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AIG CHILDREN'S WORLD FUND -- 2005
A SERIES OF
AIG ALL AGES FUNDS, INC.
505 CARR ROAD . WILMINGTON, DELAWARE 19809 . (800) 862-3984
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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)
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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.
THE FUND IS A NEWLY INCORPORATED OPEN-END MANAGEMENT INVESTMENT COMPANY AND
THEREFORE HAS NO PRIOR HISTORY.
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 on November
1, 1995.
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Shares of the Fund will be offered to investors only from November 15, 1995
through June 30, 1996. 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 June 30, 1996.
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 June 30, 1996 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. A substantial reduction of the Fund's assets could make the investment
objective of total return unachievable, although management believes a
reduction of such magnitude is unlikely. As a result, the Fund's ability to
accomplish that investment objective for those shareholders who reinvest
dividends and distributions could depend in part on the investment decisions of
other shareholders. 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.
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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. 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 EXPENSES(1)
Maximum sales load imposed on purchases (as a percentage of offering price)............ 4.75%
Maximum sales load imposed on reinvested dividends
(as a percentage of offering price).................................................. None
Deferred sales load
(as a percentage of original purchase price or redemption proceeds, as applicable):
Shares acquired under Large Purchase Privilege(2)................................ 1.00%
All other shares................................................................. None
Redemption fees (as a percentage of amount redeemed)................................... None
Exchange fee........................................................................... None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management fees (assuming 50% of the Fund's assets are invested directly in
Treasury Securities and 50% in the Equity Portfolio):
Treasury Securities 0.20% X 50% =............................................... 0.10%
Equity Portfolio 1.20% X 50% =............................................... 0.60%
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Estimated total management fees.................................................. 0.70%(3)
12b-1 fees (DURING OFFERING PERIOD ONLY)............................................... 0.50%
Other expenses(4)...................................................................... 1.30%
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Total Fund Operating Expenses:
Before Manager's expense reimbursement............................................... 2.50%
</TABLE>
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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
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<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, 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.
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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 substantial 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 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 the best
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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,
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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. No more than 30% of the Equity Portfolio's assets
may be invested in securities of issuers incorporated or organized in any one
country, except that up to 100% 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
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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 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
June 30, 1996 (the "Offering Period"). During the 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 June 30,
1996. 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, as 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 Treasury Securities. 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 tax-free 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. Pursuant to the
Manager's Guarantee, the Manager has agreed that, in the unlikely event that a
shareholder who has reinvested all dividends and distributions and who has not
redeemed any shares presents his or her shares for redemption on any date on or
after the Maturity Date and the amount that would be payable to the shareholder
upon such redemption would be less than the full amount of his or her original
investment (including any sales charge paid), the Manager will pay to the Fund
an amount sufficient to ensure that the total value of the redeeming
shareholder's shares will equal the amount originally invested. If a
shareholder has reinvested all dividends and distributions but has redeemed
some of his or her shares, then the amount that shareholder is certain to
receive under the Manager's Guarantee will be reduced in proportion to the
number of shares redeemed divided by the number of shares originally purchased
during the Offering Period. 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.
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The Support Agreement provides that the full amount of such capital
contribution or loan will be paid directly to the Fund.
OTHER INVESTMENT POLICIES
Except where specifically noted below, the following investment policies of
the Fund and the Equity Portfolio are not fundamental and the Board, or the
Trustees of the Equity Portfolio, as relevant, may change such policies without
the vote of a majority of outstanding voting securities of the Fund or the
Equity Portfolio, as relevant. A more detailed description of the Fund's and
the Equity Portfolio's investment policies, including a list of those
restrictions of the Fund's and the Equity Portfolio's investment activities
which cannot be changed without such a vote, appears in the Statement of
Additional Information. Under the 1940 Act, a "vote of a majority of the
outstanding securities" of either the Fund or the Equity Portfolio means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares
of the Fund or beneficial interests in the Equity Portfolio, as relevant, or
(2) 67% or more of the shares of the Fund or beneficial interests in the Equity
Portfolio present at a meeting of holders, if more than 50% of the outstanding
shares of the Fund or the beneficial interests in the Equity Portfolio are
represented at the meeting in person or by proxy.
