AIG ALL AGES FUNDS INC, N-30D, 1997-08-01

AIG ALL AGES FUNDS INC
N-30D, 1997-08-01

Previous: SITEL CORP, 8-K, 1997-08-01

Next: SOUTHERN PACIFIC SECURED ASSETS CORP, 8-K, 1997-08-01

<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

Portfolio of Investments
May 31, 1997 (Unaudited)

<TABLE>
<CAPTION>
Principal Maturity Value
Amount Description Date Yield * (Note 2a)

US TREASURY BONDS - 60.9%
<S> <C> <C> <C>
$ 1,950,000 US Zero Coupon Bond.................11/15/05 6.76% $ 1,114,386
300,000 US Zero Coupon Bond.................11/15/05 7.00% 171,444
200,000 US Zero Coupon Bond.................11/15/05 7.13% 114,296
200,000 US Zero Coupon Bond.................11/15/05 6.97% 114,296
200,000 US Zero Coupon Bond.................11/15/05 6.97% 114,296
100,000 US Zero Coupon Bond.................11/15/05 6.97% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.91% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.75% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.67% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.65% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.61% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.60% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.39% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.33% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.24% 57,148
100,000 US Zero Coupon Bond.................11/15/05 6.16% 57,148
50,000 US Zero Coupon Bond.................11/15/05 6.86% 28,574
50,000 US Zero Coupon Bond.................11/15/05 6.60% 28,574
50,000 US Zero Coupon Bond.................11/15/05 6.48% 28,574
50,000 US Zero Coupon Bond.................11/15/05 6.40% 28,574
50,000 US Zero Coupon Bond.................11/15/05 6.37% 28,574
50,000 US Zero Coupon Bond.................11/15/05 6.22% 28,574
50,000 US Zero Coupon Bond.................11/15/05 6.22% 28,574

Total Investments (Cost $2,455,292***).................... 2,457,364

Other Assets in Excess of Liabilities** - 39.1%........... 1,579,408
NET ASSETS - 100%......................................... $ 4,036,772
</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 $2,072.

See Accompanying Notes to the Financial Statements.

1
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

Statement of Assets and Liabilities
May 31, 1997 (Unaudited)

<TABLE>
<S> <C>
ASSETS:
Investment in securities at value (Cost $2,455,292)......................... $ 2,457,364
Investment in Equity Portfolio at value..................................... 1,476,642
Cash........................................................................ 134,750
Deferred organization costs................................................. 49,411
Receivable for fund shares sold............................................. 16,478
Interest Receivable......................................................... 278
Total Assets.......................................................... 4,134,923

LIABILITIES:
Accrued legal fees.......................................................... 25,625
Accrued shareholders communication fees..................................... 11,966
Accrued printing fees....................................................... 10,252
Accrued distribution fees................................................... 8,202
Accrued directors fees ..................................................... 7,566
Due to Manager.............................................................. 6,791
Accrued insurance fees...................................................... 6,596
Accrued shareholder services fees........................................... 4,953
Accrued registration fees................................................... 4,294
Accrued transfer agent fees................................................. 3,912
Accrued audit fees.......................................................... 3,096
Accrued administration fees................................................. 2,849
Accrued miscellaneous fees.................................................. 2,049
Total Liabilities........................................................ 98,151

NET ASSETS...................................................................... $ 4,036,772

COMPOSITION OF NET ASSETS:
Capital paid in............................................................. $ 3,816,762
Undistributed net investment income......................................... 52,767
Undistributed net realized gain on investments
and foreign currency transactions...................................... 49,598
Net unrealized appreciation on investments.................................. 117,645
NET ASSETS...................................................................... $ 4,036,772

Shares Outstanding.............................................................. 410,687

Net asset value and redemption price per share ($4,036,772 / 410,687 shares).... $ 9.83
Maximum offering price per share (Net asset value plus sales
charge - 4.75% of maximum offering price)................................... $ 10.32
</TABLE>

See Accompanying Notes to the Financial Statements.

