<PAGE>
AIG ALL AGES FUNDS, INC.
AIG CHILDREN'S WORLD FUND-2005
AIG RETIREE FUND-2003
Annual Report to Shareholders
November 30, 1997
This report is not to be distributed unless preceded or accompanied by an AIG
Children's World Fund-2005 or AIG Retiree Fund-2003 prospectus
AIG All Ages Funds, Inc.
505 Carr Road
Wilmington, DE 19809
800-862-3984
<PAGE>
January 29, 1998
Dear Shareholder:
We are pleased to send you the 1997 Annual Report to Shareholders for the AIG
All Ages Funds. The report provides you with valuable information about your
Fund's performance and investments for the fiscal year ended November 30, 1997.
As you know, during the past year the shareholders of the AIG Children's World
Fund-2005 and the AIG Retiree Fund-2003 were presented with a proposal to
liquidate those Funds and dissolve AIG All Ages Funds, Inc. pursuant to a Plan
of Liquidation and Dissolution (the "Plan"), which was described in a proxy
statement sent to shareholders on November 12, 1997. At the shareholders
meeting held on January 6, 1998, this proposal was approved by a majority of the
outstanding shares of each Fund. In accordance with the Plan, a liquidating
distribution to the shareholders of each Fund, consisting of all of that Fund's
assets, was made on January 26, 1998.
The terms of the Plan included an amendment of the guarantee provided to each
Fund by AIG Capital Management Corp., the Funds' investment manager (the
"Manager"), to allow for the guarantee to apply to the liquidating distribution.
Immediately prior to the liquidating distribution, the Manager made a payment to
each Fund pursuant to these guarantees, in an amount sufficient to ensure that
the proceeds received by all investors in the liquidating distribution were
equal to at least their original investment in Fund shares held until the
liquidation, including any front-end sales charges paid.
A notice explaining the liquidating distribution was included with the
liquidation proceeds sent to shareholders. However, if you have any further
questions, please speak with your financial representative, or our distributor's
Investor Services Unit at 1-800-862-3984.
It has been our pleasure to serve you.
Sincerely,
AIG Capital Management Corp.
<PAGE>
OUR INVESTMENT PROCESS
The investment process of the AIG Children's World Fund - 2005 (the "Children's
Fund"), the AIG Retiree Fund - 2003 (the "Retiree Fund") (collectively the
"Funds") and the First Global Equity Portfolio (the "Equity Portfolio"), a
globally diversified equity fund in which each Fund invests a portion of its
assets, is managed by the Investment Committee of AIG Capital Management Corp.
(the "Advisor"), which consists of regional portfolio managers from around the
world. This committee meets on a quarterly basis and conducts monthly
conference calls to implement its global asset allocation process. The
Investment Committee's analysis includes economic, political and market issues
in the United States, Canada, Europe, Japan, Latin America, Southeast Asia and
Australia. This analysis results in a ranking of several variables driving the
relative performance of global markets. Factors examined include interest
rates, earnings momentum, liquidity, net equity demand, valuations, political
outlook, risks and forecasts.
PERFORMANCE REVIEW
In pursuit of its two investment objectives, each Fund invests a portion of its
assets in U.S. Treasury zero coupon securities and invests the balance of its
assets in the Equity Portfolio. Therefore, the investment results of the Fund
are impacted significantly by changes in domestic interest rates as well as by
market movements in the global equity markets in which the Equity Portfolio
invests. At November 30, 1997, approximately 33% of the assets of the
Children's Fund and approximately 25% of the assets of the Retiree Fund were
invested in the Equity Portfolio.
For the fiscal year ended November 30, 1997, the total return was 1.52% and
0.69% for the Children's Fund and the Retiree Fund, respectively (assuming
deduction of the maximum front-end sales charge). During this same period the
Lehman Brothers Long Term Government/Corporate Bond Index appreciated 9.40% and
global equities, as measured by the Morgan Stanley Capital International World
Index, appreciated 12.99%.
Strong U.S. economic growth initially pushed long term interest rates upward
during the first quarter of the Funds' fiscal year. However, supported by a
steady stream of favorable news on inflation, rates started to decline during
the second quarter and continued to do so throughout the year. As a result, the
value of each Fund's holdings of Treasury securities increased, positively
contributing to total return. The performance picture for global equity
markets, however, differed dramatically by region. For the period as a whole,
stock market gains were very strong in North America, Latin America and Europe,
while the plunge in Asian stock markets and the sluggishness in Japan held back
global-based total return substantially. The aggressive allocation of the
Equity Portfolio to Latin American equity markets compensated for some of the
underperformance generated from the relative underweighting of North America.
Performance of the Equity Portfolio was also aided by an overweighting of
Europe. However, the full benefit of this allocation was offset by a biased
sector allocation to small manufacturing companies, which performed poorly in
comparison to the financial sector, which led the region due to high merger
activity. An overweighting of South East Asia had a significant negative impact
on the Equity Portfolio's overall performance.
