AIG ALL AGES FUNDS INC, 485BPOS, 1997-01-10

AIG ALL AGES FUNDS INC
485BPOS, 1997-01-10

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<PAGE>

FILE NOS. 33-91174
811-9022
As filed with the Securities and Exchange Commission on January 10, 1997
----------------
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. _____ [ ]
POST-EFFECTIVE AMENDMENT NO. 7 [X]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 10 [X]
-----
(CHECK APPROPRIATE BOX OR BOXES)
WITH RESPECT TO COMMON STOCK:

AIG ALL AGES FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

70 PINE STREET, NEW YORK, NEW YORK 10270
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(800) 862-3984
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
<TABLE>
<CAPTION>
WITH RESPECT TO GUARANTEE: WITH RESPECT TO SUPPORT AGREEMENT:

AIG CAPITAL MANAGEMENT CORP. AMERICAN INTERNATIONAL GROUP, INC.
(EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN CHARTER) (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN CHARTER)

70 PINE STREET, NEW YORK, NEW YORK 10270 70 PINE STREET, NEW YORK, NEW YORK 10270
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
<S> <C> <C> <C>
(212) 770-7000 (212) 770-7000
(CO-REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (CO-REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

ELIZABETH M. TUCK KATHLEEN E. SHANNON, ESQ.
AIG CAPITAL MANAGEMENT CORP. AMERICAN INTERNATIONAL GROUP, INC.
70 PINE STREET, NEW YORK, NEW YORK 10270 70 PINE STREET, NEW YORK, NEW YORK 10270
(NAME AND ADDRESS OF AGENT FOR SERVICE) (NAME AND ADDRESS OF AGENT FOR SERVICE)

COPIES TO:
ROBERT W. HELM, ESQ. DAVID HARTMAN, ESQ.
DECHERT PRICE & RHOADS AMERICAN INTERNATIONAL GROUP, INC.
1500 K STREET, WASHINGTON, DC 20005 70 PINE STREET, NEW YORK, NEW YORK 10270

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):

[X] immediately upon filing pursuant to [ ] on (date) pursuant to
paragraph (b) of Rule 485. paragraph (b) of Rule 485

[ ] 60 days after filing pursuant to [ ] on (date) pursuant to
paragraph (a)(1) of Rule 485. paragraph (a)(1) of Rule 485.

[ ] 75 days after filing pursuant to [ ] on (date) pursuant to
paragraph (a)(2) of Rule 485. paragraph (a)(2) of Rule 485.
</TABLE>

IF APPROPRIATE, CHECK THE FOLLOWING BOX:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

REGISTRANT AIG ALL AGES FUNDS, INC. HAS REGISTERED UNDER THE SECURITIES ACT OF
1933 AN INDEFINITE AMOUNT OF SECURITIES PURSUANT TO RULE 24f-2(a)(1) UNDER THE
INVESTMENT COMPANY ACT OF 1940. REGISTRANT INTENDS TO FILE THE NOTICE REQUIRED
BY RULE 24f-2 WITHIN THE TIME PERIOD REQUIRED BY SUCH RULE.
================================================================================
<PAGE>

EXPLANATORY NOTE

This Post-Effective Amendment No. 7 is being filed in order to
provide the annual update to the Registration Statement of the Registrant,
including the audited financial statements, and the auditor's reports
thereon, relating to the AIG Children's World Fund - 2005 series of the
Registrant (the "Children's Fund"), the AIG Retiree Fund - 2003 series of the
Registrant (the "Retiree Fund") and the First Global Equity Portfolio (the
"Equity Portfolio"), a registered open-end management investment company in
which the Children's Fund and the Retiree Fund invest.
<PAGE>

CROSS REFERENCE SHEET REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933

Item No. in Part A of Form
N-1A Location in Prospectus
- --------------------------- ---------------------------
<S> <C>
1. Cover Page Cover Page

2. Synopsis Not applicable

3. Condensed Financial Financial Highlights
Information

4. General Description of Investment Objectives and
Registrant Management Policies; American
International Group, Inc.

5. Management of Fund Investment Advisory Services

5a. Managers' Discussion of
Fund Performance Not applicable

6. Capital Stock and Other Organization and Capitalization; Dividends
and Securities and Distributions; Taxes; Investment
Objectives Management Policies
-- The Manager's
Guarantee

7. Purchase of Securities Cover Page; Purchase of Shares
Being Offered

8. Redemption or Repurchase Redemption or Repurchase of
Shares

9. Pending Legal Proceedings Not applicable

Item No. in Part B of Location in Statement of Additional
Form N-1A Information
- --------------------------- ---------------------------
10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information and General Information
History

13. Investment Objectives and Investment Objectives and
Policies Policies

14. Management of the Management and Expenses
Registrant

15. Control Persons and Directors and Officers; Other
Principal Holders of Information
Securities

16. Investment Advisory and Management and Expenses;
Other Services Other Information

17. Brokerage Allocation Portfolio Transactions and
Brokerage

18. Capital Stock and Other Other Information -- Capital
Securities Stock

19. Purchase, Redemption and Purchase and Redemption of
Pricing of Securities Fund Shares; Valuation
Being Offered

20. Tax Status Taxes

21. Underwriters Distribution Services

22. Calculation of Performance Not applicable
Data

23. Financial Statements Financial Information

</TABLE>
<PAGE>

PART A
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005 PROSPECTUS.

AIG RETIREE FUND - 2003 PROSPECTUS.

<PAGE>

AIG CHILDREN'S WORLD FUND -- 2005

A SERIES OF
AIG ALL AGES FUNDS, INC.

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

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

This prospectus describes the AIG Children's World Fund -- 2005 (the
"Fund"). The Fund is a diversified series of AIG All Ages Funds, Inc., an
open-end management investment company. The Fund has two investment
objectives. The first objective is to provide a guaranteed return, on or after
November 15, 2005, of the full amount originally invested (including any sales
charge paid) by each shareholder who has reinvested all dividends and
distributions. The Fund pursues its first objective by investing a portion of
its assets in U.S. Treasury zero coupon securities, combined with further
assurance from a guarantee (the "Manager's Guarantee") by AIG Capital
Management Corp., the Fund's investment adviser (the "Manager"). The Manager's
obligations under its guarantee will be backed by its parent, American
International Group, Inc. ("AIG").

The Fund's second objective is to achieve total return on capital through
both capital growth (realized and unrealized) and income, by investing the
balance of its assets primarily in a globally diversified portfolio of equity
securities. There can be no assurance that this second objective of total
return on capital will be achieved.

The Fund is primarily intended for shareholders who seek to invest for the
longer term for the benefit of children. Consistent with that goal, the Fund
intends to provide shareholders with ongoing reports and educational
materials, some of which will be specifically written for children.

(Continued on Page 2)

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

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

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

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

The date of this prospectus is January 10, 1997.
<PAGE>

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

The Fund is intended for shareholders who are not seeking current income,
but rather are looking for an investment vehicle that offers total return
potential, plus the return of principal. Return of principal is accomplished
through investment in zero coupon Treasury Securities coupled with the
additional assurance of the Manager's Guarantee. The Manager's Guarantee
operates such that an investor who has reinvested all dividends and
distributions (an "Eligible Investor") and who has not redeemed any shares
prior to November 15, 2005 (the "Maturity Date") will be able to demand the
return of the full amount of his or her original investment in the Fund
(including any front-end sales charges paid) on or after the Maturity Date. A
shareholder who has reinvested all dividends and distributions and has
redeemed some shares prior to the Maturity Date is still an Eligible Investor
with respect to the shares not redeemed. Investors who do not reinvest all
dividends and distributions will not be Eligible Investors and will not be
certain to receive the full benefits of the Manager's Guarantee. However, the
Manager's Guarantee operates such that non-Eligible Investors may benefit to
some extent from any payment made by the Manager to the Fund pursuant to the
Manager's Guarantee. See "Investment Objectives and Management Policies -- The
Manager's Guarantee" and "The Manager's Guarantee" in the Statement of
Additional Information.

The Fund seeks to achieve the investment objective of total return on
capital by investing a portion of its investable assets in the 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. Shareholders are urged to
consult their tax advisers concerning the effect of federal, state and local
income taxes in their individual circumstances. See "Taxes." In addition, the
Fund may not be appropriate for investors who expect to redeem all or a
portion of their shares prior to November 15, 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,

2
<PAGE>

the Fund itself does not expect to offer its shares after the end of the
Offering Period and will not benefit from an inflow of new capital
investments. In addition, the Fund may experience redemptions and capital
losses prior to November 15, 2005 and will pay dividends and distributions in
cash to shareholders who so elect. Losses, redemptions and dividends and
distributions paid in cash will reduce the Fund's assets and its ability to
meet the total return objective. See "Risk Factors -- Zero Coupon Securities."

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

3
<PAGE>

THE FUND'S AND THE EQUITY PORTFOLIO'S EXPENSES

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

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION 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)
Total management fees (after waiver).................... 0.00%(3)
12b-1 fees (DURING OFFERING PERIOD ONLY)................ 0.50%
Other expenses (after Manager's expense limitation)..... 1.50%(4)
----
Total Fund Operating Expenses (after Manager's expense
limitation)............................................ 2.00%(5)
====
</TABLE>
- --------

(1) Investment dealers and other firms may independently charge additional
fees for shareholder transactions or for advisory services; please see
their materials for details. Reduced sales charges apply to purchases of
$100,000 or more. See "Purchase of Shares."
(2) The redemption within one year of shares purchased at net asset value
under the Large Purchase Privilege (available for purchases in amounts of
$1 million or more) may be subject to a 1% contingent deferred sales
charge. See "Purchase of Shares."

(3) The management fee is 0.20% of that portion of the Fund's assets invested
directly in Treasury Securities and 1.20% of that portion of the Fund's
assets invested in the Equity Portfolio. For the fiscal year ended
November 30, 1996, the Manager, in connection with its agreement to limit
expenses of the Fund as described below, waived its entire management fee
with respect to both Treasury Securities and the Equity Portfolio. Absent
this waiver, total management fees would have been 0.52%. The allocation
among Treasury Securities and the Equity Portfolio will fluctuate with
changes in market conditions. See "Investment Objectives and Management
Policies -- Proposed Operations of the Fund." The Manager estimates that,
under normal market conditions, the portion of the Fund's assets invested
in Treasury Securities will not be less than 40% or more than 65% during
the current fiscal year. Thus the total management fee (absent waivers) is
estimated to vary between 0.55% and 0.80% during this period. However, in
extreme market conditions, the percentage of Treasury Securities could be
less than 40% or more than 65%, with the result that the total management
fee (absent waivers) would fall outside the indicated range.

(4) Comprises expenses payable directly by the Fund plus the Fund's pro rata
share of expenses incurred by the Equity Portfolio. Other expenses would
have been 27.03% of average net assets in the absence of the Manager's
agreement to limit expenses of the Fund.

(5) The Manager's assumption of the Fund's expenses is subject to
reimbursement by the Fund in subsequent years under certain circumstances,
as described below. Total Fund Operating Expenses would have been 28.05%
of average net assets in the absence of the Manager's agreement to limit
expenses of the Fund.

"Other expenses" in the above table include, among other things, fees for
transfer agent services, custodial fees, directors' and trustees' fees, legal
fees and accounting fees, printing costs, registration fees, costs of
preparing and distributing reports to shareholders as described under
"Periodic and Other Reports and Services" and the fee for shareholder
servicing described under "Shareholder Servicing Agreement." The Manager has
agreed to limit the Fund's total operating expenses to 2.00% of average daily
net assets, subject to reimbursement by the Fund in subsequent years under
certain circumstances. The Manager has agreed to maintain this expense
limitation until at least March 30, 1998. See "Investment Advisory Services --
The Manager." RULE 12B-1 FEES WILL BE PAYABLE ONLY DURING THE OFFERING
PERIOD.

4
<PAGE>

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

EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <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 $150 $269
</TABLE>

The example is intended to assist you in comparing expenses of the Fund with
those of other funds over varying investment periods. All funds are required
to present this information based on an assumed return of 5%. This makes the
comparison of various funds simpler. However, the Fund's actual return will
vary and may be greater or less than 5%. Also, if you redeem your shares
before November 15, 2005 or if you do not reinvest all dividends and
distributions, your proceeds may be less than the amount you originally
invested. This example should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.

FINANCIAL HIGHLIGHTS

The table of Financial Highlights below is supplementary information to the
financial statements contained in the Statement of Additional Information and
sets forth certain information regarding the investment results of the Fund
for the period presented. The financial statements and financial highlights
for the period ended November 30, 1996 have been audited by Coopers & Lybrand
L.L.P., whose unqualified report thereon is contained in the Statement of
Additional Information.

AIG ALL AGES FUNDS, INC.

AIG CHILDREN'S WORLD FUND - 2005
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

FOR THE PERIOD FROM DECEMBER 15, 1995* TO NOVEMBER 30, 1996

- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............................. $ 9.15
------
Income from investment operations:
Net investment income.......................................... 0.12
Net realized and unrealized gain on investments................ 0.73
------
Total income from investment operations...................... 0.85
------
Net asset value, end of period................................... $10.00
======
TOTAL RETURN..................................................... 9.29%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................ $3,887
Ratio of expenses to average net assets.......................... 2.00%(b)(c)
Ratio of net investment income to average net assets............. 2.52%(b)(c)
Portfolio turnover rate.......................................... 0.00%
</TABLE>
- --------

* Commencement of Operations.

(a) Calculated without deduction of sales charges.

(b) Net of fee waivers and expense reimbursements which had the effect of
reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 26.05 percentage
points (annualized).

5
<PAGE>

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

IN GENERAL

The Fund has two investment objectives. The first is to provide a guaranteed
return at any time on or after November 15, 2005 (the "Maturity Date") of the
full amount originally invested (including any sales charge paid) by each
shareholder who has reinvested all dividends and distributions, which the Fund
pursues through investment of a portion of its assets in U.S. Government zero
coupon securities, with additional assurance provided by the Manager's
Guarantee, backed by its parent AIG. The second objective is to achieve total
return on capital through both capital gains (realized and unrealized) and
income, by investing the balance of its assets in a globally diversified
portfolio of equity securities. The investment objectives of the Fund are
fundamental and cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of the Fund, as defined under
the Investment Company Act of 1940, as amended (the "1940 Act").

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

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

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

6
<PAGE>

the best interests of the Fund. Pursuant to the terms of the Manager's
Guarantee, shareholders who have reinvested all dividends and distributions
will be certain to receive the full amount of their original investment in the
event of such redemption.

ZERO COUPON SECURITIES

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

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

Under normal conditions at least 80% of the Equity Portfolio's assets will
be invested in securities of issuers organized in one or more of the following
countries: the United States, the United Kingdom, Canada, Australia, Japan,
France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Hong
Kong, Singapore and

7
<PAGE>

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

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

The Equity Portfolio may invest in all types of securities (subject to the
limitations discussed below and in the Statement of Additional Information),
many of which will be denominated in currencies other than the U.S. dollar.
The Equity Portfolio will normally invest its assets in equity securities,
including common stock, securities convertible into common stock, depositary
receipts for these securities, and warrants. (A brief description of these
securities is provided in the next paragraph.) The Equity Portfolio will not
ordinarily invest in nonconvertible debt securities. The Equity Portfolio,
may, however, invest up to 25% of its assets in preferred stock. Dividends may
also be considered in selecting securities when the Manager believes that such
income will favorably influence the market value of a security in light of the
Equity Portfolio's objective of total return. Equity securities in which the
Equity Portfolio will invest may be listed on a U.S. or foreign stock exchange
or traded in U.S. or foreign over-the-counter markets, although the Equity
Portfolio may also invest in securities for which there is no active trading
market (subject to the limitations discussed below and in the Statement of
Additional Information).

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

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

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<PAGE>

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

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

PROPOSED OPERATIONS OF THE FUND

As noted above, the Fund will invest directly in zero coupon Treasury
Securities and, through its investment in the Equity Portfolio, in a globally
diversified portfolio of equity securities in pursuing its objectives. Shares
of the Fund will be offered to investors only through September 30, 1997
(which period may be extended or shortened by the Fund at its discretion).
During this Offering Period the shares will be offered at their net asset
value plus the applicable sales charge, if any. The Fund does not expect that
its shares will be offered after the end of the Offering Period. See "Purchase
of Shares." The zero coupon Treasury securities that the Fund acquires with
the proceeds of the sale of its shares during the Offering Period will be
selected so as to mature at a specific face value on or about the Maturity
Date. The Manager will continually review and adjust where necessary the
proportion of the Fund's assets that are invested in zero coupon securities so
that the value of the zero coupon securities on the Maturity Date (i.e., the
aggregate face value of the zero coupon securities held by the Fund) will be
at least sufficient to enable investors who reinvest all dividends and hold
their entire investment in the Fund until the Maturity Date to receive on or
after the Maturity Date the full amount of their original investment,
including any sales charge (the "Repayment Objective"). After the Offering
Period, the Fund anticipates adjustments in its portfolio of zero coupon
securities solely to meet requests for redemption and, if required, to make
payments of dividends and distributions. Thus, the minimum face value of the
zero coupon securities per Fund share necessary to provide for the Fund's
Repayment Objective will be continually determined and maintained.

The portion of the Fund's assets that will be allocated to the purchase of
zero coupon securities will fluctuate during the Offering Period. This is
because the market value of the zero coupon securities and the shares of the
Equity Portfolio, and therefore the offering price of the Fund's shares, will
fluctuate with changes in interest rates and other market value fluctuations.
If the offering price of the Fund's shares increases during the Offering
Period, the minimum par value of zero coupon securities per Fund share
necessary to provide for the Fund's Repayment Objective will increase. The
Fund may hold zero coupon securities in an amount in excess of the amount
necessary to provide for the Fund's Repayment Objective in the discretion of
the Fund's investment manager. During the Offering Period, under normal market
conditions, the proportion of the Fund's portfolio invested in zero coupon
securities may be expected to range from 40% to 65%; but a greater or lesser
percentage is possible.

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<PAGE>

During the Offering Period, if the percentage of zero coupon securities in
the Fund's portfolio increases, the portion of the Fund's assets invested in
the Equity Portfolio will necessarily decrease. This will result in less
potential for total return from the Equity Portfolio. In order to help ensure
shareholders at least a minimum level of initial investment in the global
equity markets, the Fund will cease offering its shares if their continued
offering would cause more than 65% of its assets to be allocated to zero
coupon securities. After the Offering Period is over, it is not anticipated
that any additional assets will be allocated to the purchase of zero coupon
securities. However, since the market values of the zero coupon securities and
the net asset value of interests in the Equity Portfolio are often affected in
different ways by changes in interest rates and other market conditions and
will often fluctuate independently, the percentage of the Fund's net asset
value represented by zero coupon securities will continue to fluctuate after
the end of the Offering Period. Zero coupon securities may be liquidated
before the Maturity Date to meet redemptions and pay cash dividends, provided
that the minimum amount of zero coupon securities necessary to provide for the
Fund's Repayment Objective is maintained.

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. In the event of termination of the Fund as noted above, the
redemption of shares effected in connection with such termination would for
income tax purposes constitute a sale upon which gain or loss will be realized
depending upon whether the net asset value of the shares being redeemed is
more or less than the shareholder's adjusted cost basis.

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<PAGE>

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.
Investors are encouraged to reinvest dividends and evaluate their need to
receive some or all of their investment 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
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 and financial services in the
United States and abroad. See "American International Group, Inc." The Manager
is an indirect wholly owned subsidiary of AIG. Under the Support Agreement,
AIG has agreed that, if the Manager is unable to make full payment of any
amount required under the Manager's Guarantee, AIG will make a capital
contribution or a loan to the Manager to the extent of the Manager's inability
to pay. The Support Agreement provides that the full amount of such capital
contribution or loan will be paid directly to the Fund.

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

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<PAGE>

Fund during the Offering Period plus the maximum front-end sales charge and
assuming that such investor bought his or her shares at the highest net asset
value attained during the Offering Period.

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

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

OTHER INVESTMENT POLICIES

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

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.

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<PAGE>

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

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

Illiquid Securities. The Equity Portfolio may invest up to 15% of its net
assets in illiquid securities, including restricted securities (i.e.,
securities not readily marketable without registration under the Securities
Act of 1933 (the "1933 Act")) and other securities that are not readily
marketable, such as repurchase agreements of more than one week's duration.
The Equity Portfolio may purchase restricted securities that may be offered
and sold only to "qualified institutional buyers" under Rule 144A of the 1933
Act, and the Equity Portfolio's Trustees may determine, when appropriate, that
specific Rule 144A securities are liquid and not subject to the 15% limitation
on illiquid securities. Should the Equity Portfolio's Trustees make this
determination, it will carefully monitor the security (focusing on such
factors, among others, as trading activity and availability of information) to
determine that the Rule 144A security continues to be liquid. It is not
possible to predict with assurance exactly how the market for Rule 144A
securities will further evolve. This investment practice could have the effect
of increasing the level of illiquidity in the Equity Portfolio to the extent
that qualified institutional buyers become for a time uninterested in
purchasing Rule 144A securities.

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

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

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
Investors Service ("Moody's")

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<PAGE>

or A-1 by Standard & Poor's Ratings Group ("Standard & Poor's") or (b) unrated
obligations issued by companies having an outstanding unsecured debt issue
currently rated A or better by Standard & Poor's. A description of various
commercial paper ratings and debt securities appears in Appendix A to the
Statement of Additional Information. The Equity Portfolio's investments in
foreign short-term instruments will be limited to those that, in the opinion
of the Manager, equate generally to the standards established for U.S. short-
term instruments.

RISK FACTORS

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

Each year the Fund will be required to accrue an increasing amount of income
on its zero coupon securities utilizing a constant interest rate method which
takes into account the compounding of accrued interest. To maintain its tax
status as a regulated investment company and also to avoid imposition of
excise taxes, however, the Fund will be required to distribute dividends equal
to substantially all of its net investment income, including the accrued
income on its zero coupon securities for which it receives no payments in cash
prior to their maturity. Dividends of the Fund's net investment income and
distributions of its short-term capital gains will be taxable to shareholders
as ordinary income for income tax purposes, whether received in cash or
reinvested in additional shares. See "Taxes." However, a shareholder who
elects to receive dividends and distributions in cash, instead

14
<PAGE>

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,
Eligible Investors who hold all of their shares until the Maturity Date will
be certain of receiving at least the full amount of their original investment
in the Fund.

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

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<PAGE>

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. Depositary receipts also
involve the risks of other investments in foreign securities, as discussed
above.

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

16
<PAGE>

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, although there can be no
assurance that this will be the case. See "Investment Objectives and
Management Policies -- First Global Equity Portfolio" and " -- Other
Investment Policies."