2
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

Statement of Operations
For the six months ended May 31, 1997 (Unaudited)

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................................................. $ 84,022
Net Investment Loss Allocated from the Equity Portfolio............... (1,790)
82,232

EXPENSES:
Transfer agent expense................................... 28,595
Administration expense................................... 19,419
Shareholder communication expense........................ 11,966
Legal expense............................................ 10,759
Printing expense......................................... 10,252
Distribution expense..................................... 9,906
Registration expense..................................... 9,488
Directors fees .......................................... 7,500
Organization expense..................................... 6,988
Insurance expense........................................ 6,562
Shareholder services expense............................. 4,953
Investment advisory expense.............................. 2,581
Audit expense............................................ 2,504
Custodian expense........................................ 253
Miscellaneous expenses................................... 2,125

Total expenses before reductions.................... 133,851

Less: Expense reimbursements by Manager.................. (105,666)
Less: Advisory fee waived by Manager..................... (2,581)

Total Fee waivers and expense reimbursements by
Manager............................................ (108,247)

Net expenses.......................................................... 25,604

Net Investment Income......................................... 56,628

REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio............................................ 55,729
Net realized loss on investments from the Fund........................ (3,100)
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio...................... 27,881
Net change in unrealized depreciation on investments from the Fund.... (118,313)
Net change in realized and unrealized loss on investments
and foreign currency transactions...................... (37,803)

Net Increase in Net Assets Resulting from Operations.. $ 18,825
</TABLE>

3
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Six months ended Period from
May 31, 1997 December 15, 1995*
(Unaudited) November 30, 1996
<S> <C> <C>
OPERATIONS:
Net investment income...................................................... $ 56,628 $ 47,007
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio............................................. 55,729 32,186
Net realized loss on investments from the Fund............................. (3,100) 0
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio....................... 27,881 87,692
Net change in unrealized (depreciation) appreciation on
investments from the Fund........................................... (118,313) 120,385
Net Increase in Net Assets Resulting From Operations................. 18,825 287,270

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income....................................... (50,871) 0
Distributions from net realized gain....................................... (35,218) 0
Total dividends and distributions to shareholders..................... (86,089) 0

FUND SHARE TRANSACTIONS:
Net proceeds from shares subscribed........................................ 535,905 3,623,996
Net proceeds from dividends reinvested..................................... 51,658 0
Cost of shares redeemed.................................................... (370,325) (124,468)
Net Increase in Net Assets Resulting from Fund Share Transactions.... 217,238 3,499,528

Total Increase in Net Assets.................................. 149,974 3,786,798

Net assets at the beginning of the period...................................... 3,886,798 100,000

NET ASSETS at the end of the period (including undistributed.
net investment income of $52,767 and $44,599 respectively)................. $ 4,036,772 $ 3,886,798
</TABLE>

*Commencement of Operations.

See Accompanying Notes to the Financial Statements.

4
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005

Financial Highlights

<TABLE>
<CAPTION>
Six months ended Period from
May 31, 1997 December 15, 1995* to
(Unaudited) November 30, 1996
<S> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period............................ $ 10.00 $ 9.15

Income from investment operations:
Net investment income....................................... 0.14 0.12
Net realized and unrealized (loss) gain on investments ..... (0.09) 0.73
Total income from investment operations.............. 0.05 0.85

Dividends and distributions to shareholders:
Dividends from net investment income........................ (0.13) ---
Distributions from net realized gain........................ (0.09) ---
Total dividends and distributions to shareholders.... (0.22) ---

Net asset value, end of period.................................. $ 9.83 $ 10.00

Total Return.................................................... 0.50%(a) 9.29% (a)

Ratios / Supplemental Data:
Net assets, end of period (000's)............................... $ 4,037 $ 3,887

Ratio of expenses to average net assets......................... 2.00%(b)(c) 2.00%(b)(c)
Ratio of net investment income to average net assets............ 2.87%(b)(c) 2.52%(b)(c)

Portfolio turnover rate ........................................ 4.47% 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) for the period from December 15, 1995 (commencement of
operations) to November 30, 1996 and 8.26 percentage points (annualized) for
the six months from December 1, 1996 to May 31, 1997.
(c) Annualized.