<PAGE>
Growth of an assumed $10,000 investment in the AIG Children's World Fund - 2005
from 12/15/95 to 11/30/97 (Adjusted for deduction of maximum front-end sales
charge)*
[THE FOLLOWING CHART APPEARED IN THE PRINTED MATERIAL AS A LINE GRAPH]
Lehman Brothers Morgan Stanley AIG
Long Term Capital Children's
Gov't/Corp. International World
Bond Index World Index Fund - 2005
--------------- -------------- -----------
12/15/95 10,000 10,000 9,525
12/29/95 10,173 10,131 9,525
1/31/96 10,176 10,136 9,535
2/29/96 9,721 10,380 9,556
3/29/96 9,557 10,555 9,577
4/30/96 9,409 10,805 9,598
5/31/96 9,370 10,816 9,535
6/28/96 9,564 10,873 9,629
7/31/96 9,570 10,491 9,546
8/30/96 9,464 10,613 9,567
9/30/96 9,729 11,031 9,848
10/31/96 10,104 11,110 10,066
11/29/96 10,428 11,549 10,410
12/31/96 10,187 11,690 10,233
1/31/97 10,128 11,826 10,170
2/28/97 10,155 11,594 10,170
3/31/97 9,902 11,975 9,942
4/30/97 10,122 12,717 10,139
5/31/97 10,244 13,353 10,430
6/30/97 10,443 13,970 10,669
7/31/97 11,040 13,037 11,156
8/31/97 10,747 13,037 10,731
9/30/97 11,025 13,748 11,032
10/31/97 11,336 13,026 10,970
11/30/97 11,479 13,259 11,042
Growth of an assumed $10,000 investment in the AIG Retiree Fund - 2003 from
4/17/96 to 11/30/97 (Adjusted for deduction of maximum front-end sales charge)*
[THE FOLLOWING CHART APPEARED IN THE PRINTED MATERIAL AS A LINE GRAPH]
Lehman Brothers Morgan Stanley
Long Term Capital AIG
Gov't/Corp. International Retiree
Bond Index World Index Fund - 2003
--------------- -------------- -----------
4/17/96 10,000 10,000 9,525
4/30/96 9,957 10,309 9,525
5/31/96 9,916 10,320 9,483
6/28/96 10,121 10,374 9,567
7/31/96 10,128 10,009 9,535
8/30/96 10,015 10,126 9,525
9/30/96 10,295 10,524 9,775
10/31/96 10,692 10,600 9,993
11/29/96 11,035 11,196 10,254
12/31/96 10,781 11,018 10,087
1/31/97 10,717 11,152 10,056
2/28/97 10,746 11,283 10,066
3/31/97 10,478 11,062 9,879
4/30/97 10,711 11,425 10,056
5/31/97 10,840 12,133 10,285
6/30/97 11,051 12,740 10,483
7/31/97 11,682 13,328 10,889
8/31/97 11,372 12,439 10,566
9/30/97 11,666 13,117 10,795
10/31/97 11,995 12,428 10,785
11/30/97 12,148 12,650 10,816
<PAGE>
*The graphs on the previous page show the performance of a hypothetical
investment of $10,000 in each Fund, made on the date the Fund commenced
operations, and held through November 30, 1997. The performance of each Fund
presented in the graphs assumes the deduction of the maximum front-end sales
charge at the time the investment in the Fund was made, assumes the reinvestment
of dividends and distributions and reflects the effect of certain fee waivers
and expense reimbursements. The graphs also show the performance of the Lehman
Brothers Long Term Government/Corp. Bond Index and the Morgan Stanley Capital
International World Index for the same periods. Note that indices have inherent
performance advantages over any fund, as they do not have cash in their
portfolio, incur no operating expenses and impose no sales charges. Indices are
not available for direct investment. Past performance of a Fund is not
predictive of future results. Investment return and principle value of an
investment in a Fund will fluctuate and shares, when redeemed, may be worth more
or less than their original cost.
The Lehman Brothers Long Term Government/Corporate Bond Index is an unmanaged
index comprised of intermediate and long-term government and investment grade
corporate debt securities. The Morgan Stanley Capital International World Index
is a capitalization-weighted measure of global stock markets including the U.S.,
Canada, Europe, Australia and the Far East.
- --------------------------------------------------------------------------------
Average Annual Compound Total Return *
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
Periods Ended November 30, 1997 1 Year Inception Date
- ------------------------------ ------ --------- ---------
<S> <C> <C> <C>
AIG Children's World Fund - 2005 1.52% 5.57% 12/15/95
----- ----- --------
AIG Retiree Fund - 2003 0.69% 4.25% 4/17/96
----- ----- -------
</TABLE>
* Assumes deduction of maximum front-end sales charge.
- ------------------------------------------------------------------------------
Top 10 holdings of First Global Equity Portfolio ("FGEP") at November 30, 1997
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Holding % of FGEP Country
- ------- --------- -------
<S> <C> <C>
Veba AG 4.14 Germany
Koninklijke Ahold NV 3.49 Netherlands
Royal Dutch Petroleum 3.27 Netherlands
Roche Holdings AG 3.13 Switzerland
Pacific Gas and Electric 3.08 U.S.
General Electric Co. 2.90 U.S.
Computer Associates 2.73 U.S.
Volkswagon AG 2.73 Germany
Allstate Corp. 2.62 U.S.
Flowers Industries, Inc. 2.61 U.S.
</TABLE>
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
AIG RETIREE FUND - 2003
Financial Statements November 30, 19
Table of Contents
Page
AIG Children's World Fund - 2005:
Portfolio of Investments.................... 1
Statement of Assets and Liabilities......... 2
Statement of Operations..................... 3
Statements 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:
Portfolio of Investments.................... 12
Statement of Assets and Liabilities......... 13
Statement of Operations..................... 14
Statements of Changes in Net Assets......... 15
Financial Highlights........................ 16
Notes to the Financial Statements........... 17-21
Report of Independent Accountants........... 22
First Global Equity Portfolio:
Portfolio of Investments.................... 23-25
Statement of Assets and Liabilities......... 26
Statement of Operations..................... 27
Statements of Changes in Net Assets........ 28
Financial Highlights........................ 29
Notes to the Financial Statements........... 30-34
Report of Independent Accountants........... 35
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
- -------------------------------------------------------------------------------
Portfolio of Investments
November 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DESCRIPTION DATE YIELD * (NOTE 2A)
------------ ---------------------- -------------- ------------ ---------------
US TREASURY BONDS - 67.2%
<S> <C> <C> <C>
$ 1,260,000 US Zero Coupon Bond................................ 11/15/05 6.76% $ 790,902
300,000 US Zero Coupon Bond................................ 11/15/05 7.00% 188,310
200,000 US Zero Coupon Bond................................ 11/15/05 6.97% 125,540
200,000 US Zero Coupon Bond................................ 11/15/05 6.97% 125,540
200,000 US Zero Coupon Bond................................ 11/15/05 7.13% 125,540
100,000 US Zero Coupon Bond................................ 11/15/05 6.39% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.16% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.24% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.33% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.60% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.65% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.10% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.75% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.91% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.97% 62,770
100,000 US Zero Coupon Bond................................ 11/15/05 6.67% 62,770
60,000 US Zero Coupon Bond................................ 11/15/05 6.39% 37,662
60,000 US Zero Coupon Bond................................ 11/15/05 6.37% 37,662
50,000 US Zero Coupon Bond................................ 11/15/05 6.00% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.26% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.22% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.22% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.00% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.51% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.86% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.48% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.60% 31,385
50,000 US Zero Coupon Bond................................ 11/15/05 6.37% 31,385
---------------
TOTAL INVESTMENTS (COST $2,295.789***) 67.2%...................................... 2,435,476
---------------
Other Assets in Excess of Liabilities** - 32.8%................................... 1,186,555
---------------
NET ASSETS - 100%................................................................. $ 3,622,031
===============
</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 $139,687.
