AMERICAN ODYSSEY FUNDS INC /MD/, 485BPOS, 1996-04-29

AMERICAN ODYSSEY FUNDS INC /MD/
485BPOS, 1996-04-29

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<PAGE> 1

As filed with the Securities and Exchange Commission on April 29, 1996

Registration Nos. 33-57536
811-7450

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 5

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 6

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

AMERICAN ODYSSEY FUNDS, INC.
(Exact name of registrant)
TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
(908) 214-2000
(Address and telephone number of principal executive offices)

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

Paul S. Feinberg, Esq.
Senior Vice President and Secretary
American Odyssey Funds, Inc.
Two Tower Center
East Brunswick, New Jersey 08816
(Name and Address of Agent for Service)

copy to:
Lawrence J. Latto
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036

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

The Registrant has registered an indefinite number of shares pursuant to Rule
24f-2 under the Investment Company Act of 1940. In accordance with this Rule,
the registrant filed a 24f-2 Notice for the fiscal year ending December 31,
1995 on February 29, 1996.

It is proposed that this filing will become effective (check appropriate box):

/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x/ on May 1, 1996 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on May 1, 1996 pursuant to paragraph (a)(1) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(2) of Rule 485
/ / on ________ pursuant to paragraph (a)(2) of Rule 485

If appropriate check the following box:

/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2

CROSS REFERENCE SHEET
(pursuant to Rule 495 of the Securities Act of 1933)

<TABLE>
<CAPTION>
Item No. Part A: Information Required in Prospectus Caption in Prospectus
- -------- ------------------------------------------ ---------------------
<S> <C> <C>
Item 1. Cover Page Cover Page

Item 2. Synopsis Summary of Expenses

Item 3. Financial Highlights Financial Highlights;
Performance Information

Item 4. General Description of Registrant General Information; Investment
Objectives and Programs;
Additional Investment Information

Item 5. Management of the Fund Management of the Funds;
Portfolio Brokerage; Monitoring
for Possible Conflict

Item 5A. Management's Discussion of Fund Not Applicable
Performance

Item 6. Capital Stock and Other General Information; Voting
Securities Rights; Purchase and Redemption
of Shares; Federal Income Taxes;
Additional Information

Item 7. Purchase of Securities Being Purchase and Redemption of
Offered Shares

Item 8. Redemption or Repurchase Purchase and Redemption of
Shares

Item 9. Pending Legal Proceedings Not Applicable
</TABLE>

<TABLE>
<CAPTION>
Part B: Information Required in Caption in Statement of
Item No. Statement of Additional Information Additional Information
- -------- --------------------------------------- ----------------------
<S> <C> <C>
Item 10. Cover Page Cover Page

Item 11. Table of Contents Table of Contents

Item 12. General Information and History Not Applicable

Item 13. Investment Objectives and Investment Objectives and
Policies Programs; Investment
Restrictions

Item 14. Management of the Fund Management of the Funds
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Item 15. Control Persons and Principal Management of the Funds
Holders of Securities

Item 16. Investment Advisory and Other Management of the Funds
Services

Item 17. Brokerage Allocation and Other Portfolio Transactions
Practices

Item 18. Capital Stock and Other Ownership of Shares
Securities

Item 19. Purchase, Redemption and Net Asset Value of Shares
Pricing of Securities Being
Offered

Item 20. Tax Status Federal Income Taxes

Item 21. Underwriters Management of the Funds

Item 22. Calculations of Performance Data Performance Information

Item 23. Financial Statements Financial Statements
</TABLE>

Part C: Other Information

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE> 4

PART A

INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5

[AMERICAN ODYSSEY FUNDS LOGO]

American Odyssey International Equity Fund

American Odyssey Emerging Opportunities Fund

American Odyssey Core Equity Fund

American Odyssey Long-Term Bond Fund

American Odyssey Intermediate-Term Bond Fund

American Odyssey Short-Term Bond Fund

Prospectus

May 1, 1996

<PAGE> 6

PROSPECTUS AMERICAN ODYSSEY FUNDS, INC.
May 1, 1996
- --------------------------------------------------------------------------------

American Odyssey Funds, Inc. is a diversified open-end management
investment company that is currently made up of six different "series" or Funds.
Each Fund is, for investment purposes, a separate investment fund, and each
issues a separate class of capital stock representing an interest in that Fund.
The investment objectives of the six Funds are as follows. There is, of course,
no assurance that these objectives will be achieved.

AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND -- seeks maximum long-term total
return (capital appreciation and income) by investing primarily in common stocks
of established non-U.S. companies.

AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND -- seeks maximum long-term
total return (capital appreciation and income) by investing primarily in common
stocks of small, rapidly growing companies.

AMERICAN ODYSSEY CORE EQUITY FUND -- seeks maximum long-term total return
(capital appreciation and income) by investing primarily in common stocks of
well-established companies.

AMERICAN ODYSSEY LONG-TERM BOND FUND -- seeks maximum long-term total
return (capital appreciation and income) by investing primarily in long-term
corporate debt securities, U.S. government securities, mortgage-related
securities and asset-backed securities, as well as money market instruments.

AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND -- seeks maximum long-term
total return (capital appreciation and income) by investing primarily in
intermediate-term corporate debt securities, U.S. government securities,
mortgage-related securities and asset-backed securities, as well as money market
instruments.

AMERICAN ODYSSEY SHORT-TERM BOND FUND -- seeks maximum long-term total
return (capital appreciation and income) by investing primarily in
investment-grade, short-term debt securities.

Shares of American Odyssey Funds, Inc. may be sold only to: (1) life
insurance company separate accounts to serve as the underlying investment
vehicle for variable annuity and variable life insurance contracts; (2)
qualified retirement plans, as permitted by Treasury regulations; and (3) life
insurance companies and their affiliates.
------------------------

This prospectus sets forth concisely the information a prospective
purchaser of a variable contract or a participant in a qualified retirement plan
should know before directing that amounts credited to him or her be invested in
the Funds. It should be retained for future reference.

A Statement of Additional Information about American Odyssey Funds, Inc.,
which is incorporated by reference in this prospectus, has been filed with the
Securities and Exchange Commission. It is available, at no charge, by writing
American Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063, East Brunswick,
New Jersey 08816-1063, or by calling (908) 214-2000. The date of the Statement
of Additional Information is the same as the date of this prospectus.

- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 7

PROSPECTUS CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Expenses......................................................... 3
Financial Highlights........................................................ 6
General Information......................................................... 10
Investment Objectives and Programs.......................................... 11
American Odyssey International Equity Fund............................. 11
American Odyssey Emerging Opportunities Fund........................... 12
American Odyssey Core Equity Fund...................................... 13
American Odyssey Long-Term Bond Fund................................... 14
American Odyssey Intermediate-Term Bond Fund........................... 16
American Odyssey Short-Term Bond Fund.................................. 17
Additional Investment Information........................................... 18
Options................................................................ 18
Futures Contracts...................................................... 19
Preferred Stocks, Convertible Securities, and Warrants................. 20
Short Sales Against the Box............................................ 20
When-Issued and Delayed Delivery Securities............................ 20
Lending of Portfolio Securities........................................ 20
Investment Restrictions................................................ 20
Management of the Funds..................................................... 21
Directors and Officers................................................. 21
Manager................................................................ 21
Subadvisers............................................................ 23
Expense Limitations.................................................... 26
Custodian and Transfer Agent........................................... 26
Purchase and Redemption of Shares........................................... 27
Performance Information..................................................... 27
Federal Income Taxes........................................................ 28
Other Information........................................................... 29
Voting Rights.......................................................... 29
Portfolio Brokerage.................................................... 29
Monitoring for Possible Conflict....................................... 29
Additional Information................................................. 29
Appendix.................................................................... 30
Additional Information Regarding Money Market Instruments.............. 30
Ratings of Corporate Debt Securities................................... 31
Ratings of Commercial Paper............................................ 32
</TABLE>

2
<PAGE> 8

SUMMARY OF EXPENSES

The following table shows the expenses that will be incurred by each Fund,
expressed as a percentage of average net assets during the year. If you have
been given this prospectus because you are considering the purchase of a
variable annuity contract, you should refer instead to the corresponding table
in the variable annuity contract prospectus.

<TABLE>
<CAPTION>
LONG- INTERMEDIATE- SHORT-
INT'L EMERGING CORE TERM TERM TERM
EQUITY OPPORTUNITIES EQUITY BOND BOND BOND
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases................... None None None None None None
Sales Load on Reinvested Dividends........ None None None None None None
Deferred Sales Load Imposed on
Redemption.............................. None None None None None None
Exchange Fees............................. None None None None None None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees........................... 0.69% 0.63% 0.59% 0.50%(1) 0.50% 0.50%
12b-1 Fees................................ None None None None None None
Other Expenses............................ 0.29%(2) 0.14% 0.11% 0.16%(2) 0.18%(2) 0.25%(3)
TOTAL FUND OPERATING EXPENSES............. 0.98%(2) 0.77% 0.70% 0.66%(2) 0.68%(2) 0.75%(3)
</TABLE>

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

1 Based on the subadviser's expectation that during the upcoming year 100% of
the Fund will be invested in U.S. assets. For information about the fee that
would be applicable should the Fund invest in non-U.S. assets, see page 22.

2 Total Fund Operating Expenses and Other Expenses do not take into account an
expense limitation arrangement that is no longer applicable to the
International Equity Fund, the Long-Term Bond Fund, and the Intermediate-Term
Bond Fund. Prior to May 1, 1996, the Manager had agreed to waive fees and
reimburse expenses to the extent these Fund's total expense ratios exceeded
set percentages. Thereafter, the Funds reimbursed the Manager for any fees
waived or expenses reimbursed. Because these Funds have fully repaid the
Manager and thus no repayments will be required in 1996, the percentages above
do not include the repayments made during 1995. With those repayments
included, the Other Expenses and Total Fund Operating Expenses of these Funds
were as follows: International Equity Fund (0.40%; 1.08%); Long-Term Bond Fund
(0.20%; 0.70%); and Intermediate-Term Bond Fund (0.25%; 0.75%).

3 The Manager has agreed to continue, at least until May 1, 1997, to waive fees
or reimburse expenses to the extent the Short-Term Bond Fund's total expense
ratio exceeds 0.75%. Thereafter, the Fund is required to reimburse the Manager
for any fees waived or expenses it reimbursed provided that this reimbursement
by the Fund does not cause the total expense ratio to exceed 0.75%. Without
these expense limitations, total expenses for the Short-Term Bond Fund would
have been 0.76%.

3
<PAGE> 9

The purpose of the following example is to assist investors in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly. It shows the total expenses that would be payable
if you redeemed your shares after having held them for one, three, five and ten
year periods respectively. The amounts shown are based upon the estimates and
the Manager's agreement set forth in Note 2 above. Actual expenses may be
greater or less than shown. The example assumes a 5% annual rate of return
pursuant to requirements of the Securities and Exchange Commission. This
hypothetical rate of return is not intended to be representative of past or
future performance.

<TABLE>
<CAPTION>
LONG- INTERMEDIATE- SHORT-
INT'L. EMERGING CORE TERM TERM TERM
EQUITY OPPORTUNITIES EQUITY BOND BOND BOND
FUND FUND FUND FUND FUND FUND
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
EXAMPLE
A shareholder would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and (2)
redemption at end of each time period:
1 year..... $ 10.05 $ 7.89 $ 7.18 $ 6.77 $ 6.97 $ 7.69
3 years.... $ 31.36 $24.69 $22.46 $21.19 $21.82 $24.05
5 years.... $ 54.40 $42.93 $39.08 $36.88 $37.98 $41.83
10 years.... $120.58 $95.69 $87.28 $82.45 $84.87 $93.29
</TABLE>

4
<PAGE> 10

(This page intentionally left blank)

5
<PAGE> 11

FINANCIAL HIGHLIGHTS

The following table has been audited by Coopers & Lybrand L.L.P.,
independent accountants. Their unqualified report is included in the Statement
of Additional Information. This information should be read in conjunction with
the financial statements and notes thereto which are included in the Statement
of Additional Information.

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-------------------------------------------------
YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER DECEMBER TO DECEMBER 31,
31, 1995 31, 1994 1993
----------- ----------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE
Beginning of period...................................... $ 10.76 $ 11.98 $ 10.00
----------- ----------- ---------------
OPERATIONS
Net investment income (loss)(2).......................... 0.17 (0.05) 0.03
Net realized and unrealized gain (loss) on investments... 1.87 (0.78) 1.95
----------- ----------- ---------------
Total from investment operations......................... 2.04 (0.83) 1.98
----------- ----------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends................................................ 0.12 0.03 --
Distributions............................................ -- 0.26 --
Distributions in excess of net investment income or
realized gains......................................... -- 0.10 --
----------- ----------- ---------------
Total distributions...................................... 0.12 0.39 --
----------- ----------- ---------------
NET ASSET VALUE
End of period............................................ $ 12.68 $ 10.76 $ 11.98
========== ========== ===============
TOTAL RETURN(3)........................................... 19.00% (6.98%) 19.80%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period.............................. $92,114,545 $51,712,327 $19,978,108
Ratios of expenses to average net assets:
Before repayments and directed brokerage arrangements... 1.00% 1.36% 1.76%(4)
After repayments and directed brokerage arrangements
(6)................................................... 1.08% 1.25% 1.25%(4)
Ratio of net investment income (loss) to average net
assets:
Before repayments and directed brokerage arrangements... 1.70% 0.83% 0.34%(4)
After repayments and directed brokerage arrangements.... 1.62% 0.94% 0.85%(4)
Portfolio turnover rate.................................. 31.40% 50.25% 9.20%
</TABLE>

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

(1) Commencement of operations.

(2) Net of expense reimbursement, repayments and directed brokerage
arrangements.

(3) Total return is calculated assuming an initial investment made at net
asset value at the beginning of the period, all dividends and distributions
are reinvested and redemption on the last day of the period.

