
currencies and 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 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
25
<PAGE>
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 .25 of 1% 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 administrative 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
administrative 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. The Plan will terminate on
the last day of the Offering Period. The Plan is intended to reimburse the
Distributor for expenses it incurs in connection with the distribution of the
shares of the Fund, to the extent such expenses exceed any amounts the
Distributor retains from the sales charges payable by shareholders.
Distribution expenses of the Distributor that are reimbursable under the Plan
include the payment of commissions 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 Children's World
Fund -- 2005, PO Box 8935, Wilmington, Delaware 19899-9801. 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.
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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>
REGULAR
SALES LOAD AS A DEALER
PERCENTAGE OF DISCOUNT
------------------------ AS A % OF
OFFERING NET AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED (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.
Shares of the Fund will be offered to investors only during the Offering
Period, which commenced on November 15, 1995 and is scheduled to end on
December 31, 1996. 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 in 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 physically 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
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<PAGE>
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 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 (as supplemented),
the Large Purchase Privilege is available only with respect to the Fund and
AIG Retiree Fund -- 2003. 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).
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<PAGE>
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
selected employees (including their spouses and dependent children) 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 affiliates. Only those employees of such banks and other firms who
as part of their usual duties provide services related to transactions in Fund
shares may purchase Fund shares at net asset value hereunder. 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.
29
<PAGE>
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 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 Children's World Fund -- 2005. 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.
30
<PAGE>
REDEMPTION OR REPURCHASE OF SHARES
GENERAL
Any shareholder may require the Fund to redeem his or her shares. However,
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 sales charge paid) on or after the Maturity Date. Under the
terms of the Manager's Guarantee, the amount a shareholder is certain to
receive will be reduced in proportion to the number of shares redeemed divided
by the number of shares originally purchased during the Offering Period. Thus,
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. As noted previously (see "Investment
Objectives and Management Policies -- In General"), 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.
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 Children's World Fund -- 2005, PO Box 8935,
Wilmington, Delaware 19899-9801. 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 compliance with the Fund's procedures.
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 receipt by the Fund of the purchase
amount. 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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 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.
35
<PAGE>
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 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
36
<PAGE>
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 AIG All Ages Funds, Inc., 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 without further action by
shareholders. As of the date of this Prospectus (as supplemented), shares in
the AIG Children's World Fund -- 2005 described herein and shares in the AIG
Retiree Fund -- 2003 are the only shares authorized. Shares of capital stock
have a par value of $.001. 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
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AIG CHILDREN'S
WORLD FUND -- 2005
A SERIES OF
AIG ALL AGES FUNDS, INC.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE FUND'S EXPENSES........................................................ 3
FINANCIAL HIGHLIGHTS....................................................... 4
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES.............................. 5
RISK FACTORS............................................................... 13
PERIODIC AND OTHER REPORTS AND SERVICES.................................... 16
SPECIAL INFORMATION CONCERNING THE TWO-TIER STRUCTURE...................... 16
INVESTMENT ADVISORY SERVICES............................................... 18
AMERICAN INTERNATIONAL GROUP, INC.......................................... 22
DIVIDENDS AND DISTRIBUTIONS................................................ 23
TAXES...................................................................... 23
THE ADMINISTRATOR.......................................................... 25
THE TRANSFER AGENT AND DIVIDEND DISBURSING AGENT........................... 25
CUSTODIAN.................................................................. 25
SHAREHOLDER SERVICING AGREEMENT............................................ 25
RULE 12b-1 PLAN............................................................ 26
PURCHASES OF SHARES........................................................ 26
REDEMPTION OR REPURCHASE OF SHARES......................................... 31
SPECIAL FEATURES........................................................... 33
PERFORMANCE................................................................ 36
ORGANIZATION AND CAPITALIZATION............................................ 37
</TABLE>
AIG ALL AGES FUNDS, INC.
LINKING GENERATIONS
505 Carr Road, Wilmington, Delaware 19809
Phone: (800) 862-3984
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AIG
CHILDREN'S
WORLD FUND
--2005
PROSPECTUS
SEPTEMBER 21, 1995,
AS SUPPLEMENTED THROUGH JUNE 28, 1996
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<PAGE>
PART B
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
A Series of AIG All Ages Funds, Inc.
Statement of Additional Information
September 21, 1995 as supplemented
through June 28, 1996
505 Carr Road
Wilmington, DE 19809
(800) 862-3984
AIG Children's World Fund -- 2005 (the "Fund") is a diversified
series of AIG All Ages Funds, Inc. The Fund has two investment
objectives. The first objective is to provide a guaranteed return, on or
after November 15, 2005, of the full amount originally invested (including
any sales charge 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 the balance of its assets primarily 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 seeks to achieve the investment objective of total return
on capital by investing a portion of its investable assets in the First
Global Equity Portfolio (the "Equity Portfolio"), a diversified open-end
management investment company with the same investment objective. 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
September 21, 1995, as supplemented through June 28, 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.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
General Information............................. 3
Investment Objectives and Policies.............. 3
The Manager's Guarantee......................... 9
Directors, Trustees and Officers................ 11
Management and Expenses......................... 14
Rule 12b-1 Plan................................. 15
Shareholder Servicing Agreement................. 15
Portfolio Transactions and Brokerage............ 16
Purchase and Redemption of Fund Shares.......... 16
Distribution Services........................... 17
Valuation....................................... 18
Taxes........................................... 19
Performance Information......................... 20
Other Information............................... 21
Financial Information........................... 22
Information with Respect to AIG................. 48
</TABLE>
2
<PAGE>
GENERAL INFORMATION
The Fund is a diversified series of AIG All Ages Funds, Inc. (the
"Company"), an open-end management investment company.
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, 2005 (the
"Maturity Date"), of the full amount originally invested 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 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, through
investment of the balance of its assets primarily in a globally
diversified portfolio of equity securities. The Fund seeks to achieve its
second investment objective of total return on capital by investing a
portion of its investable assets in the First Global Equity Portfolio (the
"Equity Portfolio"), an open-end diversified management investment
company, unlike other mutual funds that directly acquire and manage their
own portfolio of 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 United States 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 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
3
<PAGE>
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 US 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 Investors, Inc. ("AIG Global") or AIGAM International Limited
("AIGAM International") (AIG Global and AIGAM International 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.
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
4
<PAGE>
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 AIG All Ages Funds, Inc. 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.
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 that necessary to meet
requests for redemption and in connection with the non-reinvestment of
dividends.
5
<PAGE>
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.
(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 and may not 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 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.
6
<PAGE>
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.
(5) Borrow money, except from banks for extraordinary or emergency
purposes and may not 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 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.
7
<PAGE>
(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 net 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.
(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 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 and the trustees of the Equity
Portfolio 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.
8
<PAGE>
THE MANAGER'S GUARANTEE
The Company and the Manager have entered into a Guarantee
Agreement, dated September 15, 1995 (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.
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 (as defined in the Prospectus) 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 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
9
<PAGE>
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 September 15,
1995. 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.
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.
10
<PAGE>
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 (49) Director Trustee Director and Chairman, AIG
70 Pine Street Capital Management Corp.;
New York, New York Director and President, AIG
10270 Asset Management Services,
Inc.; Director, AIG Asset
Management Inc.; formerly
Chairman, Kemper Sales Co.;
Senior Vice President,
Keystone; Vice President,
Alliance Capital.
Paul H. Friedman (40) Director Trustee Partner, Arter & Hadden, law
1801 K Street N.W., Suite firm.
400k
Washington, D.C 20006-
1301
Linda-Ann S. Goodwin* Director Trustee Executive Vice President, AIG
(47) Capital Management Corp.;
70 Pine Street Senior Vice President, AIG
New York, New York Asset Management Services,
10270 Inc.; formerly Marketing
Executive, Kemper Financial;
Marketing Executive, Coca
Cola USA.