Borrowing. The Equity Portfolio and the Fund may from time to time borrow
money from banks for extraordinary or emergency purposes, but may not invest
borrowed funds in additional securities. Such borrowing will not exceed 5% of
the total assets of the Equity Portfolio or the Fund, as applicable, and will
be made at prevailing interest rates. This policy is fundamental and may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund or the Equity Portfolio, as relevant.
Repurchase Agreements. The Equity Portfolio may enter into repurchase
agreements with commercial banks or broker/dealers under which the Equity
Portfolio acquires a U.S. Government security subject to resale at a mutually
agreed upon price and time. The resale price reflects an agreed upon interest
rate effective for the period the Equity Portfolio holds the instrument that is
unrelated to the interest rate on the instrument.
The Equity Portfolio's repurchase agreements will at all times be fully
collateralized by U.S. Government securities, and the Equity Portfolio will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of its custodian. Repurchase agreements
could involve certain risks in the event of bankruptcy or other default of the
seller, including possible delays and expenses in liquidating the underlying
security, decline in the value of the underlying security and loss of interest.
The Fund may not enter into repurchase agreements in respect of 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.
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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.
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.
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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. Although the Manager's Guarantee will terminate in respect
of shares redeemed prior to the Maturity Date, and such shares would no longer
be subject to the Repayment Objective, the Manager's Guarantee will still have
effect, and the Repayment Objective will still apply, to the portion of the
amount originally invested but not redeemed, provided dividends and
distributions with respect to those shares are reinvested. Thus, on or after
the Maturity Date, the holder of those remaining shares would receive, upon
redeeming them (together with shares acquired through reinvestment of dividends
and distributions thereon), an amount that equals or exceeds the purchase price
of the shares initially purchased. The Manager's Guarantee provides further
assurance that such amount will be received upon redemption. Nonetheless, the
amount received on the Maturity Date in respect of such shares, when combined
with the amount received in respect of shares redeemed prior to the Maturity
Date, may be more or less than the aggregate purchase price of all shares
purchased in the offering.
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,
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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
Federal 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 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
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
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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 Portfolio may temporarily hold
funds in foreign currencies. The value of the Equity Portfolio's investments
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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, there are no other mutual
funds that invest in the Equity Portfolio. In the future, information
concerning other funds sold by your broker that invest in the Equity Portfolio
may be obtained from your broker, or by calling 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 below.
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
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result in the Fund having a less diversified portfolio of investments or
adversely affect the Fund's liquidity and the Fund could incur brokerage, tax
or other charges in converting the securities to cash. Notwithstanding the
above, there are other means for meeting shareholder redemption requests such
as borrowing.
Smaller funds investing in the Equity Portfolio may be materially affected by
the actions of larger funds investing in the Equity Portfolio. For example, if
a large fund withdraws from the Equity Portfolio, the remaining funds may
subsequently experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, because the Equity Portfolio would become smaller,
it may become less diversified, resulting in potentially increased portfolio
risk (however, these possibilities also exist for traditionally structured
funds which have large or institutional investors who may redeem their shares).
Also, funds with a greater pro rata ownership in the Equity Portfolio could
have effective voting control of the operations of the Equity Portfolio.
Whenever the Fund is requested to vote on matters pertaining to the Equity
Portfolio (other than a vote by the Fund to continue the operation of the
Equity Portfolio upon the withdrawal of another investor in the Equity
Portfolio), the Company will hold a meeting of shareholders of the Fund and
will cast all of its votes proportionately as instructed by the Fund's
shareholders. The Company will vote the shares held by the Fund shareholders
who do not give voting instructions in the same proportion as the shares of
Fund shareholders who do give voting instructions. Shareholders of the Fund who
do not vote will have no effect on the outcome of such matters.
INVESTMENT ADVISORY SERVICES
THE MANAGER
The Manager 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, 1994, AIG and its
subsidiaries supervised investment portfolios which in the aggregate exceeded
$60 billion, of which more than $10 billion represented third party assets
under management. At such date, members of the Manager's Investment Committee
and their teams of investment professionals supervised the management of assets
in excess of $50 billion, of which more than $7 billion represented third party
funds. See " -- The Investment Process" and " -- The Subadvisors" below.