(4) Annualized.

(5) The Long-Term Bond Fund did not qualify in 1993 as a regulated investment
company for federal income tax purposes because it had substantial
short-term capital gains during this period and was not able to meet the
requirement that no more than 30% of the Fund's investment income may be
from realized capital gains on the sale of securities held for less than
three months. While the Fund incurred a federal income tax of approximately
$155,000, the investment adviser to the Long-Term Bond Fund reimbursed the
Fund for the taxes and related legal expenses, so no shareholder of the
Fund was affected. The ratio of expenses to average net assets would have
been 2.58% had the adviser not agreed to reimburse the Fund for these
expenses. The Fund qualified in 1994 and 1995 as a regulated investment
company and intends to do so in future years as well.

(6) The After repayments and directed brokerage arrangements figure may be
greater than the Before repayments and directed brokerage arrangements
figure because of repayments by the Fund to the Manager once the fund is
operating below the expense limitation.

Further information about the performance of the Funds is contained in the
Funds' annual report to shareholders which may be obtained without charge.

6
<PAGE> 12

<TABLE>
<CAPTION>
EMERGING OPPORTUNITIES FUND CORE EQUITY FUND
-------------------------------------------------- ---------------------------------------------------------
YEAR ENDED YEAR ENDED MAY 17, 1993(1) YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER TO DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 31, 1994 1993 1995 1994 1993
------------ ----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 11.84 $ 10.94 $ 10.00 $ 10.06 $ 10.33 $ 10.00
------------ ----------- --------------- --------------- --------------- ---------------
-- -- (0.01) 0.25 0.16 0.06
3.81 1.06 0.95 3.63 (0.26) 0.33
------------ ----------- --------------- --------------- --------------- ---------------
3.81 1.06 0.94 3.88 (0.10) 0.39
------------ ----------- --------------- --------------- --------------- ---------------
-- -- -- 0.24 0.17 0.06
0.58 0.16 -- 0.37 -- --
0.05 -- -- 0.01 -- --
------------ ----------- --------------- --------------- --------------- ---------------
0.63 0.16 -- 0.62 0.17 0.06
------------ ----------- --------------- --------------- --------------- ---------------
$ 15.02 $ 11.84 $ 10.94 $ 13.32 $ 10.06 $ 10.33
=========== ========== =============== =========== =========== ===============
32.23% 9.69% 9.40% 38.56% (1.01%) 3.90%
$157,192,884 $88,676,329 $29,112,652 $ 183,734,809 $ 101,591,613 $37,355,875
0.77% 0.91% 1.23% (4) 0.72% 0.84% 1.12%(4)
0.77% 0.92% 1.00% (4) 0.70% 0.85% 1.00%(4)
(0.26%) (0.31%) (0.60%)(4) 2.32% 2.27% 1.84%(4)
(0.26%) (0.32%) (0.38%)(4) 2.33% 2.27% 1.96%(4)
36.02% 27.40% 8.70% 38.44% 48.16% 48.00%
</TABLE>

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

7
<PAGE> 13

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
LONG-TERM BOND FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER TO DECEMBER 31,
1995 31, 1994 1993
------------ ----------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE
Beginning of period................................... $ 9.37 $ 10.33 $ 10.00
------------ ----------- ---------------
OPERATIONS
Net investment income (loss)(2)....................... 0.53 0.37 0.62
Net realized and unrealized gain (loss) on
investments......................................... 1.57 (0.97) 0.45
------------ ----------- ---------------
Total from investment operations...................... 2.10 (0.60) 1.07
------------ ----------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends............................................. 0.57 0.34 0.18
Distributions......................................... 0.27 0.02 0.56
Distributions in excess of net investment income or
realized gains...................................... 0.10 -- --
------------ ----------- ---------------
Total distributions................................... 0.94 0.36 0.74
------------ ----------- ---------------
NET ASSET VALUE
End of period......................................... $ 10.53 $ 9.37 $ 10.33
=========== ========== ===============
TOTAL RETURN(3)........................................ 22.44% (5.79%) 10.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period........................... $114,612,422 $70,359,236 $25,771,838
Ratios of expenses to average net assets:
Before repayments and directed brokerage
arrangements....................................... 0.66% 0.73% 1.30%(4)(5)
After repayments and directed brokerage
arrangements(6).................................... 0.70% 0.75% 0.75%(4)
Ratio of net investment income (loss) to average net
assets:
Before repayments and directed brokerage
arrangements....................................... 6.67% 7.08% 15.19%(4)
After repayments and directed brokerage
arrangements....................................... 6.63% 7.05% 15.73%(4)
Portfolio turnover rate............................... 381.53% 152.91% 589.40%
</TABLE>

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

(1) Commencement of operations.

(2) Net of expense reimbursement, repayments and directed brokerage
arrangements.

(4) Annualized.

(5) The Long-Term Bond Fund did not qualify in 1993 as a regulated investment
company for federal income tax purposes because it had substantial
short-term capital gains during this period and was not able to meet the
requirement that no more than 30% of the Fund's investment income may be
from realized capital gains on the sale of securities held for less than
three months. While the Fund incurred a federal income tax of approximately
$155,000, the investment adviser to the Long Term Bond Fund reimbursed the
Fund for the taxes and related legal expenses, so no shareholder of the
Fund was affected. The ratio of expenses to average net assets would have
been 2.58% had the adviser not agreed to reimburse the Fund for these
expenses. The Fund qualified in 1994 and 1995 as a regulated investment
company and intends to do so in future years as well.

Further information about the performance of the Funds is contained in the
Funds' annual report to shareholders which may be obtained without charge.

8
<PAGE> 14

<TABLE>
<CAPTION>
INTERMEDIATE TERM BOND FUND SHORT-TERM BOND FUND
------------------------------------------------- ---------------------------------------------------------
YEAR ENDED YEAR ENDED MAY 17, 1993(1) YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER DECEMBER TO DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
31, 1995 31, 1994 1993 1995 1994 1993
----------- ----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 9.61 $ 10.28 $ 10.00 $ 9.68 $ 10.07 $ 10.00
----------- ----------- --------------- --------------- --------------- ---------------
0.54 0.38 0.17 0.51 0.45 0.19
0.90 (0.67) 0.28 0.54 (0.46) 0.08
----------- ----------- --------------- --------------- --------------- ---------------
1.44 (0.29) 0.45 1.05 (0.01) 0.27
----------- ----------- --------------- --------------- --------------- ---------------
0.55 0.38 0.17 0.51 0.38 0.14
0.07 -- -- -- -- 0.01
0.05 -- -- -- -- 0.05
----------- ----------- --------------- --------------- --------------- ---------------
0.67 0.38 0.17 0.51 0.38 0.20
----------- ----------- --------------- --------------- --------------- ---------------
$ 10.38 $ 9.61 $ 10.28 $ 10.22 $ 9.68 $ 10.07
========== ========== =============== ========== ========== ===============
15.01% (2.85%) 4.50% 10.86% (0.14%) 2.70%
$73,480,482 $48,570,907 $19,897,257 $ 25,855,313 $ 17,628,991 $ 8,181,243
0.68% 0.75% 1.37%(4) 0.76% 1.02% 1.72%(4)
0.75% 0.75% 0.75%(4) 0.75% 0.75% 0.75%(4)
6.19% 5.35% 3.73%(4) 5.77% 4.99% 3.52%(4)
6.11% 5.35% 4.35%(4) 5.76% 5.25% 4.49%(4)
137.14% 22.72% -- 93.37% 233.25% 144.30%
</TABLE>