</TABLE>
- ------------------------
/*/ "Interested" person, as defined in the 1940 Act by reason of affiliation
with the Manager.
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>
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,
400 Bellevue Parkway N.A.; formerly Attorney,
Wilmington, Delaware Federated Investors, Inc., Sun
19809 America Asset Management
Corp. and the Boston
Company.
David T. Goss (47) Vice Vice Executive Vice President, AIG
70 Pine Street President President Asset Management Services,
New York, New York Inc.; Formerly Director,
10270 Equitilink Australia; Director,
Equitilink, Ltd; Chairman,
Equitilink Pacific, Ltd;
President, Equitilink USA, Inc.;
and Director, Valufi (Pty), Ltd.
Daniel K. Kingsbury (36) President President President, AIG Asset
70 Pine Street Management, Inc.; President,
New York, New York AIG Capital Management
10270 Corp.; Senior Vice President,
AIG Asset Management
Services, Inc.; Vice President,
AIG Equity Sales Corp.;
Executive Director, AIG Fund
Management Ltd.; formerly
Director of Strategy, AIG Asset
Management International.
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.
</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 November 30, 1996.
COMPENSATION TABLE
(NOVEMBER 30, 1996)
<TABLE>
<CAPTION>
PENSION
RETIREMENT TOTAL
BENEFITS COMPENSATION
ACCRUED ESTIMATED FROM
AS PART ANNUAL COMPANY
AGGREGATE OF BENEFITS AND FUND
COMPENSATION FUND UPON COMPLEX PAID
NAME AND POSITION FROM 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 September 20, 1995, the directors and officers of the
Company, as a group, owned no shares of common stock of the Fund.
As of September 20, 1995, 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.
13
<PAGE>
MANAGEMENT AND EXPENSES
As indicated in the Prospectus, under the Fund's and the Equity
Portfolio's agreements 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 Directors of the Company and Trustees of the Equity
Portfolio 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 50% of the Fund's assets are invested in Treasury
Securities and 50% 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 0.70%
per annum of the average total assets of the Fund. Assuming an allocation
of 40% to 65% of the Fund's assets to Treasury Securities the combined
management fee paid by the Fund will range between 0.55% and 0.80% 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 Directors of the Company or Trustees of the Equity Portfolio
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 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 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
14
<PAGE>
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 June 29, 1995 and by the sole shareholder on June 29,
1995. 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 will
continue in effect until June 30, 1997 and thereafter until June 30 of
each year if 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 July 19, 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") and by the sole shareholder of the Fund on
September 15, 1995. The Plan will terminate on the last day of the
Offering Period.
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.
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 in the
Fund, 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) and by the sole
shareholder of the Fund on June 29, 1995. The Shareholder Servicing
Agreement may not be amended to increase materially the amounts payable to
the Distributor without the approval of a majority of the outstanding
voting securities of the Fund and no material amendment to the Shareholder
Servicing Agreement may be made except by a majority of both the Directors
and the directors who are not interested persons of the Fund (as defined
in the 1940 Act).
15
<PAGE>
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 the
Subadvisors desire to buy or sell the same security at the same time, the
Manager or the Subadvisors 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.
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.
16
<PAGE>
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, 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
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
17
<PAGE>
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 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 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. 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 the 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 the 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
18
<PAGE>
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 US 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 Internal Revenue Code
of 1986, as amended (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 fewer 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).
Dividends paid by the Fund and designated as derived from the
Fund's dividend income that would be eligible for the dividends received
deduction if the Fund were not a regulated investment company will be
eligible, subject to certain restrictions, for the 70% dividends received
deduction available to shareholders of the Fund that are corporations.
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, 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
United States 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
19
<PAGE>
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
or the Equity Portfolio 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 income taxes 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,
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
20
<PAGE>
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 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 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.
As of the date of this Statement of Additional Information (as
supplemented), 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 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
21
<PAGE>
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 of
the Equity Portfolio, and will maintain direct custody of the assets of
the Fund. PNC Bank has entered into a subcustodian agreement with State
Street Bank and Trust Company ("State Street"), 1776 Heritage Drive, North
Quincy, Massachusetts 02171, in respect of the assets of the Equity
Portfolio. State Street is authorized to establish and has established
separate accounts in foreign currencies and 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 INFORMATION
The following pages include the Fund's Statement of Assets and
Liabilities as of September 11, 1995 and the report of Coopers & Lybrand,
L.L.P. thereon, as well as the unaudited Financial Statements for the Fund
from commencement of operations through May 31, 1996.
22
<PAGE>
AIG ALL AGES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 11, 1995
<TABLE>
<CAPTION>
AIG CHILDREN'S
WORLD FUND - 2005
-----------------
<S> <C>
Assets:
Investment in First Global Equity
Portfolio, at value (cost $100,000)..... $100,000
Deferred organization expenses............. 58,500
--------
Total assets.......................... 158,500
--------
Liabilities:
Organization expenses payable and accrued.. 58,500
--------
Net assets.......................... $100,000
========
Net Asset Value, Redemption Price and
Offering Price Per Share
of Beneficial Interest..................... $ 9.15
========
($100,000 divided by 10,929 shares)
</TABLE>
NOTES:
(1) AIG All Ages Funds, Inc. ("AIG All Ages"), formerly Pavilion
Funds, Inc., was organized as an open-end management investment company
incorporated under the laws of the State of Maryland on April 4, 1995 and
has been inactive since that date, except for matters relating to AIG All
Ages' organization and registration as an investment company under the
Investment Company Act of 1940 and the sale of 10,929 shares of the AIG
Children's World Fund - 2005 (the "Fund"), a series of AIG All Ages, to AIG
Asset Management Services, Inc. ("AIGAM Services"), the parent company of
AIG All Ages' investment adviser, and the investment of the proceeds of
such sale in the First Global Equity Portfolio (the "Portfolio"). The
investment in the Portfolio is valued at the aggregate net asset value of
the Portfolio multiplied by the Fund's proportionate share of the
Portfolio.
(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. The amount paid by the Fund on any
redemption by AIGAM Services will be reduced by a portion of any
unamortized organization expenses, determined by the proportion of the
number of shares redeemed to the number of the initial shares of the Fund
owned by such holder outstanding immediately prior to such redemption.
(3) AIG All Ages will enter into (i) an Administration and
Accounting Services Agreement with PFPC International Ltd. under which PFPC
International Ltd. provides administration and accounting services to AIG
All Ages pursuant to such Agreement, (ii) a Transfer Agency Agreement with
PFPC Inc., (iii) a Shareholder Servicing Agreement and a Distribution
Agreement with AIG Equity Sales Corp. under which AIG Equity Sales Corp.
will distribute shares of AIG All Ages' funds and provide information and
administrative services for shareholders and (iv) a Management Agreement
with AIG Capital Management Corp., the investment adviser.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------
To the Directors of and Shareholder in
AIG All Ages Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of the
AIG All Ages Funds, Inc., comprised of AIG Children's World Fund - 2005, as
of September 11, 1995. This financial statement is the responsibility of
the Fund'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
statements. 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
AIG All Ages Funds, Inc. as of September 11, 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
September 11, 1995
24
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 11, 1995
<TABLE>
<CAPTION>
Assets:
<S> <C>
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.