See Accompanying Notes to the Financial Statements.
1
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
November 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities at value (Cost $2,295,789)..............$ 2,435,476
Investment in Equity Portfolio at value.......................... 1,201,964
Cash............................................................. 7,977
------------
Total Assets............................................... 3,645,417
------------
LIABILITIES:
Accrued printing fees............................................ 6,348
Accrued audit fees............................................... 5,000
Accrued directors fees .......................................... 3,750
Due to Manager................................................... 3,059
Accrued transfer agent fees...................................... 2,502
Accrued administration fees...................................... 829
Accrued shareholder services fees................................ 694
Accrued miscellaneous fees....................................... 1,204
------------
Total Liabilities............................................. 23,386
------------
NET ASSETS...........................................................$ 3,622,031
============
COMPOSITION OF NET ASSETS:
Capital paid in..................................................$ 3,172,257
Undistributed net investment income.............................. 97,692
Undistributed net realized gain on investments
and foreign currency transactions........................... 111,149
Net unrealized appreciation on investments....................... 240,933
------------
NET ASSETS...........................................................$ 3,622,031
============
Shares Outstanding................................................... 347,635
============
Net asset value and redemption price per share ($3,622,031 / 347,635 $ 10.42
============
Maximum offering price per share (Net asset value plus sales
charge - 4.75% of maximum offering price)........................$ 10.94
============
</TABLE>
See Accompanying Notes to the Financial Statements.
2
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
- -------------------------------------------------------------------------------
Statement of Operations
For the year ended November 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest........................................................................................... $ 163,947
Net Investment Loss Allocated from the Equity Portfolio............................................ (15,534)
-------------
148,413
-------------
EXPENSES:
Organization expense............................................................... $ 56,399
Transfer agent expense............................................................. 47,410
Administration expense............................................................. 38,683
Distribution expense............................................................... 16,604
Legal expense...................................................................... 15,072
Directors fees .................................................................... 15,000
Registration expense............................................................... 14,411
Insurance expense.................................................................. 13,037
Printing expense................................................................... 10,000
Audit expense...................................................................... 8,750
Investment advisory expense........................................................ 5,069
Custodian expense.................................................................. 393
Shareholder communication expense.................................................. 247
Miscellaneous expenses............................................................. 4,511
-------------
Total expenses before reductions.............................................. 245,586
-------------
Less: Expense reimbursements by Manager............................................ (165,224)
Less: Fees waived by Administrator................................................. (18,000)
Less: Fees waived by Transfer Agent................................................ (16,500)
Less: Advisory fee waived by Manager............................................... (5,069)
-------------
Total fee waivers and expense reimbursements by the Manager and
Administrator................................................................ (204,793)
-------------
Net expenses........................................................................................ 40,793
-------------
Net Investment Income....................................................................... 107,620
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio.......................................................................... 90,032
Net realized gain on investments from the Fund...................................................... 18,085
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio.................................................... 13,554
Net change in unrealized appreciation on investments from the Fund.................................. 19,302
-------------
Net realized and unrealized gain on investments
and foreign currency transactions.................................................... 140,973
-------------
Net Increase in Net Assets Resulting from Operations............................... $ 248,593
=============
</TABLE>
See Accompanying Notes to the Financial Statements.
3
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year Period from
ended December 15, 1995* to
November 30, 1997 November 30, 1996
-------------------- -----------------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................... $ 107,620 $ 47,007
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio.................................................. 90,032 32,186
Net realized gain on investments from the Fund.................................. 18,085 ---
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio............................ 13,554 87,692
Net change in unrealized appreciation on
investments from the Fund................................................ 19,302 120,385
------------------- ---------------------
Net Increase in Net Assets Resulting From Operations...................... 248,593 287,270
------------------- ---------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income............................................ (50,871) ---
Distributions from net realized gain............................................ (35,218) ---
------------------- ---------------------
Total dividends and distributions to shareholders.......................... (86,089) ---
------------------- ---------------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares subscribed............................................. 680,709 3,623,996
Net proceeds from dividends reinvested.......................................... 51,658 ---
Cost of shares redeemed......................................................... (1,159,638) (124,468)
------------------- ---------------------
Net (Decrease) Increase in Net Assets Resulting from Fund Share Transactions (427,271) 3,499,528
------------------- ---------------------
Total (Decrease) Increase in Net Assets............................ (264,767) 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 $97,692 and $44,599 in 1997 and 1996, respectively).... $ 3,622,031 $ 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>
For the year Period from
ended December 15, 1995* to
November 30, 1997 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.......................................... 0.28 0.12
Net realized and unrealized gain on investments ............... 0.36 0.73
-------------------- ---------------------
Total income from investment operations................. 0.64 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..................................... $ 10.42 $ 10.00
==================== =====================
TOTAL RETURN (a)................................................... 6.60% 9.29%
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's).................................. $ 3,622 $ 3,887
Ratio of expenses to average net assets ........................... 11.51% 28.05% (b)
Ratio of expenses to average net assets (net of fee waivers and
expense reimbursements) 2.00% 2.00% (b)
Ratio of net investment loss to average net assets ................ (8.88%) (23.53% (b)
Ratio of net investment income to average net assets (net of fee
waivers and expense reimbursements) 0.63% 2.52% (b)
Portfolio turnover rate ........................................... 9.12% 0.00%
</TABLE>
- --------------
*Commencement of Operations.