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

9
<PAGE> 15

GENERAL INFORMATION

American Odyssey Funds, Inc. (the "Company") was organized as a Maryland
corporation in December 1992. It is registered under the Investment Company Act
of 1940, as amended ("1940 Act") as an open-end diversified management
investment company, commonly known as a "mutual fund." It is currently made up
of six different "series" or Funds. Each Fund is, for investment purposes, a
separate investment fund, and each issues a separate class of capital stock for
each Fund. Each share of capital stock issued with respect to a Fund has a
pro-rata interest in the assets of that Fund and has no interest in the assets
of any other Fund. Each Fund bears its own liabilities and also its
proportionate share of the general liabilities of the Company.

American Odyssey Funds Management, Inc. (the "Manager") serves as the
overall investment adviser to the Company. Before the Funds commenced
operations, the directors and officers of the Manager interviewed and evaluated
numerous investment advisers and selected one or more subadvisers for each Fund.
The subadvisers perform the actual day-to-day management of the Funds. The
Manager monitors the performance of the subadvisers and will recommend changes
if warranted. Any change in subadvisers will be submitted to shareholders of the
affected Fund(s) for approval, unless and until the Securities and Exchange
Commission enters an order permitting the subadvisers to be changed by the Board
of Directors of the Company. The current subadvisers are set forth below:

<TABLE>
<CAPTION>
FUND SUBADVISER
- -------------------------------------- --------------------------------------
<S> <C>
American Odyssey International Equity Bank of Ireland Asset Management
Fund (U.S.) Limited
American Odyssey Emerging Wilke/Thompson Capital Management,
Opportunities Fund Inc.
American Odyssey Core Equity Fund Equinox Capital Management, Inc.
American Odyssey Long-Term Bond Fund Western Asset Management Company and
WLO Global Management
American Odyssey Intermediate-Term Travelers Asset Management
Bond Fund International Corporation
American Odyssey Short-Term Bond Fund Smith Graham & Co. Asset Managers,
L.P.
</TABLE>

For more information, see Management of the Funds on page 21.

10
<PAGE> 16

INVESTMENT OBJECTIVES AND PROGRAMS

The investment objectives of the various Funds, and their programs for
achieving those objectives, are described below. There can be no assurance, of
course, that the Funds will achieve their investment objectives. The investment
objectives of the Funds are fundamental, which means that they may not be
changed without the approval of the holders of a majority of the outstanding
shares of the affected Fund, or if it is less, 67% of the shares represented at
a meeting of shareholders at which the holders of 50% or more of the shares are
represented. Unless otherwise indicated, each Fund's practices, policies, and
programs for achieving its objective are not fundamental. They may be changed by
the Board of Directors of the Company. Additional information regarding these
investment practices and their associated risks is contained in the Statement of
Additional Information.

AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND

Investment Objective. The investment objective of the International Equity
Fund is maximum long-term total return (capital appreciation and income) by
investing primarily in common stocks of established non-U.S. companies.

Investment Program. To achieve its objective, the Fund invests primarily
in common stocks of established non-U.S. companies. Under normal market
conditions, at least 65% of the Fund's total assets are invested in the
securities of companies domiciled in at least five foreign countries, not
including the United States.

Debt Securities. The Fund may acquire fixed income debt securities. It
does so primarily for defensive purposes, but may also do so where anticipated
interest rate movements, or factors affecting the degree of risk inherent in a
fixed income security, are expected to change significantly so as to produce
appreciation in the security consistent with the objective of the Fund.

Cash Reserves. The Fund may establish and maintain reserves for temporary
purposes or to enable it to take advantage of buying opportunities. The Fund's
reserves are invested in high quality domestic and foreign instruments,
including, but not limited to, obligations of the U.S. government and its
agencies and instrumentalities, bank obligations, commercial paper, and
short-term corporate debt securities. The Fund may also enter into repurchase
agreements and reverse repurchase agreements. These instruments are described
below in connection with the Long-Term Bond Fund and in the Appendix.

Depository Receipts. The Fund might not always purchase securities on the
principal market. For example, the Fund may purchase American Depository
Receipts ("ADRs"). ADRs are registered receipts typically issued in the United
States by a bank or trust company evidencing ownership of an underlying foreign
security. The Fund may invest in ADRs which are structured by a U.S. bank
without the sponsorship of the underlying foreign issuer. In addition to the
risks of foreign investment applicable to the underlying securities (described
below), such unsponsored ADRs may also be subject to the risks that the foreign
issuer may not be obligated to cooperate with the U.S. bank, and may not provide
additional financial and other information to the bank or the investor, or that
such information in the U.S. market may not be current. The Fund may likewise
utilize European

11
<PAGE> 17

Depository Receipts ("EDRs"), which are similar instruments, in bearer form,
designed for use in the European securities markets.

Foreign Currency Transactions. Normally, exchange transactions will be
conducted on a spot or cash basis at the prevailing rate in the foreign exchange
market. However, to hedge against unfavorable changes in exchange rates, and to
facilitate transactions, the Fund (1) may enter into forward contracts to
purchase or sell foreign currencies, (2) may purchase and sell options on
foreign currencies, and (3) may purchase and sell foreign currency futures
contracts and options thereon. Although such instruments may reduce the risk of
loss due to a decline in the value of the currency which is sold, they also
limit any possible gain which might result should the value of the currency
increase. Similarly, although such instruments will be used primarily to protect
the Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted thus adversely
affecting the Fund's total return. For more information, see the Statement of
Additional Information.

General Risk Considerations. There can be no assurance that the Fund will
achieve its investment objective. Because of its investment policy, the Fund may
or may not be suitable or appropriate for certain participants. A participant
who selects this Fund will incur the risks generally associated with investment
in equity securities. But a participant bears additional risks. Foreign
investments involve sovereign risk, which includes the risk of adverse local
political or economic developments, expropriation or nationalization of assets,
imposition of withholding taxes on dividend or interest payments, and currency
blockage (which would prevent local currency from being sold). Foreign
investments may also be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. And there is a risk that the subadviser
may not adequately hedge those risks. There also may be less publicly available
information about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing, and financial reporting
standards and requirements comparable to those applicable to U.S. companies.
Securities of some foreign companies are less liquid or more volatile than
securities of U.S. companies, the financial markets on which they are traded may
be subject to less strict governmental supervision, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.

AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND

Investment Objective. The investment objective of the Emerging
Opportunities Fund is maximum long-term total return (capital appreciation and
income) by investing primarily in common stocks of small, rapidly growing
companies.