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------
To the Trustees of and 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
26
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
December 15, 1995 to May 31, 1996
(Unaudited)
Page
<S> <C>
AIG Children's World Fund - 2005:
Portfolio of Investments............................................... 28
Statement of Assets and Liabilities.................................... 29
Statement of Operations................................................ 30
Statement of Changes in Net Assets..................................... 31
Financial Highlights................................................... 32
Notes to the Financial Statements...................................... 33-37
First Global Equity Portfolio:
Portfolio of Investments............................................... 38-39
Statement of Assets and Liabilities.................................... 40
Statement of Operations................................................ 41
Statement of Changes in Net Assets..................................... 42
Ratios / Supplemental Data............................................. 43
Notes to the Financial Statements..................................... 44-48
</TABLE>
27
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio of Investments
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Description Date Yield * (Note 2a)
----------- ----------- -------- ------- -----------
<S> <C> <C>
US ZERO COUPON BOND - 53.4%
$ 2,150,000 US Zero Coupon Bond........................ 11/15/05 6.76% $1,124,214
----------
Total Investments (Cost $1,146,791) - 53.4%........................................ 1,124,214
Other Assets In Excess of Liabilities - 46.6%...................................... 980,143
----------
NET ASSETS - 100%.................................................................. $2,104,357
===========
</TABLE>
*Effective yield at time of purchase.
See Accompanying Notes to the Financial Statements.
28
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Statement of Assets and Liabilities
May 31, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------
ASSETS:
<S> <C>
Investment in securities at value (Cost $1,146,791)........ $1,124,214
Investment in First Global Equity Portfolio at value....... 807,046
Cash....................................................... 89,377
Interest receivable........................................ 1,803
Receivable for fund shares sold............................ 35,798
Deferred organization costs................................ 63,730
Prepaid expenses........................................... 21,746
-----------
Total Assets......................................... 2,143,714
-----------
LIABILITIES:
Due to Manager............................................. 8,792
Payable for fund shares redeemed........................... 3,000
Accrued expenses........................................... 27,565
-----------
Total Liabilities.................................... 39,357
-----------
NET ASSETS..................................................... $2,104,357
===========
COMPOSITION OF NET ASSETS:
Capital stock, at par...................................... $ 230
Additional paid in capital................................. 2,110,415
Accumulated undistributed net investment income............ 9,553
Accumulated net realized loss on investments............... (3)
Net unrealized depreciation of investments................. (15,838)
-----------
Net Assets..................................................... $2,104,357
===========
Shares Outstanding ($0.001 par value).......................... 229,609
===========
Net asset value and redemption price per share
($2,104,357 / 229,609 shares) $ 9.16
-----------
Maximum offering price per share (Net asset value plus sales
charge - 4.75% of maximum offering price).................. $ 9.62
===========
</TABLE>
See Accompanying Notes to the Financial Statements.
29
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Statement of Operations
For the period from December 15, 1995* to May 31, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C>
Interest........................................................................................... $15,951
<CAPTION>
Investment income allocated from the Equity Portfolio:
<S> <C>
Interest.................................................... $ 1,482
Expenses.................................................... (83,473)
Less: Fee waivers and expense reimbursements............... 82,300
------------
<CAPTION>
<S> <C>
Net Investment Income Allocated From the Equity Portfolio.......................................... 309
-----------
16,260
-----------
<CAPTION>
EXPENSES:
<S> <C>
Registration fees................................................... 27,192
Directors' fees and expenses........................................ 20,810
Shareholder communication fees...................................... 15,779
Transfer agent fees................................................. 14,784
Insurance expense................................................... 13,518
Legal fees.......................................................... 12,002
Organization expense................................................ 6,770
Audit fees.......................................................... 2,400
Administrative fees................................................. 2,169
Distribution fees................................................... 1,970
Shareholder service fees............................................ 985
Investment advisory fees............................................ 672
Custodian fees...................................................... 84
Miscellaneous expenses.............................................. 1,200
----------
120,335
Less: Fee waivers and expense reimbursements........................ (113,628)
----------
<CAPTION>
<S> <C>
Net expenses.................................................................................................... 6,707
----------
Net Investment Income................................................................................... 9,553
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on securities transactions from the Equity Portfolio.......................................... (3)
Net unrealized appreciation of investments from the Equity Portfolio............................................ 6,739
Net unrealized depreciation of investments from the Fund........................................................ (22,577)
---------
Net realized and unrealized loss from investment activity............................................... (15,841)
---------
Net Decrease in Net Assets Resulting From Operations............................................ $(6,288)
=========
- --------------
</TABLE>
*Commencement of Operations.
See Accompanying Notes to the Financial Statements.
30
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the period from December 15, 1995* to May 31, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C>
Net investment income...................................... $ 9,553
Net realized loss on investments........................... (3)
Net unrealized depreciation of investments................. (15,838)
-----------
Net Decrease in Net Assets Resulting From Operations. (6,288)
FUND SHARE TRANSACTIONS:
Net proceeds from shares subscribed........................ 2,035,770
Cost of shares redeemed.................................... (25,125)
-----------
Net Increase in Net Assets Resulting From Fund Share
Transactions....................................... 2,010,645
-----------
Total Increase in Net Assets.................. 2,004,357
-----------
Net assets at the beginning of the period...................... 100,000
-----------
NET ASSETS at the end of the period (including undistributed
net investment income of $9,553).......................... $2,104,357
===========
</TABLE>
- --------------------
*Commencement of Operations.
See Accompanying Notes to Financial Statments.
31
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Financial Highlights
For the period from December 15, 1995* to May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------------------
Per Share Operating Performance
<S> <C>
Net asset value, beginning of period................................... $ 9.15
----------
Income (loss) from investment operations:
Net investment income.............................................. 0.04
Net realized and unrealized loss on investments.................... (0.03)
----------
Total income from investment operations..................... 0.01
----------
Net asset value, end of period......................................... $ 9.16
==========
Total Return........................................................... 0.11% (c)
Ratios / Supplemental Data:
Net assets, end of period (000's)...................................... $ 2,090
Ratio to average net assets--
Expenses........................................................... 2.00%(a)(b)
Net investment income.............................................. 2.42%(a)(b)
Portfolio turnover rate ............................................... 0.00%
</TABLE>
- ---------------------
*Commencement of Operations.
(a) Net of fee waivers and expense reimbursements which had the effect of
reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 49.60 percentage
points (annualized).
(b) Annualized.
(c) Calculated without deduction of sales charges.
See Accompanying Notes to Financial Statements.
32
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
___________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (unaudited)
___________________________________________________________________________
NOTE 1 - ORGANIZATION
AIG All Ages Funds, Inc. (the "Company) is registered under the Investment
Company Act of 1940, as amended, as an open-ended diversified management
investment company. The Company was incorporated in Maryland on April 4, 1995
and commenced operations on December 15, 1995. At May 31, 1996, the Company
operated as a series company comprising two funds. The accompanying financial
statements and notes are those of the AIG Children's World Fund - 2005 (the
"Fund") only.
Shares of the Fund will be offered to investors only from November 15, 1995
through December 31, 1996 (the "Offering Period"). The Offering Period may be
extended or shortened by the Fund at its discretion.
The Fund has two investment objectives. The first objective is to provide a
guaranteed return, on or after November 15, 2005 (the "Maturity Date"), of the
full amount originally invested (including any 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 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 the balance of
its assets primarily in a globally diversified portfolio of equity 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-ended
management investment company that invests in a globally diversified portfolio
of equity securities. The Fund and the Equity Portfolio constitute a two-tier
master-feeder structure. The value of the Fund's investment in the Equity
Portfolio included in the accompanying Statement of Assets and Liabilities
reflects the Fund's proportionate beneficial interest of 79.7% in the net assets
of the Equity Portfolio at May 31, 1996. The financial statements of the Equity
Portfolio, including its portfolio of investments, are included within this
report and should be read in conjunction with the Fund's financial statements.
33
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
___________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (unaudited)
___________________________________________________________________________
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
a) SECURITY VALUATIONS:
During the Offering Period, U.S. Treasury zero coupon securities are valued at
the average of the last reported bid and ask prices; thereafter, they will be
valued at the last reported bid price. Short-term securities with less than
sixty days remaining to maturity when acquired are valued at amortized cost,
which approximates market value. Short-term securities with more than sixty
days remaining to maturity are valued at current market value until the sixtieth
day prior to maturity, and are then valued on an amortized cost basis. The
valuation of the Fund's investment in the Equity Portfolio is discussed in Note
2 of the Equity Portfolio's financial statements.
b) INVESTMENT INCOME AND SECURITY TRANSACTIONS:
Security transactions of the Fund are accounted for on a trade date basis.