See Accompanying Notes to the Financial Statements.

5
<PAGE>

AIG CHILDREN'S WORLD FUND - 2005
- --------------------------------------------------------------------------------
Notes to Financial Statements
May 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------

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 May 31, 1997,
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 45.6% in
the net assets of the Equity Portfolio at May 31, 1997. 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.

7
<PAGE>

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 and/or reimburse the Fund's
expenses to the extent that total Fund operating expenses exceed 2.00% of
average daily net assets until at least March 31, 1998, subject to reimbursement
by the Fund in subsequent years under certain circumstances. For the six months
ended May 31, 1997, the Manager waived its entire fee as adviser and reimbursed
the Fund in the aggregate amount of $152,039 which is inclusive of waiver
amounts at the Equity Portfolio and Fund level.

The Manager, an indirect wholly owned subsidiary of AIG, has entered into
subadvisory agreements with AIG Global Investment Corp. ("AIG Global"), which is
an indirect 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"), an indirect 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 six months ended May 31, 1997.

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.
PFPC Inc. serves as Fund's transfer agent and dividend disbursing agent. 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 1, 1996 December 15, 1995*
to May 31, 1997 to November 30,1996
--------------- -------------------

Shares Amount Shares Amount
------ -------- ------- ----------

Shares sold.................. 55,859 $535,905 390,836 $3,623,996

Shares reinvested............ 5,331 51,658 0 0

Shares redeemed...... ....... (39,077) (370,325) (13,191) (124,468)
-------- --------- ------- ---------

Net increase................. 22,113 $217,238 377,645 $3,499,528
====== ======== ======= ==========

*Commencement of Operations

NOTE 5 - SECURITIES TRANSACTIONS

For the six months ended May 31, 1997 purchases of U.S. Treasury zero coupon
securities (other than short-term securities) were $198,574. For the six months
ended May 31, 1997 sales of US Treasury zero coupon securities (other than
short-term securities) were $110,017.

DIVIDEND DISTRIBUTION

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

10
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Portfolio of Investments
May 31, 1997 (Unaudited)

Value
Description Shares (Note 2a)

COMMON STOCKS - 90.4%

Australia - 0.3%
News Corp Ltd................................... 2,500 $ 11,096

France - 5.4%
Castorama Dubois Investissement................. 180 24,837
Generale des Eaux .............................. 300 36,970
Generale des Eaux Warrants...................... 300 206
Schneider....................................... 450 21,658
Societe Generale ............................... 400 44,502
Total SA B shares .............................. 500 45,821
173,994
Germany - 6.8%
Bilfinger & Berger AG........................... 1,500 58,132
Veba AG......................................... 1,600 91,135
Volkswagen AG................................... 110 71,588
220,855
Hong Kong - 3.8%
Cheung Kong Infrastructure...................... 18,000 57,030
Hutchinson Whampoa.............................. 8,000 66,594
123,624
Japan - 13.4%
Advantest....................................... 20 1,359
Amano........................................... 1,000 10,641
Bank of Tokyo - Mitsubishi Ltd ................. 1,000 17,335
Calsonic Corp................................... 1,000 5,535
Chiba Bank...................................... 4,000 20,767
Chugai Pharmaceutical........................... 3,000 25,436
Hitachi......................................... 2,000 21,282
Hitachi Zosen Corp.............................. 2,000 7,638
Kajima Corp..................................... 3,000 16,760
Kamigumi........................................ 1,000 5,964
Katokichi ...................................... 1,000 18,450
Kuraray Co. .................................... 2,000 19,223
Kyocera......................................... 400 28,799
Matsushita Electrical Works..................... 2,000 22,140
Mitsubishi Heavy Industries .................... 1,000 7,191
Mitsubishi Motors............................... 3,000 22,192
NEC Corp ....................................... 1,000 13,902

See Accompanying Notes to the Financial Statements.