The Manager also manages 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 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
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Portfolio will be responsible for all expenses other than those assumed by the
Manager including those for necessary professional and brokerage services,
costs of regulatory compliance, costs associated with maintaining corporate
existence, custody, shareholder relations and insurance costs.
The Manager has agreed that, in the event that the total expenses of the Fund
during its first fiscal year (which will end on June 30, 1996), 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 June 30, 1996. The Fund and the
Manager have also agreed that, for each of the three fiscal years of the Fund
ending June 30, 1999, if the Fund's total expenses (calculated as described
above) are less than 2.00% 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% for such year. 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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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. For
defensive reasons, however, the Manager may elect to take a greater proportion
of a redemption from the Equity Portfolio. 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.
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
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<PAGE>
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 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.
21
<PAGE>
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. 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 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 more than 100 foreign countries. 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, 1994, AIG and its consolidated
subsidiaries had total assets of $114.3 billion and capital funds of $16.4
billion; consolidated net income for the year then ended was $2.2 billion. The
Statement of Additional Information contains AIG's financial statements and
certain other information about AIG. At December 31, 1994, AIG and its
consolidated subsidiaries had approximately 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.
22
<PAGE>
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 short term 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.
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.
23
<PAGE>
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.
24
<PAGE>
THE ADMINISTRATOR
PFPC International Ltd. will serve as the Fund's administrator and accounting
agent. PFPC International Ltd.'s principal business address is 80 Harcourt
Street, Dublin, Ireland. Pursuant to the administration and accounting
agreement with the Fund, it will assist the Fund in all aspects of its
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 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, AIG Equity Sales Corp. (the
"Distributor") provides information and administrative services for Fund
shareholders. The Distributor enters into related arrangements with various
financial services firms, such as broker-dealer firms or banks (which may be
affiliated with the Distributor), that provide services and facilities for
their customers or clients who are shareholders of the Fund. Such
administrative services and assistance may include, but are not limited to,
establishing and maintaining shareholder accounts and records, processing
purchase and redemption transactions and answering routine shareholder
inquiries regarding the Fund and its special features. The Distributor bears
all its expenses for
25
<PAGE>
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 AIG Equity Sales Corp. (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
26
<PAGE>
little as $1,000 and reach the $2,500 minimum with several additional
investments during the Offering Period. The minimum investment for an
Individual Retirement Account ("IRA") or employee benefit plan account is
$2,000, and the minimum subsequent investment is $50; for these accounts you
may choose to make an initial investment of as little as $250 and reach the
$2,000 minimum with several additional investments during the Offering Period.
To do this you must indicate on the Account Application your intent to invest
at least the $2,500 minimum (or $2,000 for IRAs and employee benefit plans) by
the end of the Offering Period. If you have not invested at least the minimum
amount by the end of the Offering Period, the Fund may redeem your shares
(which may occur at a time when the net asset value is less than when you
invested) or the Fund may impose an annual account keeping fee of $10. This fee
may be changed at any time in management's discretion.
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 from November 15, 1995
through June 30, 1996 (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 June 30, 1996. However, the Fund may at its option
extend or shorten 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. AIG Equity
Sales Corp., the Fund's principal underwriter (the "Distributor"), retains the
sales charge from which it allows discounts from the applicable
27
<PAGE>
public offering price to investment dealers, which discounts are uniform for
all dealers in the United States and its territories. The normal discount
allowed to dealers is set forth in the above table. Upon notice to all dealers
with whom it has sales agreements, the Distributor may reallow up to the full
applicable sales charge, as shown in the above table, during periods and for
transactions specified in such notice and such reallowances may be based upon
attainment of minimum sales levels. During periods when 90% or more of the
sales charge is reallowed, such dealers may be deemed to be underwriters as
that term is defined in the 1933 Act.
Banks and other financial services firms may provide administrative services
related to order placement and payment to facilitate transactions in shares of
the Fund for their clients, and the Distributor may pay them a transaction fee
up to the level of the discount or other concession allowable to dealers as
described above. Banks currently are prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. Management does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund.