Investment Program. To achieve its objective, the Fund will invest
primarily in common stocks of companies with a market value of less than $1
billion that the investment manager believes will grow more rapidly than larger
well-established companies.

12
<PAGE> 18

commercial paper, and short-term corporate debt securities. The Fund may also
enter into repurchase agreements and reverse repurchase agreements. These
instruments are described below in connection with the Long-Term Bond Fund and
in the Appendix.

Foreign Securities and Foreign Currency Transactions. The Fund may invest
in securities principally traded in markets outside the United States and in
American Depository Receipts ("ADRs"). To facilitate the purchase and sale of
those securities and to manage foreign exchange risk, the Fund may enter into
forward contracts to purchase or sell foreign currencies. More information
concerning foreign securities, ADRs, and foreign currency transactions is set
forth above in connection with the International Equity Fund and in the
Statement of Additional Information.

General Risk Considerations. There can be no assurance that the Fund will
achieve its investment objective. Because of its investment policy, the Fund may
or may not be suitable or appropriate for certain participants. The Fund is
designed for long-term investors who can accept the somewhat larger risks
entailed in seeking long-term growth through investment in small companies. The
value of the Fund's securities will fluctuate based on market conditions,
specific industry conditions, and the condition of the individual issuers.
Moreover, while investments in foreign securities and foreign currency forward
contracts are intended to reduce overall risk by providing further
diversification, such investments involve additional risks discussed above in
connection with the International Equity Fund and in the Statement of Additional
Information. Consistent with a long-term investment approach, participants
selecting the Fund should be prepared to withstand periods of adverse market
conditions and should not invest in the Fund with an objective of short-term
financial gain.

AMERICAN ODYSSEY CORE EQUITY FUND

Investment Objective. The investment objective of the Core Equity Fund is
maximum long-term total return (capital appreciation and income) by investing
primarily in common stocks of well-established companies.

Investment Program. To achieve its objective, the Fund invests primarily
in the stocks of a diversified group of well-established companies which have
favorable valuations relative to the overall market (i.e., S&P 500) and are
expected to demonstrate long-term earnings growth that is greater than the
projected growth rate for the economy as a whole.

Cash Reserves. The Fund is normally fully invested in equities, but may
establish and maintain reserves for temporary purposes or to enable it to take
advantage of buying opportunities. The Fund's reserves are invested in high
quality domestic and foreign instruments, including, but not limited to,
obligations of the U.S. government and its agencies and instrumentalities, bank
obligations, commercial paper, and short-term corporate debt securities. The
Fund may also enter into repurchase agreements and reverse repurchase
agreements. These instruments are described below in connection with the
Long-Term Bond Fund and in the Appendix.

Foreign Securities. The Fund may invest in securities principally traded
in markets outside the United States and in American Depository Receipts
("ADRs"). To facilitate the purchase and sale of

13
<PAGE> 19

those securities and to manage foreign exchange risk, the Fund may enter into
forward contracts to purchase or sell foreign currencies. More information
concerning foreign securities, ADRs, and foreign currency transactions is set
forth above in connection with the International Equity Fund and in the
Statement of Additional Information.

General Risk Considerations. There can be no assurance that the Fund will
achieve its investment objective. Because of its investment policy, the Fund may
or may not be suitable or appropriate for certain participants. The Fund is
designed for long-term investors who can accept the risks entailed in seeking
long-term growth of capital and an increase in future income through investment
primarily in common stocks. By investing primarily in well-established growth
companies, the Fund seeks to avoid some of the volatility associated with
investment in less established companies. The Manager believes that, over the
long term, the earnings of well-established growth companies will not be as
adversely affected by unfavorable economic conditions as the earnings of more
cyclical companies. As with the Emerging Opportunities Fund, the value of the
securities held will fluctuate based on a variety of factors, and thus
participants selecting the Fund should be prepared to withstand periods of
adverse market conditions and should not invest with an objective of short-term
financial gain. Moreover, while investments in foreign securities and foreign
currency forward contracts are intended to reduce overall risk by providing
further diversification, such investments involve additional risks discussed
above in connection with the International Equity Fund and in the Statement of
Additional Information.

AMERICAN ODYSSEY LONG-TERM BOND FUND

Investment Objective. The investment objective of the Long-Term Bond Fund
is maximum long-term total return (capital appreciation and income) by investing
primarily in long-term corporate debt securities, U.S. government securities,
mortgage-related securities, and asset-backed securities, as well as money
market instruments.

Investment Program. To achieve its objective, the Fund generally invests
at least 85% of its assets in a diversified portfolio of five categories of
marketable (i.e., securities for which market quotations are readily available)
debt instruments: (1) corporate debt securities, (2) U.S. government securities,
(3) mortgage-related securities, (4) asset-backed securities, and (5) money
market instruments.

The dollar-weighted average maturity of the Fund's investments will
generally vary between eight and 25 years, depending upon the subadviser's
opinion of current and future economic conditions. The subadviser expects that
the portfolio turnover rate for the Fund will exceed 100%. Although brokerage
expenses increase as turnover increases, the subadviser believes that the
benefits of more active trading exceed the additional costs.

Corporate Debt. The Fund may invest in investment grade corporate debt,
i.e., corporate debt rated at least Baa by Moody's Investors Service, Inc.
("Moody's") or at least BBB by Standard & Poor's Corporation ("S&P") at the
time of purchase. The Fund may also purchase unrated corporate debt
securities that the subadviser determines to be of comparable quality. For
a description of Moody's and S&P's ratings, see the Appendix.

14
<PAGE> 20

U.S. Government Securities. The Fund may purchase (1) direct obligations
of the U.S. Treasury (such as Treasury bills, notes and bonds), (2)
obligations guaranteed as to principal and interest by the U.S. Treasury
(such as obligations of the Farmers Home Administration and the
Export-Import Bank), and (3) obligations issued by U.S. government agencies
and instrumentalities that are neither direct obligations of nor guaranteed
by the U.S. Treasury (such as obligations of Federal Land Banks, Central
Bank for Cooperatives, and Federal Intermediate Credit Banks).

Mortgage-Related Securities. The Fund may invest in mortgage-backed
securities issued by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA"), and the Federal Home
Loan Mortgage Corporation ("FHLMC"). These securities represent an interest
in a pool of mortgages, such as 30-year and 15-year fixed mortgages and
adjustable rate mortgages. For GNMA securities, the payment of principal
and interest on the underlying mortgages is guaranteed by the full faith
and credit of the U.S. government; for FNMA and FHLMC securities the
payment of principal and interest is guaranteed by the issuing agency, but
not the U.S. government. The guarantees, however, do not extend to the
securities' value or yield, which like other fixed income securities, are
likely to fluctuate inversely with fluctuations in interest rates.
Mortgage-backed securities have an investment characteristic that is not
applicable to other fixed-income securities. When interest rates fall
appreciably, mortgage borrowers tend to refinance and prepay their
mortgages, increasing the principal payments from the pool. The proceeds
can then be reinvested, but only at lower rates. Thus, although the value
of mortgage-backed securities will generally decrease in the same way as
other bonds when interest rates are rising, their value may not increase as
much when interest rates are falling.