11
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Portfolio of Investments - Continued
May 31, 1997 (Unaudited)

Value
Description Shares (Note 2a)

Japan- Continued
Nippon Shokubai................................. 1,000 $ 6,694
Nippon Steel Corp............................... 4,000 11,705
Nippon Telegraph and Telephone Corp............. 3 28,608
Nomura Securities .............................. 1,000 11,842
Sumitomo........................................ 2,000 17,678
Suzuki Motor Corp............................... 2,000 25,058
Tokio Marine and Fire........................... 2,000 23,513
Tomen Corporation............................... 5,000 12,958
Toto Ltd........................................ 1,100 12,366
Yodogawa Steel Works............................ 3,000 18,536
433,572

Mexico - 2.7%
Cementos de Mexico.............................. 23,400 86,021

Netherlands - 3.7%
Hunter Douglas NV............................... 500 44,168
Koninklijke Ahold NV............................ 1,000 76,037
120,205
Spain - 2.7%
Bankinter SA.................................... 300 50,813
Corporacion Mapfre Compania..................... 700 37,548
88,361
Sweden - 1.4%
Volvo AB Rights ................................ 1,600 429
Volvo Ser A .................................... 1,600 44,512
44,941
Switzerland - 2.2%
Roche Holdings AG............................... 8 71,139

United Kingdom - 8.6%
Cable and Wireless PLC ......................... 5,000 40,818
Glynwed International PLC ...................... 6,500 28,340
Laporte PLC..................................... 3,000 32,246
National Westminister........................... 3,500 42,630
Stanley Leisure Org. PLC........................ 9,000 45,129
Tarmac PLC...................................... 25,000 51,943
Vaux Group PLC ................................. 8,000 36,254
277,360

See Accompanying Notes to the Financial Statements.

12
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Portfolio of Investments - Continued
May 31 , 1997 (Unaudited)

Value
Description Shares (Note 2a)

United States - 39.4%
Allstate Corp................................... 1,000 $ 73,625
Amoco Corp...................................... 600 53,625
Bellsouth Corp.................................. 900 40,838
Computer Associates............................. 1,000 54,750
Corning, Inc.................................... 1,500 75,563
Deere and Co.................................... 800 40,900
Du Pont De Nemours.............................. 300 32,663
Federal National Mortgage Association........... 900 39,263
Flowers Industries, Inc......................... 4,500 79,313
General Electric Co............................. 900 54,338
General Motors Corp............................. 800 45,800
Hewlett Packard Co.............................. 1,100 56,650
IBM............................................. 600 51,900
Johnson and Johnson............................. 700 41,913
Medimmune, Inc.................................. 3,000 46,500
Merck and Co., Inc.............................. 500 44,938
Monsanto Co..................................... 900 39,600
Pacific Gas and Electric........................ 2,500 57,813
Pepsico, Inc. .................................. 1,300 47,775
Philip Morris Co................................ 1,100 48,400
Provident Life and Accident Insurance........... 1,000 53,750
Schlumberger Ltd................................ 400 47,650
Time Warner, Inc................................ 1,000 46,500
Ultramar Diamond................................ 1,600 52,800
Union Pacific Corp.............................. 700 47,425
1,274,292

Total Common Stocks (Cost $2,667,753*) - 90.4% ...... 2,925,460
Other Assets in Excess of Liabilities - 9.6%......... 311,833
NET ASSETS - 100% ................................... $ 3,237,293

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

Unrealized appreciation: $352,262
Unrealized depreciation: (94,555)

Net unrealized appreciation: $257,707

See Accompanying Notes to the Financial Statements.

13
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Statement of Assets and Liabilities
May 31, 1997 (Unaudited)

ASSETS:
Investment in securities at value (cost $2,667,753) .... $ 2,925,460
Cash.................................................... 228,823
Deferred organization costs ............................ 143,361
Dividends receivable.................................... 14,754
Total Assets ..................................... 3,312,398

LIABILITIES:
Accrued audit fees ..................................... 20,000
Accrued insurance fees ................................. 13,125
Accrued administration fees............................. 12,477
Accrued legal fees ..................................... 10,794
Accrued directors fees ................................. 7,500
Accrued custodian fees ................................. 3,408
Due to Manager ........................................ 1,946
Accrued miscellaneous fees.............................. 5,855
Total Liabilities................................ 75,105

NET ASSETS.................................................. $ 3,237,293

COMPOSITION OF NET ASSETS:
Capital paid in......................................... $ 2,812,410
Accumulated net investment loss......................... (8,717)
Accumulated net realized gain on investments and
foreign currency transactions.................... 175,893
Net unrealized appreciation on investments and foreign
currency transactions............................ 257,707

NET ASSETS.................................................. $ 3,237,293

See Accompanying Notes to the Financial Statements.