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

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<PAGE>

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

In addition to selling a beneficial interest to the Fund, the Equity
Portfolio may sell beneficial interests to other mutual funds or institutional
investors. Beneficial interests may be offered and sold only in transactions
exempt from the registration requirements of the 1933 Act. The Equity
Portfolio's Declaration of Trust prohibits it from selling beneficial
interests to individuals, S corporations (as defined in the Internal Revenue
Code (S) 1361 et seq.), partnerships and grantor trusts. All investors will
invest in the Equity Portfolio on the same terms and conditions and will bear
a proportionate share of the Equity Portfolio's expenses. However, the other
mutual funds that may in the future invest in the Equity Portfolio may sell
their own shares with sales charges and expenses different from those of the
Fund. Such different pricing structures may result in differences in returns
experienced by investors in other funds that invest in the Equity Portfolio.
Such differences in return are not uncommon and are present in other mutual
fund structures. As of the date of this Prospectus (as supplemented), there is
only one other registered investment company that invests in the Equity
Portfolio, the AIG Retiree Fund -- 2003. In the future, information concerning
the AIG Retiree Fund -- 2003 and other funds sold by your broker that invest
in the Equity Portfolio may be obtained from your broker, or by calling the
Fund's principal underwriter, AIG Equity Sales Corp. (the "Distributor") at
(800) 862-3984.

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

Certain changes in the Equity Portfolio's investment objectives, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in
the Equity Portfolio's investment objectives or restrictions, may require
withdrawal of the Fund's interest in the Equity Portfolio. Any such withdrawal
could result in a distribution of the Equity Portfolio's securities to the
Fund in kind (as opposed to a cash distribution). In this case, the securities
received by the Fund may or may not be readily marketable. The distribution in
kind may result in the Fund having a less diversified portfolio of investments
or adversely affect the Fund's liquidity and 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.

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<PAGE>

the Fund is requested to vote on matters pertaining to the Equity Portfolio
(other than a vote by the Fund to continue the operation of the Equity
Portfolio upon the withdrawal of another investor in the Equity Portfolio),
the Company will hold a meeting of shareholders of the Fund and will cast all
of its votes proportionately as instructed by the Fund's shareholders. The
Company will vote the shares held by the Fund shareholders who do not give
voting instructions in the same proportion as the shares of Fund shareholders
who do give voting instructions. Shareholders of the Fund who do not vote will
have no effect on the outcome of such matters.

INVESTMENT ADVISORY SERVICES

THE MANAGER

The Manager, an investment advisor registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), is an indirect wholly owned
subsidiary of American International Group, Inc. ("AIG"). AIG is a holding
company which through its subsidiaries is primarily engaged in a broad range
of insurance and insurance-related activities in the United States and abroad.
At September 30, 1996, members of the Manager's Investment Committee and their
teams of investment professionals supervised the management of assets in
excess of $68 billion, of which approximately $10 billion represented third
party funds. See " -- The Investment Process" and " -- The Subadvisor" below.

The Manager also manages the AIG Retiree Fund -- 2003, another series of the
Company, and the AIG Money Market Fund, a separate money market investment
portfolio of a registered investment company. The principal business address
of the Manager is 70 Pine Street, New York, New York 10270.

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

The Manager has agreed that, in the event that the total expenses of the
Fund, 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 limit the Fund's expenses to the extent of any such
excess, subject to reimbursement by the Fund as described below. The total
amount of any excess so limited by the Manager is referred to as the "Refunded
Amount." The Manager has agreed to maintain this expense limitation until at
least March 30, 1998. The Manager has no obligation to waive its fee or
reimburse any expenses of the Fund thereafter. The Fund and the Manager have
also agreed that, for the thirty-six months following the end of the Offering
Period, if the Fund's total expenses (calculated as described above) are less
than 2.00% per annum of average daily net assets of the Fund during such year,
the Fund will pay to the Manager an expense reimbursement fee, relating to any
expenses waived or

19
<PAGE>

reimbursed by the Manager during the Offering Period, computed and paid
monthly, such that after such reimbursement the aggregate expenses of the Fund
will not exceed 2.00% per annum. The total amount of such expense
reimbursement fees will not exceed the Refunded Amount plus the Manager's
related financing costs. The Board of Directors of the Fund has agreed that
any related financing costs would be calculated at an interest rate of prime
rate plus 1%.

THE INVESTMENT PROCESS

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

IAN P. BUTTER. Mr. Butter has been a Director of AIG Global Investment Corp.
(Europe) Ltd ("AIG Global Europe") in London since January 1992, where he has
also served in a trading capacity since 1988. In January 1996, Mr. Butter
transferred to AIG Global Europe's Japanese affiliate where he currently
serves as Chief Investment Officer of AIG Global Investment Corp. (Japan).

IAN M. COULMAN. Mr. Coulman is Director of Global and Emerging Market Fixed
Income of AIG Global Europe. Prior to joining AIG Global Europe in 1991, he
was a multicurrency fixed income portfolio manager at Lombard Odier Investment
Management in London.

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

ARTHUR DJANG. Mr. Djang is Vice President, Global Risk Management of AIG
Global Investment Corp. ("AIG Global"), which he joined in 1996. Prior to
joining AIG Global, he was Vice President and head of the Portfolio Advisory
Group at J.P. Morgan Securities, Inc. in New York.

JIM GIBBONS. Mr. Gibbons is Managing Director and Fixed Income Portfolio
Supervisor of AIG Global, which he joined in 1987, and is also a Director of
AIG Global Europe. Prior to joining AIG Global, he worked in the Corporate
Treasury Department at Unilever Corp.

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.

ROBERT B. MEYER. Mr. Meyer is Managing Director and U.S. Equity Portfolio
Manager of AIG Global, which he joined in 1979. Prior to joining AIG Global,
he was a security analyst for Royal Insurance Company in New York.

20
<PAGE>

March 1995 and has served as a Director of AIG Global Europe since April 1995.
Prior to joining these companies, Mr. Neuger was with Bankers Trust, where he
was a Senior Vice President and, since October 1991, a Managing Director in
the investment management area.

YUKIHIRO NISHIMIYA. Mr. Nishimiya has been a portfolio manager for AIG
Global since July 1996. From October 1990 until July 1996, he was a portfolio
manager for AIG Global Investment Corp. (Japan).

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

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

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

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

THE SUBADVISOR

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<PAGE>

an annual rate of 0.0825% of the average daily net assets of the Fund (other
than the Fund's interest in the Equity Portfolio) and 0.15% of the average
daily net assets of the Equity Portfolio. These fees are all paid from the
management fee paid to the Manager. The principal office of AIG Global is 70
Pine Street, New York, New York 10270.

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 the Subadvisor. The use of brokers who provide investment and
market research and securities and economic analysis may result in higher
brokerage charges than the use of brokers selected solely on the basis of the
most favorable brokerage commission rates, and research and analysis received
may be useful to the Manager and the Subadvisor 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 Subadvisor may consider sales of shares of
other mutual funds managed by the Manager as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Fund or the
Equity Portfolio.

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

VALUATION. The net asset value of the shares of the Fund is determined each
day, Monday through Friday, as of the close of regular trading on the New York
Stock Exchange ("NYSE") (usually 4:00 p.m. New York City Time) on each day
that the NYSE is open. During the Offering Period, zero coupon Treasury
Securities will be valued at the average of the last reported bid and ask
prices; thereafter, in order to ensure that an adequate amount of Treasury
Securities is maintained to achieve the Repayment Objective when shares of the
Fund are redeemed, zero coupon Treasury Securities will be valued at the last
reported bid. Securities traded on a foreign exchange or over-the-counter
market are valued at the last sales price on the primary exchange or market in
which they are traded. Securities for which there are no recent sales
transactions are valued based on quotations provided by primary market makers
in such securities. Any securities for which recent market quotations are not
readily available are valued at fair value determined in accordance with
procedures approved by the Board and by the Trustees of the Equity Portfolio.
Short-term holdings maturing in 60 days or less are generally valued at
amortized costs if their original maturity was 60 days or less. Short-term
holdings with more than 60 days remaining to maturity will be valued at
current market value until the 61st day prior to maturity, and will then be
valued on an amortized cost basis based on the value as of such date unless
the Board or the Trustees of the Equity Portfolio determines that this
amortized cost value does not represent fair market value.

22
<PAGE>

AMERICAN INTERNATIONAL GROUP, INC.

American International Group, Inc. ("AIG") is a Delaware corporation which
through its subsidiaries is primarily engaged in a broad range of insurance
and insurance-related and financial services activities in the United States
and abroad. AIG's primary activities include both general and life insurance
operations. 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 September 30, 1996, AIG and its consolidated
subsidiaries had total assets of approximately $144.6 billion and capital
funds of approximately $21.1 billion; consolidated net income for the nine
months then ended was $2.1 billion. Consolidated net income for the year ended
December 31, 1995 was $2.51 billion. The Statement of Additional Information
incorporates by reference AIG's financial statements and certain other
information about AIG. At December 31, 1995, AIG and its consolidated
subsidiaries had more than 34,500 employees. The principal executive offices
of AIG are located at 70 Pine Street, New York, New York 10270 and its
telephone number is (212) 770-7000.

DIVIDENDS AND DISTRIBUTIONS

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

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

TAXES

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

The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). For each year it so
qualifies, the Fund will not be subject to federal income taxes on

23
<PAGE>

its net investment income and realized net capital gains, if any, which it
distributes to its shareholders, provided that at least 90% of the sum of its
net investment income and net short-term capital gains are distributed to
shareholders each year.

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

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

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

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

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

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<PAGE>

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

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

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

THE ADMINISTRATOR

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

THE TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

PFPC Inc. serves 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.

CUSTODIANS

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<PAGE>

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

SHAREHOLDER SERVICING AGREEMENT

Under the Shareholder Servicing Agreement, the Distributor provides
information and administrative services for Fund shareholders. The Distributor
enters into related arrangements with various financial services firms, such
as broker-dealer firms or banks (which may be affiliated with the
Distributor), that provide services and facilities for their customers or
clients who are shareholders of the Fund. Such administrative services and
assistance may include, but are not limited to, establishing and maintaining
shareholder accounts and records, processing purchase and redemption
transactions and answering routine shareholder inquiries regarding the Fund
and its special features. The Distributor bears all its expenses for providing
services pursuant to the Shareholder Servicing Agreement, including the
payment of any service fees. For services under the Shareholder Servicing
Agreement, the Fund pays the Distributor a fee, payable monthly, at the annual
rate of up to .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

26
<PAGE>

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

PURCHASES OF SHARES

Shares of the Fund may be purchased from investment dealers during the
Offering Period at the public offering price, which is the net asset value
next determined plus a sales charge that is a percentage of the public
offering price and varies as shown below. You may also purchase shares
directly from the Fund's transfer agent, PFPC Inc., by completing the Account
Application attached to this Prospectus and mailing it to AIG Children's World
Fund -- 2005, PO Box 8935, Wilmington, Delaware 19899-9801. The minimum
investment is $2,500, and the minimum subsequent investment is $100. However,
you may choose to make an initial investment of as little as $1,000 and reach
the $2,500 minimum with several additional investments during the Offering
Period. The minimum investment for an Individual Retirement Account ("IRA") or
employee benefit plan account is $2,000, and the minimum subsequent investment
is $50; for these accounts you may choose to make an initial investment of as
little as $250 and reach the $2,000 minimum with several additional
investments during the Offering Period. To do this you must indicate on the
Account Application your intent to invest at least the $2,500 minimum (or
$2,000 for IRAs and employee benefit plans) by the end of the Offering Period.
If you have not invested at least the minimum amount by the end of the
Offering Period, the Fund may redeem your shares (which may occur at a time
when the net asset value is less than when you invested) or the Fund may
impose an annual account keeping fee of $10. This fee may be changed at any
time in management's discretion. The investment minimums may be waived by the
Distributor in instances where the Distributor determines that it is necessary
or appropriate to do so.

INVESTMENT SALES LOAD SCHEDULE

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

27
<PAGE>

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

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

The Fund receives the entire net asset value of all shares sold. The
Distributor retains the sales charge from which it allows discounts from the
applicable public offering price to investment dealers, which discounts are
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.

28
<PAGE>

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 available only with respect to the Fund and the AIG
Retiree Fund -- 2003. In the future, you may obtain a list of the funds for
which the Large Purchase Privilege is available and request a prospectus by
telephoning (800) 862-3984.

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

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.

29
<PAGE>

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

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

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

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

30
<PAGE>

Orders for the purchase of shares of the Fund will be confirmed at a price
based on the net asset value next determined after receipt by the Distributor
of the order accompanied by payment. However, orders received by dealers or
other firms prior to the determination of net asset value (see "Investment
Advisory Services -- Valuation") and received by the Distributor prior to the
close of its business day will be confirmed at a price based on the net asset
value effective on that day. Dealers and other financial services firms are
obligated to transmit orders promptly. Payment for purchase orders must be
made by check (a check drawn on a foreign bank will not be accepted) or
Federal Reserve Draft or by wiring Federal Funds to the Fund's Transfer Agent.
Checks should be made payable to AIG Children's World Fund -- 2005. See
"Purchase and Redemption of Shares" in the Statement of Additional
Information.

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

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

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. As noted
previously, pursuant to the terms of the Manager's Guarantee, shareholders who
wish to be certain of receiving at least the full amount of their original
investment must reinvest all dividends and distributions in additional shares
and hold all their shares until the Maturity Date.

When shares are held for the account of a shareholder by the Fund's Transfer
Agent, the shareholder may redeem them by making a written request with
signatures guaranteed to AIG 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.

31
<PAGE>

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

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

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

REPURCHASES (CONFIRMED REDEMPTIONS)

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

33
<PAGE>

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

RIGHT OF ACCUMULATION

34
<PAGE>

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 purchase shares of the
Fund. This Program permits you to use the dollar-cost-averaging method to
invest in the Fund. The Automatic Investment Program will typically terminate
on the last day of the Offering Period. See the terms and conditions on the
Account Application.

35
<PAGE>

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 Micropal, Ltd. Such
performance calculations are generally based upon changes in net asset value
with all dividends reinvested.

36
<PAGE>

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. A discussion of the Fund's performance
for the fiscal year ended November 30, 1996 appears in its Annual Report to
Shareholders, available without charge upon request 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 and classes thereof
without further action by shareholders. As of the date of this Prospectus,
shares in the AIG Children's World Fund -- 2005 described herein and shares in
the AIG Retiree Fund -- 2003 are the only shares authorized. Shares of capital
stock have a par value of $.001. Each share of the Company is given one vote.
Matters affecting a certain series of the Company, such as approval of new
investment advisory agreements and changes in the fundamental policies of a
series of the Company, will require the affirmative vote of the shareholders
of that series. All shares have non-cumulative voting rights for the election
of directors. Each outstanding share is fully paid and non-assessable, and
each is freely transferable. There are no liquidation, conversion or
preemptive rights. The Company will furnish without charge to each shareholder
upon request a full statement of (1) the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends,

37
<PAGE>

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>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<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 AND THE EQUITY PORTFOLIO'S EXPENSES............................. 4
FINANCIAL HIGHLIGHTS....................................................... 5
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES.............................. 6
RISK FACTORS............................................................... 14
PERIODIC AND OTHER REPORTS AND SERVICES.................................... 17
SPECIAL INFORMATION CONCERNING THE TWO-TIER STRUCTURE...................... 17
INVESTMENT ADVISORY SERVICES............................................... 19
AMERICAN INTERNATIONAL GROUP, INC.......................................... 23
DIVIDENDS AND DISTRIBUTIONS................................................ 23
TAXES...................................................................... 23
THE ADMINISTRATOR.......................................................... 25
THE TRANSFER AGENT AND DIVIDEND DISBURSING AGENT........................... 25
CUSTODIANS................................................................. 25
SHAREHOLDER SERVICING AGREEMENT............................................ 26
RULE 12b-1 PLAN............................................................ 26
PURCHASES OF SHARES........................................................ 27
REDEMPTION OR REPURCHASE OF SHARES......................................... 31
SPECIAL FEATURES........................................................... 34
PERFORMANCE................................................................ 36
ORGANIZATION AND CAPITALIZATION............................................ 37
</TABLE>

AIG ALL AGES FUNDS, INC.
LINKING GENERATIONS

505 Carr Road, Wilmington, Delaware 19809
Phone: (800) 862-3984

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

AIG
CHILDREN'S
WORLD FUND
--2005

PROSPECTUS

JANUARY 10, 1997

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

AIG RETIREE FUND -- 2003

A SERIES OF
AIG ALL AGES FUNDS, INC.

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

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

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

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

The date of this prospectus is January 10, 1997.
<PAGE>

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

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

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

2
<PAGE>

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

3
<PAGE>

THE FUND'S AND THE EQUITY PORTFOLIO'S EXPENSES

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

SHAREHOLDER TRANSACTION EXPENSES(1)
<TABLE>
<S> <C>
Maximum sales load imposed on purchases (as a percentage of offering
price)............................................................. 4.75%
Maximum sales load imposed on reinvested dividends
(as a percentage of offering price)................................ None
Deferred sales load
(as a percentage of original purchase price or redemption proceeds,
as applicable):
Shares acquired under Large Purchase Privilege(2)................. 1.00%
All other shares.................................................. None
Redemption fees (as a percentage of amount redeemed)................ None
Exchange fee........................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Total management fees (after waiver)................................ 0.00%(3)
12b-1 fees (DURING OFFERING PERIOD ONLY)............................ 0.50%
Other expenses (after Manager's expense limitation)................. 1.45%(4)
----
Total Fund Operating Expenses (after Manager's expense limitation).. 1.95%(5)
====
</TABLE>
- --------
(1) Investment dealers and other firms may independently charge additional
fees for shareholder transactions or for advisory services; please see
their materials for details. Reduced sales charges apply to purchases of
$100,000 or more. See "Purchase of Shares."
(2) The redemption within one year of shares purchased at net asset value
under the Large Purchase Privilege (available for purchases in amounts of
$1 million or more) may be subject to a 1% contingent deferred sales
charge. See "Purchase of Shares."

(3) The management fee is 0.20% of that portion of the Fund's assets invested
directly in Treasury Securities and 1.20% of that portion of the Fund's
assets invested in the Equity Portfolio. For the current fiscal year, the
Manager estimates that it will waive its entire management fee with
respect to both Treasury Securities and the Equity Portfolio, in
connection with its agreement to limit expenses of the Fund as described
below. The Manager estimates that, absent this waiver, the total
management fee would be 0.55%, which assumes that 65% of the Fund's assets
are invested directly in zero coupon Treasury Securities and 35% in the
Equity Portfolio. However, this allocation will fluctuate with changes in
market conditions. See "Investment Objectives and Management Policies --
Proposed Operations of the Fund." The Manager estimates that, under
normal market conditions, the portion of the Fund's assets invested in
zero coupon Treasury Securities will not be less than 50% or more than 80%
during the current fiscal year. Thus the total management fee (absent
waivers) is estimated to vary between 0.40% and 0.70% during this period.
However, in extreme market conditions, the percentage of zero coupon
Treasury Securities could be less than 50% or more than 80%, with the
result that the total management fee (absent waivers) would fall outside
the indicated range.

(4) Comprises expenses payable directly by the Fund plus the Fund's pro rata
share of expenses incurred by the Equity Portfolio. The Fund estimates
that, absent the Manager's agreement to limit Fund expenses, other
expenses would be 2.95% of average net assets for the current fiscal year.

(5) The Manager's limitation of the Fund's expenses is subject to
reimbursement by the Fund in subsequent years under certain circumstances,
as described below. The Fund estimates that, absent the Manager's
agreement to limit Fund expenses, Total Fund Operating Expenses would be
4.00% of average net assets for the current fiscal year.

4
<PAGE>

"Other expenses" in the above table include, among other things, fees for
transfer agent services, custodial fees, directors' and trustees' fees, legal
fees and accounting fees, printing costs, registration fees, costs of
preparing and distributing reports to shareholders and the fee for shareholder
servicing described under "Shareholder Servicing Agreement," and is based on
estimated amounts for the current fiscal year. The Manager has agreed to limit
the Fund's total operating expenses to 1.95% of average daily net assets,
subject to reimbursement by the Fund in subsequent years under certain
circumstances. The Manager has agreed to maintain this expense limitation
until at least March 30, 1998. See "Investment Advisory Services -- The
Manager." RULE 12B-1 FEES WILL BE PAYABLE ONLY DURING THE OFFERING PERIOD.

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

EXAMPLE

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

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

5
<PAGE>

FINANCIAL HIGHLIGHTS

AIG ALL AGES FUNDS, INC.

AIG RETIREE FUND -- 2003

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

FINANCIAL HIGHLIGHTS

FOR THE PERIOD FROM APRIL 17, 1996* TO NOVEMBER 30, 1996

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

<TABLE>
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............................. $ 9.15
------
Income from investment operations:
Net investment income.......................................... 0.09
Net realized and unrealized gain on investments................ 0.61
------
Total income from investment operations...................... 0.70
------
Net asset value, end of period................................... $ 9.85
======
TOTAL RETURN..................................................... 7.65%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................ $6,076
Ratio of expenses to average net assets.......................... 1.95%(b)(c)
Ratio of net investment income to average net assets............. 2.96%(b)(c)
Portfolio turnover rate.......................................... 0.00%
</TABLE>
- --------

* Commencement of Operations.

(a) Calculated without deduction of sales charges.

6
<PAGE>

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

IN GENERAL

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

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

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

When the zero coupon Treasury Securities in the Fund's portfolio mature on
or about the Maturity Date, the Fund will reinvest the principal amount in
short-term, highly liquid obligations of the U.S. Government. The value of
these securities is not expected to fluctuate significantly, so shareholders
who reinvest all dividends and distributions and who have held all of their
shares until the Maturity Date, and who redeem their shares at any time on or
after the Maturity Date should expect to receive the amount of their initial
investment (from the liquidation of the Fund's zero coupon Treasury
Securities) plus the value (if any) of their proportionate share of the Fund's
interest in the Equity Portfolio. After the Maturity Date, the Board of
Directors may, in its sole

7
<PAGE>

discretion and without shareholder approval, cause the Fund to redeem all of
its outstanding shares at their net asset value and distribute the proceeds to
shareholders if the Board determines that continuing the existence of the Fund
is not in the best interests of the Fund. Pursuant to the terms of the
Manager's Guarantee, shareholders who have reinvested all dividends and
distributions will be certain to receive at least the full amount of their
original investment in the event of such redemption.