Realized gains and losses on securities transactions are determined on the
identified cost basis. Interest income, including accretion of discount and
amortization of premium, is accrued daily. The Fund records its pro-rata share
of investment income, expenses and realized and unrealized gains and losses
recorded by the Equity Portfolio on a daily basis. Expenses common to all funds
within the Company are allocated among the funds on the basis of average net
assets.
c) DIVIDENDS AND DISTRIBUTIONS:
The Fund declares and pays dividends from net investment income and distributes
net realized capital gains, if any, at least annually. Dividends and
distributions are recorded on the ex-dividend date. The amounts of dividends
from net investment income and distributions from net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles, therefore, the Fund may
periodically make re-classifications among certain of its capital accounts as a
result of timing and characterization of certain income and capital gains
distributions.
34
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
___________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (unaudited)
___________________________________________________________________________
d) FEDERAL INCOME TAXES:
The Fund has elected to be taxed as a regulated investment company and intends
to comply with the requirements of the Internal Revenue Code and to distribute
substantially all its taxable income to shareholders. Therefore, no federal
income tax provision is required.
e) ORGANIZATION EXPENSES:
Expenses incurred in connection with the organization of the Fund are being
amortized on a straight line basis over a five year period beginning December
15, 1995. The amount paid by the Fund on any redemption by AIG Asset Management
Services, Inc. will be reduced by a proportion of any unamortized organizational
expenses determined by the proportion of the number of shares redeemed and the
number of the initial shares of the Equity Portfolio owned by such holder,
outstanding immediately prior to such redemption.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Manager serves as the Fund's and the Equity Portfolio's investment adviser
and is responsible for the management of the assets of the Fund and the Equity
Portfolio in conformity with the stated objectives and policies of the Fund and
the Equity Portfolio. For its services, the Manager is entitled to a fee
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 Manager
has voluntarily agreed to waive its management fee or reimburse the Fund's
expenses to the extent that total Fund operating expenses exceed 2.00% of
average daily net assets during the Fund's limited offering period, subject to
reimbursement by the Fund in subsequent years under certain circumstances. For
the period ended May 31, 1996, the Manager waived its entire fee as adviser and
reimbursed the Fund in the aggregate amount of $113,628.
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 Investment Advisers Act of 1940, as amended ("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 Treasury
Securities and in respect of the management of the assets of the Equity
Portfolio and officers of AIG Global provide representation on the Manager's
Investment Committee. 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
35
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
___________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (unaudited)
___________________________________________________________________________
NOTE 3 - CONTINUED
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 paid from the management fee paid to the Manager.
The Manager was previously party to a subadvisory agreement with AIGAM
International Limited ("AIGAM International"). AIGAM International, a wholly
owned subsidiary of AIG, was renamed AIG Global Investment Corp. (Europe) Ltd.,
("AIG Global Europe") on January 1, 1996. Effective May 28, 1996 AIG Global
Europe deregistered under the Advisers Act and the subadvisory agreement was
replaced with a service agreement pursuant to which AIG Global Europe agreed to
provide investment advisory services.
The Manager serves as the Fund's and the Equity Portfolio's investment adviser
and is responsible for the management of the assets and review and supervision
of the investment program. In addition to the subadvisory agreements, the
Manager has entered into service agreements with certain affiliates, including
AIG Global Europe, whereby such affiliates provide investment advisory services
under the direction of the Manager. Certain officers of these affiliates
provide representation on the Manager's Investment Committee. Under the terms
of the service agreements, the Manager is required to pay the service providers
a total combined fee 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
0.45% of the average daily net assets of the Equity Portfolio. These fees are
paid from the management fee paid to the Manager. There have been no such fees
paid through the period ended May 31, 1996.
Under the Shareholder Servicing Agreement, AIG Equity Sales Corp. (the
"Distributor"), a wholly owned subsidiary of AIG, provides administrative
services for the Fund's shareholders for which the Fund pays the Distributor a
fee at the annual rate of up to 0.25% of average daily net assets. Under a plan
of distribution 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. The
Plan will terminate on the last day of the Offering Period.
PFPC International Ltd. serves as the Fund's administrator and accounting agent.
PFPC Inc. serves as Fund's transfer agent and dividend disbursing agent. PNC
Bank, NA serves as custodian of the Fund's assets.
36
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
___________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (unaudited)
___________________________________________________________________________
Certain directors and officers of the Company are also directors and/or officers
of the Manager
or Distributor. These directors and officers are paid no compensation by the
Fund.
NOTE 4 - CAPITAL SHARE TRANSACTIONS
The Company has authorized 400 million shares of capital stock in the Fund with
a par value of $0.001. For the period ended May 31, 1996, there were 221,407
shares of capital stock sold, and 2,727 shares of capital stock redeemed.
NOTE 5 - SECURITIES TRANSACTIONS
For the period ended May 31, 1996 purchases of U.S. Treasury zero coupon
securities (other than short-term securities) were $1,145,111. There were no
sales of U.S. Treasury zero coupon securities in the period. At May 31, 1996,
the cost of the securities of the Fund for federal income tax purposes was
substantially the same as for financial reporting purposes. Accordingly, net
unrealized depreciation of investments amounted to $22,577.
37
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Portfolio of Investments
May 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------
Value
Description Shares (Note 2)
----------- ------ --------
COMMON STOCKS - 106.7%
<S> <C> <C>
France - 6.8%
Generale des Eaux ................................................... 300 $ 32,167
Total CIE Franc des Petroles B shares ............................... 500 36,229
-------------
68,396
-------------
Hong Kong - 12.1%
Shanghai Industrial Holdings Ltd..................................... 49,000 59,534
Simsen Metals Holdings Ltd .......................................... 200,000 34,123
Temfat Hingfung ..................................................... 250,000 29,082
-------------
122,739
-------------
Japan - 23.9%
Bank of Tokyo - Mitsubishi Ltd ...................................... 1,000 23,697
Bridgestone Corp..................................................... 1,000 17,403
Canon Inc ........................................................... 1,000 19,624
Daihatsu Motor Co ................................................... 2,000 12,311
Kajima .............................................................. 1,000 10,460
Kao Corp ........................................................... 1,000 13,330
Kirin Brewery ....................................................... 1,000 12,404
Komatsu Ltd ......................................................... 1,000 9,534
Mitsubishi Chemical Corp ............................................ 2,000 9,886
Mitsubishi Heavy Industries ......................................... 1,000 8,599
Mitsubishi Trust & Banking .......................................... 1,000 16,662
Mitsukoshi .......................................................... 1,000 11,016
NEC ................................................................. 1,000 11,016
Nippon Steel ........................................................ 3,000 10,192
Nomura Securities ................................................... 1,000 18,884
Sankyo Co. Ltd....................................................... 1,000 23,697
* Tokio Marine & Fire Insurance......................................... 1,000 12,959
-------------
241,674
-------------
Netherlands - 7.5%
Getronics N.V. ...................................................... 500 41,618
Hunter Douglas N.V. ................................................. 500 34,755
-------------
76,373
-------------
Sweden - 3.6%
Astra AB A - Free Shares ........................................... 800 36,670
-------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Value
Description Shares (Note 2)
----------- ------ --------
<S> <C> <C>
United Kingdom - 16.8%
Cable & Wireless .............................................................. 5,000 $ 34,421
Glaxo Wellcome PLC ............................................................ 2,500 32,599
Glynwed International PLC ..................................................... 6,500 34,669
Legal & General Group PLC ..................................................... 3,000 32,840
Vaux Group PLC ................................................................ 8,000 35,351
----------
169,880
----------
United States - 36.0%
Canadian Pacific Ltd. ......................................................... 2,400 49,200
Flowers Industries Inc......................................................... 3,000 47,250
Kroger Co...................................................................... 600 23,550
Octel Communications Corp...................................................... 1,900 46,550
Pall Corp...................................................................... 1,800 48,150
Snap - On Tools Corp........................................................... 1,000 48,125
Ultramar ...................................................................... 1,600 51,400
Unifi Inc...................................................................... 1,800 49,950
----------
364,175
----------
<CAPTION>
<S> <C>
Total Common Stocks (Cost $1,071,733)............................................................. 1,079,907
----------
SHORT-TERM INVESTMENTS - 26.8%
Cayman Island Time Deposit - 2.75% due 06/03/96 (Cost $272,000)................................ 272,000
----------
Total Investments (Cost $1,343,733) - 133.5% ...................................................... 1,351,907
Liabilities in excess of other assets - (33.5%) ................................................... (339,464)
----------
NET ASSETS - 100% ................................................................................. $1,012,443
==========
- ---------------
</TABLE>
* Non-income producing security.