(a) Calculated without deduction of sales charges.
(b) Annualized.
See Accompanying Notes to the Financial Statements.
5
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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,
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 were offered to investors only through September 30, 1997
(the"Offering Period") and since that date, the Fund has been closed to new
investments other than reinvestments of distributions.
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 52.47% in
the net assets of the Equity Portfolio at November 30, 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 CHILDREN'S WORLD FUND - 2005
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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:
U.S. Treasury zero coupon securities are valued at the last reported bid price.
During the Offering Period, they had been valued at the average of the last
reported bid and ask prices. 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, 1997, the Fund decreased undistributed net
investment income by $3,657 and increased undistributed net realized capital
gain on investments and foreign currency transactions by $3,657. 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, 1997
______________________________________________________________________________
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
were being amortized on a straight line basis over a five year period beginning
December 15, 1995. Due to the decision to liquidate the Fund, all remaining
organizational costs were expensed in 1997. The unamortized balance of $43,985
has been reimbursed by the Manager due to the plan to liquidate the Fund, as
discussed in note 6 below. The total organisation expense for the year ended
November 30, 1997 was $56,399.
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. For the year ended
November 30, 1997, the Manager waived its entire fee as adviser and reimbursed
the Fund in the aggregate amount of $170,293.
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>
AIG CHILDREN'S WORLD FUND - 2005
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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 year ended November 30, 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 was authorized to pay the Distributor a distribution fee during the
Offering Period only at the annualized rate of up to 0.50% of the average daily
net assets of the Fund. The Plan terminated on the last day of the Offering
Period.
PFPC International Ltd. serves as the Fund's administrator and accounting agent.
For the year ended November 30, 1997, PFPC International Ltd. voluntarily waived
an aggregate $42,923 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 year ended November 30, 1997, PFPC Inc.
voluntarily waived an aggregate $17,265 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.
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.
9
<PAGE>
AIG CHILDREN'S WORLD FUND - 2005
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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.
<TABLE>
<CAPTION>
December 1, 1996 December 15,1995*
to November 30, 1997 to November 30,1996
-------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold..................... 69,870 $680,709 390,836 $3,623,996
Shares reinvested............... 5,330 51,658 - -
Shares redeemed................. (116,139) (1,159,638) (13,191) (124,468)
--------- ----------- -------- -----------
Net (decrease)/increase....... (40,939) $(427,271) 377,645 $3,499,528
========= =========== ======= ==========
</TABLE>
*Commencement of Operations
NOTE 5 - SECURITIES TRANSACTIONS
For the twelve months ended November 30, 1997 purchases of U.S. Treasury zero
coupon securities (other than short-term securities) were $359,636. For the
twelve months ended November 30, 1997 sales of US Treasury zero coupon
securities (other than short-term securities) were $524,294.
NOTE 6 - CESSATION OF ACTIVITY
At a meeting held on October 15, 1997, the Company's Board of Directors
unanimously approved the liquidation of each of the Fund and the AIG Retiree
Fund-2003 (the "Retiree Fund") series of the Company, and the subsequent
dissolution of the Company. To this end the Board approved submitting a plan of
liquidation and dissolution ("the Plan") to the shareholders of the Fund and the
Retiree Fund for their approval. At a shareholder's meeting held on January 6,
1998, a majority of the outstanding shares of each of the Fund and the Retiree
Fund approved the Plan. Accordingly, the Fund's portfolio of investments was
liquidated after January 6, 1998, and it is anticipated that the Fund will be
completely liquidated on or about January 31, 1998 and that the Company will be
dissolved as soon as practicable thereafter. The interests of shareholders in
the assets of the Fund will be fixed on the date prior to the liquidation of the
Fund, and on the liquidation date the Fund will make a ratable distribution of
its assets (consisting entirely of cash) to the shareholders. In connection with
the Plan, the Manager and the Company executed an amended guarantee agreement on
January 6, 1998, which has the effect of applying the original Manager's
guarantee (described in note 1 above) to the proceeds of the liquidation. The
Manager's obligations under the amended guarantee are backed by AIG. Pursuant
to the amended guarantee, the Manager will cause any amount due thereunder to be
paid to the Fund immediately prior to the liquidating distribution to
shareholders.
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, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for the year then ended and
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
audits.
We conducted our audits 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, 1997, 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 audits provide 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,
1997, the results of its operations for the year then ended, and the changes in
its net assets and the financial highlights for the year then ended and 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 9, 1998
11
<PAGE>
AIG RETIREE FUND - 2003
- -------------------------------------------------------------------------------
Portfolio of Investments
November 30,1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DESCRIPTION DATE YIELD * (NOTE 2A)
------------ ------------------- ----------- ----------- -----------------
US TREASURY BONDS - 75.3%
<S> <C> <C> <C>
$ 300,000 US Zero Coupon Bond................................ 11/15/03 6.52% $ 212,682
300,000 US Zero Coupon Bond................................ 11/15/03 6.74% 212,682
300,000 US Zero Coupon Bond................................ 11/15/03 6.50% 212,682
200,000 US Zero Coupon Bond................................ 11/15/03 5.96% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.04% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.10% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.16% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.66% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.74% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.82% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.49% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.56% 141,788
200,000 US Zero Coupon Bond................................ 11/15/03 6.82% 141,788
130,000 US Zero Coupon Bond................................ 11/15/03 6.79% 92,162
100,000 US Zero Coupon Bond................................ 11/15/03 6.14% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.28% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.37% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.53% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.55% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.21% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.22% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.03% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 5.99% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.05% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.25% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.25% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.45% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.41% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.42% 70,894
100,000 US Zero Coupon Bond................................ 11/15/03 6.48% 70,894
60,000 US Zero Coupon Bond................................ 11/15/03 6.21% 42,535
-----------------
TOTAL INVESTMENTS(COST $3,218,291***)-75.3%............................................ 3,324,928
-----------------
Other Assets in Excess of Liabilities** - 24.7%........................................ 1,088,145
-----------------
NET ASSETS - 100%...................................................................... $ 4,413,073
=================
</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 $106,637.