ZERO COUPON SECURITIES

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

FIRST GLOBAL EQUITY PORTFOLIO

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

8
<PAGE>

9
<PAGE>

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

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 through September 30, 1997
(which period may be extended or shortened by the Fund at its discretion).
During this Offering Period the shares will be offered at their net asset
value plus the applicable sales charge, if any. The Fund does not expect that
its shares will be offered after the end of the Offering Period. See "Purchase
of Shares." The zero coupon Treasury Securities that the Fund acquires with
the proceeds of the sale of its shares during the Offering Period will be
selected so as to mature at a specific face value on or about the Maturity
Date. The Manager will continually review and adjust where necessary the
proportion of the Fund's assets that are invested in zero coupon Treasury
Securities so that the value of the zero coupon Treasury Securities on the
Maturity Date (i.e., the aggregate face value of the zero coupon Treasury
Securities held by the Fund) will be at least sufficient to enable investors
who reinvest all dividends and hold their entire investment in the Fund until
the Maturity Date to receive on or after the Maturity Date the full amount of
their original investment, including any front-end sales charges paid (the
"Repayment Objective"). After the Offering Period, the Fund anticipates
adjustments in its portfolio of zero coupon Treasury Securities solely to meet
requests for redemption and, if required, to make payments of dividends and
distributions. Thus, the minimum face value of the zero coupon Treasury
Securities per Fund share necessary to provide for the Fund's Repayment
Objective will be continually determined and maintained.

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

10
<PAGE>

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

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

Subject to shareholder approval, other alternatives may be pursued by the
Fund after the Maturity Date. For instance, the Board may consider the
possibility of a reorganization between the Fund and another registered open-
end management investment company or any other series of the Company. In the
event of the liquidation or reorganization of the Fund after the Maturity
Date, all Eligible Investors will be deemed to have tendered their shares for
redemption, and, if the Manager's Guarantee is triggered by such redemption,
the Manager will make any required payment. Any such payment will take into
account any known liabilities in connection with the liquidation or
reorganization, and, therefore, Eligible Investors will in such event be
assured to receive from

11
<PAGE>

the Fund at least their original investment (including any front-end sales
charges paid). The Board has not made any determinations about the continued
operation of the Fund after the Maturity Date.

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

THE MANAGER'S GUARANTEE

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

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

12
<PAGE>

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

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

OTHER INVESTMENT POLICIES

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

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

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

Temporary Investments. When the Manager believes that market conditions
warrant a temporary defensive position, the Equity Portfolio may invest up to
100% of its assets in short-term instruments such as commercial paper, bank
certificates of deposit, bankers' acceptances, or repurchase agreements for
such securities and

14
<PAGE>

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

RISK FACTORS

Zero Coupon Securities. Zero coupon securities of the type held by the Fund
can be sold prior to their due date in the secondary market at their then
prevailing market value which, depending on prevailing levels of interest
rates, the time remaining to maturity and liquidity (i.e., relative levels of
supply and demand for the particular zero coupon security), may be more or
less than the securities' "accreted value", that is, their value based solely
on the amount due at maturity and accretion of interest from the date of
purchase. The market prices of zero coupon securities are generally more
volatile than the market prices of securities that pay interest periodically
and, accordingly, are likely to respond to a greater degree to changes in
interest rates than do non-zero coupon securities having similar maturities
and yields. The current net asset value of the Fund attributable to zero
coupon securities and other debt instruments generally will increase as
prevailing interest rates decrease, and they will decrease as such rates
increase. For example, during the Offering Period, an increase in prevailing
interest rates of one-half of one percent could be expected to cause the
market value of the Fund's zero coupon securities to decrease by more than
three percent, and a one-half percent decrease in such rates could be expected
to cause the market value of such securities to increase by more than three
percent. Such fluctuations may be larger or smaller depending on, among other
things, the level of current rates and the time remaining to maturity. As a
result, the net asset value of shares of the Fund may fluctuate over a greater
range than shares of other mutual funds that invest in Treasury Securities
having similar maturities and yields but that make current distributions of
interest.

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

Each year the Fund will be required to accrue an increasing amount of income
on its zero coupon Treasury securities utilizing a constant interest rate
method which takes into account the compounding of accrued interest. To
maintain its tax status as a regulated investment company and also to avoid
imposition of excise taxes,

15
<PAGE>

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

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 Treasury Securities and the expenses associated
with borrowing money in these circumstances could render the Fund unable to
meet its Repayment Objective. Under the terms of the Manager's Guarantee,
however, Eligible Investors who hold all of their shares until the Maturity
Date will be certain of receiving at least the full amount of their original
investment in the Fund.

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<PAGE>

investment in a certain market), limitations on the removal of moneys or other
assets of the Equity Portfolio, political or social instability or revolution,
or diplomatic developments that could affect investments in those countries.
In addition, it may be difficult to obtain and enforce a judgment in a court
outside the United States.

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

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<PAGE>

asset value will be affected by changes in currency exchange rates. Changes in
foreign currency exchange rates may also affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed by the Equity Portfolio
to owners of beneficial interests. The rate of exchange between the U.S.
dollar and other currencies is determined by the forces of supply and demand
in the foreign exchange markets (which in turn are affected by interest rates,
trade flow and numerous other factors, including, in some countries, local
government intervention).

SPECIAL INFORMATION CONCERNING THE TWO-TIER STRUCTURE

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

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

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<PAGE>

et seq.), partnerships and grantor trusts. All investors will invest in the
Equity Portfolio on the same terms and conditions and will bear a
proportionate share of the Equity Portfolio's expenses. However, the other
mutual funds that may in the future invest in the Equity Portfolio may sell
their own shares with sales charges and expenses different from those of the
Fund. Such different pricing structures may result in differences in returns
experienced by investors in other funds that invest in the Equity Portfolio.
Such differences in return are not uncommon and are present in other mutual
fund structures. As of the date of this Prospectus, there is only one other
registered investment company that invests in the Equity Portfolio, the AIG
Children's World Fund -- 2005. In the future, information concerning the AIG
Children's World Fund -- 2005 and other funds sold by your broker that invest
in the Equity Portfolio may be obtained from your broker, or by calling the
Fund's principal underwriter, AIG Equity Sales Corp. (the "Distributor") at
(800) 862-3984.

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

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.

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<PAGE>

INVESTMENT ADVISORY SERVICES

THE MANAGER

The Manager, an investment adviser registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), is an indirect wholly owned
subsidiary of AIG. AIG is a holding company which through its subsidiaries is
primarily engaged in a broad range of insurance and insurance-related
activities in the United States and abroad. At September 30, 1996, members of
the Manager's Investment Committee and their teams of investment professionals
supervised the management of assets in excess of $68 billion, of which
approximately $10 billion represented third party funds. See "-- The
Investment Process" and "-- The Subadvisor" below.

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

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

The Manager has agreed that, in the event that the total expenses of the
Fund, including the Fund's proportional share of the expenses of the Equity
Portfolio, but excluding interest, taxes, brokerage commissions and
extraordinary expenses, should exceed 1.95% of the average daily net assets of
the Fund, the Manager will limit the Fund's expenses to the extent of any such
excess, subject to reimbursement by the Fund as described below. The total
amount of any excess so limited by the Manager is referred to as the "Refunded
Amount." The Manager has agreed to maintain this expense limitation until at
least March 30, 1998. The Manager has no obligation to waive its fee or
reimburse any expenses of the Fund thereafter. The Fund and the Manager have
also agreed that, for the thirty-six months following the end of the Offering
Period, if the Fund's total expenses (calculated as described above) are less
than 1.95% per annum of average daily net assets of the Fund, the Fund will
pay to the Manager an expense reimbursement fee, relating to any expenses
waived or reimbursed by the Manager during the Offering Period, computed and
paid monthly, such that after such reimbursement the aggregate expenses of the
Fund will not exceed 1.95% per annum. The total amount of such expense
reimbursement fees will not exceed the Refunded Amount plus the Manager's
related financing costs. The Board of Directors of the Fund has agreed that
any related financing costs would be calculated at an interest rate of prime
rate plus 1%.

THE INVESTMENT PROCESS

20
<PAGE>

Subadvisor" below) or regional affiliates of the Manager to whom the Manager
or Subadvisor have access under service arrangements. The members of the
Investment Committee meet monthly, and meet in person quarterly, to determine
collectively the allocation of the assets of the Fund between zero coupon
Treasury Securities and the Equity Portfolio, as well as the allocation of the
assets of the Equity Portfolio on a regional basis. Members of the Investment
Committee, assisted by a team of investment professionals, are primarily
responsible for the Equity Portfolio's country and stock selection within
their respective global region. Currently the members of the Investment
Committee are:

IAN P. BUTTER. Mr. Butter has been a Director of AIG Global Investment Corp.
(Europe) Ltd ("AIG Global Europe") in London since January 1992, where he also
served in a trading capacity since 1988. In January 1996, Mr. Butter
transferred to AIG Global Europe's Japanese affiliate where he currently
serves as Chief Investment Officer of AIG Global Investment Corp. (Japan).

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 AIG Global Europe since April
1995. Prior to joining these companies, Mr. Neuger was with Bankers Trust
Company, where he was a Senior Vice President and, since October 1991, a
Managing Director in the investment management area.

YUKIHIRO NISHIMIYA. Mr. Nishimiya has been a portfolio manager for AIG
Global since July 1996. From October 1990 until July 1996, he was a portfolio
manager for AIG Global Investment Corp. (Japan).

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<PAGE>

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

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

THE SUBADVISOR

The Manager has entered into subadvisory agreements with AIG Global, which
is a wholly owned subsidiary of AIG and registered under the Advisers Act.
Pursuant to its subadvisory agreements, AIG Global provides investment
advisory services to the Manager in respect of the management of the Fund's
zero coupon Treasury Securities and in respect of the management of the assets
of the Equity Portfolio and officers of AIG Global provide representation on
the Investment Committee (see "The Investment Process"). Under the subadvisory
agreements with AIG Global, the Manager pays AIG Global a fee which is
calculated daily and paid monthly at an annual rate of 0.0825% of the average
daily net assets of the Fund (other than the Fund's interest in the Equity
Portfolio) and 0.15% of the average daily net assets of the Equity Portfolio.
These fees are all paid from the management fee paid to the Manager. The
principal office of AIG Global is 70 Pine Street, New York, New York 10270.

22
<PAGE>

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 the Subadvisor. The use of brokers who provide
investment and market research and securities and economic analysis may result
in higher brokerage charges than the use of brokers selected solely on the
basis of the most favorable brokerage commission rates, and research and
analysis received may be useful to the Manager and the Subadvisor 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.

VALUATION. The net asset value of the shares of the Fund is determined each
day, Monday through Friday, as of the close of regular trading on the New York
Stock Exchange ("NYSE") (usually 4:00 p.m. New York City time) on each day
that the NYSE is open. During the Offering Period, zero coupon Treasury
Securities will be valued at the average of the last reported bid and ask
prices; thereafter, in order to ensure that an adequate amount of zero coupon
Treasury Securities is maintained to achieve the Repayment Objective when
shares of the Fund are redeemed, zero coupon Treasury Securities will be
valued at the last reported bid. Securities traded on a foreign exchange or
over-the-counter market are valued at the last sales price on the primary
exchange or market in which they are traded. Securities for which there are no
recent sales transactions are valued based on quotations provided by primary
market makers in such securities. Any securities for which recent market
quotations are not readily available are valued at fair value determined in
accordance with procedures approved by the Board and by the Trustees of the
Equity Portfolio. Short-term holdings maturing in 60 days or less are
generally valued at amortized cost if their original maturity was 60 days or
less. Short-term holdings with more than 60 days remaining to maturity will be
valued at current market value until the 61st day prior to maturity, and will
then be valued on an amortized cost basis based on the value as of such date
unless the Board or the Trustees of the Equity Portfolio determines that this
amortized cost value does not represent fair market value.

AMERICAN INTERNATIONAL GROUP, INC.

AIG is a Delaware corporation which through its subsidiaries is primarily
engaged in a broad range of insurance and insurance-related and financial
services activities in the United States and abroad. AIG's primary

23
<PAGE>

activities include both general and life insurance 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 September 30, 1996, AIG and its consolidated subsidiaries had
total assets of approximately $144.6 billion and capital funds of
approximately $21.1 billion; consolidated net income for the nine months then
ended was $2.1 billion. Consolidated net income for the year ended December
31, 1995 was $2.5 billion. The Statement of Additional Information
incorporates by reference AIG's financial statements and certain other
information about AIG. At December 31, 1995, AIG and its consolidated
subsidiaries had more than 34,500 employees. The principal executive offices
of AIG are located at 70 Pine Street, New York, New York 10270 and its
telephone number is (212) 770-7000.

DIVIDENDS AND DISTRIBUTIONS

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 it so
qualifies, the Fund will generally not be subject to federal income taxes on
its net investment income and realized net capital gains, if any, which it
timely distributes to its shareholders, provided that at least 90% of the sum
of its net investment income and net short-term capital gains are distributed
to shareholders each year.

24
<PAGE>

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

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

25
<PAGE>

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

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

THE ADMINISTRATOR

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

THE TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

CUSTODIANS

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

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<PAGE>

SHAREHOLDER SERVICING AGREEMENT

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

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

RULE 12b-1 PLAN

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

27
<PAGE>

PURCHASES OF SHARES

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

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

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

28
<PAGE>

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

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 available only with respect to the Fund and the AIG
Children's World Fund -- 2005. In the future, you may obtain a list of the
funds for which the Large Purchase Privilege is available and request a
prospectus by telephoning (800) 862-3984.

29
<PAGE>

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

30
<PAGE>

31
<PAGE>

Agent. Checks should be made payable to AIG Retiree Fund--2003. See "Purchase
and Redemption of Shares" in the Statement of Additional Information.

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

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

REDEMPTION OR REPURCHASE OF SHARES

GENERAL

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

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

32
<PAGE>

been received for the purchase of such shares, which will be up to 15 days
from the purchase date. The redemption within one year of shares purchased at
net asset value under the Large Purchase Privilege may be subject to a 1%
contingent deferred sales charge (see "Purchase of Shares").

REPURCHASES (CONFIRMED REDEMPTIONS)

A request for repurchase may be communicated by a shareholder through a
securities dealer or other financial services firm to the Distributor, which
the Fund has authorized to act as its agent. There is no charge by the
Distributor with respect to repurchases; however, dealers or other firms may
charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value next determined after receipt of a request by the
Distributor. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Investment Advisory
Services -- Valuation") and received by the Distributor prior to the close of
the Distributor's business day will be confirmed at the net asset value
effective on that day. The offer to repurchase may be suspended at any time.
Requirements as to stock powers, certificates, payments and delay of payments
are the same as for redemptions.

33
<PAGE>

EXPEDITED WIRE TRANSFER REDEMPTIONS

REINSTATEMENT PRIVILEGE

A shareholder who has redeemed shares of the Fund or certain other funds may
reinstate up to the full amount redeemed at net asset value at the time of the
reinstatement in shares of the Fund (but only prior to the end of the Offering
Period) or, if available, in shares of certain other funds managed by the
Manager. A shareholder of the Fund who redeems shares purchased under the
Large Purchase Privilege (see "Purchase of Shares") and incurs a contingent
deferred sales charge may reinstate up to the full amount redeemed at net
asset value at the time of the reinstatement in shares of the Fund (but only
prior to the end of the Offering Period) or, if available, in shares of
certain other funds managed by the Manager. The amount of any contingent
deferred sales charge also will be reinstated. The funds for which these
privileges are available will vary from time to time because they are
generally offered only for limited periods. As of the date of this Prospectus,
the Reinstatement Privilege is not available for any other funds. In the
future, you may obtain a list of the funds for which these privileges are
available and request a prospectus by telephoning (800) 862-3984. These
reinstated shares will retain their original cost and purchase date for
purposes of the contingent deferred sales charge. Purchases through the
Reinstatement Privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for funds
available for sale in the shareholder's state of residence as listed under
"Special Features -- Exchange Privilege." The Reinstatement Privilege can be
used only once as to any specific shares and reinstatement must be effected
within six months of the redemption. If a loss is realized on the redemption
of Fund shares, the reinstatement may be subject to the "wash sale" rules if
made within 30 days of the redemption, resulting in the postponement of the
recognition of such loss for federal income tax purposes. The Reinstatement
Privilege may be terminated or modified at any time and is subject to the
limited Offering Period of the Fund.

34
<PAGE>

SPECIAL FEATURES

LETTER OF INTENT

RIGHT OF ACCUMULATION

YOU MAY QUALIFY FOR A REDUCED SALES CHARGE. Pursuant to the Right of
Accumulation, certain investors are permitted to purchase shares of the Fund
at the sales charge applicable to the total of (a) the dollar amount then
being purchased plus (b) the current public offering price of all shares of
the Fund, shares of the other series of AIG All Ages Funds, Inc. and shares of
certain other funds managed by the Manager, then held by that investor. The
following purchases may be aggregated for the purposes of determining the
amount of purchase and the corresponding sales load: (a) individual purchases
on behalf of a single purchaser, the purchaser's spouse and their children
under the age of 21 years including shares purchased in connection with a
retirement account exclusively for the benefit of such individual(s), such as
an IRA, and purchases made by a company controlled by such individual(s); (b)
individual purchases by a trustee or other fiduciary account, including an
employee benefit plan (such as employer-sponsored pension, profit-sharing and
stock bonus plans, including plans under Section 401(k) of the Code, and
medical, life and disability insurance trusts); or (c) individual purchases by
a trustee or other fiduciary purchasing shares concurrently for two or more
employee benefit plans of a single employer or of employers affiliated with
each other. Subsequent purchases made under the conditions set forth above
will be subject to the minimum subsequent investment of $250 and will be
entitled to the Right of Accumulation.

EXCHANGE PRIVILEGE

35
<PAGE>

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

RETIREMENT PLANS

36
<PAGE>

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 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.

37
<PAGE>

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.

ORGANIZATION AND CAPITALIZATION

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

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

38
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

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

AIG RETIREE FUND -- 2003

A SERIES OF
AIG ALL AGES FUNDS, INC.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND'S AND THE EQUITY PORTFOLIO'S
EXPENSES.................................................................. 4
FINANCIAL HIGHLIGHTS....................................................... 6
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES.............................. 7
RISK FACTORS............................................................... 15
SPECIAL INFORMATION CONCERNING THE
TWO-TIER STRUCTURE........................................................ 18
INVESTMENT ADVISORY SERVICES............................................... 20
AMERICAN INTERNATIONAL GROUP, INC.......................................... 23
DIVIDENDS AND DISTRIBUTIONS................................................ 24
TAXES...................................................................... 24
THE ADMINISTRATOR.......................................................... 26
THE TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT.......................................................... 26
CUSTODIANS................................................................. 26
SHAREHOLDER SERVICING AGREEMENT............................................ 27
RULE 12b-1 PLAN............................................................ 27
PURCHASES OF SHARES........................................................ 28
REDEMPTION OR REPURCHASE OF SHARES......................................... 32
SPECIAL FEATURES........................................................... 35
PERFORMANCE................................................................ 37
ORGANIZATION AND CAPITALIZATION............................................ 38
</TABLE>

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

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

AIG
RETIREE FUND -- 2003

JANUARY 10, 1997

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

PART B

<PAGE>

AIG CHILDREN'S WORLD FUND - 2005
A Series of AIG All Ages Funds, Inc.

Statement of Additional Information
January 10, 1997

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

AIG Children's World Fund -- 2005 (the "Fund") is a diversified series
of AIG All Ages Funds, Inc. The Fund has two investment objectives. The first
objective is to provide a guaranteed return, on or after November 15, 2005, of
the full amount originally invested (including any sales charge paid) by each
shareholder who has reinvested all dividends and distributions. The Fund pursues
its first objective by investing a portion of its assets in U.S. Treasury zero
coupon securities, combined with further assurance from a guarantee by AIG
Capital Management Corp., the Fund's investment adviser (the "Manager"). The
Manager's obligations under its guarantee will be backed by its parent, American
International Group, Inc. ("AIG").

The Fund's second objective is to achieve total return on capital
through both capital growth (realized and unrealized) and income, by investing
the balance of its assets primarily in a globally diversified portfolio of
equity securities. There can be no assurance that the Fund's investment
objective of total return on capital will be achieved.

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the Fund, dated January 10, 1997, and
as further amended or supplemented from time to time, a copy of which may be
obtained from the Fund upon request. This Statement of Additional Information is
incorporated by reference in its entirety into the Prospectus.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................................... 3

Investment Objectives and Policies.................................... 3

The Manager's Guarantee............................................... 8

Directors, Trustees and Officers...................................... 9

Management and Expenses...............................................13

Rule 12b-1 Plan.......................................................14

Shareholder Servicing Agreement.......................................15

Portfolio Transactions and Brokerage..................................15

Purchase and Redemption of Fund Shares................................16

Distribution Services.................................................17

Valuation.............................................................17

Taxes.................................................................18

Performance Information...............................................19

Other Information.....................................................21

Financial Information.................................................22

Information with Respect to AIG.......................................23
</TABLE>

-2-
<PAGE>

GENERAL INFORMATION

The Fund is a diversified series of AIG All Ages Funds, Inc. (the
"Company"), an open-end management investment company.

INVESTMENT OBJECTIVES AND POLICIES

OVERVIEW

The Fund has two investment objectives. The first is to provide a
guaranteed return, at any time on or after November 15, 2005 (the "Maturity
Date"), of the full amount originally invested by each shareholder who has
reinvested all dividends and distributions. The Fund pursues its first
objective by investing a portion of its assets in U.S. Treasury zero coupon
securities, combined with further assurance from a guarantee by the Manager (the
"Manager's Guarantee"). The Manager's obligations under the Manager's Guarantee
will be backed by its parent, AIG. The Fund's second objective is to provide
total return on capital through both capital growth (realized and unrealized)
and income, through investment of the balance of its assets primarily in a
globally diversified portfolio of equity securities. The Fund seeks to achieve
its second investment objective of total return on capital by investing a
portion of its investable assets in the First Global Equity Portfolio (the
"Equity Portfolio"), an open-end diversified management investment company,
unlike other mutual funds that directly acquire and manage their own portfolio
of securities. The investment objectives of the Fund are fundamental and cannot
be changed without the approval of the holders of a majority of the outstanding
voting securities of the Fund, as defined under the Investment Company Act of
1940, as amended (the "1940 Act"). The following information regarding the
Fund's and the Equity Portfolio's investment policies supplements the
information contained in the Prospectus.