See Accompanying Notes to the Financial Statements.
39
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities at value (cost $1,343,733)............ $1,351,907
Cash........................................................... 7,971
Interest receivable............................................. 21
Deferred organization costs.................................... 184,904
Prepaid expenses............................................... 9,697
----------
Total Assets................................................. 1,554,500
-----------
LIABILITIES:
Payable for investment securities purchased.................... 349,329
Due to Manager................................................. 156,804
Accrued expenses............................................... 35,924
----------
Total Liabilities............................................ 542,057
----------
NET ASSETS....................................................... $1,012,443
==========
See Accompanying Notes to the Financial Statements.
40
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Statement of Operations
For the period from December 15, 1995* to May 31, 1996 (Unaudited)
- ----------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ..................................................................... $ 1,530
----------
EXPENSES:
Trustees' fees and expenses................................................... 24,006
Organization expenses......................................................... 19,641
Insurance expense............................................................. 14,017
Legal fees.................................................................... 12,002
Audit fees ................................................................... 6,001
Administrative fees........................................................... 4,963
Registration fees............................................................. 2,068
Investment advisory fees ..................................................... 755
Shareholder communication fees................................................ 480
Miscellaneous................................................................. 1,442
----------
85,375
----------
Less: Fee waivers and expense reimbursements ................................. (84,117)
----------
Net expenses.................................................................. 1,258
----------
Net Investment Income ............................................... 272
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on securities transactions ................................. (3)
Net change in unrealized appreciation of investments ......................... 8,174
----------
Net realized and unrealized gain from investment activity............ 8,171
----------
Net Increase in Net Assets Resulting From Operations......... 8,443
==========
</TABLE>
- ----------------------------
*Commencement of Operations.
See Accompanying Notes to the Financial Statements.
41
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the period from December 15, 1995* to May 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income............................. $ 272
Net realized loss on securities transactions...... (3)
Net change in unrealized appreciation of
investments..................................... 8,174
---------
Net Increase in Net Assets Resulting From
Operations.................................. 8,443
---------
PORTFOLIO SHARE TRANSACTIONS:
Contributions..................................... 903,000
---------
Total Increase in Net Assets ............... 911,443
Net assets at the beginning of the period............. 101,000
---------
NET ASSETS at the end of the period................... $1,012,443
===========
- ---------------------
*Commencement of Operations.
See Accompanying Notes to the Financial Statements.
42
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
- ------------------------------------------------------------------
Ratios / Supplemental Data:
For the period from December 15, 1995* to May 31, 1996 (Unaudited)
- ------------------------------------------------------------------
Net assets, end of period (000's) .. $ 1,012
Ratio to average net assets--
Expenses........................ 2.00%(a)(b)
Net investment income........... 0.43%(a)(b)
Portfolio turnover rate............. 0.00%
Average commission rate paid........ $ 0.0076
- -----------------
*Commencement of Operations.
(a) Net of fee waivers and expense reimbursements which had the effect of
reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 133.32 percentage
points (annualized).
(b) Annualized.
See Accompanying Notes to the Financial Statements.
43
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
___________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (Unaudited)
___________________________________________________________________________
NOTE 1 - ORGANIZATION
First Global Equity Portfolio (the "Equity Portfolio"), a Delaware Business
Trust, is registered under the Investment Company Act of 1940, as amended, as an
open-end diversified management investment company. The Equity Portfolio was
organized on June 26, 1995 and commenced operations on December 15, 1995.
The investment objective of the Equity Portfolio is to achieve total return on
capital through both capital growth (realized and unrealized) and income. The
Equity Portfolio seeks to achieve this objective by making investments in
securities of issuers from around the world.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Equity Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
All the net investment income and unrealized and realized gains and losses from
securities and foreign currency transactions of the Equity Portfolio are
allocated pro-rata amongst the investors in the Equity Portfolio at the time of
such determination.
a) Security Valuations:
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 of Trustees
of the Equity Portfolio. Short-term securities with less than sixty days
remaining to maturity when acquired are valued at amortized cost, which
approximates market value. Short-term securities with more than sixty days
remaining to maturity are valued at current market value until the sixtieth day
prior to maturity, and are then valued on an amortized cost basis.
44
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
_____________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (Unaudited)
_____________________________________________________________________________
b) Investment Income and Security Transactions:
Security transactions of the Equity Portfolio are accounted for on a trade date
basis. Realized gains and losses on securities transactions are determined on
the identified cost basis. Interest income, including accretion of discount and
amortization of premium, is accrued daily. Dividend income is recognized on the
ex-dividend date.
c) Foreign Currency Transactions:
The Equity Portfolio's investment valuations, other assets and liabilities
initially expressed in foreign currencies are converted each day into U.S.
dollars based upon currency exchange rates determined prior to the close of the
New York Stock Exchange. Purchases and sales of foreign investments and income
and expenses are converted into U.S. dollars based upon currency exchange rates
prevailing on the respective dates of such transactions. The Equity Portfolio
does not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included in net realized and unrealized gains or losses on securities.
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 AIG Capital Management Corp. (the "Manager") or AIG
Global Investment Corp. ("AIG Global"), the subadvisor. 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. With respect to foreign forward currency exchange
contracts losses in excess of amounts recognized in the statement of assets and
liabilities may arise due to changes in value of the foreign currency or if the
counterparty does not perform under the contract.
45
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (Unaudited)
______________________________________________________________________________
d) Federal Income Taxes:
The Equity Portfolio will be classified as a partnership for United States
federal income tax purposes. As a consequence, the Equity Portfolio itself will
not be subject to United States federal income tax, but each investor in the
Equity Portfolio will be required to take into account its distributive share of
items of partnership income, gain, loss, deduction and credit substantially as
though such items had been realized directly by the investor and without regard
to whether any distribution from the Equity Portfolio has been or will be
received.
e) Organization Expenses:
Expenses incurred in connection with the organization of the Equity Portfolio
are being amortized on a straight line basis over a five year period beginning
December 15, 1995. The amount paid by the fund on any redemption by AIG Asset
Management Services, Inc. will be reduced by a proportion of any unamortized
organizational expenses determined by the proportion of the amount of capital
withdrawn and the amount of initial capital of the Equity Portfolio owned by
such holder, outstanding immediately prior to such withdrawal.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Manager, an indirect wholly owned subsidiary of American International
Group, Inc. ("AIG"), serves as the Equity Portfolio's investment adviser and is
responsible for the management of the assets of the Equity Portfolio in
conformity with its stated objectives and policies. For its services, the
Manager is entitled to a fee calculated daily and paid monthly, at an annual
rate of 1.20% of the average daily net assets of the Equity Portfolio. The
Manager has voluntarily agreed to waive its management fee or reimburse the
Equity Portfolio's expenses to the extent that its total operating expenses
exceed 2.00% of average daily net assets for a limited period. For the period
ended May 31, 1996, the Manager waived its entire fee as adviser and reimbursed
the Equity Portfolio in the aggregate amount of $84,117.