14
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Statement of Operations
For the six months ended May 31, 1997 (Unaudited)

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes of $3,278)............................. $ 27,350

EXPENSES:
Administrative expense................................................. 52,894
Organization expense................................................... 20,275
Investment advisory expense............................................ 18,860
Directors fees ........................................................ 15,000
Insurance expense...................................................... 13,125
Custodian expenses..................................................... 12,125
Legal expense.......................................................... 10,955
Audit expense.......................................................... 7,500
Miscellaneous expenses................................................. 5,000

Total expenses before reductions................................... 155,734

Less: Expense reimbursements by Manager................................ (105,441)
Less: Advisory fees waived by Manager.................................. (18,860)

Total Fee waiver and expense reimbursements by Manager............. (124,301)

Net expenses........................................................... 31,433

Net Investment Loss .......................................... (4,083)

REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments....................................... 118,934
Net realized loss on foreign currency transactions..................... (2,219)
Net change in unrealized appreciation on investments................... 77,576
Net change in unrealized depreciation on foreign currency transactions. (205)
Net realized and unrealized gain on investments and foreign
currency transactions...................................... 194,086

Net Increase in Net Assets Resulting from Operations.. $ 190,003
</TABLE>

See Accompanying Notes to the Financial Statements.

15
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Six months ended Period from
May 31, 1997 December 15, 1995* to
(Unaudited) November 30, 1996
<S> <C> <C>
OPERATIONS:
Net investment loss................................................. $ (4,083) $ (4,634)
Net realized gain on investments.................................... 118,934 63,546
Net realized loss on foreign currency transactions.................. (2,219) (4,366)
Net change in unrealized appreciation on investments............... 77,576 180,131
Net change in unrealized (depreciation) appreciation on
foreign currency transactions.............................. (205) 203
Net Increase in Net Assets Resulting from Operations........ 190,003 234,880

CAPITAL TRANSACTIONS:
Proceeds from Capital Invested...................................... 110,900 2,749,510
Value of Capital Withdrawn.......................................... (149,000) 0

Total Increase in Net Assets .............................. 151,903 2,984,390

Net assets at the beginning of the period............................... 3,085,390 101,000

NET ASSETS at the end of the period..................................... $ 3,237,293 $ 3,085,390
</TABLE>

*Commencement of Operations

See Accompanying Notes to the Financial Statements.

16
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO

Financial Highlights

<TABLE>
<CAPTION>
Six months ended Period from
May 31, 1997 December 15, 1995* to
(Unaudited) November 30, 1996
<S> <C> <C>
Net assets, end of period (000's) ..................... $ 3,237 $ 3,085

Ratio of expenses to average net assets................ 2.00% (a)(b) 2.00% (a)(b)
Ratio of net investment loss to average net assets..... (0.26%) (a)(b) (0.44%) (a)(b)

Portfolio turnover rate................................ 52.84% 26.31% (c)

Average commission rate paid........................... $ 0.0163 (d) $ 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) for the period from December 15, 1995 (commencement
of operations) to November 30, 1996 and 7.91 percentage points
(annualized) for the six months from December 1, 1996 to May 31, 1997.
(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.

17
<PAGE>

FIRST GLOBAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Notes to Financial Statements
May 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION

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

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

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

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

A) SECURITY VALUATIONS:

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

18
<PAGE>

NOTE 2 - CONTINUED

B) INVESTMENT INCOME AND SECURITY TRANSACTIONS:

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

C) FOREIGN CURRENCY TRANSACTIONS:

The Equity Portfolio's investment valuations 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.