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

Zero Coupon securities of the U.S. Government that are currently available
are called STRIPS (Separate Trading of Registered Interest and Principal of
Securities) STRIPS are issued under a program introduced by the U.S. Treasury
and are direct obligations of the U.S. Government. The U.S. Government does not
issue zero coupon securities directly. The STRIPS program, which is ongoing, is
designed to facilitate the secondary market stripping of selected Treasury notes
and bonds into individual interest and principal components. Under the program,
the U.S. Treasury continues to sell its shares and bonds through its customary
auction process. However, a purchaser of those notes and bonds who has access to
a book-entry account at a Federal Reserve bank may separate the specified
Treasury notes and bonds into individual interest and principal components. The
selected Treasury securities may thereafter be maintained in the book-entry
system operated by the Federal Reserve in a manner that permits the separate
trading and ownership of the interest and principal payments. The Federal
Reserve does not charge a fee for this service; however, the book-entry transfer
of interest and principal components is subject

-3-
<PAGE>

to the same fee schedule generally applicable to the transfer of Treasury
securities.

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

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

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

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

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

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

Borrowing. The Fund or the Equity Portfolio may from time to time borrow
money for extraordinary or emergency purposes in an amount up to 5% of its total
assets from banks at prevailing interest rates. This policy is fundamental.
Should the Fund or the Equity Portfolio, for any reason, have borrowings that do
not meet this test, then within three business days, it must reduce such
borrowings so as to meet the foregoing test. Under these circumstances, the
Fund or the Equity Portfolio may have to liquidate its holdings at a time when
it is disadvantageous to do so. Gains made with additional funds borrowed will
generally cause the net asset value of the Fund or the Equity Portfolio, as
relevant, to rise faster than could be the case without borrowings.

-4-
<PAGE>

Conversely, if investment results fail to cover the cost of borrowings, the net
asset value of the Fund or Equity Portfolio, as relevant, could decrease faster
than if there had been no borrowings.

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

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

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

ADDITIONAL INVESTMENT RESTRICTIONS FOR THE FUND AND THE EQUITY PORTFOLIO

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

The Fund may not:

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

(2) Make short sales of securities.

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

(4) Write put or call options on securities.

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

(6) Engage in the underwriting of securities, except insofar as the Fund
may be

-5-
<PAGE>

deemed an underwriter under the Securities Act in disposing of a
portfolio security.

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

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

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

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

The Equity Portfolio may not:

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

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

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

(4) Write put or call options on securities.

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

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

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

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

(9) Make loans or lend portfolio securities except as described in the

-6-
<PAGE>

Prospectus under "Other Investment Policies - Repurchase Agreements."

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

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

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

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

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

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

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

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

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

The Prospectus states that the Equity Portfolio may invest up to 15% of its
assets in illiquid securities and that the Trustees of the Equity Portfolio (the
"Trustees") may determine that certain securities sold under Rule 144A of the
1933 Act are not subject to this 15% limitation.

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

-7-
<PAGE>

THE MANAGER'S GUARANTEE

The Company and the Manager have entered into a Guarantee Agreement, dated
September 15, 1995 (the "Manager's Guarantee"). The Manager's Guarantee
operates such that an investor who has reinvested all dividends and
distributions (an "Eligible Investor") will be able to demand the return of the
full amount of his or her original investment in the Fund (including any front-
end sales charges paid) after the Maturity Date. An Eligible Investor who has
redeemed some shares prior to the Maturity Date is still an Eligible Investor
with respect to the shares not redeemed.

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

Any payment made by the Manager pursuant to the Manager's Guarantee will be
to the Fund and will cause the net asset value of all outstanding shares to
increase by the same amount. Thus, 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,

-8-
<PAGE>

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

The Manager's obligations under the Manager's Guarantee are backed by its
parent, AIG, pursuant to a Support Agreement, dated September 15, 1995. AIG is
a holding company which through its subsidiaries is primarily engaged in a broad
range of insurance and insurance-related activities in the United States and
abroad. Other significant activities of AIG are financial services and agency
and service fee operations. Under the Support Agreement, AIG has agreed that,
if the Manager is unable to make full payment of any amount required under the
Manager's Guarantee, AIG will make a capital contribution or a loan to the
Manager to the extent of the Manager's inability to pay. The Support Agreement
provides that the full amount of such capital contribution or loan will be paid
directly to the Fund.

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

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

DIRECTORS, TRUSTEES AND OFFICERS

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

<TABLE>
<CAPTION>
POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- --------------------- ------- --------- ----------------------
<S> <C> <C> <C>
Roger T. Wickers (61) Chairman Chairman Retired; formerly Senior Vice
339 Forest Road of the of the President and General
Wolfeboro, New Board Board Counsel, Keystone.
Hampshire 03894 and and
Director Trustee

Paul H. Friedman (42) Director Trustee Partner, Arter & Hadden, law
1801 K Street N.W., Suite firm.
400k
Washington, D.C 20006-
1301
</TABLE>

-9-
<PAGE>

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

Charles Vinick (49) Director Trustee Independent Consultant;
214 South Venice Blvd. Director, Jean-Michel
Venice, California 90291 Cousteau Productions;
Director, Passage International
Incorporated; Advisory Board
Member, SMR Energy, Inc.;
formerly Vice President, The
Cousteau Society.

Gary M. Gardner (45) Secretary Secretary Chief Counsel, PNC Bank,
400 Bellevue Parkway N.A.; formerly Attorney,
Wilmington, Delaware Federated Investors, Inc., Sun
19809 America Asset Management
Corp. and the Boston
Company.

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

* "Interested" person as defined in the 1940 Act by reason of affiliation
with the Manager.

-10-
<PAGE>

<TABLE>
<CAPTION>
POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- --------------------- ------- --------- ----------------------
<S> <C> <C> <C>
Daniel K. Kingsbury (38) President President President, AIG Asset
New York, New York Management, Inc.; President,
10270 AIG Capital Management
Corp.; Senior Vice President,
AIG Asset Management
Services, Inc.; Vice President,
AIG Equity Sales Corp.;
Executive Director, AIG Asset
Management Ltd. and AIG
Asset Management Services
Ltd.; formerly Director of
Strategy and Business
Development, AIG Investment
Corporation; formerly Director
of Strategy, AIG Asset
Management International Ltd.

J. Fergus McKeon (35) Treasurer Treasurer General Manager, PFPC
80 Harcourt Street International; formerly Chief
Dublin, Ireland Accountant, SBC-ISL; Director,
Emerging Markets Fixed
Income Fund.

David Hartman (32) Assistant Assistant Assistant General Counsel,
70 Pine Street Secretary Secretary AIG; formerly Associate,
New York, New York Simpson Thacher & Bartlett.
10270
</TABLE>

-11-
<PAGE>

<TABLE>
<CAPTION>
POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- --------------------- ------- --------- ----------------------
<S> <C> <C> <C>
Walter Josiah (36) Assistant --- Manager, Investor Services Unit
505 Carr Road Secretary of AIG Equity Sales Corp.;
Wilmington, Delaware formerly Assistant Vice
19809 President, Mutual Fund
Operations, Kidder, Peabody &
Co.

Elizabeth M. Tuck (41) Assistant Assistant Assistant Secretary, AIG;
70 Pine Street Secretary Secretary Corporate Secretary for various
New York, New York domestic affiliates and
10270 subsidiaries of AIG.

Jay F. Nusblatt (35) Assistant Assistant Vice President and Director of
103 Bellevue Parkway Treasurer Treasurer Accounting and Administration,
Wilmington, Delaware PFPC Inc.; formerly Assistant
19809 Vice President of Fund/Plan
Services, Inc. and PFPC Inc.

Eugene Cichanowsky (50) Assistant Assistant Vice President Financial and
70 Pine Street Treasurer Treasurer Administration, AIG Asset
New York, New York Management Services, Inc.;
10270 formerly Vice President,
Delaware Management Holdings,
Inc.; Vice President and
Controller, Delaware
Management Holdings, Inc.

</TABLE>

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

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

-12-
<PAGE>

COMPENSATION TABLE
(NOVEMBER 30, 1996)

<TABLE>
<CAPTION>
PENSION TOTAL
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM
ACCRUED ANNUAL COMPANY
AGGREGATE AS PART BENEFITS AND FUND
COMPENSATION OF FUND UPON COMPLEX PAID
NAME AND POSITION FROM COMPANY EXPENSES RETIREMENT TO DIRECTORS
- -------------------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C>
Roger T. Wickers $14,166 None N/A $28,333
Director

Paul H. Friedman $14,166 None N/A $28,333
Director

Linda-Ann S. Goodwin 0 None N/A 0
Director

Charles Vinick $14,166 None N/A $28,333
Director

</TABLE>

As of December 31, 1996, the directors and officers of the Company, as a
group, owned less than 1% of the shares of common stock of the Fund.

MANAGEMENT AND EXPENSES

As indicated in the Prospectus, under the Fund's and the Equity Portfolio's
agreements with the Manager dated September 15, 1995, subject to the control of
the Board of Directors of the Fund and the Trustees of the Equity Portfolio, the
Manager administers the business and other affairs of the Fund and the Equity
Portfolio. The Manager provides both the Fund and the Equity Portfolio with
such office space, administrative and other services and executive and other
personnel as are necessary for the operations of the Fund and the Equity
Portfolio. The Manager pays all of the compensation of Directors of the Company
and Trustees of the Equity Portfolio who are employees, consultants and/or
directors of the Manager and of the officers and employees of the Fund and the
Equity Portfolio. The Fund pays the Manager a management fee for its services,
calculated daily and payable monthly equal to 0.20% per annum of the average
daily net assets of the Fund (other than its interest in the Equity Portfolio).
Similarly, the Equity Portfolio pays the Manager a management fee, calculated
daily and payable monthly equal to 1.20% per annum of the average daily net
assets of the Equity Portfolio. As described in the Prospectus, the Manager has
agreed to waive or reimburse certain expenses subject to reimbursement under
certain circumstances by the Fund in later years. Assuming an allocation of 40%
to 65% of the Fund's assets to Treasury Securities the combined management fee
paid by the Fund will range between 0.55% and 0.80% per annum of the average
total assets of the Fund. Fees paid by the Manager to the Subadvisor (which do
not affect the fees paid by the Fund) are described in the Prospectus. For the
fiscal year ended November 30, 1996, the Manager waived its entire advisory fee
which totaled $2,538 and $12,776 for the Fund and the Equity Portfolio,
respectively. For the fiscal year ended November 30, 1996, the Manager paid no
fees to the Subadvisor.

-13-
<PAGE>

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

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

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

RULE 12b-1 PLAN

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

The Plan was originally approved on July 19, 1995 by the Board of Directors
of the Company, including a majority of the directors who are not interested
persons (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Fund (the "Qualified Directors") and
by the sole shareholder of the Fund on September 15, 1995. The Plan will
terminate on the last day of the Offering Period (including any extension
thereof).

The Plan requires the Treasurer of the Fund to provide the Directors, and
that the

-14-
<PAGE>

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

For the fiscal year ended November 30, 1996, the Distributor accrued fees
from the Fund pursuant to the Plan totaling $9,378. Substantially all of this
amount was reimbursement for printing expenses incurred by the Distributor.

SHAREHOLDER SERVICING AGREEMENT

As indicated in the Prospectus, the Fund has entered into a Shareholder
Servicing Agreement with the Distributor pursuant to which the Fund pays the
Distributor a fee, payable monthly at the annual rate of up to 0.25% of net
assets of accounts in the Fund that it maintains and services, in exchange for
shareholder services. The Shareholder Servicing Agreement was originally
approved on June 29, 1995 by the Board of Directors of the Fund, including a
majority of the directors who are not interested persons (as defined in the 1940
Act) and by the sole shareholder of the Fund on June 29, 1995. For the fiscal
year ended November 30, 1996, the Fund paid $4,689 as fees to the Distributor as
shareholder servicing agent of the Fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

When two or more investment advisory clients of the Manager or the
Subadvisor desire to buy or sell the same security at the same time, the Manager
or the Subadvisor may aggregate the securities to be sold or purchased in order
to obtain the most favorable price or lower brokerage commissions and efficient
execution. The securities purchased or sold are allocated by the Manager and
the Subadvisor in a manner believed to be equitable to each client. There
may

-15-
<PAGE>

be possible advantages or disadvantages of such transactions with respect to
price or the size of positions readily obtainable or saleable.

The Fund paid no brokerage commissions during the fiscal year ended
November 30, 1996. During the same period, the Equity Portfolio paid brokerage
commissions in the aggregate amount of $13,039.

PURCHASE AND REDEMPTION OF FUND SHARES

PURCHASE OF SHARES

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

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

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

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

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

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

-16-
<PAGE>

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

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

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

DISTRIBUTION SERVICES

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

Aggregate underwriting commissions in connection with the offering of the
Fund's shares for the fiscal year ended November 30, 1996 were $136,513. After
allowances to dealers, the Distributor retained of this amount $38,414.

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

VALUATION

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

-17-
<PAGE>

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

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

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

TAXES

The Fund intends to elect to be treated and to qualify each year as
a "regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify, the Fund must, among other things,
(i) derive at least 90% of its annual gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stocks, securities or foreign currencies, and other income
(including but not limited to gains from options, futures and forward contracts)
derived with respect to the Fund's business of investing in stocks, securities
or foreign currencies; (ii) derive less than 30% of its annual gross income from
the sale or other disposition of stocks or securities (or certain options,
futures, forward contracts and foreign currencies) held for fewer than three
months; and (iii) diversify its holdings so that, at the end of each fiscal
quarter, (x) at least 50% of the value of the Fund's assets is represented by
cash, U.S. Government securities and other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the value of the Fund's assets
and 10% of the outstanding voting securities of such issuer and (y) not more
than 25% of the value of the Fund's assets is represented by securities of any
one issuer (other than U.S. Government securities).

The Fund and the Equity Portfolio are components of a so-called "master-
feeder" structure. Under this type of structure, management of the Fund expects
to take into account, for

-18-
<PAGE>

purposes of determining the Fund's status as a regulated investment company, the
Fund's proportionate share of the assets, income, and deductions of the Equity
Portfolio.

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

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

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

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

PERFORMANCE INFORMATION

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

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

-19-
<PAGE>

where:
P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.

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

For the period from December 15, 1995 (commencement of operations)
through November 30, 1996, the total return of the Fund was 4.05% (assuming
deduction of the maximum front-end sales charge).

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

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

Advertisements of total return will always show a calculation that
includes the effect of the maximum sales charge but may also show total return
without giving effect to that charge. Because these additional quotations will
not reflect the maximum sales charge payable, these performance quotations will
be higher than the performance quotations that reflect the maximum sales charge.
For the period from December 15, 1995 (commencement of operations) through
November 30, 1996, the total return of the Fund without deduction of any front-
end sales charges was 9.29%.

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

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

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

-20-
<PAGE>

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.

OTHER INFORMATION

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

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

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

ACCOUNTANTS. Coopers & Lybrand, L.L.P., independent auditors, have been

-21-
<PAGE>

selected as auditors of the Fund. Their address is 1301 Avenue of the Americas,
New York, New York 10019.

PRINCIPAL SHAREHOLDERS. As of December 20, 1996, to the knowledge of the
Fund, no person owned of record or beneficially 5% or more of the Fund's
outstanding shares, except that Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive, East, Jacksonville, Florida, 32246 owned of record 153,150 shares
(37.80% of the outstanding shares).

FINANCIAL INFORMATION

The following pages include the Fund's and the Equity Portfolio's audited
financial statements for the fiscal year ended November 30, 1996 and the report
of Coopers & Lybrand, L.L.P. thereon.

-22-
<PAGE>

INFORMATION WITH RESPECT TO AIG

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

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

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

Audited Financial Statements:

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

From AIG's Report on Form 10-Q for the fiscal quarter ended September 30, 1996:

Managements Discussion and Analysis of Financial Condition and Results of
Operations

Financial Statements (Unaudited):

Consolidated Balance Sheet at September 30, 1996
Consolidated Statement of Income for the three months ended
September 30, 1996 and1995
Consolidated Statement of Cash Flows for the three months ended
September 30, 1996 and 1995
Notes to Financial Statements

-23-
<PAGE>

APPENDIX A
CORPORATE BOND AND COMMERCIAL PAPER RATINGS

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

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

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

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

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

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

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

A-1
<PAGE>

outweighed by large uncertainties or major risk exposures to adverse conditions.

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

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

A-2
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

Financial Statements

December 15, 1995 (Commencement of Operations) to November 30, 1996

Page

AIG Children's World Fund - 2005:
Portfolio of Investments........................... 1
Statement of Assets and Liabilities................ 2
Statement of Operations............................ 3
Statement of Changes in Net Assets................. 4
Financial Highlights............................... 5
Notes to the Financial Statements.................. 6-10
Report of Independent Accountants.................. 11

First Global Equity Portfolio:
Portfolio of Investments........................... 12-14
Statement of Assets and Liabilities................ 15
Statement of Operations............................ 16
Statement of Changes in Net Assets................. 17
Financial Highlights............................... 18
Notes to the Financial Statements.................. 19-23
Report of Independent Accountants.................. 24

<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

-----------------------------------------------------------------------------
Portfolio of Investments
November 30, 1996
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

Principal Maturity Value
Amount Description Date Yield * (Note 2a)
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
US TREASURY BONDS - 62.0%
$2,150,000 US Zero Coupon Bond...................15-Nov-05 6.76% $ 1,247,860
300,000 US Zero Coupon Bond...................15-Nov-05 7.00% 174,120
200,000 US Zero Coupon Bond...................15-Nov-05 7.13% 116,080
200,000 US Zero Coupon Bond...................15-Nov-05 6.97% 116,080
200,000 US Zero Coupon Bond...................15-Nov-05 6.97% 116,080
100,000 US Zero Coupon Bond...................15-Nov-05 6.97% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.91% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.75% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.67% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.65% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.61% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.60% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.33% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.24% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.22% 58,040
100,000 US Zero Coupon Bond...................15-Nov-05 6.16% 58,040
----------

Total Investments (Cost $2,288,275***) - 62.0%.............. 2,408,660

Other Assets in Excess of Liabilities** - 38.0%............. 1,478,138
----------
NET ASSETS - 100%........................................... $ 3,886,798
==========
</TABLE>
* Effective yield at time of purchase.
** Includes assets in First Global Equity Portfolio.
*** For federal income tax purposes, cost is substantially the same as for
financial reporting purposes with unrealized appreciation of $120,385.

See Accompanying Notes to the Financial Statements.

-1-
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
30-Nov-96
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities at value (Cost $2,288,275)........................... $ 2,408,660
Investment in Equity Portfolio at value....................................... 1,379,798
Cash.......................................................................... 113,142
Deferred organization costs................................................... 56,399
Prepaid expenses.............................................................. 2,764
Receivable for fund shares sold............................................... 2,381
Due from Manager.............................................................. 418
-----------
Total Assets............................................................ 3,963,562
-----------

LIABILITIES:
Accrued transfer agent expenses............................................... 44,783
Accrued legal expenses........................................................ 24,999
Accrued administration expenses............................................... 5,407
Miscellaneous accrued expenses................................................ 1,575
-----------
Total Liabilities 76,764
-----------

NET ASSETS........................................................................$ 3,886,798
==========
COMPOSITION OF NET ASSETS:
Capital paid in...............................................................$ 3,599,528
Undistributed net investment income........................................... 44,599
Undistributed net realized gain on investments
and foreign currency transactions........................................ 34,594
Net unrealized appreciation on investments.................................... 208,077
---------
Net Assets........................................................................$ 3,886,798
==========

Shares Outstanding................................................................ 388,574
==========

Net asset value and redemption price per share ($3,886,798 / 388,574 shares)......$ 10.00
==========
Maximum offering price per share (Net asset value plus sales
charge - 4.75% of maximum offering price).....................................$ 10.50
==========
</TABLE>

See Accompanying Notes to the Financial Statements.

-2-
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

- -------------------------------------------------------------------------------
Statement of Operations
For the period from December 15, 1995* to November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................... $ 74,288
Net Investment Loss Allocated from the Equity
Portfolio............................................................ (2,072)
--------
72,216
--------

EXPENSES:
Transfer agent expense.................................... 74,528
Shareholder communication expense......................... 46,404
Registration expense...................................... 40,831
Administration expense.................................... 36,037
Directors' fees and expenses.............................. 33,807
Legal expense............................................. 24,999
Insurance expense......................................... 20,657
Organization expense...................................... 14,101
Distribution expense...................................... 9,378
Audit expense............................................. 4,998
Shareholder services expense.............................. 4,689
Investment advisory expense............................... 2,538
Custodian expense......................................... 298
Miscellaneous expenses.................................... 2,499
--------
Total expenses before reductions..................... 315,764
--------
Less: Fee waivers and expense reimbursements by Manager...(250,034)
Less: Fee waivers by Administrator........................ (21,163)
Less: Fee waivers by Transfer Agent....................... (19,358)
--------

Net expenses............................................................ 25,209
--------

Net Investment Income........................................... 47,007
--------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio.............................................. 32,186
Net unrealized appreciation on investments and foreign currency transactions
from the Equity Portfolio.............................................. 87,692
Net unrealized appreciation on investments from the Fund................ 120,385
--------
Net realized and unrealized gain on investments
and foreign currency transactions................................. 240,263
--------
Net Increase in Net Assets Resulting from Operations............$287,270
========

</TABLE>
- -------------
*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-3-
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the period from December 15, 1995* to November 30, 1996
- ------------------------------------------------------------------------------

<TABLE>
<S> <C>
OPERATIONS:
Net investment income................................................................. $ 47,007
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio........................................................ 32,186
Net unrealized appreciation on investments and foreign currency
transactions from the Equity Portfolio........................................... 87,692
Net unrealized appreciation on investments from the Fund.............................. 120,385
----------
Net Increase in Net Assets Resulting From Operations............................ 287,270
----------

FUND SHARE TRANSACTIONS:
Net proceeds from shares subscribed................................................... 3,623,996
Cost of shares redeemed............................................................... (124,468)
----------
Net Increase in Net Assets Resulting from Fund Share Transactions... 3,499,528
----------

Total Increase in Net Assets............................................. 3,786,798

Net assets at the beginning of the period................................................. 100,000
----------

NET ASSETS at the end of the period (including undistributed
net investment income of $44,599)........................................ $ 3,886,798
==========
</TABLE>
- --------

*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-4-
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

- --------------------------------------------------------------------------------
Financial Highlights
For the period from December 15, 1995* to November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period..................................... $ 9.15
-------

Income from investment operations:
Net investment income................................................... 0.12
Net realized and unrealized gain on investments ........................ 0.73
-------
Total income from investment operations.......................... 0.85
-------

Net asset value, end of period............................. $ 10.00
=======

Total Return................................................................ 9.29%(a)

Ratios / Supplemental Data:
Net assets, end of period (000's).......................... $ 3,887

Ratio of expenses to average net assets..................................... 2.00%(b)(c)
Ratio of net investment income to average net assets....... 2.52%(b)(c)

Portfolio turnover rate .................................................... 0.00%

</TABLE>
- -------------
*Commencement of Operations.
(a) Calculated without deduction of sales charges.
(b) Net of fee waivers and expense reimbursements which had the effect of
reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 26.05 percentage
points (annualized).
(c) Annualized.