See Accompanying Notes to the Financial Statements.
12
<PAGE>
AIG RETIREE FUND - 2003
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
November 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment in securities at value (Cost $3,218,291).................................... $ 3,324,928
Investment in Equity Portfolio at value................................................ 1,087,633
Cash................................................................................... 37,086
-------------
Total Assets..................................................................... 4,449,647
-------------
LIABILITIES:
Accrued administration fees............................................................ 10,200
Accrued printing fees.................................................................. 6,277
Due to Manager......................................................................... 5,942
Accrued audit fees..................................................................... 5,000
Accrued directors fees ................................................................ 3,750
Accrued transfer agent fees............................................................ 3,468
Accrued shareholder services fees...................................................... 858
Accrued miscellaneous fees............................................................. 1,079
-------------
Total Liabilities................................................................ 36,574
-------------
NET ASSETS................................................................................. $ 4,413,073
=============
COMPOSITION OF NET ASSETS:
Capital paid in........................................................................ $ 3,841,938
Undistributed net investment income.................................................... 161,790
Undistributed net realized gain on investments
and foreign currency transactions................................................. 172,903
Net unrealized appreciation of investments............................................. 236,442
=============
NET ASSETS................................................................................. $ 4,413,073
=============
SHARES OUTSTANDING......................................................................... 431,128
=============
Net asset value and redemption price per share ($4,413,073 / 431,128 shares)............... $ 10.24
=============
Maximum offering price per share (Net asset value plus sales
charge - 4.75% of maximum offering price).............................................. $ 10.75
=============
</TABLE>
See Accompanying Notes to the Financial Statements.
13
<PAGE>
AIG RETIREE FUND - 2003
- -------------------------------------------------------------------------------
Statement of Operations
For the year ended November 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.................................................................................................. $ 265,859
Net Investment Loss Allocated from the Equity Portfolio................................................... (6,077)
-------------
259,782
-------------
EXPENSES:
Transfer agent expense.................................................................... $ 46,501
Administrative expense.................................................................... 40,459
Organization expense...................................................................... 25,600
Distribution expense...................................................................... 24,927
Registration expense...................................................................... 19,739
Directors fees ........................................................................... 15,000
Legal expense............................................................................. 14,341
Shareholder services expense.............................................................. 14,411
Insurance expense......................................................................... 13,071
Printing expense.......................................................................... 10,000
Audit expense............................................................................. 8,750
Investment advisory expense............................................................... 8,296
Custodian expense......................................................................... 655
Shareholder communication expense......................................................... 231
Miscellaneous expenses.................................................................... 4,498
-------------
Total expenses before reductions.................................................... 246,479
-------------
Less: Expense reimbursements by Manager................................................... (132,253)
Less: Fees waived by Administrator........................................................ (13,500)
Less: Fees waived by Transfer Agent....................................................... (12,375)
Less: Advisory fee waived by Manager...................................................... (8,296)
-------------
Total fee waivers and expense reimbursements by the Manager and Administrator........ (166,424)
-------------
Net expenses............................................................................................... 80,055
-------------
Net Investment Income............................................................................... 179,727
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio................................................................................. 147,045
Net realized gain on investments from the Fund............................................................. 21,241
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio........................................................... 37,231
Net change in unrealized appreciation of investments from the Fund......................................... (71,111)
-------------
Net realized and unrealized gain on investments and
foreign currency transactions..................................................................... 134,406
-------------
Net Increase in Net Assets Resulting from Operations....................................... $ 314,133
=============
</TABLE>
See Accompanying Notes to the Financial Statements.
14
<PAGE>
AIG RETIREE FUND - 2003
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year Period from
ended April 17, 1996* to
November 30, 1997 November 30, 1996
--------------------- -----------------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................$ 179,727 $ 53,901
Net realized gain on investments and foreign currency transactions
from the Equity Portfolio................................................ 147,045 26,992
Net realized gain on investments from the Fund................................ 21,241 ---
Net change in unrealized appreciation on investments and foreign
currency transactions from the Equity Portfolio.......................... 37,231 92,574
Net change in unrealized (depreciation) appreciation on
investments from the Fund.............................................. (71,111) 177,748
------------------ ------------------
Net Increase in Net Assets Resulting from Operations.................... 314,133 351,215
------------------ ------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income.......................................... (65,949) ---
Distributions from net realized gain.......................................... (28,264) ---
------------------ ------------------
Total dividends and distributions to shareholders........................ (94,213) ---
------------------ ------------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares subscribed........................................... 1,284,702 6,041,162
Net proceeds from shares reinvested........................................... 23,407 ---
Cost of shares redeemed....................................................... (3,191,080) (316,253)
------------------ ------------------
Net (Decrease) Increase in Net Assets Resulting from Fund
Share Transactions..................................................... (1,882,971) 5,724,909
------------------ ------------------
Total (Decrease) Increase in Net Assets.......................... (1,663,051) 6,076,124
Net assets at the beginning of the period......................................... 6,076,124 ---
------------------ ------------------
NET ASSETS at the end of the period (including undistributed.
net investment income of $161,790 and $51,969 in 1997 and 1996, respectively).... $ 4,413,073 $ 6,076,124
================== ==================
</TABLE>
- -------------
*Commencement of Operations
See Accompanying Notes to the Financial Statements.
15
<PAGE>
AIG RETIREE FUND - 2003
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year Period from
ended April 17, 1996* to
November 30, 1997 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........................................ 0.44 0.09
Net realized and unrealized gain on investments ............. 0.11 0.61
------------------ ------------------
Total income from investment operations............... 0.55 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................................... $ 10.24 $ 9.85
================== ==================
TOTAL RETURN (a)................................................. 5.70% 7.65%
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................ $ 4,413 $ 6,076
Ratio of expenses to average net assets ......................... 7.65% 12.95% (b)
Ratio of expenses to average net assets (net of fee waivers and
expense reimbursements) 1.95% 1.95% (b)
Ratio of net investment loss to average net assets .............. (2.58% (8.04%)(b)
Ratio of net investment income to average net assets (net of fee
waivers and expense reimbursements) 3.12% 2.96% (b)
Portfolio turnover rate ......................................... 12.12% 0.00%
</TABLE>
- --------------
*Commencement of Operations
(a) Calculated without deduction of sales charges.