19
<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 six
months ended May 31, 1997, the Manager waived its entire fee as adviser and
reimbursed the Equity Portfolio in the aggregate amount of $124,301.

20
<PAGE>

NOTE 3 - CONTINUED

The Manager has entered into a subadvisory agreement with AIG Global, an
indirect 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. There have been no such fees paid through the six months ended May 31,
1997.

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 six months ended May 31,
1997.

PFPC International Ltd. serves as the Equity Portfolio's administrator and
accounting agent. State Street Bank and Trust Company serves as custodian of
the Equity Portfolio's assets.

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

21
<PAGE>

NOTE 4 - SECURITIES TRANSACTIONS

For the six months ended May 31, 1997, purchases of portfolio securities (other
than short-term securities) were $1,554,327. Sales of portfolio securities were
$1,882,468.

22
<PAGE>

AIG RETIREE FUND - 2003

Portfolio of Investments
May 31,1997 (Unaudited)

<TABLE>
<CAPTION>
Principal Maturity Value
Amount Description Date Yield * (Note 2a)
---------- ---------------------- -------- -------- ------------
US TREASURY BONDS - 69.7%
<S> <C> <C> <C> <C>
$ 125,000 US Zero Coupon Bond............................. 08/15/03 6.86% $ 83,759
400,000 US Zero Coupon Bond............................. 11/15/03 6.74% 263,572
500,000 US Zero Coupon Bond............................. 11/15/03 6.73% 329,464
400,000 US Zero Coupon Bond............................. 11/15/03 6.82% 263,572
300,000 US Zero Coupon Bond............................. 11/15/03 7.00% 197,679
300,000 US Zero Coupon Bond............................. 11/15/03 6.86% 197,679
300,000 US Zero Coupon Bond............................. 11/15/03 6.84% 197,679
300,000 US Zero Coupon Bond............................. 11/15/03 6.52% 197,679
300,000 US Zero Coupon Bond............................. 11/15/03 6.50% 197,679
200,000 US Zero Coupon Bond............................. 11/15/03 7.01% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.79% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.66% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.56% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.49% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.16% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.10% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.04% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 6.25% 131,786
200,000 US Zero Coupon Bond............................. 11/15/03 5.96% 131,786
100,000 US Zero Coupon Bond............................. 11/15/03 6.55% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.53% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.48% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.45% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.42% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.41% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.37% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.28% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.22% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.21% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.14% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.05% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 6.03% 65,893
100,000 US Zero Coupon Bond............................. 11/15/03 5.99% 65,893

Total Investments(Cost $4,175,898***)...................................... 4,169,124

Other Assets in Excess of Liabilities** - 30.3%............................ 1,810,915
NET ASSETS - 100%.......................................................... $ 5,980,039
</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 depreciation
of $6,774.

See Accompanying Notes to the Financial Statements.

1
<PAGE>

AIG RETIREE FUND - 2003

Statement of Assets and Liabilities
May 31, 1997 (Unaudited)

<TABLE>
<S> <C>
ASSETS:
Investment in securities at value (Cost $4,175,898)..............................$ 4,169,124
Investment in Equity Portfolio at value.......................................... 1,759,482
Cash............................................................................. 72,784
Receivable for fund shares sold.................................................. 42,994
Deferred organization costs...................................................... 22,494
Interest Receivable.............................................................. 464
Total Assets............................................................... 6,067,342

LIABILITIES:
Accrued legal fees............................................................... 15,411
Accrued distribution fees........................................................ 13,264
Accrued shareholder services fees................................................ 7,975
Accrued audit fees............................................................... 7,478
Accrued printing fees............................................................ 7,375
Accrued insurance fees........................................................... 6,563
Accrued registration fees........................................................ 6,488
Accrued shareholders communication fees.......................................... 5,349
Accrued transfer agent fees...................................................... 3,856
Accrued directors fees .......................................................... 3,799
Accrued administration fees...................................................... 3,027
Payable for fund shares redeemed................................................. 2,652
Due to Manager................................................................... 2,186
Accrued miscellaneous fees....................................................... 1,880
Total Liabilities.......................................................... 87,303