See Accompanying Notes to the Financial Statements.

-5-
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005
______________________________________________________________________________
Notes to Financial Statements
November 30, 1996
______________________________________________________________________________

NOTE 1 - ORGANIZATION

AIG All Ages Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end diversified
management investment company. The Company was incorporated in Maryland on
April 4, 1995 and commenced operations on December 15, 1995. At November 30,
1996, the Company operated as a series company comprising two funds. The
accompanying financial statements and notes are those of the AIG Children's
World Fund - 2005 (the "Fund") only.

Shares of the Fund will be offered to investors only through September 30, 1997
(as such period may be extended or shortened by the Board of Directors of the
Company, the "Offering Period").

The Fund has two investment objectives. The first objective is to provide a
guaranteed return, on or after November 15, 2005 (the "Maturity Date"), of the
full amount originally invested (including any sales charges paid) by each
shareholder who has reinvested all dividends and distributions, which the Fund
pursues through investment of a portion of its assets in U.S. Treasury zero
coupon securities, combined with further assurance from a guarantee by AIG
Capital Management Corp., the Fund's investment adviser (the "Manager"). The
Manager's obligations under its guarantee are 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 in the First Global Equity Portfolio (the "Equity Portfolio"), an
open-end management investment company that invests in a globally diversified
portfolio of equity securities. The Fund and the Equity Portfolio constitute a
two-tier master-feeder structure. The value of the Fund's investment in the
Equity Portfolio included in the accompanying Statement of Assets and
Liabilities reflects the Fund's proportionate beneficial interest of 44.7% in
the net assets of the Equity Portfolio at November 30, 1996. The financial
statements of the Equity Portfolio, including its portfolio of investments, are
included within this report and should be read in conjunction with the Fund's
financial statements.

-6-
<PAGE>

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.

a) SECURITY VALUATIONS:

During the Offering Period, U.S. Treasury zero coupon securities are valued at
the average of the last reported bid and ask prices; thereafter, they will be
valued at the last reported bid price. Short-term securities with less than
sixty days remaining to maturity when acquired are valued at amortized cost,
which approximates market value. Short-term securities with more than sixty
days remaining to maturity are valued at current market value until the sixtieth
day prior to maturity, and are then valued on an amortized cost basis. The
valuation of the Fund's investment in the Equity Portfolio is discussed in Note
2a of the Equity Portfolio's financial statements.

b) INVESTMENT INCOME AND SECURITY TRANSACTIONS:

Security transactions of the Fund are accounted for on a trade date basis.
Realized gains and losses on securities transactions are determined on the
identified cost basis. Interest income, including accretion of discount and
amortization of premium on U.S. Treasury zero coupon securities, is accrued
daily. The Fund records its pro-rata share of investment income, expenses and
realized and unrealized gains and losses recorded by the Equity Portfolio on a
daily basis. Expenses common to all funds within the Company are allocated
among the funds on the basis of average net assets.

c) DIVIDENDS AND DISTRIBUTIONS:

The Fund declares and pays dividends from net investment income and distributes
net realized capital gains, if any, at least annually. Dividends and
distributions are recorded on the ex-dividend date. The amounts of dividends
from net investment income and distributions from net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles, therefore, the Fund may
periodically make re-classifications among certain of its capital accounts as a
result of timing and characterization of certain income and capital gains
distributions. On November 30, 1996, the Fund decreased undistributed net
investment income by $2,408 and increased undistributed net realized capital
gain on investments and foreign currency transactions by $2,408. These
differences are due to the reclassification of realized losses on foreign
currency contracts to ordinary income.

-7-
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005
____________________________________________________________________
Notes to Financial Statements
November 30, 1996
____________________________________________________________________

NOTE 2 - CONTINUED

d) FEDERAL INCOME TAXES:

The Fund has elected to be taxed as a regulated investment company and intends
to comply with the requirements of the Internal Revenue Code and to distribute
substantially all its taxable income to shareholders. Therefore, no federal
income tax provision is required.

e) ORGANIZATION EXPENSES:

Expenses of $70,500 incurred in connection with the organization of the Fund are
being amortized on a straight line basis over a five year period beginning
December 15, 1995.

NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

The Manager serves as the Fund's and the Equity Portfolio's investment adviser
and is responsible for the management of the assets of the Fund and the Equity
Portfolio in conformity with the stated objectives and policies of the Fund and
the Equity Portfolio. For its services, the Manager is entitled to a fee
calculated daily and paid monthly, at an annual rate of 0.20% of the average
daily net assets of the Fund (other than its interest in the Equity Portfolio)
and 1.20% of the average daily net assets of the Equity Portfolio. The Manager
has voluntarily agreed to waive its management fee or reimburse the Fund's
expenses to the extent that total Fund operating expenses exceed 2.00% of
average daily net assets during the Fund's limited offering period, subject to
reimbursement by the Fund in subsequent years under certain circumstances. For
the period ended November 30, 1996, the Manager waived its entire fee as adviser
and reimbursed the Fund in the aggregate amount of $395,277 which is inclusive
of waiver amounts at the Equity Portfolio and Fund level.

The Manager has entered into subadvisory agreements with AIG Global Investment
Corp. ("AIG Global"), which is a wholly owned subsidiary of AIG and is
registered under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"). Pursuant to its subadvisory agreements, AIG Global provides investment
advisory services to the Manager in respect of the management of the Fund's
Treasury Securities and in respect of the management of the assets of the Equity
Portfolio and officers of AIG Global provide representation on the Manager's
Investment Committee. Under the subadvisory agreements with AIG Global, the
Manager pays AIG Global a fee which is calculated daily and paid monthly at an
annual rate of 0.0825% of the average daily net assets of the Fund (other than
the Fund's interest in the Equity Portfolio) and 0.15% of the average daily net
assets of the Equity Portfolio. These fees are paid from the management fee
paid to the Manager.

-8-
<PAGE>

NOTE 3 - CONTINUED

The Manager was previously party to a subadvisory agreement with AIG Global
Investment Corp. (Europe) Ltd., ("AIG Global Europe"), a wholly owned subsidiary
of AIG. Effective May 28, 1996, AIG Global Europe deregistered under the
Advisers Act and the subadvisory agreement was replaced with a service agreement
pursuant to which AIG Global Europe agreed to provide investment advisory
services.

The Manager serves as the Fund's and the Equity Portfolio's investment adviser
and is responsible for the management of the assets and review and supervision
of the investment program. In addition to the subadvisory agreements, the
Manager has entered into service agreements with certain affiliates, including
AIG Global Europe, whereby such affiliates provide investment advisory services
under the direction of the Manager. Certain officers of these affiliates
provide representation on the Manager's Investment Committee. Under the terms
of the service agreements, the Manager is required to pay the service providers
a total combined fee at an annual rate of 0.0175% of the average daily net
assets of the Fund (other than the Fund's interest in the Equity Portfolio) and
0.45% of the average daily net assets of the Equity Portfolio. These fees are
funded from the management fee paid to the Manager. There have been no such
fees paid through the period ended November 30, 1996.

Under the Shareholder Servicing Agreement, AIG Equity Sales Corp. (the
"Distributor"), a wholly owned subsidiary of AIG, provides administrative
services for the Fund's shareholders for which the Fund pays the Distributor a
fee at the annual rate of up to 0.25% of average daily net assets. Under a plan
of distribution adopted pursuant to Rule 12b-1 under the 1940 Act (the "Plan"),
the Fund may pay the Distributor a distribution fee during the Offering Period
at the annualized rate of up to 0.50% of the average daily net assets of the
Fund. The Plan will terminate on the last day of the Offering Period.

PFPC International Ltd. serves as the Fund's administrator and accounting agent.
For the period ended November 30, 1996, PFPC International Ltd. voluntarily
waived an aggregate $71,298 of its fee which is inclusive of waiver amounts at
the Equity Portfolio and Fund level. PFPC Inc. serves as Fund's transfer agent
and dividend disbursing agent. For the period ended November 30, 1996, PFPC
Inc. voluntarily waived an aggregate $20,891 of its fee which is inclusive of
waiver amounts at the Equity Portfolio and Fund level. PNC Bank, N.A. serves as
custodian of the Fund's assets.

-9-
<PAGE>

NOTE 3 - CONTINUED

Certain directors and officers of the Company are also directors and/or officers
of the Manager or Distributor. These directors and officers are paid no
compensation by the Fund.

NOTE 4 - CAPITAL SHARE TRANSACTIONS

The Company has authorized 100,000,000 shares of capital stock in the Fund with
a par value of $0.001.

December 15, 1995*
to November 30, 1996
--------------------
Shares Amount
------ ------
Shares sold.......................... 390,836 $3,623,996
Shares redeemed...................... (13,191) (124,468)
--------- -----------

Net increase........................ 377,645 $3,499,528
======= ===========

* Commencement of Operations.

NOTE 5 - SECURITIES TRANSACTIONS

For the period ended November 30, 1996 purchases of U.S. Treasury zero coupon
securities (other than short-term securities) were $2,230,556. There were no
sales of U.S. Treasury zero coupon securities in the period.

DIVIDEND DISTRIBUTION (UNAUDITED)

On December 10, 1996, the Board of Directors of the Fund declared a dividend
$86,089, or $0.22 per share, payable on December 13, 1996 to shareholders of
record on December 9, 1996.

-10-
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

REPORT OF
INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of AIG All Ages Funds, Inc.:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of AIG Children's World Fund - 2005 (one of the
funds comprising AIG All Ages Funds, Inc.) as of November 30, 1996, and the
related statement of operations, the statement of changes in net assets and the
financial highlights for the period from December 15, 1995 (commencement of
operations) to November 30, 1996. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of November 30,
1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of AIG
Children's World Fund - 2005 of AIG All Ages Funds, Inc. as of November 30,
1996, the results of its operations, the changes in its net assets and the
financial highlights for the period from December 15, 1995 (commencement of
operations) to November 30, 1996, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
January 2, 1997

-11-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

- -------------------------------------------------------------------------------
Portfolio of Investments
November 30, 1996
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Value
Description Shares (Note 2a)
---------- -------- ---------
<S> <C> <C>
COMMON STOCKS - 99.1%

Australia - 0.4%
News Corp Ltd........................................ 2,500 $ 13,317
---------

Canada - 4.3%
Canadian Pacific Ltd................................. 2,400 66,000
Philip Environmental, Inc............................ 5,000 65,000
---------
131,000
---------
France - 5.6%
Castorama Dubois Investissement...................... 180 31,708
Generale des Eaux.................................... 300 36,993
Schneider............................................ 450 21,412
Societe Generale..................................... 400 43,733
Total CIE Franc des Petroles B shares................ 500 39,990
---------
173,836
---------
Germany - 3.0%
Veba AG.............................................. 1,600 93,735
---------

Hong Kong - 7.7%
Cheung Kong Infrastructure........................... 48,000 116,710
DC Finance Holding................................... 90,000 56,163
DC Finance Warrants.................................. 9,000 1,047
Hutchinson Whampoa................................... 8,000 61,821
---------
235,741
---------
Japan - 27.1%
Advantest............................................ 500 21,353
Aoki International................................... 2,000 39,016
Bank of Tokyo - Mitsubishi Ltd....................... 2,000 40,949
Canon, Inc........................................... 1,000 21,090
Chiba Bank........................................... 5,000 37,917
Fanuc................................................ 500 16,301
Hitachi.............................................. 4,000 37,258
Hitachi Zosen Corp................................... 2,000 9,262
Kajima Corp.......................................... 3,000 23,990
Kao Corp............................................. 1,000 11,599
Katokichi............................................ 2,000 40,773
Kuraray Co........................................... 2,000 19,332
Marui Co............................................. 1,000 18,981
Matsushita Electrical Works.......................... 3,000 27,944
Mitsubishi Heavy Industries.......................... 1,000 8,172
Mitsubishi Motors.................................... 5,000 39,148
NEC Corp............................................. 2,000 24,253
Nippon Electric Glass................................ 2,000 30,229
Nippon Steel Corp.................................... 5,000 15,114
Nippon Telegraph and Telephone Corp.................. 3 21,406
Nomura Securities.................................... 1,000 16,872

</TABLE>

See Accompanying Notes to the Financial Statements.

-12-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Value
Description Shares (Note 2a)
---------- -------- ---------
<S> <C> <C>
Japan- Continued
Sakura Bank.......................................... 4,000 $ 36,555
Sankyo Co. Ltd....................................... 1,000 26,801
Showa Shell Sekiyu................................... 2,000 19,156
Sumitomo............................................. 4,000 44,288
Toagosei Co. Ltd..................................... 4,000 17,153
Tokio Marine & Fire.................................. 2,000 22,144
Tokyo Electric Power................................. 1,800 40,650
Tokyo Ohka Kogyo..................................... 700 16,485
Tomen Corporation.................................... 5,000 15,905
Tonami Transport..................................... 5,000 28,515
Toto................................................. 1,000 13,093
Toyo Trust and Banking............................... 2,000 17,276
Yodogawa Steel Works................................. 3,000 18,111
---------
837,091
---------
Malaysia - 1.0%
Hong Leong Credit.................................... 5,000 30,861
---------

Mexico - 3.8%
Cementos de Mexico................................... 35,000 116,378
---------

Netherlands - 4.8%
Getronics NV......................................... 2,000 53,578
Hunter Douglas NV.................................... 500 32,703
Koninklijke Ahold NV................................. 1,000 62,565
---------
148,846
---------
Philippines - 0.9%
Universal Rightfield Properties......................213,000 27,551
---------

Spain - 2.5%
Bankinter SA......................................... 300 39,382
Corporacion Mapfre Compania.......................... 700 37,027
---------
76,409
Sweden - 1.3%
Astra AB A - Free Shares............................ 800 38,376
---------

Switzerland - 2.0%
Roche Holdings AG.................................... 8 61,553
---------

United Kingdom - 8.5%
Cable & Wireless PLC................................. 5,000 39,991
Glynwed International PLC............................ 6,500 38,172
Laporte PLC.......................................... 3,000 34,480
National Westminster................................. 3,500 40,491
Stanley Leisure Org. PLC............................. 9,000 38,638
Tarmac PLC........................................... 25,000 37,177
Vaux Group PLC....................................... 8,000 33,875
---------
262,824
---------

</TABLE>
See Accompanying Notes to the Financial Statements.

-13-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

- -------------------------------------------------------------------------------
Portfolio of Investments - Continued
November 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2a)
---------- -------- ---------
<S> <C> <C>
United States - 26.2%
Allstate Corp......................................... 1,000 $ 60,250
Bellsouth Corp........................................ 900 36,338
Cooper Industries, Inc................................ 1,000 41,500
Emerson Electric Co................................... 600 58,875
Federal National Mortgage Association................. 900 37,125
Flowers Industries, Inc............................... 3,000 70,875
Kroger Co............................................. 1,065 49,123
Nabisco Holdings Corp................................. 1,200 46,500
Octel Communications Corp............................. 1,000 18,000
Pall Corp............................................. 1,800 47,025
Penney (J.C.), Inc.................................... 1,000 53,750
Public Storage, Inc................................... 2,000 50,750
Snap - On, Inc........................................ 1,500 54,375
Ultramar Diamond...................................... 1,600 50,800
Unifi, Inc............................................ 1,800 54,675
Union Pacific Corp.................................... 700 40,775
Union Pacific Resources............................... 1,300 38,837
---------
809,573
---------

Total Common Stocks (Cost $2,876,960) - 99.1% ............. 3,057,091
Other Assets in Excess of Liabilities - 0.9%............... 28,299
---------
NET ASSETS - 100% ......................................... $3,085,390
=========

</TABLE>

* For federal income tax purposes, cost is substantially the same as for
financial reporting purposes and net unrealized appreciation is as follows:

Unrealized appreciation: $265,596
Unrealized depreciation: (85,465)
--------

Net unrealized appreciation: $180,131
=======

See Accompanying Notes to the Financial Statements.

-14-
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
November 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment in securities at value (cost $2,876,960) ................................$ 3,057,091
Deferred organization costs ........................................................ 163,636
Cash................................................................................ 118,511
Receivable for investment securities sold........................................... 42,899
Dividends and interest receivable................................................... 3,863
-----------
Total Assets ................................................................. 3,386,000
-----------

LIABILITIES:
Payable for investment securities purchased ........................................ 158,927
Due to Manager...................................................................... 58,534
Accrued legal fees ................................................................. 24,999
Accrued administration expenses .................................................... 17,659
Miscellaneous accrued expenses ..................................................... 40,491
-----------
Total Liabilities............................................................ 300,610
-----------

NET ASSETS..............................................................................$ 3,085,390
===========

COMPOSITION OF NET ASSETS:
Capital paid in.....................................................................$ 2,905,056
Net unrealized appreciation on investments and foreign
currency transactions and forward foreign currency
contracts...................................................................... 180,334
-----------
Net Assets..............................................................................$ 3,085,390
===========
</TABLE>

See Accompanying Notes to the Financial Statements.

-15-

<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

- --------------------------------------------------------------------------------
Statement of Operations
For the period from December 15, 1995* to November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>

<S> <C>
INVESTMENT INCOME:
Dividends ................................................................... $ 13,228
Interest .................................................................... 3,404
---------
16,632
---------
EXPENSES:
Administrative expense....................................................... 95,423
Directors' fees and expenses................................................. 50,000
Organization expense......................................................... 40,909
Insurance expense............................................................ 29,195
Legal expense................................................................ 25,000
Investment advisory expense.................................................. 12,776
Audit expense................................................................ 12,500
Registration expense......................................................... 3,044
Miscellaneous accrued expenses............................................... 7,208
---------
Total expenses before reductions......................................... 276,055
---------
Less: Fee waivers and expense reimbursements by Manager...................... (195,435)
Less: Fee waivers by Administrator........................................... (57,591)
Less: Fee waivers by Transfer Agent.......................................... (1,763)
---------
Net expenses................................................................. 21,266
---------
Net Investment Loss ................................................ (4,634)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions........... 59,180
Net unrealized appreciation on investments and foreign currency transactions. 180,334
---------
Net realized and unrealized gain on investments and foreign
currency transactions............................................ 239,514
---------
Net Increase in Net Assets Resulting from Operations........ $234,880
=========
</TABLE>

- ----------------
*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-16-

<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the period from December 15, 1995* to November 30, 1996
- -------------------------------------------------------------------------------

<TABLE>

<S> <C>
OPERATIONS:
Net investment loss..................................................................... $ (4,634)
Net realized gain on investments and foreign currency transactions....................... 59,180
Net unrealized appreciation on investments and foreign currency transactions.... 180,334
---------
Net Increase in Net Assets Resulting from Operations................................ 234,880
---------

CAPITAL TRANSACTIONS:
Proceeds from capital invested........................................................... 2,749,510
---------

Total Increase in Net Assets ...................................................... 2,984,390

Net assets at the beginning of the period.................................................... 101,000
---------

NET ASSETS at the end of the period................................................. $ 3,085,390
=========
</TABLE>
- -------------
*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-17-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

--------------------------------------------------------------------------
Financial Highlights
For the period from December 15, 1995* to November 30, 1996
--------------------------------------------------------------------------

Net assets, end of period (000's) .................... $3,085

Ratio of expenses to average net assets............... 2.00% (a)(b)
Ratio of net investment loss to average net assets.... (0.44%)(a)(b)

Portfolio turnover rate............................... 26.31% (c)

Average commission rate paid..........................$0.0069 (d)

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

*Commencement of Operations.
(a) Net of fee waivers and expense reimbursements which had the effect of
reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 25.74 percentage
points (annualized).
(b) Annualized.
(c) This figure is calculated for the period during which there were
equity holdings.
(d) Represents total commissions paid on portfolio securities divided by the
total number of shares purchased and sold on which commissions are
charged.

See Accompanying Notes to the Financial Statements.

-18-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
November 30, 1996
______________________________________________________________________________

NOTE 1 - ORGANIZATION

First Global Equity Portfolio (the "Equity Portfolio"), a Delaware Business
Trust, is registered under the Investment Company Act of 1940, as amended, as an
open-end diversified management investment company. The Equity Portfolio was
organized on June 26, 1995 and commenced operations on December 15, 1995.

The investment objective of the Equity Portfolio is to achieve total return on
capital through both capital growth (realized and unrealized) and income. The
Equity Portfolio seeks to achieve this objective by making investments in
securities of issuers from around the world.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by the
Equity Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.

All the net investment income and unrealized and realized gains and losses from
securities and foreign currency transactions of the Equity Portfolio are
allocated pro-rata amongst the investors in the Equity Portfolio at the time of
such determination.

a) SECURITY VALUATIONS:

Securities traded on a foreign exchange or over-the-counter market are
valued at the last sales price on the primary exchange or market in which
they are traded. Securities for which there are no recent sales
transactions are valued based on quotations provided by primary market
makers in such securities. Any securities for which recent market
quotations are not readily available are valued at fair value determined in
accordance with procedures approved by the Board of Trustees of the Equity
Portfolio. Short-term securities with less than sixty days remaining to
maturity when acquired are valued at amortized cost, which approximates
value. Short-term securities with more than sixty days remaining to
maturity are valued at current market value until the sixtieth day prior to
maturity, and are then valued on an amortized cost basis.

-19-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO
_______________________________________________________________________________
Notes to Financial Statements
November 30, 1996
______________________________________________________________________________

NOTE 2 - CONTINUED

a) INVESTMENT INCOME AND SECURITY TRANSACTIONS:

Security transactions of the Equity Portfolio are accounted for on a trade
date basis. Realized gains and losses on securities transactions are
determined on the identified cost basis. Interest income, including
accretion of discount and amortization of premium, is accrued daily.
Dividend income is recognized on the ex-dividend date.

c) FOREIGN CURRENCY TRANSACTIONS:

The Equity Portfolio's investment valuations and other assets and
liabilities initially expressed in foreign currencies are converted each
day into U.S. dollars based upon currency exchange rates determined prior
to the close of the New York Stock Exchange. Purchases and sales of
foreign investments and income and expenses are converted into U.S. dollars
based upon currency exchange rates prevailing on the respective dates of
such transactions. The Equity Portfolio does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included in net realized and
unrealized gains or losses on securities.