The Fund may invest in mortgage-backed securities issued by private
entities, such as commercial or mortgage banks, savings and loan
associations, or broker-dealers, that meet the quality standards set forth
above for corporate debt. The issuer's obligation may vary but often it is
to "pass-through" the payments of principal and interest upon the mortgages
in the pool. In some cases timely payment of principal and interest is
guaranteed or insured by a third party, but in all cases, like any other
fixed-income security, a default by the issuer could lead to a loss.

The Fund may invest in collateralized mortgage obligations ("CMOs"). CMOs
are mortgage-backed securities that have been partitioned into several
classes with a ranked priority with respect to payments on the underlying
mortgages. The prepayment risks of certain CMOs are higher than that of
other mortgage-backed securities because of this partitioning. In addition,
certain CMOs have encountered liquidity problems in rising interest rate
environments with consequent adverse effects on their market values.

Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool or
pools of similar assets (e.g., trade receivables). Asset-backed commercial
paper, one type of asset-backed securities, is issued by a special purpose
entity, organized solely to issue the commercial paper and to purchase
interests in the assets. The

15
<PAGE> 21

credit quality of these securities depends primarily upon the quality of
the underlying assets and the level of credit support and/or enhancement
provided.

Money Market Instruments. The Fund may invest in money market instruments,
including bank obligations and commercial paper. The Fund may also engage
in repurchase agreements and reverse repurchase agreements. These
instruments are described in the Appendix.

High Yield Debt. The Fund may invest up to 15% of its assets in debt
securities rated below investment grade, i.e., securities with a Moody's rating
of Ba or lower, or with S&P rating of BB or lower, or unrated securities
determined by the investment manager to be of comparable quality. While these
securities, sometimes referred to as junk bonds, generally offer a higher yield
than higher rated securities, they involve additional risks. They are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. The market
value of the securities also tend to be more sensitive than higher-rated
securities to news about the issuer and changes in overall economic conditions.
In addition, markets for lower-rated securities may be more limited than for
higher-rated securities.

Foreign Securities and Foreign Currency Transactions. The Fund may invest
up to 25% of its assets in fixed income securities of foreign companies or
governmental agencies denominated in foreign currencies. To facilitate the
purchase and sale of those securities and to manage foreign exchange risk, the
Fund may enter into forward contracts to purchase or sell foreign currencies.
More information concerning foreign securities and foreign currency transactions
as well as the risks of these investments is set forth above in connection with
the International Equity Fund and in the Statement of Additional Information.

General Risk Considerations. There can be no assurance that the Fund will
achieve its investment objective. Because of its investment policy, the Fund may
or may not be suitable or appropriate for certain participants. The value of the
portfolio securities of the Fund will fluctuate based upon market conditions and
interest rates. An increase in interest rates will generally reduce the value of
debt securities, and conversely, a decline in interest rates will generally
increase the value of debt securities. This effect is generally greater the
longer the maturity of the security. Thus, the Long-Term Bond Fund will likely
be subject to greater fluctuation in value than either the Intermediate-Term or
Short-Term Bond Funds. The Fund is also subject to credit risk -- the risk that
the issuer will not be able to meet its obligations. Although the Fund seeks to
reduce credit risk through credit analysis and investment in a diversified
portfolio, these measures do not eliminate the risk entirely.

AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND

Investment Objective. The investment objective of the Intermediate-Term
Bond Fund is maximum long-term total return (capital appreciation and income) by
investing primarily in intermediate-term corporate debt securities, U.S.
government securities, mortgage-related securities, and asset-backed securities,
as well as money market instruments.

Investment Program. To achieve its objective, the Fund generally invests
at least 85% of its assets in a diversified portfolio of five categories of
marketable (i.e., securities for which market

16
<PAGE> 22

quotations are readily available) debt instruments: (1) corporate debt
securities, (2) U.S. government securities, (3) mortgage-related securities, (4)
asset-backed securities, and (5) money market instruments. The Fund may also
engage in repurchase agreements and reverse repurchase agreements. These
securities are described in more detail above in connection with the Long-Term
Bond Fund and in the Appendix.

The dollar-weighted average maturity of the Fund's investments will
generally vary between two and seven years, depending upon the subadviser's
opinion of current and future economic conditions.

The Fund will invest primarily in investment grade securities, i.e.,
securities rated at least Baa by Moody's or at least BBB by S&P, or unrated
securities determined by the subadviser to be of similar quality. The Fund may
invest up to 15% of its assets in high yield debt securities with lower ratings
(or comparable unrated security as determined by the investment manager) as long
as the subadviser determines that the investment is consistent with the Fund's
objective of preserving capital. More information about high yield debt and its
risks is set forth above in connection with the Long-Term Bond Fund.

Foreign Securities and Foreign Currency Transactions. The Fund may invest
up to 25% of its assets in fixed income securities issued by foreign companies
or governments and their agencies denominated in foreign currencies. To
facilitate the purchase and sale of those securities and to manage foreign
exchange risk, the Fund may enter into forward contracts to purchase or sell
foreign currencies. More information concerning foreign securities and foreign
currency transactions as well as the risks of these investments is set forth
above in connection with the International Equity Fund and in the Statement of
Additional Information.

General Risk Considerations. There can be no assurance that the Fund will
achieve its investment objective. Because of its investment policy, the Fund may
or may not be suitable or appropriate for certain participants. The value of the
portfolio securities of the Fund fluctuates based upon market conditions and
interest rates. An increase in interest rates generally reduces the value of
debt securities, and conversely, a decline in interest rates generally increases
the value of debt securities. This effect is generally greater the longer the
maturity of the security. Thus the Intermediate-Term Bond Fund will likely be
subject to greater fluctuation in value than the Short-Term Bond Fund but less
than the Long-Term Bond Fund. The Fund is also subject to credit risk -- the
risk that the issuer will not be able to meet its obligations. Although the Fund
seeks to reduce credit risk through credit analysis and investment in a
diversified portfolio, these measures do not eliminate the risk entirely.

AMERICAN ODYSSEY SHORT-TERM BOND FUND

Investment Objective. The investment objective of the Short-Term Bond Fund
is maximum long-term total return (capital appreciation and income) by investing
primarily in investment-grade, short-term debt securities.

Investment Program. To achieve its objective, the Fund invests primarily
in a diversified portfolio of investment-grade, short-term debt securities,
including corporate debt securities, U.S.

17
<PAGE> 23

government securities, mortgage-related securities, asset-backed securities, and
money market instruments. The Fund may also engage in repurchase agreements and
reverse repurchase agreements. These securities are described in more detail
above in connection with the Long-Term Bond Fund and in the Appendix.

The dollar-weighted average maturity of the Fund's investments will
generally vary between one and five years, depending upon the subadviser's
opinion of current and future economic conditions. As long as that average
maturity requirement is met, however, the Fund may purchase individual
securities with longer maturities. The subadviser expects that the portfolio
turnover rate for the Fund will exceed 100%. Although brokerage expenses
increase as turnover increases, the subadviser believes that the benefits of
more active trading exceed the additional costs.