In addition to the discounts or commissions described above, the Distributor
or the Manager may, from time to time, pay or allow additional concessions or
promotional incentives, in the form of cash or other compensation, to firms
that sell shares of the Fund. In some instances, such discounts or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Fund or other funds underwritten by the Distributor. Such concessions may be
paid as a lump sum or be periodic and may be up to 0.25% of the value of shares
sold by a dealer, plus additional compensation for continuing due diligence or
other services.
Shares of the Fund may be purchased at net asset value by a participant-
directed qualified retirement plan described in Code Section 401(a) or a
participant-directed non-qualified deferred compensation plan described in Code
Section 457 provided in either case that such plan has not less than 200
eligible employees.
Shares of the Fund may also be purchased at net asset value by any purchaser
provided that the amount invested in the Fund or certain other funds totals at
least $1,000,000, including purchases pursuant to the "Letter of Intent" and
"Cumulative Discount" features described under "Special Features" (the "Large
Purchase Privilege"). The other funds for which the Large Purchase Privilege is
available will vary from time to time because they are generally offered only
for limited periods. As of the date of this Prospectus, the Large Purchase
Privilege is not available for any other funds. 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
28
<PAGE>
of the shares redeemed less the above exclusions. The contingent deferred sales
charge will be waived in the event of redemption of shares of a shareholder
(including a registered joint owner) who has died or who, after purchase of the
shares being redeemed, becomes totally disabled (as evidenced by a
determination by the federal Social Security Administration).
Shares of the Fund purchased under the Large Purchase Privilege may be
exchanged for shares of certain other funds managed by the Manager under the
exchange privilege described under "Special Features -- Exchange Privilege"
without paying any contingent deferred sales charge at the time of exchange. If
the shares received in exchange are redeemed thereafter, a contingent deferred
sales charge may be imposed in accordance with the foregoing requirements
provided that the shares redeemed will retain their original cost and purchase
date for purposes of the contingent deferred sales charge.
The Distributor may in its discretion compensate investment dealers or other
financial services firms in connection with the sale of shares of the Fund to
employer sponsored employee benefit plans at net asset value up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million during the Offering Period, 0.50% on the next $5 million and 0.25%
on amounts over $10 million during the Offering Period. The Distributor may in
its discretion compensate investment dealers or other financial service firms
in connection with the sale of shares of the Fund in accordance with the Large
Purchase Privilege up to the following amounts: 1.00% of the net asset value of
shares sold on amounts up to $3 million, .50% on the next $2 million and .25%
on amounts over $5 million. For purposes of determining the appropriate
commission percentage to be applied to a particular sale under the foregoing
schedule, the Distributor will consider the cumulative amount invested by the
purchaser in the Fund and other funds eligible for the Large Purchase
Privilege.
Shares may be sold to officers, trustees, directors, employees (including
retirees) and sales representatives of the Fund, its investment manager, its
subadvisors, its principal underwriter or certain affiliated companies, for
themselves or members of their families, or to any trust, pension, profit-
sharing or other benefit plan for only such persons at net asset value in any
amount. Shares may be sold at net asset value in any amount to registered
representatives and employees of broker-dealers having selling group agreements
with the Distributor and officers, directors and employees of service agents of
the Fund, for themselves or their spouses or dependent children, or to any
trust or pension, profit-sharing or other benefit plan for only such persons.
Shares may be sold at net asset value in any amount to 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 Investment Advisers Act of 1940 and other
financial services firms that adhere to certain standards established
29
<PAGE>
by the Distributor, including a requirement that such shares be sold for the
benefit of their clients participating in a "wrap account" or similar program
under which such clients pay a fee to the investment adviser or other firm.
Such shares are sold for investment purposes and on the condition that they
will not be resold except through redemption or repurchase by the Fund. The
Fund may also issue shares at net asset value in connection with the
acquisition of the assets of or merger or consolidation with another investment
company, or to shareholders in connection with the investment or reinvestment
of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser," which includes an individual, or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account, or an organization exempt from
federal income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to
qualify for a lower sales charge, all orders from an organized group will have
to be placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no
information with respect to or control over accounts of specific shareholders.