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

The Equity Portfolio is not required to enter into forward contracts with
regard to settlement of its foreign currency-denominated securities and
will not do so unless deemed appropriate by AIG Capital Management Corp.
(the "Manager") or AIG Global Investment Corp. ("AIG Global"), the
subadvisor. Forward foreign currency exchange contracts do not eliminate
fluctuations in the underlying price of the securities. They simply
establish a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to fluctuations in the
value of the currency being traded, at the same time, they tend to limit
any potential gain which might result from an increase in the value of that
currency. With respect to forward foreign currency exchange contracts,
losses in excess of amounts recognized in the statement of assets and
liabilities may arise due to changes in value of the foreign currency or if
the counterparty does not perform under the contract.

-20-
<PAGE>

NOTE 2 - CONTINUED

d) FEDERAL INCOME TAXES:

The Equity Portfolio will be classified as a partnership for United States
federal income tax purposes. As a consequence, the Equity Portfolio itself
will not be subject to United States federal income tax, but each investor
in the Equity Portfolio will be required to take into account its
distributive share of items of partnership income, gain, loss, deduction
and credit substantially as though such items had been realized directly by
the investor and without regard to whether any distribution from the Equity
Portfolio has been or will be received.

e) ORGANIZATION EXPENSES:

Expenses of $204,545 incurred in connection with the organization of the
Equity Portfolio are being amortized on a straight line basis over a five
year period beginning December 15, 1995. The amount paid by the fund on
any redemption by AIG Asset Management Services, Inc. will be reduced by a
proportion of any unamortized organizational expenses determined by the
proportion of the amount of capital withdrawn and the amount of initial
capital of the Equity Portfolio owned by such holder, outstanding
immediately prior to such withdrawal.

NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

The Manager, an indirect wholly owned subsidiary of American International
Group, Inc. ("AIG"), serves as the Equity Portfolio's investment adviser and is
responsible for the management of the assets of the Equity Portfolio in
conformity with its stated objectives and policies. For its services, the
Manager is entitled to a fee calculated daily and paid monthly, at an annual
rate of 1.20% of the average daily net assets of the Equity Portfolio. The
Manager has voluntarily agreed to waive its management fee or reimburse the
Equity Portfolio's expenses to the extent that its total operating expenses
exceed 2.00% of average daily net assets for a limited period. For the period
ended November 30, 1996, the Manager waived its entire fee as adviser and
reimbursed the Equity Portfolio in the aggregate amount of $195,435.

-21-
<PAGE>

NOTE 3 - CONTINUED

The Manager has entered into a subadvisory agreement with AIG Global, a wholly
owned subsidiary of AIG which is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). Pursuant to its subadvisory agreement,
AIG Global provides investment advisory services to the Manager in respect of
the management of the assets of the Equity Portfolio and officers of AIG Global
provide representation on the Manager's Investment Committee. Under the
subadvisory agreement, the Manager is required to pay AIG Global a fee at an
annual rate of 0.15% of the average daily net assets of the Equity Portfolio.
These fees are paid from the management fee paid to the Manager.

The Manager serves as the Equity Portfolio's investment adviser and is
responsible for the management of the assets and review and supervision of the
investment program. In addition to the subadvisory agreements, the Manager has
entered into service agreements with certain affiliates, including AIG Global
Europe, whereby such affiliates provide investment advisory services under the
direction of the Manager. Certain officers of these affiliates provide
representation on the Manager's Investment Committee. Under the terms of the
service agreements, the Manager is required to pay the service providers a total
combined fee at an annual rate of 0.45% of the average daily net assets of the
Equity Portfolio. These fees are paid from the management fee paid to the
Manager. There have been no such fees paid through the period ended November
30, 1996.

PFPC International Ltd. serves as the Equity Portfolio's administrator and
accounting agent. For the period ended November 30, 1996, PFPC International
Ltd. voluntarily waived $57,591 of its fee. State Street Bank and Trust Company
serves as custodian of the Equity Portfolio's assets.

Certain trustees and officers of the Equity Portfolio are also directors and/or
officers of the Manager. These trustees and officers are paid no compensation
by the Equity Portfolio.

-22-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO
__________________________________________________________________________
Notes to Financial Statements
November 30, 1996
__________________________________________________________________________

NOTE 4 - SECURITIES TRANSACTIONS

For the period ended November 30, 1996, purchases of portfolio securities (other
than short-term securities) were $3,312,710. Sales of portfolio securities were
$499,298.

NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS AS OF NOVEMBER 30, 1996

<TABLE>
<CAPTION>
Unrealized
Market Value Contract Delivery Appreciation
Contracts to Buy: (U.S. Dollars) Price Date (Depreciation)
- ----------------- -------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
British Pound Sterling $ 41,483 0.59382 12/03/96 $ (49)
British Pound Sterling 37,951 0.59382 12/03/96 (44)
Spanish Peseta 35,517 129.50000 12/03/96 (140)
------- -----
Total Contracts to Buy: 114,951 (233)

Contracts to Sell:
- ------------------
British Pound Sterling 42,933 0.59382 12/03/96 51

Total Unrealized Depreciation $ (182)
======

</TABLE>

-23-
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

REPORT OF
INDEPENDENT ACCOUNTANTS

To the Holders of Beneficial Interest and Board of Trustees of First Global
Equity Portfolio:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of First Global Equity Portfolio as of November
30, 1996, and the related statement of operations, the statement of changes in
net assets and the financial highlights for the period from December 15, 1995
(commencement of operations) to November 30, 1996. These financial statements
and the financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosure in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1996, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
First Global Equity Portfolio as of November 30, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
period from December 15, 1995 (commencement of operations) to November 30, 1996,
in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
January 2, 1997

-24-
<PAGE>

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

Statement of Additional Information

January 10, 1997

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

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

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

This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of the Fund, dated January 10, 1997,
and as further amended or supplemented from time to time, a copy of which may be
obtained from the Fund upon request. This Statement of Additional Information
is incorporated by reference in its entirety into the Prospectus.
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S> <C>
General Information...................... 3

Investment Objectives and Policies....... 3

The Manager's Guarantee.................. 8

Directors, Trustees and Officers......... 9

Management and Expenses.................. 13

Rule 12b-1 Plan.......................... 15

Shareholder Servicing Agreement.......... 15

Portfolio Transactions and Brokerage..... 15

Purchase and Redemption of Fund Shares... 16

Distribution Services.................... 17

Valuation................................ 18

Taxes.................................... 19

Performance Information.................. 20

Other Information........................ 21

Financial Information.................... 22

Information with Respect to AIG.......... 23
</TABLE>

-2-
<PAGE>

GENERAL INFORMATION

The Fund is a diversified series of AIG All Ages Funds, Inc. (the
"Company"), an open-end management investment company.

INVESTMENT OBJECTIVES AND POLICIES

OVERVIEW

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

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

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

-3-
<PAGE>

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

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

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

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

Borrowing. The Fund or the Equity Portfolio may from time to time borrow
money for extraordinary or emergency purposes in an amount up to 5% of its total
assets from banks

-4-
<PAGE>

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

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

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

ADDITIONAL INVESTMENT RESTRICTIONS FOR THE FUND AND THE EQUITY PORTFOLIO

The Fund may not:

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

(2) Make short sales of securities.

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

-5-
<PAGE>

(4) Write put or call options on securities.

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

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

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

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

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

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

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

The Equity Portfolio may not:

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

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

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

(4) Write put or call options on securities.

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

-6-
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

-7-
<PAGE>

outstanding securities of such issuer, together own beneficially more than 5% of
such outstanding securities. This policy is not fundamental.

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

The Prospectus states that the Equity Portfolio may invest up to 15% of
its assets in illiquid securities and that the Trustees of the Equity Portfolio
(the "Trustees") may determine that certain securities sold under Rule 144A of
the 1933 Act are not subject to this 15% limitation.

THE MANAGER'S GUARANTEE

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

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

-8-
<PAGE>

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

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

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

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

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

DIRECTORS, TRUSTEES AND OFFICERS

-9-
<PAGE>

POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Roger T. Wickers (61) Chairman Chairman Retired; formerly Senior Vice
339 Forest Road of the of the President and General Counsel,
Wolfeboro, New Board Board and Keystone.
Hampshire 03894 and Trustee
Director

Paul H. Friedman (42) Director Trustee Partner, Arter & Hadden, law
1801 K Street N.W., firm.
Suite 400k
Washington, D.C 20006-
1301

Linda-Ann S. Goodwin* Director Trustee Executive Vice President, AIG
(48) Capital Management Corp.;
70 Pine Street Senior Vice President, AIG Asset
New York, New York Management Services, Inc.;
10270 formerly Marketing Executive,
Kemper Financial; Marketing
Executive, Coca Cola, USA.

Charles Vinick (49) Director Trustee Independent Consultant;
214 South Venice Blvd. Director, Jean-Michel Cousteau
Venice, California 90291 Productions; Director, Passage
International Incorporated;
Advisory Board Member, SMR
Energy, Inc.; formerly Vice
President, The Cousteau
Society.

Gary M. Gardner (45) Secretary Secretary Chief Counsel, PNC Bank, N.A.;
400 Bellevue Parkway formerly Attorney, Federated
Wilmington, Delaware Investors, Inc., Sun America
19809 Asset Management Corp. and
the Boston Company.

</TABLE>

- ----------
* "Interested" person as defined in the 1940 Act by reason of affiliation
with the Manager.

-10-
<PAGE>

POSITION
POSITION WITH
WITH EQUITY PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE COMPANY PORTFOLIO DURING PAST 5 YEARS
- -------------------- --------- --------- ---------------------------
<S> <C> <C> <C>
David T. Goss (48) Vice Vice President, AIG Asset
70 Pine Street President President Management Services, Inc.;
New York, New York Director and Vice Chairman, AIG
10270 Capital Management Corp.;
Director and Chairman, AIG
Asset Management Ltd. and AIG
Asset Management Services,
Ltd.; formerly Director, Equitilink
Australia; Director, Equitilink, Ltd;
Chairman, Equitilink Pacific, Ltd;
President, Equitilink USA, Inc.;
and Director, Valufi (Pty), Ltd.

Daniel K. Kingsbury (38) President President President, AIG Asset
70 Pine Street Management, Inc.; President,
New York, New York AIG Capital Management Corp.;
10270 Senior Vice President, AIG Asset
Management Services, Inc.; Vice
President, AIG Equity Sales
Corp.; Executive Director, AIG
Asset Management Ltd. and AIG
Asset Management Services,
Ltd.; formerly Director of Strategy
and Business Development, AIG
Investment Corporation; formerly
Director of Strategy, AIG Asset
Management International Ltd.

J. Fergus McKeon (35) Treasurer Treasurer General Manager, PFPC
80 Harcourt Street International; formerly Chief
Dublin, Ireland Accountant, SBC-ISL; Director,
Emerging Markets Fixed Income
Fund.

David Hartman (32) Assistant Assistant Assistant General Counsel, AIG;
70 Pine Street Secretary Secretary formerly Associate, Simpson
New York, New York Thacher & Bartlett.
10270

</TABLE>

-11-

<PAGE>

Walter Josiah (36) Assistant --- Manager, Investor Services Unit
505 Carr Road Secretary of AIG Equity Sales Corp.;
Wilmington, Delaware formerly Assistant Vice
19809 President, Mutual Fund
Operations, Kidder, Peabody &
Co.

Jay F. Nusblatt (35) Assistant Assistant Vice President and Director of
103 Bellevue Parkway Treasurer Treasurer Fund Accounting and
Wilmington, Delaware Administration, PFPC Inc.;
19809 formerly Assistant Vice President
of Fund/Plan Services, Inc. and
PFPC Inc.

Eugene Cichanowsky (50) Assistant Assistant Vice President Financial and
70 Pine Street Treasurer Treasurer Administration, AIG Asset
New York, New York Management Services, Inc.;
10270 formerly, Vice President,
Delaware Management Holdings
Inc.; Vice President and
Controller, Delaware
Management Holdings, Inc.

</TABLE>

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

-12-
<PAGE>

<TABLE>
<CAPTION>
COMPENSATION TABLE
(NOVEMBER 30, 1996)

PENSION TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM
AGGREGATE ACCRUED ESTIMATED COMPANY
COMPENSATION AS PART ANNUAL AND FUND
FROM OF FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION COMPANY EXPENSES RETIREMENT TO DIRECTORS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Roger T. Wickers $14,166 None N/A $28,333
Director
- ------------------------------------------------------------------------------
Paul H. Friedman $14,166 None N/A $28,333
Director
- ------------------------------------------------------------------------------
Linda-Ann S. Goodwin 0 None N/A 0
Director
- ------------------------------------------------------------------------------
Charles Vinick $14,166 None N/A $28,333
Director
- ------------------------------------------------------------------------------
</TABLE>

As of December 31, 1996, the directors and officers of the Company, as a
group, owned less than 1% of the shares of common stock of the Fund.

MANAGEMENT AND EXPENSES

As indicated in the Prospectus, under the Fund's agreement with the
Manager dated February 15, 1996 and the Equity Portfolio's Agreement with the
Manager dated September 15, 1995, subject to the control of the Board of
Directors of the Fund and the Trustees of the Equity Portfolio, the Manager
administers the business and other affairs of the Fund and the Equity Portfolio.
The Manager provides both the Fund and the Equity Portfolio with such office
space, administrative and other services and executive and other personnel as
are necessary for the operations of the Fund and the Equity Portfolio. The
Manager pays all of the compensation of those Directors and Trustees who are
employees, consultants and/or directors of the Manager and of the officers and
employees of the Fund and the Equity Portfolio. The Fund pays the Manager a
management fee for its services, calculated daily and payable monthly equal to
0.20% per annum of the average daily net assets of the Fund (other than its
interest in the Equity Portfolio). Similarly, the Equity Portfolio pays the
Manager a management fee, calculated daily and payable monthly equal to 1.20%
per annum of the average daily net assets of the Equity Portfolio. As described
in the Prospectus, the Manager has agreed to waive or reimburse certain expenses
subject to reimbursement under certain circumstances by the Fund in later years.
Assuming that 65% of the Fund's assets are invested in zero coupon Treasury
Securities and 35% in the Equity Portfolio, the combined management fee paid by
the Fund (which includes fees paid by the Equity Portfolio for assets of the
Fund held by the Equity Portfolio) would be equal to 0.55% per annum of the
average

-13-
<PAGE>

total assets of the Fund. Assuming an allocation of 50% to 80% of the Fund's
assets to zero coupon Treasury Securities the combined management fee paid by
the Fund will range between 0.40% and 0.70% per annum of the average total
assets of the Fund. Fees paid by the Manager to the Subadvisor (which do not
affect the fees paid by the Fund) are described in the Prospectus. For the
fiscal year ended November 30, 1996, the Manager waived its entire advisory fee,
which totaled $2,767 and $12,776 for the Fund and the Equity Portfolio,
respectively. For the fiscal year ended November 30, 1996, the Manager paid no
fees to the Subadvisor.

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

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

-14-
<PAGE>

RULE 12B-1 PLAN

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

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

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

For the fiscal year ended November 30, 1996, the Distributor accrued fees
from the Fund pursuant to the Plan totaling $9,228. Substantially all of this
amount was reimbursement for printing expenses accrued by the Distributor.

SHAREHOLDER SERVICING AGREEMENT

As indicated in the Prospectus, the Fund has entered into a Shareholder
Servicing Agreement with the Distributor pursuant to which the Fund pays the
Distributor a fee, payable monthly at the annual rate of up to 0.25% of net
assets of accounts in the Fund that it maintains and services, in exchange for
shareholder services. The Shareholder Servicing Agreement was originally
approved on June 29, 1995 by the Board of Directors of the Fund, including a
majority of the directors who are not interested persons (as defined in the 1940
Act). The addition of the Fund to the Shareholder Servicing Agreement was
approved on December 18, 1995 by the Board of Directors of the Fund. For the
fiscal year ended November 30, 1996, the Fund paid $4,614 as fees to the
Distributor as shareholder servicing agent of the Fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

-15-
<PAGE>

Manager and Subadvisor to be beneficial to the Fund or the Equity Portfolio. In
addition, the Manager and the Subadvisor are authorized to place orders with
brokers who provide supplemental investment and market research and statistical
and economic analysis through the use of such brokers selected solely on the
basis of seeking the most favorable price and execution, although such research
and analysis may be useful to the Manager and the Subadvisor in connection with
their services to clients other than the Fund or the Equity Portfolio.

The Fund paid no brokerage commissions during the period ended November
30, 1996. During the same period, the Equity Portfolio paid brokerage
commissions in the aggregate amount of $13,039.

PURCHASE AND REDEMPTION OF FUND SHARES

PURCHASE OF SHARES

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

-16-
<PAGE>

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

FURTHER TYPES OF REDUCTIONS. Shares of the Fund may be issued without a
sales load in connection with the acquisition of cash and securities owned by
other investment companies and other personal holding companies, to financial
institution trust departments, to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Fund shares,
or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Fund, to separate
accounts established and maintained by an insurance company which are exempt
from registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with the Distributor and shareholders of
mutual funds with investment objectives and policies similar to the Fund who
purchase shares with redemption proceeds of such funds as described in the
Prospectus.

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

DISTRIBUTION SERVICES

-17-
<PAGE>

Aggregate underwriting commissions in connection with the offering of the
Fund's shares for the period ended November 30, 1996 were $243,052. After
allowances to dealers, the Distributor retained of this amount $27,936.

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

VALUATION

The net asset value per share is determined by dividing the market value
of the Fund's securities (including its interest in the Equity Portfolio) as of
the close of trading plus any cash or other assets (including dividends and
accrued interest receivable) less all liabilities (including accrued expenses),
by the number of shares outstanding. During the Offering Period, zero coupon
Treasury Securities will be valued at the average of the last reported bid and
ask prices; thereafter, in order to ensure that an adequate amount of zero
coupon Treasury Securities is maintained to achieve the Repayment Objective when
shares of the Fund are redeemed, zero coupon Treasury Securities will be valued
at the last reported bid. Equity Portfolio securities are valued at the last
sales price on the securities exchange or securities market on which such
securities are primarily traded. Securities for which there are not recent
sales transactions are valued based on quotations provided by primary market
makers in such securities. Any securities for which recent market quotations
are not readily available are valued at fair value determined in accordance with
procedures approved by the Board of Directors or the Trustees. Short-term
obligations with less than sixty days remaining to maturity are generally valued
at amortized cost. Short-term obligations with more than sixty days remaining to
maturity will be valued at current market value until the sixtieth day prior to
maturity, and will then be valued on an amortized cost basis based on the value
on such date unless the Board of Directors or the Trustees, as relevant,
determines that this amortized cost value does not represent fair market value.
Expenses and fees, including the investment management fee are accrued daily and
taken into account for the purpose of determining the net asset value of Fund
shares.

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

-18-
<PAGE>

that is a regular participant in the foreign exchange market or on the basis of
a pricing service that takes into account the quotes provided by a number of
such major banks.

TAXES

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

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

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

Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates that occur between the time the Fund or the
Equity Portfolio accrues interest or

-19-
<PAGE>

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

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

PERFORMANCE INFORMATION

P(1 + T)/n/ = ERV
where:
P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period.

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

For the period from April 17, 1996 (commencement of operations) through
November 30, 1996, the total return of the Fund was 2.50% (assuming deduction of
the maximum front-end sales charge).

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

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

-20-
<PAGE>

Advertisements of total return will always show a calculation that includes
the effect of the maximum sales charge but may also show total return without
giving effect to that charge. Because these additional quotations will not
reflect the maximum sales charge payable, these performance quotations will be
higher than the performance quotations that reflect the maximum sales charge.
For the period from April 17, 1996 (commencement of operations) through November
30, 1996, the total return of the Fund without deduction of any front-end sales
charges was 7.65%.

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

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

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

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

OTHER INFORMATION

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

-21-

<PAGE>

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

FINANCIAL INFORMATION

The following pages include the Fund's and the Equity Portfolio's audited
financial statements for the fiscal year ended November 30, 1996 and the report
of Coopers & Lybrand L.L.P. thereon.

-22-
<PAGE>

INFORMATION WITH RESPECT TO AIG

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

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

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

From AIG's Report on Form 10-Q for the fiscal quarter ended September 30, 1996:

Managements Discussion and Analysis of Financial Condition and Results of
Operations

Financial Statements (Unaudited):

Consolidated Balance Sheet at September 30, 1996
Consolidated Statement of Income for the three months ended
September 30, 1996 and 1995
Consolidated Statement of Cash Flows for the three months ended
September 30, 1996 and 1995
Notes to Financial Statements

-23-
<PAGE>

APPENDIX A
CORPORATE BOND AND COMMERCIAL PAPER RATINGS

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

A-1
<PAGE>

or changing circumstances are more likely to lead to a weakened capacity to pay
interest and principal.

A-2
<PAGE>

AIG RETIREE FUND - 2003

Financial Statements

April 17, 1996 (Commencement of Operations) to November 30, 1996

Page

AIG Retiree Fund - 2003:
Portfolio of Investments........................... 1
Statement of Assets and Liabilities................ 2
Statement of Operations............................ 3
Statement of Changes in Net Assets................. 4
Financial Highlights............................... 5
Notes to the Financial Statements.................. 6-10
Report of Independent Accountants.................. 11

AIG RETIREE FUND - 2003

Principal Maturity Value
Amount Description Date Yield * (Note 2a)
--------- -------- --------- ------- -----------
<S> <C> <C> <C> <C>
US TREASURY BONDS - 68.7%
$ 625,000 US Zero Coupon Bond..............15-Aug-03 6.60% $ 421,894
340,000 US Zero Coupon Bond..............15-Aug-03 6.86% 229,510
500,000 US Zero Coupon Bond..............15-Nov-03 6.74% 332,155
500,000 US Zero Coupon Bond..............15-Nov-03 6.73% 332,155
400,000 US Zero Coupon Bond..............15-Nov-03 6.82% 265,724
300,000 US Zero Coupon Bond..............15-Nov-03 7.00% 199,293
300,000 US Zero Coupon Bond..............15-Nov-03 6.86% 199,293
300,000 US Zero Coupon Bond..............15-Nov-03 6.84% 199,293
300,000 US Zero Coupon Bond..............15-Nov-03 6.52% 199,293
300,000 US Zero Coupon Bond..............15-Nov-03 6.50% 199,293
200,000 US Zero Coupon Bond..............15-Nov-03 7.01% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.79% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.66% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.56% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.49% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.25% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.16% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.10% 132,862
200,000 US Zero Coupon Bond..............15-Nov-03 6.04% 132,862
100,000 US Zero Coupon Bond..............15-Nov-03 6.48% 66,431
100,000 US Zero Coupon Bond..............15-Nov-03 6.45% 66,431
100,000 US Zero Coupon Bond..............15-Nov-03 6.42% 66,431
100,000 US Zero Coupon Bond..............15-Nov-03 6.41% 66,431
100,000 US Zero Coupon Bond..............15-Nov-03 6.05% 66,431
100,000 US Zero Coupon Bond..............15-Nov-03 5.99% 66,431

Total Investments Cost 3,994,499***) - 68.7%.............. 4,172,247

Other Assets in Excess of Liabilities** - 31.3%........... 1,903,877
---------
NET ASSETS - 100%.........................................$ 6,076,124
==========
</TABLE>

* Effective yield at time of purchase.
** Includes assets in First Global Equity Portfolio.
*** For federal income tax purposes, cost is substantially the same as for
financial reporting purposes with unrealized appreciation of $177,748.