The Fund invests primarily in investment grade securities, i.e., securities
rated at least Baa by Moody's or BBB by S&P, or unrated securities determined by
the subadviser to be of similar quality. The Fund may invest up to 15% of its
assets in high yield debt securities with lower ratings (or comparable unrated
security as determined by the investment manager) as long as the subadviser
determines that the investment is consistent with the Fund's objective of
preserving capital. More information about high yield debt and its risks is set
forth above in connection with the Long-Term Bond Fund.

General Risk Considerations. The Fund is not a money market fund and does
not attempt to maintain a stable net asset value of $1.00 per share. While the
Fund seeks to preserve capital, there can be no assurance that it will achieve
that objective. The Fund may purchase some securities of a lower quality than a
money market fund may purchase. Moreover, the average maturity of the Fund can
be longer than that of a money market fund, and thus the value of the Fund's
shares may be more sensitive to changes in interest rates although not to the
same extent as the Long-Term and Intermediate-Term Bond Funds.

ADDITIONAL INVESTMENT INFORMATION

Options. Each Fund may write (i.e., sell) options under certain
limitations set forth in the Statement of Additional Information. More
specifically, (1) the International Equity Fund, the Emerging Opportunities
Fund, and the Core Equity Fund may purchase and write (i.e., sell) put and call
options on stocks or stock indices that are traded on national securities
exchanges or that are listed on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"); (2) any Fund other than the Emerging
Opportunities and the Core Equity Funds may purchase and

18
<PAGE> 24

write (i.e., sell) put and call options on debt securities (including U.S.
government debt securities) that are traded on national securities exchanges or
that result from privately negotiated transactions with primary U.S. government
securities dealers recognized by the Federal Reserve Bank of New York; and (3)
any Fund may purchase and write (i.e., sell) put and call options on foreign
currencies traded on U.S. or foreign securities exchanges or boards of trade.
The Funds will only write covered options, as explained in the Statement of
Additional Information. An option gives the owner the right to buy or sell
securities at a predetermined exercise price for a given period of time.
Although options are primarily used to minimize principal fluctuations, or to
generate additional premium income for the Funds, they do involve certain risks.
Writing covered call options involves the risk of not being able to effect
closing transactions at a favorable price or participate in the appreciation of
the underlying securities or index above the exercise price. Writing covered put
options also involves the risk of not being able to effect closing transactions
at favorable prices or losing part or all of the securities used for cover if
the price of the underlying security falls below the exercise price. Purchasing
put or call options involves the risk of losing the entire premium (purchase
price of the option). Further details concerning the Funds' use of options and
the risks involved are contained in the Statement of Additional Information.

Futures Contracts. Each Fund may enter into futures contracts and options
thereon under certain limitations set forth in the Statement of Additional
Information. More specifically, (1) the International Equity Fund, the Emerging
Opportunities Fund, and the Core Equity Fund may buy and sell stock index
futures contracts traded on a commodities exchange or board of trade and options
thereon; (2) any Fund other than the Emerging Opportunities and the Core Equity
Funds may buy and sell futures contracts on interest bearing securities (such as
U.S. Treasury Bonds, U.S. Treasury Notes, 3-month U.S. Treasury Bills, and GNMA
certificates) or interest rate indices and options thereon; and (3) any Fund may
buy and sell futures contracts on foreign currencies or groups of foreign
currencies such as the European Currency Unit and options thereon. The Funds use
these instruments as a hedge against or to minimize adverse principal
fluctuations or as an efficient means of adjusting its exposure to the market.
The Funds do not use futures contracts or options thereon for speculation. Each
Fund limits its use of futures contracts and options thereon so that no more
than 5% of the Fund's total assets will be committed to initial margin deposits
or premiums on options. Furthermore, immediately after entering into such
contracts or purchasing such options, no more than 30% of a Fund's total assets
may be represented by such contracts and options (other than futures contracts
and options thereon relating to money market instruments). These contracts and
options entail certain risks, including (but not limited to) the following: (1)
no assurance that futures contracts transactions can be offset at favorable
prices; (2) possible reduction of the Fund's total return due to the use of
hedging; (3) possible reduction in value of both the securities hedged and the
hedging instrument; (4) possible lack of liquidity due to daily limits on price
fluctuation or other factors; (5) an imperfect correlation between price
movements in the contract and in the securities being hedged; and (6) potential
losses in excess of the amount invested in the futures contracts themselves.
Further details concerning the Funds' use of futures contracts and the risks
involved are contained in the Statement of Additional Information.

19
<PAGE> 25

Preferred Stocks, Convertible Securities, and Warrants. All Funds other
than the Short-Term Bond Fund may invest in preferred stocks and convertible
securities. Preferred stocks are equity securities whose owners have a claim on
a company's earnings and assets before common stockholders but after debt
holders. Convertible securities are debt or preferred stock which are
convertible into or exchangeable for common stock. In addition, the
International Equity Fund, the Emerging Opportunities Fund, and the Core Equity
Fund may invest in warrants. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrant (generally two or more years).

Short Sales Against the Box. The International Equity Fund, the Emerging
Opportunities Fund, and the Core Equity Fund may make short sales of securities
or maintain a short position, provided that at all times when a short position
is open the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, with or without payment of any further
consideration, for an equal amount of the securities of the same issuer as the
securities sold short (a "short sale against the box"); provided, that if
further consideration is required in connection with the conversion or exchange,
cash or U.S. government securities in an amount equal to such consideration must
be put in a segregated account.

When-Issued and Delayed Delivery Securities. The Funds may purchase
securities on a when-issued or delayed delivery basis (i.e., delivery and
payment can take place a month or more after the date of the transaction). A
Fund will make commitments for when-issued transactions only with the intention
of actually acquiring the securities and, to facilitate such acquisitions, the
Fund's custodian bank will maintain in a temporary holding account cash, U.S.
government securities or other high-grade debt obligations having a value equal
to or greater than such commitments. On delivery dates for such transactions,
the Fund will meet its obligations from maturities or sales of the securities
held in the temporary holding account and/or from then available cash flow. If
the Fund chooses to dispose of the right to acquire a when-issued security prior
to its acquisition it could, as with the disposition of any other Fund security,
incur a gain or loss due to market fluctuations. No when-issued commitments will
be made if, as a result, more than 15% of the Fund's net assets would be so
committed.

Lending of Portfolio Securities. For the purpose of realizing additional
income, each Fund may, as a fundamental policy, lend securities with a value of
up to 33% of its total assets to unaffiliated broker-dealers or institutional
investors. Any such loan will be continuously secured by collateral at least
equal to the value of the security loaned. Although the risks of lending
portfolio securities are believed to be slight, as with other extensions of
secured credit, such lending could result in delays in receiving additional
collateral or in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially. Loans will only be made to
firms deemed to be of good standing and will not be made unless the
consideration to be earned from such loans would justify the risk.