NET ASSETS...........................................................................$ 5,980,039

COMPOSITION OF NET ASSETS:
Capital paid in..................................................................$ 5,694,795
Undistributed net investment income.............................................. 90,023
Undistributed net realized gain on investments
and foreign currency transactions........................................... 59,968
Net unrealized appreciation of investments....................................... 135,253
NET ASSETS...........................................................................$ 5,980,039

Shares Outstanding................................................................... 614,566

Net asset value and redemption price per share ($5,980,039 / 614,566 shares).........$ 9.73
Maximum offering price per share (Net asset value plus sales
charge - 4.75% of maximum offering price)........................................$ 10.22
</TABLE>

See Accompanying Notes to the Financial Statements.

<PAGE>

AIG RETIREE FUND - 2003

Statement of Operations
For the six months ended May 31, 1997 (Unaudited)

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................................$ 149,166
Net Investment Loss Allocated from the Equity Portfolio.................. (2,294)
146,872

EXPENSES:
Transfer agent expense........................................ 23,624
Administrative expense........................................ 20,540
Distribution expense.......................................... 15,950
Legal expense................................................. 9,000
Shareholder services expense.................................. 7,975
Printing expense.............................................. 7,899
Directors fees ............................................... 7,500
Insurance expense............................................. 6,563
Shareholder communication expense............................. 5,349
Investment advisory expense................................... 4,619
Registration expense.......................................... 4,564
Organization expense.......................................... 3,106
Audit expense................................................. 2,500
Custodian expense............................................. 449
Miscellaneous expenses........................................ 2,249

Total expenses before reductions........................ 121,887

Less: Expense reimbursements by Manager....................... (65,778)
Less: Advisory fee waived by Manager.......................... (4,619)
Less: Fee waivers by Transfer Agent........................... (3,543)
Less: Fee waivers by Administrator............................ (3,142)

Total Fee waivers and expense reimbursements ............. (77,082)

Net expenses............................................................. 44,805

Net Investment Income............................................. 102,067

REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio............................................... 60,923
Net realized gain on investments from the Fund........................... 316
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio......................... 49,455
Net change in unrealized depreciation of investments from the Fund....... (184,522)
Net change in realized and unrealized loss on investments and
foreign currency transactions................................... (73,828)

Net Increase in Net Assets Resulting from Operations.....$ 28,239
</TABLE>

See Accompanying Notes to the Financial Statements.

<PAGE>

AIG RETIREE FUND - 2003

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
Six months ended Period from
May 31, 1997 April 17, 1996* to
(Unaudited) November 30, 1996
<S> <C> <C>
OPERATIONS:
Net investment income....................................................................$ 102,067 $ 53,901
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio........................................................... 60,923 26,992
Net realized gain on investments from the Fund........................................... 316 0
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio..................................... 49,455 92,574
Net change in unrealized (depreciation) appreciation on
investments from the Fund......................................................... (184,522) 177,748
Net Increase in Net Assets Resulting from Operations............................... 28,239 351,215

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income..................................................... (65,949) 0
Distributions from net realized gain..................................................... (28,265) 0
Total dividends and distributions to shareholders................................... (94,214) 0

FUND SHARE TRANSACTIONS:
Net proceeds from shares subscribed...................................................... 1,122,896 6,041,162
Net proceeds from shares reinvested...................................................... 23,407 0
Cost of shares redeemed.................................................................. (1,176,413) (316,253)
Net (Decrease) Increase in Net Assets Resulting from Fund Share Transactions....... (30,110) 5,724,909

Total (Decrease) Increase in Net Assets..................................... (96,085) 6,076,124

Net assets at the beginning of the period.................................................... 6,076,124 0

NET ASSETS at the end of the period (including undistributed
net investment income of $90,023 and $51,969 respectively)...............................$ 5,980,039 $ 6,076,124
</TABLE>

*Commencement of Operations

See Accompanying Notes to the Financial Statements.