See Accompanying Notes to the Financial Statements.

1
<PAGE>

AIG RETIREE FUND - 2003
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment in securities at value (Cost $3,994,499)........................ $ 4,172,247
Investment in Equity Portfolio at value.................................... 1,704,497
Receivable for fund shares sold............................................ 149,829
Cash....................................................................... 86,539
Deferred organization costs................................................ 25,600
Interest Receivable........................................................ 4,176
Prepaid expenses........................................................... 349
--------------
Total Assets......................................................... 6,143,237
--------------
LIABILITIES:
Accrued transfer agent expense............................................. 17,758
Accrued legal expense...................................................... 15,597
Due to Manager............................................................. 5,518
Accrued administration expense............................................. 3,030
Miscellaneous accrued expenses............................................. 25,210
--------------
Total Liabilities.................................................... $ 67,113
--------------
NET ASSETS..................................................................... $ 6,076,124
==============
COMPOSITION OF NET ASSETS:
Capital paid in............................................................ $ 5,724,909
Undistributed net investment income........................................ 51,969
Undistributed net realized gain on investments
and foreign currency transactions..................................... 28,924
Net unrealized appreciation of investments................................. 270,322
--------------
Net Assets..................................................................... $ 6,076,124
==============

Shares Outstanding............................................................. 616,787
==============

Net asset value and redemption price per share ($6,076,124 / 616,787 shares)... $ 9.85
==============
Maximum offering price per share (Net asset value plus sales
charge - 4.75% of maximum offering price).................................. $ 10.34
==============
</TABLE>
See Accompanying Notes to the Financial Statements.

-2-
<PAGE>

AIG RETIREE FUND - 2003
- --------------------------------------------------------------------------------
Statement of Operations
For the period from April 17, 1996* to November 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest.................................................................... $ 83,323
Net Investment Loss Allocated from the Equity Portfolio..................... (2,571)
--------
80,752
EXPENSES: --------
Transfer agent expense...................................... 36,195
Registration expense........................................ 32,171
Administrative expense...................................... 23,918
Directors' fees and expenses................................ 16,193
Legal expense............................................... 15,596
Distribution expense........................................ 9,228
Insurance expense........................................... 8,733
Shareholder communication expense........................... 7,847
Organization expense........................................ 6,400
Audit expense............................................... 4,978
Shareholder services expense................................ 4,614
Investment advisory expense................................. 2,767
Custodian expense........................................... 320
Miscellaneous expenses...................................... 2,499
---------
Total expenses before reductions...................... 171,459
---------
Less: Fee waivers and expense reimbursements by Manager..... (110,236)
Less: Fee waivers by Administrator.......................... (17,926)
Less: Fee waivers by Transfer Agent......................... (16,446)
---------
Net expenses.................................................................... 26,851
---------

Net Investment Income.................................................... 53,901
---------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio...................................................... 26,992
Net unrealized appreciation on investments and foreign currency transactions
from the Equity Portfolio...................................................... 92,574
Net unrealized appreciation of investments from the Fund........................ 177,748
---------
Net realized and unrealized gain on investments and
foreign currency transactions..........................................
Net Increase in Net Assets Resulting from Operations............ 297,314
---------
$ 351,215
=========
</TABLE>
- ----------

*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-3-
<PAGE>

AIG RETIREE FUND - 2003

- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the period from April 17, 1996* to November 30, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATIONS:
Net investment income....................................................$ 53,901
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio........................................... 26,992
Net unrealized appreciation on investments and foreign currency
transactions from the Equity Portfolio.............................. 92,574
Net unrealized appreciation on investments from the Fund................. 177,748
---------
Net Increase in Net Assets Resulting from Operations............... 351,215
---------

FUND SHARE TRANSACTIONS:
Net proceeds from shares subscribed...................................... 6,041,162
Cost of shares redeemed.................................................. (316,253)
---------
Net Increase in Net Assets Resulting from Fund Share Transactions.. 5,724,909
---------

Total Increase in Net Assets................................ 6,076,124

Net assets at the beginning of the period.................................... --
---------

NET ASSETS at the end of the period (including undistributed
net investment income of $51,969).......................................$ 6,076,124
=========

</TABLE>
*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-4-
<PAGE>

AIG RETIREE FUND - 2003

- --------------------------------------------------------------------------------
Financial Highlights
For the period from April 17, 1996* to November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period.................................. $ 9.15
-------

Income from investment operations:
Net investment income............................................. 0.09
Net realized and unrealized loss on investments .................. 0.61
-------
Total income from investment operations.................... 0.70
-------

Net asset value, end of period........................................ $ 9.85
=======

Total Return.......................................................... (7.65%) (a)

Ratios / Supplemental Data:
Net assets, end of period (000's)..................................... $ 6,076

Ratio of expenses to average net assets............................... 1.95% (b)(c)
Ratio of net investment income to average net assets.................. 2.96% (b)(c)

Portfolio turnover rate .............................................. 0.00%

</TABLE>
- -------------
*Commencement of Operations.
(a) Calculated without deduction of sales charges.
(b) Net of fee waivers and expense reimbursements which had the effect of
reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 11.00 percentage
points (annualized).
(c) Annualized.

See Accompanying Notes to the Financial Statement.

-5-

<PAGE>

AIG RETIREE FUND - 2003
______________________________________________________________________________
Notes to Financial Statements
November 30, 1996
______________________________________________________________________________

NOTE 1 - ORGANIZATION

Shares of the Fund will be offered to investors only through September 30, 1997
(as such period may be extended or shortened by the Board of Directors of the
Company, the "Offering Period").

The Fund has two investment objectives. The first objective is to provide a
guaranteed return, on or after November 15, 2003 (the "Maturity Date"), of the
full amount originally invested (including any sales charges paid) by each
shareholder who has reinvested all dividends and distributions, which the Fund
pursues through investment of a portion of its assets in U.S. Treasury zero
coupon securities, combined with further assurance from a guarantee by AIG
Capital Management Corp., the Fund's investment adviser (the "Manager"). The
Manager's obligations under its guarantee are 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 in the First Global Equity Portfolio (the "Equity Portfolio"), an
open-end management investment company that invests in a globally diversified
portfolio of equity securities. The Fund and the Equity Portfolio constitute a
two-tier master-feeder structure. The value of the Fund's investment in the
Equity Portfolio included in the accompanying Statement of Assets and
Liabilities reflects the Fund's proportionate beneficial interest of 55.2% in
the net assets of the Equity Portfolio at November 30, 1996. The financial
statements of the Equity Portfolio, including its portfolio of investments, are
included within this report and should be read in conjunction with the Fund's
financial statements.

-6-
<PAGE>

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

a) SECURITY VALUATIONS:

b) INVESTMENT INCOME AND SECURITY TRANSACTIONS:

c) DIVIDENDS AND DISTRIBUTIONS:

The Fund declares and pays dividends from net investment income and distributes
net realized capital gains, if any, at least annually. Dividends and
distributions are recorded on the ex-dividend date. The amounts of dividends
from net investment income and distributions from net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles, therefore, the Fund may
periodically make re-classifications among certain of its capital accounts as a
result of timing and characterization of certain income and capital gains
distributions. On November 30, 1996, the Fund decreased undistributed net
investment income by $1,932 and increased undistributed net realized capital
gain on investments and foreign currency transactions by $1,932. These
differences are due to the reclassification of realized losses on foreign
currency contracts to ordinary income.

-7-
<PAGE>

AIG RETIREE FUND - 2003
____________________________________________________________________
Notes to Financial Statements
November 30, 1996
____________________________________________________________________

NOTE 2 - CONTINUED

On November 30, 1996, the Fund decreased undistributed net investment income by
$1,932 and increased undistributed net realized capital gain on investments and
foreign currency transactions by $1,932. These differences are due to the
reclassification of realized losses on foreign currency contracts to ordinary
income.

d) FEDERAL INCOME TAXES:

e) ORGANIZATION EXPENSES:

Expenses of $32,000 incurred in connection with the organization of the Fund are
being amortized on a straight line basis over a five year period beginning April
17, 1996.

NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

The Manager serves as the Fund's and the Equity Portfolio's investment adviser
and is responsible for the management of the assets of the Fund and the Equity
Portfolio in conformity with the stated objectives and policies of the Fund and
the Equity Portfolio. For its services, the Manager is entitled to a fee
calculated daily and paid monthly, at an annual rate of 0.20% of the average
daily net assets of the Fund (other than its interest in the Equity Portfolio)
and 1.20% of the average daily net assets of the Equity Portfolio. The Manager
has voluntarily agreed to waive its management fee or reimburse the Fund's
expenses to the extent that total Fund operating expenses exceed 1.95% of
average daily net assets during the Fund's limited offering period, subject to
reimbursement by the Fund in subsequent years under certain circumstances. For
the period ended November 30, 1996, the Manager waived its entire fee as adviser
and reimbursed the Fund in the aggregate amount of $159,580 which is inclusive
of waiver amounts at the Equity Portfolio and Fund level.

-8-
<PAGE>

NOTE 3 - CONTINUED

Portfolio and officers of AIG Global provide representation on the Manager's
Investment Committee. Under the subadvisory agreements with AIG Global, the
Manager pays AIG Global a fee which is calculated daily and paid monthly at an
annual rate of 0.0825% of the average daily net assets of the Fund (other than
the Fund's interest in the Equity Portfolio) and 0.15% of the average daily net
assets of the Equity Portfolio. These fees are paid from the management fee
paid to the Manager.

PFPC International Ltd. serves as the Fund's administrator and accounting agent.
For the period ended November 30, 1996, PFPC International Ltd. voluntarily
waived an aggregate $24,986 of its fee which is inclusive of waiver amounts at
the Equity Portfolio and Fund level. PFPC Inc. serves as the Fund's transfer
agent and dividend disbursing agent. For the period ended November 30, 1996,
PFPC Inc. voluntarily waived an aggregate $16,664 of its fee which is inclusive
of waiver amounts at the Equity Portfolio and Fund level. PNC Bank, N.A. serves
as custodian of the Fund's assets.

-9-
<PAGE>

NOTE 3 - CONTINUED

Certain directors and officers of the Company are also directors and/or officers
of the Manager or Distributor. These directors and officers are paid no
compensation by the Fund.

NOTE 4 - CAPITAL SHARE TRANSACTIONS

The Company has authorized 100,000,000 shares of capital stock in the Fund with
a par value of $0.001.

April 17, 1996*
to November 30, 1996
--------------------
Shares Amount
------ ------
Shares sold........................... 651,040 $6,041,162
Shares redeemed....................... (34,253) (316,253)

Net increase.......................... 616,787 $5,724,909

* Commencement of Operations.

NOTE 5 - SECURITIES TRANSACTIONS

For the period ended November 30, 1996 purchases of U.S. Treasury zero coupon
securities (other than short-term securities) were $3,918,290. There were no
sales of U.S. Treasury zero coupon securities in the period.

DIVIDEND DISTRIBUTION (UNAUDITED)

On December 10, 1996, the Board of Directors of the Fund declared a dividend of
$94,214, or $0.15 per share, payable on December 13, 1996 to shareholders of
record on December 9, 1996.

-10-
<PAGE>

AIG RETIREE FUND - 2003

REPORT OF
INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of AIG All Ages Funds, Inc.:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of AIG Retiree Fund - 2003 (one of the funds
comprising AIG All Ages Funds, Inc.) as of November 30, 1996, and the related
statement of operations, the statement of changes in net assets and the
financial highlights for the period from April 17, 1996 (commencement of
operations) to November 30, 1996. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audit.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of AIG
Retiree Fund - 2003 of AIG All Ages Funds, Inc. as of November 30, 1996, the
results of its operations, the changes in its net assets and the financial
highlights for the period from April 17, 1996 (commencement of operations) to
November 30, 1996, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
January 2, 1997

-11-
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

- --------------------------------------------------------------------------------
Portfolio of Investments
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Value
Description Shares (Note 2a)
----------- -------- --------

COMMON STOCKS - 99.1%
<S> <C> <C>
Australia - 0.4%
News Corp Ltd.............................................. 2,500 $ 13,317
--------

Canada - 4.3%
Canadian Pacific Ltd....................................... 2,400 66,000
Philip Environmental, Inc.................................. 5,000 65,000
--------
131,000
--------
France - 5.6%
Castorama Dubois Investissement............................ 180 31,708
Generale des Eaux.......................................... 300 36,993
Schneider.................................................. 450 21,412
Societe Generale........................................... 400 43,733
Total CIE Franc des Petroles B shares...................... 500 39,990
--------
173,836
--------
Germany - 3.0%
Veba AG.................................................... 1,600 93,735
--------

Hong Kong - 7.7%
Cheung Kong Infrastructure................................. 48,000 116,710
DC Finance Holding......................................... 90,000 56,163
DC Finance Warrants........................................ 9,000 1,047
Hutchinson Whampoa......................................... 8,000 61,821
--------
235,741
--------
Japan - 27.1%
Advantest.................................................. 500 21,353
Aoki International......................................... 2,000 39,016
Bank of Tokyo - Mitsubishi Ltd............................. 2,000 40,949
Canon, Inc................................................. 1,000 21,090
Chiba Bank................................................. 5,000 37,917
Fanuc...................................................... 500 16,301
Hitachi.................................................... 4,000 37,258
Hitachi Zosen Corp......................................... 2,000 9,262
Kajima Corp................................................ 3,000 23,990
Kao Corp................................................... 1,000 11,599
Katokichi.................................................. 2,000 40,773
Kuraray Co................................................. 2,000 19,332
Marui Co................................................... 1,000 18,981
Matsushita Electrical Works................................ 3,000 27,944
Mitsubishi Heavy Industries................................ 1,000 8,172
Mitsubishi Motors.......................................... 5,000 39,148
NEC Corp................................................... 2,000 24,253
Nippon Electric Glass...................................... 2,000 30,229
Nippon Steel Corp.......................................... 5,000 15,114
Nippon Telegraph and Telephone Corp........................ 3 21,406
Nomura Securities.......................................... 1,000 16,872

</TABLE>
See Accompanying Notes to the Financial Statements.

12
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

- --------------------------------------------------------------------------------
Portfolio of Investments - Continued
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2a)
----------- -------- --------
<S> <C> <C>
Japan - Continued
Sakura Bank............................................................... 4,000 $ 36,555
Sankyo Co. Ltd............................................................ 1,000 26,801
Showa Shell Sekiyu........................................................ 2,000 19,156
Sumitomo.................................................................. 4,000 44,288
Toagosei Co. Ltd.......................................................... 4,000 17,153
Tokio Marine & Fire....................................................... 2,000 22,144
Tokyo Electric Power...................................................... 1,800 40,650
Tokyo Ohka Kogyo.......................................................... 700 16,485
Tomen Corporation......................................................... 5,000 15,905
Tonami Transport.......................................................... 5,000 28,515
Toto...................................................................... 1,000 13,093
Toyo Trust and Banking.................................................... 2,000 17,276
Yodogawa Steel Works...................................................... 3,000 18,111
--------
837,091
--------
Malaysia - 1.0%
Hong Leong Credit......................................................... 5,000 30,861
--------

Mexico - 3.8%
Cementos de Mexico........................................................ 35,000 116,378
--------

Netherlands - 4.8%
Getronics NV.............................................................. 2,000 53,578
Hunter Douglas NV......................................................... 500 32,703
Koninklijke Ahold NV...................................................... 1,000 62,565
--------
148,846
--------
Philippines - 0.9%
Universal Rightfield Properties........................................... 213,000 27,551
--------

Spain - 2.5%
Bankinter SA.............................................................. 300 39,382
Corporacion Mapfre Compania............................................... 700 37,027
--------
76,409
--------
Sweden - 1.3%
Astra AB A - Free Shares................................................. 800 38,376
--------

Switzerland - 2.0%
Roche Holdings AG......................................................... 8 61,553
--------

United Kingdom - 8.5%
Cable & Wireless PLC...................................................... 5,000 39,991
Glynwed International PLC................................................. 6,500 38,172
Laporte PLC............................................................... 3,000 34,480
National Westminster...................................................... 3,500 40,491
Stanley Leisure Org. PLC.................................................. 9,000 38,638
Tarmac PLC................................................................ 25,000 37,177
Vaux Group PLC............................................................ 8,000 33,875
--------
262,824
--------
</TABLE>

See Accompanying Notes to the Financial Statements.

13
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

- --------------------------------------------------------------------------------
Portfolio of Investments - Continued
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2a)
----------- -------- ----------
<S> <C> <C>
United States - 26.2%
Allstate Corp................................................................ 1,000 $ 60,250
Bellsouth Corp............................................................... 900 36,338
Cooper Industries, Inc....................................................... 1,000 41,500
Emerson Electric Co.......................................................... 600 58,875
Federal National Mortgage Association........................................ 900 37,125
Flowers Industries, Inc...................................................... 3,000 70,875
Kroger Co.................................................................... 1,065 49,123
Nabisco Holdings Corp........................................................ 1,200 46,500
Octel Communications Corp.................................................... 1,000 18,000
Pall Corp.................................................................... 1,800 47,025
Penney (J.C.), Inc........................................................... 1,000 53,750
Public Storage, Inc.......................................................... 2,000 50,750
Snap - On, Inc............................................................... 1,500 54,375
Ultramar Diamond............................................................. 1,600 50,800
Unifi, Inc................................................................... 1,800 54,675
Union Pacific Corp........................................................... 700 40,775
Union Pacific Resources...................................................... 1,300 38,837
----------
809,573
----------

Total Common Stocks (Cost $2,876,960) - 99.1% .................................... 3,057,091
Other Assets in Excess of Liabilities - 0.9%...................................... 28,299
----------
NET ASSETS - 100% ................................................................ $ 3,085,390
==========
</TABLE>

* For federal income tax purposes, cost is substantially the same as for
financial reporting purposes and net unrealized appreciation is as follows:

Unrealized appreciation: $265,596
Unrealized depreciation: (85,465)
--------

Net unrealized appreciation: $180,131
=======

See Accompanying Notes to the Financial Statements.

14
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities at value (cost $2,876,960) ................. $ 3,057,091
Deferred organization costs ......................................... 163,636
Cash................................................................. 118,511
Receivable for investment securities sold............................ 42,899
Dividends and interest receivable.................................... 3,863
---------
Total Assets .................................................. 3,386,000
---------

LIABILITIES:
Payable for investment securities purchased ......................... 158,927
Due to Manager....................................................... 58,534
Accrued legal fees .................................................. 24,999
Accrued administration expenses ..................................... 17,659
Miscellaneous accrued expenses ...................................... 40,491
---------
Total Liabilities............................................. 300,610
---------

NET ASSETS............................................................... $ 3,085,390
=========

COMPOSITION OF NET ASSETS:
Capital paid in..................................................... $ 2,905,056
Net unrealized appreciation on investments and foreign
currency transactions and forward foreign currency
contracts...................................................... 180,334
----------
Net Assets.............................................................. $ 3,085,390
=========

</TABLE>

See Accompanying Notes to the Financial Statements.

-15-

<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

<S> <C>
INVESTMENT INCOME:
Dividends .......................................................................... $ 13,228

Interest ........................................................................... 3,404
--------
16,632
--------
EXPENSES:
Administrative expense.............................................................. 95,423
Directors' fees and expenses........................................................ 50,000
Organization expense................................................................ 40,909
Insurance expense................................................................... 29,195
Legal expense....................................................................... 25,000
Investment advisory expense......................................................... 12,776
Audit expense....................................................................... 12,500
Registration expense................................................................ 3,044
Miscellaneous accrued expenses...................................................... 7,208
--------

Total expenses before reductions................................................ 276,055
--------
Less: Fee waivers and expense reimbursements by Manager............................. (195,435)
Less: Fee waivers by Administrator.................................................. (57,591)
Less: Fee waivers by Transfer Agent................................................. (1,763)
--------
Net expenses........................................................................ 21,266
--------

Net Investment Loss ....................................................... (4,634)
--------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions.................. 59,180
Net unrealized appreciation on investments and foreign currency transactions........ 180,334
--------
Net realized and unrealized gain on investments and foreign
currency transactions................................................... 239,514
--------
Net Increase in Net Assets Resulting from Operations............... $234,880
========

</TABLE>
- ----------------
*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-16-
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the period from December 15, 1995* to November 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATIONS:
Net investment loss.................................................................. $ (4,634)
Net realized gain on investments and foreign currency transactions................... 59,180
Net unrealized appreciation on investments and foreign currency transactions 180,334
---------
Net Increase in Net Assets Resulting from Operations............................ 234,880
---------
CAPITAL TRANSACTIONS:
Proceeds from capital invested....................................................... 2,749,510
---------

Total Increase in Net Assets .................................................. 2,984,390

Net assets at the beginning of the period................................................ 101,000
----------

NET ASSETS at the end of the period...................................................... $ 3,085,390
==========
</TABLE>

- ----------------
*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

-17-
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO

------------------------------------------------------------------------
Financial Highlights
For the period from December 15, 1995* to November 30, 1996
-----------------------------------------------------------------------
<TABLE>
<S> <C>
Net assets, end of period (000's) ..................... $ 3,085

Ratio of expenses to average net assets................ 2.00% (a)(b)
Ratio of net investment loss to average net assets..... (0.44%) (a)(b)

Portfolio turnover rate................................ 26.31% (c)

Average commission rate paid........................... $ 0.0069 (d)

</TABLE>
-------------
*Commencement of Operations.
(a) Net of fee waivers and expense reimbursements which had the effect
of reducing the ratio of expenses to average net assets and
increasing the ratio of net investment income to average net assets
by 25.74 percentage points (annualized).
(b) Annualized.
(c) This figure is calculated for the period during which there were
equity holdings.
(d) Represents total commissions paid on portfolio securities divided by
the total number of shares purchased and sold on which commissions
are charged.

See Accompanying Notes to the Financial Statements.