46
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (Unaudited)
______________________________________________________________________________
NOTE 3 - CONTINUED
The Manager has entered into a subadvisory agreement with AIG Global, a wholly
owned subsidiary of AIG which is registered under the Investment Advisers Act of
1940, as amended ("Advisers Act"). Pursuant to its subadvisory agreement, AIG
Global provides investment advisory services to the Manager in respect of the
management of the assets of the Equity Portfolio and officers of AIG Global
provide representation on the Manager's Investment Committee. Under the
subadvisory agreement, the Manager is required to pay AIG Global a fee at an
annual rate of 0.15% of the average daily net assets of the Equity Portfolio.
These fees are paid from the management fee paid to the Manager.
The Manager was previously party to a subadvisory agreement with AIGAM
International Limited ("AIGAM International"). AIGAM International, a wholly
owned subsidiary of AIG, was renamed AIG Global Investment Corp. (Europe) Ltd.,
("AIG Global Europe") on January 1, 1996. Effective May 28, 1996 AIG Global
Europe deregistered under the Advisers Act and the subadvisory agreement was
replaced with a service agreement pursuant to which AIG Global Europe agreed to
provide investment advisory services.
The Manager serves as the Equity Portfolio's investment adviser and is
responsible for the management of the assets and review and supervision of the
investment program. In addition to the subadvisory agreements, the Manager has
entered into service agreements with certain affiliates, including AIG Global
Europe, whereby such affiliates provide investment advisory services under the
direction of the Manager. Certain officers of these affiliates provide
representation on the Manager's Investment Committee. Under the terms of the
service agreements, the Manager is required to pay the service providers a total
combined fee at an annual rate of 0.45% of the average daily net assets of the
Equity Portfolio. These fees are paid from the management fee paid to the
Manager. There have been no such fees paid through the period ended May 31,
1996.
PFPC International Ltd. serves as the Equity Portfolio's administrator and
accounting agent. State Street Bank and Trust Company serves as custodian of the
Equity Portfolio's assets.
Certain trustees and officers of the Equity Portfolio are also directors and/or
officers of the Manager. These trustees and officers are paid no compensation
by the Equity Portfolio.
47
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
May 31, 1996 (Unaudited)
______________________________________________________________________________
NOTE 4 - SECURITIES TRANSACTIONS
For the period ended May 31, 1996, purchases of portfolio securities (other than
short-term securities) were $1,071,733. There were no sales of portfolio
securities. At May 31, 1996, the cost of the securities of the Equity Portfolio
for federal income tax purposes was substantially the same as for financial
reporting purposes. Accordingly, net unrealized appreciation of investments
amounted to $8,174 consisting of gross unrealized appreciation of $24,519 and
gross unrealized depreciation of $16,345.
48
<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
From AIG's Report on From 10-Q for the three months ended March
31, 1996:
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Statements (Unaudited):
Consolidated Balance Sheet at March 31, 1996
Consolidated Statement of Income for the three months ended
March 31, 1996 and 1995
Consolidated Statement of Cash Flows for the three months ended
March 31, 1996 and 1995
Notes to Financial Statements
49
<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 rate 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 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.
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.
A-1
<PAGE>
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.
A-2
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Schedules:
PART A - Financial Highlights for the AIG Children's World Fund - 2005.
PART B - Statement of Assets and Liabilities and Notes of the Registrant
with respect to AIG Children's World Fund - 2005 as of September
11, 1995 and report of independent auditors thereon.
Statement of Assets and Liabilities and Notes of First Global
Equity Portfolio as of September 11, 1995 and report of
independent auditors thereon.
Portfolio of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets,
Financial Highlights and Notes to the Financial Statements of the
Registrant with respect to AIG Children's World Fund - 2005 as of
May 31, 1996.
Portfolio of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets,
Ratios/Supplemental Data and Notes to the Financial Statements of
First Global Equity Portfolio as of May 31, 1996.
Financial Information of American International Group, Inc. is
incorporated by reference into Part B.
(b) EXHIBITS:
(1) Articles of Incorporation./1/
(1)(a) Articles of Amendment, dated June 29, 1995./2/
(1)(b) Articles of Amendment, dated August 16, 1995./3/
(1)(c) Certificate of Correction, dated September 11, 1995./4/
(1)(d) Articles Supplementary, dated November 3, 1995./5/
(1)(e) Articles of Amendment, dated January 11, 1996./6/
(2) By-laws of Registrant./1/
(3) Not Applicable.
(4) Specimen Common Stock Certificate./2/
(5)(a) Form of Management Agreement relating to AIG Children's World Fund
-- 2005./2/
(5)(b) Form of Subadvisory Agreement with AIGAM International Limited relating
to AIG Children's World Fund -- 2005./2/
(5)(c) Form of Subadvisory Agreement with AIG Global Investors, Inc. relating to
AIG Children's World Fund -- 2005./2/
(5)(d) Form of Management Agreement relating to AIG Retiree Fund
-- 2003./5/
(5)(e) Form of Subadvisory Agreement with AIGAM International Limited relating
to AIG Retiree Fund -- 2003./5/
(5)(f) Form of Subadvisory Agreement with AIG Global Investors Inc. relating to
AIG Retiree Fund -- 2003./5/
(6)(a) Form of Distribution Agreement relating to AIG Children's World Fund --
2005./2/
(6)(b) Form of Distribution Agreement relating to AIG Retiree Fund -- 2003./5/
(7) Not Applicable.
(8) Form of Custody Agreement./2/
- -------------------
/1/ Filed with the initial filing of this Registration Statement on April 13,
1995.
/2/ Filed with Pre-Effective Amendment No. 1 to this Registration Statement on
July 21, 1995.
/3/ Filed with Pre-Effective Amendment No. 2 to this Registration Statement on
September 7, 1995.
/4/ Filed with Pre-Effective Amendment No. 3 to this Registration Statement on
September 13, 1995.
/5/ Filed with Post-Effective Amendment No. 2 to this Registration Statement on
November 3, 1995.
/6/ Filed with Post-Effective Amendment No. 3 to this Registration Statement on
January 16, 1996.
c - i
<PAGE>
(9)(a) Form of Shareholder Servicing Agreement./2/
(9)(b) Form of Administration and Accounting Services Agreement./2/
(9)(c) Form of Transfer Agency Agreement./2/
(9)(d) Powers of Attorney (included on the signature page of the referenced
filing):
(i) Registrant (other than Ms. Linda-Ann Goodwin)/1/
(ii) First Global Equity Portfolio (other than Ms. Linda-Ann Goodwin)/2/
(iii) AIG Capital Management Corp./3/
(iv) American International Group, Inc. (other than Mr. Houghton
Freeman)/3/
(v) Mr. Houghton Freeman (Director of American International Group,
Inc.)/4/
(vi) Ms. Linda-Ann S. Goodwin (Director of Registrant and of First
Global Equity Portfolio)/6/
(9)(e) Form of Guarantee Agreement relating to AIG Children's World Fund --
2005./4/
(9)(f) Form of Support Agreement relating to AIG Children's World Fund --
2005./4/
(9)(g) Form of Guarantee Agreement relating to AIG Retiree Fund-- 2003./5/
(9)(h) Form of Support Agreement relating to AIG Retiree Fund --2003./5/
(10)(a) Opinion and Consent of counsel with respect to shares of AIG Children's
World Fund -- 2005./4/
(10)(b) Opinions and Consents of counsel with respect to the Guarantee and the
Support Agreement relating to AIG Children's World Fund-- 2005./4/
(10)(c) Opinion and Consent of counsel with respect to shares of AIG Retiree
Fund - 2003./6/
(10)(d) Opinions and Consents of counsel with respect to the Guarantee and the
Support Agreement relating to AIG Retiree Fund --2003./7/
(11) Consent of independent auditors./8/
(12) Not Applicable.