(b) Annualized.
See Accompanying Notes to the Financial Statements.
16
<PAGE>
AIG RETIREE FUND - 2003
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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,
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 were offered to investors only through September 30, 1997
(the "Offering Period") and since that date, the Fund has been closed to new
investments other than reinvestments of distributions.
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 47.48% in
the net assets of the Equity Portfolio at November 30, 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.
17
<PAGE>
AIG RETIREE FUND - 2003
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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:
U.S. Treasury zero coupon securities are valued at the last reported bid price.
During the Offering Period, they had been valued at the average of the last
reported bid and ask prices. 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, 1997, the Fund decreased undistributed net
investment income by $3,957 and increased undistributed net realized capital
gain on investments and foreign currency transactions by $3,957. These
differences are due to the reclassification of realized losses on foreign
currency contracts to ordinary income.
18
<PAGE>
AIG RETIREE FUND - 2003
___________________________________________________________________________
Notes to Financial Statements
November 30, 1997
___________________________________________________________________________
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 $32,000 incurred in connection with the organization of the Fund
were being amortized on a straight line basis over a five year period beginning
April 17, 1996. Due to the decision to liquidate the Fund, all remaining
organizational costs were expensed in 1997. The unamortized balance of $20,243
has been reimbursed by the Manager due to the plan to liquidate the Fund, as
discussed in note 6 below. The total organisation expense for the period ended
November 30, 1997 was $25,600.
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. For the year ended
November 30, 1997, the Manager waived its entire fee as adviser and reimbursed
the Fund in the aggregate amount of $140,549.
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.
19
<PAGE>
AIG RETIREE FUND - 2003
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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 year ended November 30, 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 was authorized to pay the Distributor a distribution fee during the
Offering Period only at the annualized rate of up to 0.50% of the average daily
net assets of the Fund. The Plan terminated on the last day of the Offering
Period.
PFPC International Ltd. serves as the Fund's administrator and accounting agent.
For the year ended November 30, 1997, PFPC International Ltd. voluntarily waived
an aggregate $37,442 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 year ended November 30, 1997, PFPC Inc.
voluntarily waived an aggregate $13,109 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.
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.
20
<PAGE>
AIG RETIREE FUND - 2003
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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.
<TABLE>
<CAPTION>
December 1,1996 April 17, 1996*
to November 30, 1997 to November 30,1996
-------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ -------
<S> <C> <C> <C> <C>
Shares sold..................... 133,726 $1,284,702 651,040 $6,041,162
Shares reinvested............... 2,436 23,407 - -
Shares redeemed................. (321,821) (3,191,080) (34,253) (316,253)
--------- ----------- ------- ---------
Net (decrease)/increase....... (185,659) $(1,882,971) 616,787 $5,724,909
========= ============ ======= ==========
</TABLE>
*Commencement of Operations
NOTE 5 - SECURITIES TRANSACTIONS
For the twelve months ended November 30, 1997 purchases of U.S. Treasury zero
coupon securities (other than short-term securities) were $697,988. For the
twelve months ended November 30, 1997 sales of US Treasury zero coupon
securities (other than short-term securities) were $1,788,552.
NOTE 6 - CESSATION OF ACTIVITY
At a meeting held on October 15, 1997, the Company's Board of Directors
unanimously approved the liquidation of each of the Fund and the AIG Children's
World Fund - 2005 (the "Children's Fund") series of the Company, and the
subsequent dissolution of the Company. To this end the Board approved
submitting a plan of liquidation and dissolution ("the Plan") to the
shareholders of the Fund and the Children's Fund for their approval. At a
shareholder's meeting held on January 6, 1998, a majority of the outstanding
shares of each of the Fund and the Children's Fund approved the Plan.
Accordingly, the Fund's portfolio of investments was liquidated after January 6,
1998, and it is anticipated that the Fund will be completely liquidated on or
about January 31, 1998 and that the Company will be dissolved as soon as
practicable thereafter. The interests of shareholders in the assets of the Fund
will be fixed on the date prior to the liquidation of the Fund, and on the
liquidation date the Fund will make a ratable distribution of its assets
(consisting entirely of cash) to the shareholders. In connection with the Plan,
the Manager and the Company executed an amended guarantee agreement on January
6, 1998, which has the effect of applying the original Manager's guarantee
(described in note 1 above) to the proceeds of the liquidation. The Manager's
obligations under the amended guarantee are backed by AIG. Pursuant to the
amended guarantee, the Manager will cause any amount due thereunder to be paid
to the Fund immediately prior to the liquidating distribution to shareholders.
21
<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 - 2005 (one of the funds
comprising AIG All Ages Funds, Inc.) as of November 30, 1997, the related
statement of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for the year then ended, and 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 audits.
We conducted our audits 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, 1997, 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 audits provide 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
Retiree Fund - 2003 of AIG All Ages Funds, Inc. as of November 30, 1997, the
results of its operations for the year then ended, and the changes in its net
assets and the financial highlights for the year then ended, and 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 9, 1998
22
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
Portfolio of Investments
November 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2A)
--------------- ------------ --------------
COMMON STOCKS - 90.7%
<S> <C> <C>
AUSTRALIA - 0.6%
News Corp Ltd............................................................................... 2,500 $ 13,377.