-18-
<PAGE>

NOTE 1 - ORGANIZATION

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

a) SECURITY VALUATIONS:

-19-

<PAGE>

NOTE 2 - CONTINUED

a) INVESTMENT INCOME AND SECURITY TRANSACTIONS:

c) FOREIGN CURRENCY TRANSACTIONS:

The Equity Portfolio is not required to enter into forward contracts with
regard to settlement of its foreign currency-denominated securities and
will not do so unless deemed appropriate by AIG Capital Management Corp.
(the "Manager") or AIG Global Investment Corp. ("AIG Global"), the
subadvisor. Forward foreign currency exchange contracts do not eliminate
fluctuations in the underlying price of the securities. They simply
establish a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to fluctuations in the
value of the currency being traded, at the same time, they tend to limit
any potential gain which might result from an increase in the value of that
currency. With respect to forward foreign currency exchange contracts,
losses in excess of amounts recognized in the statement of assets and
liabilities may arise due to changes in value of the foreign currency or if
the counterparty does not perform under the contract.

-20-

<PAGE>

NOTE 2 - CONTINUED

d) FEDERAL INCOME TAXES:

e) ORGANIZATION EXPENSES:

NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

-21-

<PAGE>

NOTE 3 - CONTINUED

Certain trustees and officers of the Equity Portfolio are also directors and/or
officers of the Manager. These trustees and officers are paid no compensation
by the Equity Portfolio.

-22-

<PAGE>

NOTE 4 - SECURITIES TRANSACTIONS

For the period ended November 30, 1996, purchases of portfolio securities (other
than short-term securities) were $3,312,710. Sales of portfolio securities were
$499,298.

NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS AS OF NOVEMBER 30, 1996

Contracts to Sell:
- ------------------
British Pound Sterling 42,933 0.59382 12/03/96 51

Total Unrealized Depreciation $ (182)
======

</TABLE>

-23-

<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

REPORT OF
INDEPENDENT ACCOUNTANTS

To the Holders of Beneficial Interest and Board of Trustees of First Global
Equity Portfolio:

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosure in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1996, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.

COOPERS & LYBRAND L.L.P.

New York, New York
January 2, 1997

-24-

<PAGE>

THIS PAGE. PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements and Schedules:

PART A - Audited Financial Highlights for the AIG Children's World Fund -
2005.
Audited Financial Highlights for the AIG Retiree Fund - 2003.

PART B - Portfolio of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights, Notes to the Financial Statements and Report of Independent
Accountants thereon of the Registrant with respect to AIG Children's World
Fund - 2005 as of November 30, 1996.

Portfolio of Investments, Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, Notes to
the Financial Statements and Report of Independent Accountants thereon of the
Registrant with respect to AIG Retiree Fund - 2003 as of November 30, 1996.

Portfolio of Investments, Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, and Notes
to the Financial Statements and Report of Independent Accountants thereon of
First Global Equity Portfolio as of November 30 , 1996.

Financial Information of American International Group, Inc. is incorporated by
reference into Part B.

(b) EXHIBITS:

(1) Articles of Incorporation./1/
(1)(a) Articles of Amendment, dated June 29, 1995./2/
(1)(b) Articles of Amendment, dated August 16, 1995./3/
(1)(c) Certificate of Correction, dated September 11, 1995./4/
(1)(d) Articles Supplementary, dated November 3, 1995./5/
(1)(e) Articles of Amendment, dated January 11, 1996./6/
(2) By-laws of Registrant./1/
(3) Not Applicable.
(4) Specimen Common Stock Certificate./2/
(5)(a) Form of Management Agreement relating to AIG Children's World Fund --
2005./2/
(5)(b) Form of Subadvisory Agreement with AIGAM International Limited relating
to AIG Children's World Fund -- 2005./2/
(5)(c) Form of Subadvisory Agreement with AIG Global Investors, Inc. relating to
AIG Children's World Fund -- 2005./2/
(5)(d) Form of Management Agreement relating to AIG Retiree Fund -- 2003./5/
(5)(e) Form of Subadvisory Agreement with AIGAM International Limited relating
to AIG Retiree Fund -- 2003./5/
(5)(f) Form of Subadvisory Agreement with AIG Global Investors Inc. relating
to AIG Retiree Fund -- 2003./5/
(6)(a) Form of Distribution Agreement relating to AIG Children's World Fund --
2005./2/
(6)(b) Form of Distribution Agreement relating to AIG Retiree Fund -- 2003./5/
(7) Not Applicable.
(8) Form of Custody Agreement./2/

c-i
<PAGE>

6 Filed with Post-Effective Amendment No. 3 to this Registration Statement on
January 16, 1996.

(9)(a) Form of Shareholder Servicing Agreement./2/
(9)(b) Form of Administration and Accounting Services Agreement./2/
(9)(c) Form of Transfer Agency Agreement./2/

(9)(d) Powers of Attorney (included on the signature page of the referenced
filing):
(i) Registrant (other than Ms. Linda-Ann Goodwin)/1/
(ii) First Global Equity Portfolio (other than Ms. Linda-Ann
Goodwin)/2/
(iii) AIG Capital Management Corp./3/
(iv) American International Group, Inc. (other than Mr. Houghton
Freeman)/3/
(v) Mr. Houghton Freeman (Director of American International Group,
Inc.)/4/

(vi) Ms. Linda-Ann S. Goodwin (Director of Registrant and of First
Global Equity Portfolio)/6/
(9)(e) Form of Guarantee Agreement relating to AIG Children's World Fund --
2005./4/
(9)(f) Form of Support Agreement relating to AIG Children's World Fund --
2005./4/
(9)(g) Form of Guarantee Agreement relating to AIG Retiree Fund -- 2003./5/
(9)(h) Form of Support Agreement relating to AIG Retiree Fund -- 2003./5/
(10)(a) Opinion and Consent of counsel with respect to shares of AIG
Children's World Fund -- 2005./4/
(10)(b) Opinions and Consents of counsel with respect to the Guarantee and the
Support Agreement relating to AIG Children's World Fund -- 2005./4/
(10)(c) Opinion and Consent of counsel with respect to shares of AIG Retiree
Fund - 2003./6/

(10)(d) Opinions and Consents of counsel with respect to the Guarantee and the
Support Agreement relating to AIG Retiree Fund -- 2003./7/

(11) Consent of Independent Accountants. /8/
(12) Not Applicable.
(13) Form of Agreement with respect to provision of initial capital./3/
(14) Not Applicable.
(15)(a) Rule 12b-1 Plan relating to AIG Children's World Fund -- 2005./2/
(15)(b) Form of Rule 12b-1 Plan relating to AIG Retiree Fund -- 2003./5/
(16) Not Applicable.
(17)(a) Financial Data Schedule for AIG Retiree Fund - 2003./8/

(17)(b) Financial Data Schedule for AIG Children's World Fund - 2005./8/
(17)(c) Financial Data Schedule for First Global Equity Portfolio./8/
(18) Not Applicable.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of December 26, 1996, there were 449 holders of shares of the AIG
Children's World Fund -- 2005 series of the Registrant and there were 131
holders of shares of the AIG Retiree Fund -- 2003 series of the Registrant.

- ---------
1 Filed with the initial filing of this Registration Statement on April 13,
1995.
2 Filed with Pre-Effective Amendment No. 1 to this Registration Statement on
July 21, 1995.
3 Filed with Pre-Effective Amendment No. 2 to this Registration Statement on
September 7, 1995.
4 Filed with Pre-Effective Amendment No. 3 to this Registration Statement on
September 13, 1996.
5 Filed with Post-Effective Amendment No. 2 to this Registration Statement on
November 3, 1995.
6 Filed with Post-Effective Amendment No. 3 to this Registration Statement on
January 16, 1996.
7 Filed with Post-Effective Amendment No. 4 to this Registration Statement on
June 28, 1996.
8 Filed herewith.

c-ii
<PAGE>

ITEM 27. INDEMNIFICATION

Section 2-418 of the General Corporation Law of the State of Maryland provides
that the Registrant may indemnify its directors, officers, employees and agents.
Article Twelfth of the Registrant's Articles of Incorporation and Article VII of
the Registrant's By-Laws provide that the Registrant shall indemnify to the
fullest extent permitted by law any person made or threatened to be made a party
to any action, suit or proceeding by reason of the fact that such person or such
person's testator or intestate is or was a director, officer or employee of the
Registrant, provided that no representative of the Registrant shall be
indemnified to the extent liability results from misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
representative's office.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant for expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The Registrant maintains or intends to obtain, subject to availability and the
determination of the directors as to the reasonableness of insurance premiums
from time to time, insurance insuring its officers and directors against certain
liabilities incurred in their capacities as such, and insuring the Registrant
against any payments which it is obligated to make to such persons under the
foregoing indemnification provisions.

The Restated Certificate of Incorporation of AIG (the "Certificate") provides:

"The Company shall indemnify to the full extent permitted by law any person
made, or threatened to be made, a party to an action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Company or serves or served any other enterprise at the request of the
Company."

Section 6.4 of AIG's By-laws contains a similar provision.

The Certificate also provides that a director will not be personally liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such an exemption from liability
or limitation thereof is not permitted by the Delaware General Corporation Law
(the "GCL").

Section 145 of GCL permits indemnification against expenses, fines, judgments
and settlements incurred by any director, officer or employee of AIG in the
event of pending or threatened civil, criminal, administrative or investigative
proceedings, if such person was, or was threatened to be made, a party by reason
of the fact that he is or was a director, officer or employee of AIG. Section
145 also provides that the indemnification provided for therein shall not be
deemed exclusive of any other rights to which those seeking indemnification may
otherwise be entitled. In addition, AIG and its subsidiaries maintain a
directors' and officers' liability insurance policy.

c-iii
<PAGE>

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

AIG Capital Management Corp. (Manager)
- ----------------------------

AIG Capital Management Corp. is a U.S. registered investment advisor which also
manages the assets of the AIG Money Market Fund, a separate money market
investment portfolio of The Advisors' Inner Circle Fund. The Advisors' Inner
Circle Fund is an open end investment company that is registered under the
Investment Company Act of 1940.

AIG Global Investment Corp. (Subadvisor)
- ----------------------------------------

AIG Global Investment Corp. is a U.S. registered investment advisor that
provides global asset management services primarily to AIG and its subsidiaries,
but also provides investment advisory services to third parties.

The list required by this Item 28 of officers and directors of AIG Capital
Management Corp. and AIG Global Investment Corp., together with information as
to any other business, vocation, profession or employment of a substantial
nature engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by AIG Capital
Management Corp. and AIG Global Investment Corp., respectively, pursuant to the
Investment Advisers Act of 1940 (SEC File Nos. 801-47192 and 801-18759,
respectively).

ITEM 29. PRINCIPAL UNDERWRITERS

AIG Equity Sales Corp. also acts as a principal underwriter for:

1. AIG Life Insurance Company, as depositor on behalf of Variable Account I
and Variable Account II; and

2. American International Life Assurance Company of New York, as depositor for
Variable Account A and Variable Account B.

The Officers and Directors of the Distributor are:

NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
- -------------------------- -------------------------- ---------------------

Michele L. Abruzzo President None
80 Pine Street and Director
New York, NY 10005

Bernard J. Bujak Associate Vice President None
80 Pine Street
New York, NY 10005

Kevin N. Clowe Vice President None
70 Pine Street and Director
New York, NY 10270

Florence A. Davis General Counsel and None
70 Pine Street Director
New York, NY 10270

c-iv
<PAGE>

NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
---------------- ---------------- ---------------

Kenneth F. Judkowitz Vice President, None
80 Pine Street Treasurer and
New York, NY 10005 Comptroller

Edward E. Matthews Director None
70 Pine Street
New York, NY 10270

Jerome T. Muldowney Director None
One Chase Manhattan Plz.
New York, NY 10005

Robert J. O'Connell Director None
80 Pine Street
New York, NY 10005

Julia Perlman Assistant Vice President None
80 Pine Street and Director of Marketing
New York, NY 10005

Daniel K. Kingsbury Vice President President
70 Pine Street
New York, NY 10270

Philomena Scamardella Vice President and None
80 Pine Street Senior Compliance
New York, NY 10005 Officer

Ernest E. Stempel Director None
70 Pine Street
New York, NY 10270

Elizabeth M. Tuck Secretary Assistant Secretary
70 Pine Street
New York, NY 10270

c-v
<PAGE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS - All accounts, books and other
documents required to be maintained by Section 31(a) of the 1940 Act
and the Rules (17 CFR 270.31a-1 to 31a-3) promulgated thereunder will
be maintained by the following:

AIG Capital Management Corp., 70 Pine Street, New York, New York 10270 (records
relating to its function as investment adviser).

PFPC International Ltd., 80 Harcourt Street, Dublin, Ireland (records relating
to its functions as Administrator).

PNC Bank, National Association, Airport Business Center, International Court 2,
200 Stevens Drive, Lester, Pennsylvania 19113 (records relating to its function
as Custodian).

AIG Equity Sales Corp., 80 Pine Street, New York, New York 10005 (records
relating to its function as Distributor).

ITEM 31. MANAGEMENT SERVICES - None not discussed in the Prospectus or Statement
of Additional Information for the Registrant.

ITEM 32. UNDERTAKINGS

The Registrant undertakes to, if requested to do so by holders of at
least ten percent of its outstanding shares, call a meeting of
shareholders for the purpose of voting upon the removal of a director
or directors and to assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940.

c-vi
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York, on the 7th day of January, 1997.

AIG ALL AGES FUNDS, INC.

By: /s/ Daniel K. Kingsbury
--------------------------------------
Daniel K. Kingsbury
President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons, in the capacities
indicated, on the 7th day of January, 1997.

Signature Title
--------- -----

* Chairman of the
- ---------------------------------- Board and Director
Roger Wickers

* Director
- ----------------------------------
Paul Friedman

* Director
- ----------------------------------
Linda-Ann S. Goodwin

* Director
- ----------------------------------
Charles Vinick

/s/ Daniel K. Kingsbury President (principal executive officer)
- ----------------------------------
Daniel K. Kingsbury

* Treasurer (principal financial and
- ---------------------------------- accounting officer)
J. Fergus McKeon

*By: /s/ Daniel K. Kingsbury
-------------------------------------
Daniel K. Kingsbury
As Attorney-in-Fact

s-i
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the First Global Equity Portfolio has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Grand Cayman, the Cayman Islands, on
the 5th day of January, 1997.

FIRST GLOBAL EQUITY PORTFOLIO

By: /s/ Daniel K. Kingsbury
----------------------------------------
Daniel K. Kingsbury
President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons, in the capacities
indicated, on the 5th day of January, 1997.

Signature Title
--------- -----

* Chairman of
- ------------------------------ the Board and Trustee of First
Roger Wickers Global Equity Portfolio

* Trustee of First
- ------------------------------ Global Equity Portfolio
Paul Friedman

* Trustee of First
- ------------------------------ Global Equity Portfolio
Linda-Ann S. Goodwin

* Trustee of
- ------------------------------ First Global Equity Portfolio
Charles Vinick

/s/ Daniel K. Kingsbury President (principal executive
- ------------------------------ officer) of First Global Equity Portfolio
Daniel K. Kingsbury

* Treasurer
- ------------------------------ (principal financial and
J. Fergus McKeon accounting officer) of First Global Equity
Portfolio

*By: /s/ Daniel K. Kingsbury
--------------------------------------
Daniel K. Kingsbury
As Attorney-in-Fact

s-ii
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Co-registrant
AIG Capital Management Corp. has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York, on the 7th day of January, 1997.

AIG CAPITAL MANAGEMENT CORP.

By: /s/ Daniel K. Kingsbury
----------------------------------------
Daniel K. Kingsbury
President

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons, in
the capacities indicated, on the 7th day of January, 1997.

Signature Title
--------- -----

/s/ David T. Goss Vice Chairman of the Board and Director
- ----------------------------- of AIG Capital Management Corp.
David T. Goss

* Director of AIG Capital
- ----------------------------- Management Corp.
William N. Dooley

* Director of AIG Capital
- ----------------------------- Management Corp.
Ronald A. Latz

* Director of AIG Capital
- ----------------------------- Management Corp.
Helen Stefanis

/s/ Daniel K. Kingsbury Director and President of AIG Capital
- ----------------------------- Management Corp.
Daniel K. Kingsbury

* Vice President and
- ------------------------------ Comptroller (principal
Neil Friedman financial and accounting officer)
of AIG Capital Management Corp.

*By: /s/ Daniel K. Kingsbury
-----------------------------
Daniel K. Kingsbury
As Attorney-in-Fact

s-iii
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Co-registrant
American International Group, Inc. has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in The City of New York, the State of New York on the 7th day
of January, 1997.

AMERICAN INTERNATIONAL GROUP, INC.

By: /s/ Edward E. Matthews
-----------------------------
Edward E. Matthews
Vice Chairman

Signature Title
--------- -----

* Chairman and Director
- ----------------------------------- (Principal Executive
M.R. Greenberg Officer) of American International Group,
Inc.

/s/ Edward E. Matthews Vice Chairman and Director of American
- ----------------------------------- International Group, Inc.
Edward E. Matthews

* Executive Vice President
- ----------------------------------- and Comptroller
Howard I. Smith (Principal Accounting and Financial
Officer) of American International
Group, Inc.

* Director of American
- ----------------------------------- International Group, Inc.
M. Bernard Aidinoff

* Director of American
- ----------------------------------- International Group, Inc.
Lloyd M. Bentsen

Director of American International Group,
- ----------------------------------- Inc.
Pei-yuan Chia

* Director of American
- ----------------------------------- International Group, Inc.
Marshall Cohen

* Director of American
- ----------------------------------- International Group, Inc.
Barber B. Conable Jr.

s-iv
<PAGE>

* Director of American
- --------------------------------- International Group, Inc.
Martin Feldstein

* Director of American
- --------------------------------- International Group, Inc.
Leslie L. Gonda

Director of American International Group,
- --------------------------------- Inc.
Evan G. Greenberg

* Director of American
- --------------------------------- International Group, Inc.
Carla A. Hills

* Director of American
- --------------------------------- International Group, Inc.
Frank Hoenemeyer

* Director of American
- --------------------------------- International Group, Inc.
Dean P. Phypers

* Director of American
- --------------------------------- International Group, Inc.
John J. Roberts

* Director of American
- --------------------------------- International Group, Inc.
Thomas R. Tizzio

Director of American International
- --------------------------------- Group, Inc.
Edmund S.W. Tse

*By: /s/ Edward E. Matthews
---------------------------
Edward E. Matthews
As Attorney-in-Fact

s-v
<PAGE>

EXHIBIT INDEX

A complete list of exhibits is included in Part C, Item 24(b) of the
Registration Statement. The following exhibits are filed herewith:

Exhibit
- -------

(11) Consent of Independent Accountants.

(17)(a) Financial Data Schedule for AIG Children's World Fund - 2005.

(17)(b) Financial Data Schedule for AIG Retiree Fund - 2003.

(17)(c) Financial Data Schedule for First Global Equity Portfolio.

<PAGE>

<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> AIG CHILDREN'S WORLD FUND - 2005

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 3550285
<INVESTMENTS-AT-VALUE> 3788458
<RECEIVABLES> 2381
<ASSETS-OTHER> 172723
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3963562
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 76764
<TOTAL-LIABILITIES> 76764
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3599528
<SHARES-COMMON-STOCK> 377645
<SHARES-COMMON-PRIOR> 10929
<ACCUMULATED-NII-CURRENT> 47007
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 32186
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 208077
<NET-ASSETS> 3886798
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 74288
<OTHER-INCOME> (2072)
<EXPENSES-NET> 25209
<NET-INVESTMENT-INCOME> 47007
<REALIZED-GAINS-CURRENT> 32186
<APPREC-INCREASE-CURRENT> 208077
<NET-CHANGE-FROM-OPS> 287270
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 390836
<NUMBER-OF-SHARES-REDEEMED> 13191
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3886798
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 315764
<AVERAGE-NET-ASSETS> 1940709
<PER-SHARE-NAV-BEGIN> 9.15
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> .73
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> AIG RETIREE FUND - 2003

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 5581999
<INVESTMENTS-AT-VALUE> 5876744
<RECEIVABLES> 154005
<ASSETS-OTHER> 112488
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6143237
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 67113
<TOTAL-LIABILITIES> 67113
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5724909
<SHARES-COMMON-STOCK> 616787
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 53901
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26992
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 270322
<NET-ASSETS> 6076124
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 83323
<OTHER-INCOME> (2571)
<EXPENSES-NET> 26851
<NET-INVESTMENT-INCOME> 53901
<REALIZED-GAINS-CURRENT> 26992
<APPREC-INCREASE-CURRENT> 270322
<NET-CHANGE-FROM-OPS> 351215
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 651040
<NUMBER-OF-SHARES-REDEEMED> 34253
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6076124
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2767
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 171459
<AVERAGE-NET-ASSETS> 2940172
<PER-SHARE-NAV-BEGIN> 9.15
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> .61
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.85
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>

<ARTICLE> 6
<CIK> 0000948407
<NAME> FIRST GLOBAL EQUITY PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 2876960
<INVESTMENTS-AT-VALUE> 3057091
<RECEIVABLES> 46762
<ASSETS-OTHER> 282147
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3386000
<PAYABLE-FOR-SECURITIES> 158927
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141683
<TOTAL-LIABILITIES> 300610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2905056
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (4634)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 59180
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 180334
<NET-ASSETS> 3085390
<DIVIDEND-INCOME> 13228
<INTEREST-INCOME> 3404
<OTHER-INCOME> 0
<EXPENSES-NET> 21266
<NET-INVESTMENT-INCOME> (4634)
<REALIZED-GAINS-CURRENT> 59180
<APPREC-INCREASE-CURRENT> 180334
<NET-CHANGE-FROM-OPS> 234880
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2984390
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12776
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 276055
<AVERAGE-NET-ASSETS> 1099445
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

EXHIBIT 99.11

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Post-Effective Amendment No. 7 to the
Registration Statement of AIG All Ages Funds, Inc. on Form N-1A (File No.
33-91174) (the "Registration Statement") of our reports dated January 2, 1997 on
our audits of the financial statements and financial highlights of AIG
Children's World Fund-2005, AIG Retiree Fund-2003, and First Global Equity
Portfolio, and we consent to the incorporation by reference in the Registration
Statement of our report dated February 23, 1996 on our audit of the financial
statements of American International Group, Inc. which is included in the Annual
Report on Form 10-K of American International Group, Inc. for the year ended
December 31, 1995. We also consent to the reference to our Firm under the
heading "Other Information--Accountants" and "Financial Information" in the
Statement of Additional Information which is part of the Registration Statement.

COOPERS & LYBRAND L.L.P.

New York, New York
January 10, 1997