(13) Form of Agreement with respect to provision of initial capital./3/
(14) Not Applicable.
(15)(a) Rule 12b-1 Plan relating to AIG Children's World Fund -- 2005./2/
(15)(b) Form of Rule 12b-1 Plan relating to AIG Retiree Fund --2003./5/
(16) Not Applicable.
(17)(a) Financial Data Schedule for AIG Children's World Fund -2005./8/
(17)(b) Financial Data Schedule for First Global Equity Portfolio./8/
(18) Not Applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of June 13, 1996, there were 288 holders of shares of the AIG
Children's World Fund -- 2005 series of the Registrant and there were
34 holders of shares of the AIG Retiree Fund -- 2003 series of the
Registrant.
ITEM 27. INDEMNIFICATION
Section 2-418 of the General Corporation Law of the State of Maryland
provides that the Registrant may indemnify its directors, officers,
employees and agents. Article Twelfth of the Registrant's Articles of
Incorporation and Article VII of the Registrant's By-Laws provide that
the Registrant shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to any action, suit
or proceeding by reason of the fact that such person or such person's
testator or intestate is or was a director, officer or employee of the
Registrant, provided that no representative of the Registrant
___________________
/2/ Filed with Pre-Effective Amendment No. 1 to this Registration
Statement on July 21, 1995.
/4/ Filed with Pre-Effective Amendment No. 3 to this Registration
Statement on September 13, 1995.
/5/ Filed with Post-Effective Amendment No. 2 to this Registration
Statement on November 3, 1995.
/6/ Filed with Post-Effective Amendment No. 3 to this Registration
Statement on January 16, 1996.
/7/ Filed with Post-Effective Amendment No. 4 to this Registration
Statement on February 15, 1996.
/8/ Filed herewith.
c - ii
<PAGE>
PART C. OTHER INFORMATION (continued)
shall be indemnified to the extent liability results from misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such representative's office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant for expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of
such issue.
The Registrant maintains or intends to obtain, subject to availability and
the determination of the directors as to the reasonableness of insurance
premiums from time to time, insurance insuring its officers and directors
against certain liabilities incurred in their capacities as such, and
insuring the Registrant against any payments which it is obligated to make
to such persons under the foregoing indemnification provisions.
The Restated Certificate of Incorporation of AIG (the
"Certificate") provides:
"The Company shall indemnify to the full extent permitted by law
any person made, or threatened to be made, a party to an action, suit or
proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that he, his testator or intestate is or was a
director, officer or employee of the Company or serves or served any other
enterprise at the request of the Company."
Section 6.4 of AIG's By-laws contains a similar provision.
The Certificate also provides that a director will not be personally
liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent that such an
exemption from liability or limitation thereof is not permitted by the
Delaware General Corpora tion Law (the "GCL").
Section 145 of GCL permits indemnification against expenses, fines,
judgments and settlements incurred by any director, officer or employee of
AIG in the event of pending or threatened civil, criminal, administrative
or investigative proceedings, if such person was, or was threatened to be
made, a party by reason of the fact that he is or was a director, officer
or employee of AIG. Section 145 also provides that the indemnification
provided for therein shall not be deemed exclusive of any other rights to
which those seeking indemnification may otherwise be entitled. In
addition, AIG and its subsidiaries maintain a directors' and officers'
liability insurance policy.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
AIG Capital Management Corp. (Manager)
----------------------------
AIG Capital Management Corp. is a U.S. registered investment advisor which
also manages the assets of the AIG Money Market Fund, a separate money
market investment portfolio of The Advisors' Inner Circle Fund. The
Advisors' Inner Circle Fund is an open end investment company that is
registered under the Investment Company Act of 1940.
c - iii
<PAGE>
PART C. OTHER INFORMATION (continued)
AIG Global Investment Corp. (Subadvisor)
----------------------------------------
AIG Global Investment Corp. is a U.S. registered investment advisor that
provides domestic asset management services primarily to AIG and its
subsidiaries, but also provides investment advisory services to third
parties.
The list required by this Item 28 of officers and directors of AIG Capital
Management Corp. and AIG Global Investment Corp., together with
information as to any other business, vocation, profession or employment
of a substantial nature engaged in by such officers and directors during
the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by AIG Capital Management Corp. and AIG Global Investment
Corp., respectively, pursuant to the Investment Advisers Act of 1940 (SEC
File Nos. 801-47192 and 801-18759, respectively).
ITEM 29. PRINCIPAL UNDERWRITERS
AIG Equity Sales Corp. also acts as a principal underwriter for:
1. AIG Life Insurance Company, as depositor on behalf of Variable Account
I and Variable Account II; and
2. American International Life Assurance Company of New York, as
depositor for Variable Account A and Variable Account B.
The Officers and Directors of the Distributor are:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
- ------------------ --------------------- ---------------------
<S> <C> <C>
Michele L. Abruzzo President None
80 Pine Street and Director
New York, NY 10005
Bernard J. Bujak Associate Vice President None
80 Pine Street
New York, NY 10005
Kevin N. Clowe Vice President None
70 Pine Street and Director
New York, NY 10270
Florence A. Davis General Counsel and None
70 Pine Street Director
New York, NY 10270
</TABLE>
c - iv
<PAGE>
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
- ------------------ --------------------- ---------------------
<S> <C> <C>
Kenneth F. Judkowitz Vice President, None
80 Pine Street Treasurer and
New York, NY 10005 Comptroller
Edward E. Matthews Director None
70 Pine Street
New York, NY 10270
Jerome T. Muldowney Director None
One Chase Manhattan Plz.
New York, NY 10005
Robert J. O'Connell Director None
80 Pine Street
New York, NY 10005
Julia Perlman Assistant Vice President None
80 Pine Street and Director of Marketing
New York, NY 10005
Daniel K. Kingsbury Vice President President
70 Pine Street
New York, NY 10270
Philomena Scamardella Vice President and None
80 Pine Street Senior Compliance
New York, NY 10005 Officer
Ernest E. Stempel Director None
70 Pine Street
New York, NY 10270
Elizabeth M. Tuck Secretary Assistant Secretary
70 Pine Street
New York, NY 10270
</TABLE>
c - v
<PAGE>
PART C. OTHER INFORMATION (continued)
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS - All accounts, books and other
documents required to be maintained by Section 31(a) of the 1940 Act
and the Rules (17 CFR 270.31a-1 to 31a-3) promulgated thereunder will
be maintained by the following:
AIG Capital Management Corp., 70 Pine Street, New York, New York 10270
(records relating to its function as investment adviser).
PFPC International Ltd., 80 Harcourt Street, Dublin, Ireland (records
relating to its functions as Administrator).
PNC Bank, National Association, Airport Business Center, International
Court 2, 200 Stevens Drive, Lester, Pennsylvania 19113 (records relating
to its function as Custodian).
AIG Equity Sales Corp., 80 Pine Street, New York, New York 10005 (records
relating to its function as Distributor).
ITEM 31. MANAGEMENT SERVICES - None not discussed in the Prospectus or
Statement of Additional Information for the Registrant.
ITEM 32. UNDERTAKINGS
The Registrant (a) undertakes to file a post-effective amendment under the
Securities Act of 1933 with financial statements as of a reasonably
current date, that may be unaudited, of the AIG Retiree Fund - 2003 within
four to six months after the date on which the AIG Retiree Fund - 2003
commences selling its shares to the public, and (b) if requested to do so
by holders of at least ten percent of its outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the removal of a
director or directors and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company Act of
1940.
c - vi
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this registration statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York, on the 26th
day of June, 1996.
AIG ALL AGES FUNDS, INC.
By: /s/ Daniel K. Kingsbury
------------------------
Daniel K. Kingsbury
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in
the capacities indicated, on the 26th day of June, 1996.