--------------
13,377
--------------
FRANCE - 6.0%
Castorama Dubois Investissement............................................................. 180 21,526
Generale des Eaux .......................................................................... 300 39,638
Generale des Eaux Warrants , Expire 5/2/01.................................................. 300 183
Schneider................................................................................... 450 24,087
Total SA B shares .......................................................................... 500 52,512
--------------
137,946
--------------
GERMANY - 6.9%
Veba AG..................................................................................... 1,600 94,794
Volkswagen AG............................................................................... 110 62,426
--------------
157,220
--------------
JAPAN - 9.4%
Advantest................................................................................... 20 1,384
Calsonic Corp............................................................................... 1,000 5,250
Chiba Bank.................................................................................. 2,000 7,804
Fanuc Ltd................................................................................... 400 15,044
Hitachi..................................................................................... 2,000 14,182
Japan Tobacco, Inc.......................................................................... 1 7,655
Kajima Corp................................................................................. 1,000 3,291
Kanaden Corp................................................................................ 1,000 4,552
Konami Co. Ltd.............................................................................. 200 5,140
Kuraray Co. ................................................................................ 1,000 8,619
Kyocera..................................................................................... 200 9,653
Mitsu Mining & Smelting..................................................................... 1,000 4,145
Mitsubishi Heavy Industries ................................................................ 1,000 3,933
Nikken Chemicals Co. Ltd.................................................................... 2,000 6,582
Nippon Chemi-Con Corp ...................................................................... 2,000 6,519
Nippon Express Co Ltd....................................................................... 2,000 10,468
Nippon Shokubai............................................................................. 2,000 10,061
Nippon Steel Corp........................................................................... 2,000 3,698
Nippon Telegraph and Telephone Corp......................................................... 2 16,455
Sanwa Bank Ltd.............................................................................. 1,000 10,970
Sony Corp................................................................................... 200 17,081
</TABLE>
See Accompanying Notes to the Financial Statements.
23
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
Portfolio of Investments - Continued
November 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2A)
--------------- ------------ --------------
<S> <C> <C>
JAPAN - Continued
Sumitomo................................................................................... 1,000 $ 6,597
Suzuki Motor Corp.......................................................................... 1,000 10,891
Takaoka Electric MFG Co. Ltd............................................................... 4,000 6,582
Tokio Marine and Fire...................................................................... 1,000 9,481
Tokyo Electric Power Co.................................................................... 200 3,589
Toto Ltd................................................................................... 100 917
Yuken Kogyo................................................................................ 2,000 4,529
--------------
215,072
--------------
NETHERLANDS - 8.5%
Hunter Douglas NV.......................................................................... 1,000 39,790
Koninklijke Ahold NV....................................................................... 3,000 79,982
Royal Dutch Petroleum...................................................................... 1,440 74,971
--------------
194,743
--------------
SINGAPORE - .6%
CM Telecom Intl............................................................................. 63,000 14,175
--------------
14,175
--------------
SPAIN - 1.5%
Corporacion Mapfre Compania................................................................. 700 34,173
--------------
34,173
--------------
SWEDEN - 1.7%
Volvo Ser A ................................................................................ 1,520 39,964
--------------
39,964
--------------
SWITZERLAND - 3.1%
Roche Holdings AG........................................................................... 8 71,600
--------------
71,600
--------------
UNITED KINGDOM - 8.3%
Cable and Wireless PLC ..................................................................... 5,000 45,321
Glynwed International PLC .................................................................. 6,500 25,133
Laporte PLC................................................................................. 3,000 32,045
National Westminster Bank................................................................... 3,500 52,954
Vaux Group PLC ............................................................................. 8,000 34,370
--------------
189,823
--------------
</TABLE>
See Accompanying Notes to the Financial Statements.
24
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
Portfolio of Investments - Continued
November 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2A)
--------------- ------------ --------------
<S> <C> <C>
UNITED STATES - 44.1%
Allstate Corp............................................................................... 700 $ 60,113
Amoco Corp.................................................................................. 600 54,000
Bellsouth Corp.............................................................................. 900 49,275
Computer Associates......................................................................... 1,200 62,475
Corning, Inc................................................................................ 900 38,194
Deere and Co................................................................................ 800 43,850
Flowers Industries, Inc..................................................................... 3,000 59,813
General Electric Co......................................................................... 900 66,375
General Motors Corp......................................................................... 800 48,800
IBM......................................................................................... 500 54,781
Medimmune, Inc.............................................................................. 1,500 57,375
Merck and Co., Inc.......................................................................... 500 47,281
Pacific Gas and Electric.................................................................... 2,500 70,625
Pepsico, Inc. .............................................................................. 1,300 47,938
Philip Morris Co............................................................................ 1,100 47,850
Provident Life and Accident Insurance....................................................... 1,600 52,500
Schlumberger Ltd............................................................................ 600 49,387
Time Warner, Inc............................................................................ 1,000 58,250
Union Pacific Corp.......................................................................... 700 42,000
--------------
1,010,882
--------------
TOTAL COMMON STOCKS (COST $1,847,648) - 90.7% ................................................... 2,078,975
Other Assets in Excess of Liabilities - 9.3%..................................................... 211,803
--------------
NET ASSETS - 100% ............................................................................... $ 2,290,778
==============
</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: $ 354,387
Unrealized depreciation: (123,060)
--------------
Net unrealized appreciation: $ 231,327
==============
See Accompanying Notes to the Financial Statements.
25
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities
November 30, 1997
- ------------------------------------------------------------------------------------------------------------------------
ASSETS:
<S> <C>
Investment in securities at value (cost $1,847,648) ................................................. $ 2,078,975
Cash............................................................................................. 261,802
Dividends receivable............................................................................. 5,225
-------------
Total Assets .............................................................................. 2,346,002
-------------
LIABILITIES:
Accrued administration fees...................................................................... 21,084
Accrued audit fees .............................................................................. 15,000
Accrued directors fees .......................................................................... 7,500
Due to Manager ................................................................................. 5,614
Accrued custodian fees .......................................................................... 4,305
Accrued miscellaneous fees....................................................................... 1,721
-------------
Total Liabilities......................................................................... 55,224
-------------
NET ASSETS........................................................................................... $ 2,290,778
=============
COMPOSITION OF NET ASSETS:
Capital paid in.................................................................................. $ 2,059,643
Net unrealized appreciation on investments and foreign
currency transactions..................................................................... 231,135
-------------
NET ASSETS........................................................................................... $ 2,290,778
=============
</TABLE>
See Accompanying Notes to the Financial Statements.