Such shareholders may obtain access to their accounts and information about
their accounts only from their firm. Certain of these firms may receive
compensation from the Fund through the Distributor for recordkeeping and other
expenses relating to these nominee accounts. See "Shareholder Servicing
Agreement." In addition, certain privileges with respect to the purchase and
redemption of shares or the reinvestment of dividends may not be available
through such firms. Some firms may participate in a program allowing them
access to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. Such firms, including affiliates of the Distributor, may receive
compensation from the Fund through the Distributor for these services. This
prospectus should be read in conjunction with such firms' material regarding
their fees and services.
Orders for the purchase of shares of the Fund will be confirmed at a price
based on the net asset value next determined after receipt by the Distributor
of the order accompanied by payment. However, orders received by 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
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<PAGE>
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.
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.
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<PAGE>
The redemption price will be the net asset value next determined following
receipt by the Distributor of a properly executed request with any required
documents. Payment for shares redeemed will be made in cash as promptly as
practicable but in no event later than three business days after receipt of a
properly executed request in proper form for transfer. When the Fund is
requested to redeem shares for which it may not have yet received good
payment, it may delay transmittal of redemption proceeds until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 15 days from 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 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 Shareholder Service Agent 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
32
<PAGE>
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 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.
33
<PAGE>
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 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 the 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 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
Letter of Intent is not available for any other funds. For a list of the funds
for which the Letter of Intent is available in the future, 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
34
<PAGE>
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 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
35
<PAGE>
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.
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
36
<PAGE>
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 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. To date, shares in the AIG Children's World Fund -- 2005
described herein 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
37
<PAGE>
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.
38
<PAGE>
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AIG CHILDREN'S
WORLD FUND -- 2005
A SERIES OF
AIG ALL AGES FUNDS, INC.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND'S EXPENSES........................................................ 3
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........................................................... 34
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 ON NOVEMBER 1, 1995
- --------------------------------------------------------------------------------
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<PAGE>
AIG CHILDREN'S WORLD FUND--2005
SUPPLEMENT DATED MARCH 18, 1996 TO PROSPECTUS
DATED SEPTEMBER 21, 1995, AS SUPPLEMENTED ON NOVEMBER 1, 1995
SUPPLEMENTAL DESCRIPTION OF THE MANAGER'S GUARANTEE
The following description of certain features of the Manager's Guarantee is
intended to provide investors with additional information and should be read in
conjunction with the section of the Prospectus captioned "Investment Objectives
and Management Policies--The Manager's Guarantee" (pages 10 and 11); in
addition, the seventh and eighth sentences of that section are deleted in their
entirety.
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 the person who acquired one share during the Offering Period and
continuously reinvested all dividends and distributions. Due to reinvestment of
dividends and distributions, that person would own more than one share at the
Maturity Date. Dividends and distributions paid by the Fund during the Offering
Period will be taken into account in determining 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%.
Any payment made by the Manager pursuant to the Manager's Guarantee will be
to the Fund and will cause the net asset value of all outstanding shares to
increase by the same amount. Thus, all shareholders may benefit to some extent
from any payment under the Manager's Guarantee. However, a shareholder who has
not reinvested all dividends and distributions will own fewer shares on or
after the Maturity Date than a shareholder who invested the same amount during
the Offering Period but has reinvested continuously. Moreover, such shareholder
will not be entitled to make a demand for payment under the Manager's
Guarantee. The benefits of the Manager's Guarantee will not be available with
respect to shares redeemed prior to the Maturity Date, nor will they be
available after the Maturity Date if no shareholder of the Fund has reinvested
all of his or her dividends and distributions or no Eligible Investor has yet
tendered shares for redemption. The availability of the Manager's Guarantee
will not be affected by the termination or amendment of the Fund's Management
Agreement with the Manager.
In the event of the liquidation or reorganization of the Fund after the
Maturity Date, all Eligible Investors will be deemed to have tendered their
shares for redemption, and, if the Manager's Guarantee is triggered by such
redemption, then the Manager will make any required payment. Any such payment
will take into account any known liabilities in connection with the liquidation
or reorganization, and, therefore, Eligible Investors will in such event be
assured to receive from the Fund at least their original investment (including
any front-end sales charges paid).
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
The third full sentence on page 7 of the Prospectus is deleted in its
entirety and replaced with the following sentence: 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.