Signature Title
--------- -----
* Chairman of the Board and
---------------------------- Director
Roger Wickers
* Director
----------------------------
Robert Ash
* Director
----------------------------
Paul Friedman
* Director
----------------------------
Linda-Ann S. Goodwin
* Director
----------------------------
Charles Vinick
/s/ Daniel K. Kingsbury President (principal
---------------------------- executive officer)
Daniel K. Kingsbury
* Treasurer (principal
---------------------------- financial and
J. Fergus McKeon accounting officer)
*By: /s/ Daniel K. Kingsbury
-----------------------
Daniel K. Kingsbury
As Attorney-in-Fact
c - vii
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the First Global Equity Portfolio has
duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Tucker's
Town, Bermuda on the 19th day of June, 1996.
FIRST GLOBAL EQUITY PORTFOLIO
By: /s/ Daniel K. Kingsbury
-------------------------
Daniel K. Kingsbury
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in
the capacities indicated, on the 19th day of June, 1996.
Signature Title
--------- -----
*
---------------------------- Chairman of the Board and
Trustee of First
Roger Wickers Global Equity Portfolio
* Trustee of First Global
---------------------------- Equity Portfolio
Robert Ash
* Trustee of First Global
---------------------------- Equity Portfolio
Paul Friedman
* Trustee of First Global
---------------------------- Equity Portfolio
Linda-Ann S. Goodwin
* Trustee of First Global
---------------------------- Equity Portfolio
Charles Vinick
/s/ Daniel K. Kingsbury President (principal executive
---------------------------- officer) of First Global
Daniel K. Kingsbury Equity Portfolio
* Treasurer
---------------------------- (principal financial and
J. Fergus McKeon accounting officer) of First
Global Equity Portfolio
*By: /s/ Daniel K. Kingsbury
-----------------------
Daniel K. Kingsbury
As Attorney-in-Fact
c - viii
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Co-registrant AIG Capital Management Corp. has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York on the 26th
day of June, 1996.
AIG CAPITAL MANAGEMENT CORP.
By: /s/ Daniel K. Kingsbury
---------------------------
Daniel K. Kingsbury
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons, in the capacities indicated, on the 26th day of June,
1996.
Signature Title
--------- -----
* Chairman of the Board and
---------------------------- and Director of AIG Capital
Robert L. Ash Management Corp.
*
---------------------------- Vice Chairman of the Board
David T. Gross and Director of AIG Capital
Management Corp.
* Director of AIG Capital
---------------------------- Management Corp.
William N. Dooley
* Director of AIG Capital
---------------------------- Management Corp.
Ronald A. Latz
* Director of AIG Capital
---------------------------- Management Corp.
Helen Stefanis
/s/ Daniel K. Kingsbury Director and President of AIG
---------------------------- Capital Management Corp.
Daniel K. Kingsbury
* Vice President and Comptroller
---------------------------- (principal financial and
Neil Friedman accounting officer) of AIG
Capital Management Corp.
*By: /s/ Daniel K. Kingsbury
-----------------------------
Daniel K. Kingsbury
As Attorney-in-Fact
c - ix
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Co-registrant American International Group, Inc. has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York, the State
of New York on the 26th day of June, 1996.
----
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ Edward E. Matthews
---------------------------
Edward E. Matthews
Vice Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons, in the capacities indicated, on the 26th day of June,
----
1996.
Signature Title
--------- -----
* Chairman and Director
---------------------------- (Principal Executive Officer)
M.R. Greenberg of American International
Group, Inc.
/s/ Edward E. Matthews
---------------------------- Vice Chairman and Director
Edward E. Matthews (Principal Financial Officer)
of American Internation Group,
Inc.
* Executive Vice President and
---------------------------- Comptroller (Principal
Howard I. Smith Accounting Officer) of
American International Group,
Inc.
* Director of American
---------------------------- International Group, Inc.
M. Bernard Aidinoff
* Director of American
---------------------------- International Group, Inc.
Lloyd M. Bentsen
* Director of American
---------------------------- International Group, Inc.
Marshall Cohen
* Director of American
---------------------------- International Group, Inc.
Barber B. Conable Jr.
* Director of American
---------------------------- International Group, Inc.
Martin Feldstein
* Director of American
---------------------------- International Group, Inc.
Leslie L. Gonda
c - x
<PAGE>
* Director of American
---------------------------- International Group, Inc.
Evan G. Greenberg
* Director of American
---------------------------- International Group, Inc.
Carla A. Hills
* Director of American
---------------------------- International Group, Inc.
Frank Hoenemeyer
* Director of American
---------------------------- International Group, Inc.
Dean P. Phypers
* Director of American
---------------------------- International Group, Inc.
John J. Roberts
* Director of American
---------------------------- International Group, Inc.
Thomas R. Tizzio
* Director of American
---------------------------- International Group, Inc.
Edmund S.W. Tse
*By: /s/ Edward E. Matthews
--------------------------
Edward E. Matthews
As Attorney-in-Fact
c - xi
<PAGE>
EXHIBIT INDEX
A complete list of exhibits is included in Part C, Item 24(b) of
the Registration Statement. The following exhibits are filed herewith:
Sequentially
Numbered
Exhibit Page
------- ------------
(11) Consent of independent auditors.
(17)(a) Financial Data Schedules for AIG Children's
World Fund - 2005.
(17)(b) Financial Data Schedules for First Global
Equity Portfolio.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000943969
<NAME> AIG ALL AGES FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> AIG CHILDREN'S WORLD FUND - 2005
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1953837
<INVESTMENTS-AT-VALUE> 1931260
<RECEIVABLES> 37601
<ASSETS-OTHER> 174853
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2143714
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39357
<TOTAL-LIABILITIES> 39357
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2110645
<SHARES-COMMON-STOCK> 229609
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 9553
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (15838)
<NET-ASSETS> 2104357
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15951
<OTHER-INCOME> 309
<EXPENSES-NET> (6707)
<NET-INVESTMENT-INCOME> 9553
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> (15838)
<NET-CHANGE-FROM-OPS> (6288)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 221407
<NUMBER-OF-SHARES-REDEEMED> 2727
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 911443
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 755
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 85375
<AVERAGE-NET-ASSETS> 853183
<PER-SHARE-NAV-BEGIN> 9.15
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> (.03)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.16
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000948407
<NAME> FIRST GLOBAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1343733
<INVESTMENTS-AT-VALUE> 1351907
<RECEIVABLES> 21
<ASSETS-OTHER> 202572
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1554500
<PAYABLE-FOR-SECURITIES> 349329
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 192728
<TOTAL-LIABILITIES> 542057
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1004000
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 272
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8174
<NET-ASSETS> 1012443
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1530
<OTHER-INCOME> 0
<EXPENSES-NET> 1258
<NET-INVESTMENT-INCOME> 272
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 8174
<NET-CHANGE-FROM-OPS> 8443
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 911443
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 755
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 85375
<AVERAGE-NET-ASSETS> 853183
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 11
[LETTERHEAD OF COOPERS & LYBRAND]
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------
We consent to the inclusion in Post Effective Amendment No. 5 to the
Registration Statement of AIG All Ages Funds, Inc. on Form N-1A (File No.
33-91174) (the "Registration Statement") of our report dated September 11, 1995
on our audit of the financial statement of AIG Children's World Fund-2005, and
we consent to the inclusion in the Registration Statement of our report dated
September 11, 1995 on our audit of the financial statement of First Global
Equity Portfolio, and we consent to the incorporation by reference in the
Registration Statement of our report dated February 23, 1996 on our audit of the
financial statements of American International Group, Inc. which is included in
the Annual Report on Form 10-K of American International Group, Inc. for the
year ended December 31, 1995. We also consent to the reference to our Firm under
the headings "Other Information-Accountants" and "Financial Information" in the
Statement of Additional Information which is part of this Registration
Statement.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
June 26, 1996