26
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Statement of Operations
For the year ended November 30, 1997
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C>
Dividends (net of foreign taxes of $4,325).......................................................... $ 48,784
------------
EXPENSES:
Organization expense................................................................................ 163,636
Administrative expense.............................................................................. 115,513
Investment advisory expense......................................................................... 36,330
Directors fees ..................................................................................... 30,000
Insurance expense................................................................................... 26,142
Audit expense....................................................................................... 15,000
Custodian expenses.................................................................................. 11,330
Legal expense....................................................................................... 5,151
Miscellaneous expenses.............................................................................. 8,500
------------
Total expenses before reductions................................................................ 411,602
------------
Less: Expense reimbursements by Manager............................................................. (265,846)
Less: Fees waived by Administrator.................................................................. (48,887)
Less: Advisory fees waived by Manager............................................................... (36,330)
------------
Total fee waivers and expense reimbursements by the Manager and Administrator.................. (351,063)
------------
Net expenses........................................................................................ 60,539
------------
Net Investment Loss ....................................................................... (11,755)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments.................................................................... 222,385
Net realized loss on foreign currency transactions.................................................. (7,616)
Net change in unrealized appreciation on investments................................................ 51,196
Net change in unrealized appreciation on foreign currency transactions.............................. (395)
------------
Net realized and unrealized gain on investments and foreign
currency transactions................................................................... 265,570
------------
Net Increase in Net Assets Resulting from Operations............................... $ 253,815
============
</TABLE>
See Accompanying Notes to the Financial Statements.
27
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year Period from
ended December 15, 1995* to
November 30, 1997 November 30, 1996
----------------- ----------------------
<S> <C> <C>
OPERATIONS:
Net investment loss....................................................... $ (11,755) $ (4,634)
Net realized gain on investments.......................................... 222,385 63,546
Net realized loss on foreign currency transactions........................ (7,616) (4,366)
Net change in unrealized appreciation on investments..................... 51,196 180,131
Net change in unrealized (depreciation) appreciation on
foreign currency transactions.................................... (395) 203
-------------------- ----------------------
Net Increase in Net Assets Resulting from Operations.............. 253,815 234,880
-------------------- ----------------------
CAPITAL TRANSACTIONS:
Proceeds from Capital Invested............................................ 197,300 2,749,510
Value of Capital Withdrawn................................................ (1,245,727) ---
-------------------- ----------------------
Net (Decrease) Increase in Net Assets Resulting from Fund
Share Transactions................................................. (1,048,427) 2,749,510
-------------------- ----------------------
Total (Decrease) Increase in Net Assets ......................... (794,612) 2,984,390
Net assets at the beginning of the period..................................... 3,085,390 101,000
-------------------- ----------------------
NET ASSETS at the end of the period..................................... $ 2,290,778 $ 3,085,390
==================== ======================
</TABLE>
- -----------------
*Commencement of Operations
See Accompanying Notes to the Financial Statements.
28
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------
For the year Period from
ended December 15, 1995* to
November 30, 1997 November 30, 1996
----------------- -----------------
<S> <C> <C>
Net assets, end of period (000's) ................................ $ 2,291 $ 3,085
Ratio of expenses to average net assets (a)............................ 13.61% 27.74% (a)
Ratio of expenses to average net assets (a) (net of fee waivers and
expense reimbursements) 2.00% 2.00% (a)
Ratio of net investment loss to average net assets ............... ((12.00%) (25.03%) (a)
Ratio of net investment loss to average net assets (net of fee
waivers and expense reimbursements) (0.39%) (0.44%) (a)
Portfolio turnover rate (b)....................................... 64.70% 26.31%
Average commission rate paid (c).................................. $ 0.0054 $ 0.0069
</TABLE>
- --------------
*Commencement of Operations.
(a) Annualized.
(b) This figure is calculated for the period during which there were equity
holdings.
(c) 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.
29
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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.
30
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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.
31
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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 were being amortized on a straight line basis over a five year period
beginning December 15, 1995. Due to the decision to liquidate the Fund, all
remaining organizational costs were expensed in 1997. The unamortized balance of
$127,617 has been reimbursed by the Manager due to the plan to liquidate the
Equity Portfolio, as discussed in note 5 below. The total organisation expense
for the period ended November 30, 1997 was $163,636.
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 year
ended November 30, 1997, the Manager waived its entire fee as adviser and
reimbursed the Equity Portfolio in the aggregate amount of $302,176.
32
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
______________________________________________________________________________
Notes to Financial Statements
November 30, 1997
______________________________________________________________________________
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 year ended November 30,
1997.
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 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 year ended November 30,
1997.
PFPC International Ltd. serves as the Equity Portfolio's administrator and
accounting agent. For the year ended November 30, 1997, PFPC International Ltd.
voluntarily waived $50,387. 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.
33
<PAGE>
FIRST GLOBAL EQUITY PORTFOLIO
__________________________________________________________________________
Notes to Financial Statements
November 30, 1997
__________________________________________________________________________
NOTE 4 - SECURITIES TRANSACTIONS
For the year ended November 30, 1997, purchases of portfolio securities (other
than short-term securities) were $1,956,534. Sales of portfolio securities were
$3,208158.
NOTE 5 - CESSATION OF ACTIVITY
It is anticipated that the Equity Portfolio will cease operations during 1998.
During 1998, each of the AIG Children's World Fund-2005 and the AIG Retiree
Fund-2003, each of which is a separate series of a registered investment
company, withdrew their investment from the Equity Portfolio pursuant to actions
duly taken by their Board of Directors and shareholders. Immediately prior to
these redemptions, the interests of those two investors represented
approximately 99.95% of the Equity Portfolio. During January, 1998, AIG Asset
Management Services, Inc. became the sole shareholder of the Equity Portfolio,
and has informed the Board of Trustees that it anticipates taking all necessary
actions to effect the liquidation of the remainder of the Equity Portfolio's
portfolio and the subsequent dissolution of the Equity Portfolio during 1998.
34
<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, 1997, and the related statements of operations for the year then ended, and
the statements of changes in net assets and the financial highlights for the
year then ended and for the period from December 15, 1995 (commencement of
operation) 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 audits.
We conducted our audits 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, 1997, 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 audits provide 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, 1997, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period 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 8, 1998
35