4
<PAGE>

AIG RETIREE FUND - 2003

- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------

Six months ended Period from
May 31, 1997 April 17, 1996* to
(Unaudited) November 30, 1996
<S> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period....................................$ 9.85 $ 9.15

Income from investment operations:
Net investment income............................................... 0.16 0.09
Net realized and unrealized (loss) gain on investments ............. (0.12) 0.61
Total income from investment operations...................... 0.04 0.70

Dividends and distributions to shareholders:
Dividends from net investment income................................ (0.11)
Distributions from net realized gain................................ (0.05) ---
Total dividends and distributions to shareholders............ (0.16) ---

Net asset value, end of period..........................................$ 9.73 $ 9.85

Total Return............................................................ 0.41% (a) 7.65% (a)

Ratios / Supplemental Data:
Net assets, end of period (000's).......................................$ 5,980 $ 6,076

Ratio of expenses to average net assets................................. 1.95% (b)(c) 1.95% (b)(c)
Ratio of net investment income to average net assets.................... 3.17% (b)(c) 2.96% (b)(c)

Portfolio turnover rate ................................................ 13.88% 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) for the period from April 17, 1996 (commencement of
operations) to November 30, 1996 and 4.58 percentage points (annualized) for
the six months from December 1, 1996 to May 31, 1997.
(c) Annualized.

See Accompanying Notes to the Financial Statements.

5
<PAGE>

AIG RETIREE FUND - 2003

- --------------------------------------------------------------------------------
Notes to Financial Statements
May 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------

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 May 31, 1997, the
Company operated as a series company comprising two funds. The accompanying
financial statements and notes are those of the AIG Retiree Fund - 2003 (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, 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 54.4% in
the net assets of the Equity Portfolio at May 31, 1997. 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>

AIG RETIREE FUND - 2003

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

A) SECURITY VALUATIONS:

B) INVESTMENT INCOME AND SECURITY TRANSACTIONS:

C) DIVIDENDS AND DISTRIBUTIONS:

7
<PAGE>

AIG RETIREE FUND - 2003

NOTE 2 - CONTINUED

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 and/or reimburse the Fund's
expenses to the extent that total Fund operating expenses exceed 1.95% of
average daily net assets until at least March 31, 1998, subject to reimbursement
by the Fund in subsequent years under certain circumstances. For the six months
ended May 31, 1997, the Manager waived its entire fee as adviser and reimbursed
the Fund in the aggregate amount of $124,812 which is inclusive of waiver
amounts at the Equity Portfolio and Fund level.

8
<PAGE>

AIG RETIREE FUND - 2003

NOTE 3 - CONTINUED

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 six months ended May 31, 1997, PFPC International Ltd. voluntarily
waived an aggregate $3,142 of its fee. PFPC Inc. serves as the Fund's transfer
agent and dividend disbursing agent. For the six months ended May 31, 1997,
PFPC Inc. voluntarily waived $3,543 of its fee. PNC Bank, N.A. serves as
custodian of the Fund's assets.

9
<PAGE>

AIG RETIREE FUND - 2003

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 1, 1996 April 17, 1996*
to May 31, 1997 to November 30,1996
--------------- -------------------
Shares Amount Shares Amount
------- ------ ------ ------

Shares sold........ 117,568 $1,122,896 651,040 $6,041,162

Shares reinvested.. 2,436 23,407 0 0

Shares redeemed....... (122,225) (1,176,413) (34,253) (316,253)
--------- ----------- -------- ---------

Net (decrease)/increase....... (2,221) $(30,110) 616,787 $5,724,909
======= ========= ======= ==========

*Commencement of Operations

NOTE 5 - SECURITIES TRANSACTIONS

For the six months ended May 31, 1997 purchases of U.S. Treasury zero coupon
securities (other than short-term securities) were $657,264. For the six months
ended May 31, 1997 sales of US Treasury zero coupon securities (other than
short-term securities) were $622,969.

DIVIDEND DISTRIBUTION

On December 10, 1996, the Board of Directors of the Fund declared a dividend of
$94,214, or $0.16 per share, payable on December 13, 1996 to shareholders of
record on December 9, 1996.