Investment Restrictions. Each Fund is also subject to certain investment
restrictions which are fundamental and may not be changed except with the
approval of a majority vote (as defined on page 11) of the persons having voting
rights with respect to the affected Fund. Investment limitations may also arise
under state insurance laws and regulations, and the Fund will comply with any
such

20
<PAGE> 26

applicable limitation. For a detailed discussion of the investment restrictions
applicable to the Funds, see INVESTMENT RESTRICTIONS in the Statement of
Additional Information.

MANAGEMENT OF THE FUNDS

DIRECTORS AND OFFICERS

The affairs of the Company are managed under the direction of its Board of
Directors. The directors decide upon matters of general policy and review the
actions of the Company's investment manager and subadvisers, and the Company's
officers conduct and supervise its daily business operations.

The Company is responsible for the payment of certain fees and expenses
including, among others, the following: (1) management and investment advisory
fees; (2) the fees of non-interested directors; (3) the fees of the Funds'
custodian; (4) the fees of the Company's legal counsel and independent
accountants; (5) brokerage commissions incurred in connection with fund
transactions; (6) all taxes and charges of governmental agencies; (7) the
reimbursement of organizational expenses; and (8) expenses of printing and
mailing prospectuses and other expenses related to shareholder communications.

MANAGER

American Odyssey Funds Management, Inc. (the "Manager"), Two Tower Center,
P.O. Box 1063, East Brunswick, New Jersey 08816-1063, is the overall investment
adviser of the Company. Pursuant to separate subadvisory agreements between the
Manager and the subadvisers, the subadvisers furnish investment advisory
services in connection with the management of the Funds. Each subadviser is paid
a fee for its services by the Manager out of the fee it collects from the Funds.
The Manager continues to have responsibility for all investment advisory
services pursuant to the Management Agreement and supervises the subadvisers'
performance of such services. The Manager provides accounting services to and
keeps the accounts and records of the Company, other than those maintained by
the custodian. It or an affiliated company pays the salaries and expenses of all
of its and the Company's personnel except for fees and expenses of the
non-interested directors. It or an affiliated company provides necessary office
space, staff assistance to the Board, and all expenses incurred in connection
with managing the ordinary course of the Company's business, other than the fees
and expenses described above that are paid directly by the Company.

The Manager is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended. It is a wholly-owned indirect subsidiary of
Travelers Group Inc. and a member of The Copeland Companies, which includes
another investment adviser upon whose expertise it is able to draw. In addition,
it employs one or more consultants with extensive experience in monitoring and
evaluating the performance of investment advisers. See OTHER SERVICE PROVIDERS
in the Statement of Additional Information.

Subject to the supervision and direction of the Directors, the Manager
manages the investment operations of the Funds and is responsible for monitoring
and overseeing the performance of the

21
<PAGE> 27

subadvisers to each of the Funds. The Manager meets periodically with each of
the subadvisers to review and agree upon investment strategies and programs in
the light of anticipated cash flows. The Manager has responsibility for
communicating performance expectations and evaluations to subadvisers and
recommending to the Directors whether subadvisers' contracts should be renewed,
modified, or terminated. The Manager reports to the Directors regarding the
results of its evaluation and monitoring functions. Each Fund pays the Manager a
fee for its services that is computed daily and paid monthly at the annual rates
specified below based on the value of the average net assets of the Fund. The
Manager pays each subadviser, out of the fee it receives from the Fund, a fee
that is computed daily and paid monthly at the annual rates specified below
based on the value of the Fund's average daily net assets:

<TABLE>
<CAPTION>
FEE PAID BY MANAGER TO THE
FUND MANAGER'S FEE SUBADVISER
- ---------------------------- ----------------------------- -----------------------------
<S> <C> <C>
International Equity Fund - 0.70% for first $50 million - 0.45% for first $50 million
in assets, plus in assets, plus
- 0.65% for next $50 million - 0.40% for next $50 million
in assets, plus in assets, plus
- 0.55% for assets over $100 - 0.30% for assets over $100
million million
Emerging Opportunities Fund - 0.65% for first $100 - 0.40% for first $100
million in assets, plus million in assets, plus
- 0.55% for assets over $100 - 0.30% for assets over $100
million million
Core Equity Fund - 0.60% for first $100 - 0.35% for first $100
million in assets, plus million in assets, plus
- 0.55% for assets over $100 - 0.30% for assets over $100
million million
Long-Term Bond Fund - 0.50% for first $250 - 0.25% for first $250
million of U.S. assets, million of U.S. assets,
plus plus
- 0.40% for U.S. assets over - 0.15% for U.S. assets over
$250 million, plus $250 million, plus
- 0.70% for first $250 - 0.45% for first $250
million of non-U.S. assets, million of non-U.S. assets,
plus plus
- 0.60% for non-U.S. assets - 0.35% for non-U.S. assets
over $250 million over $250 million
Intermediate-Term Bond Fund - 0.50% for first $100 - 0.25% for first $100
million in assets, plus million in assets, plus
- 0.45% for next $100 million - 0.20% for next $100 million
in assets, plus in assets, plus
- 0.40% for assets over $200 - 0.15% for assets over $200
million million
Short-Term Bond Fund - 0.50% for first $100 - 0.25% for first $100
million in assets, plus million in assets, plus
- 0.40% for assets over $100 - 0.15% for assets over $100
million million
</TABLE>

During 1995, the Manager's fees (prior to any adjustment for the expense
limitation agreement) were the following percentages of the Funds' average net
assets: International Equity Fund, 0.69%;

22
<PAGE> 28

Emerging Opportunities Fund, 0.63%; Core Equity Fund, 0.59%; Long-Term Bond
Fund, 0.50%, Intermediate-Term Bond Fund, 0.50%; and Short-Term Bond Fund,
0.50%.

During 1995, the subadviser's fees (which were paid by the Manager) were
the following percentages of the Funds' average net assets: International Equity
Fund, 0.44%; Emerging Opportunities Fund, 0.38%; Core Equity Fund, 0.34%;
Long-Term Bond Fund, 0.25%; Intermediate-Term Bond Fund, 0.25%; and Short-Term
Bond Fund, 0.25%.

SUBADVISERS

The fees received by the subadvisers are generally lower than the fees they
charge to institutional clients to which they provide investment services or
advice. They are willing to do so in part because their functions are limited to
managing the securities held by the Funds by making investment decisions and
placing orders to buy and sell securities, with the Manager responsible for
administration and operations of the Funds. Although the subadvisers' fees are
paid by the Manager rather than by the Company, the subadvisory agreements have
been approved by the Board of Directors and the Company is a party to each of
the subadvisory agreements.

Set forth below is information about each of the subadvisers:

BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED ("BIAM") serves as
subadviser for the International Equity Fund. It is an indirect wholly-owned
subsidiary of Bank of Ireland. Its head offices are at 26 Fitzwilliam Place,
Dublin 2, Ireland. Its U.S. offices are at 2 Greenwich Plaza, Greenwich, CT
06830. The Bank of Ireland provides investment management services through a
network of sister companies, including BIAM which represents U.S. clients. As of
December 31, 1995, the Bank of Ireland managed over $3.8 billion in global
securities for U.S. clients. The Manager (not the Fund) pays BIAM, on a monthly
basis, an annual advisory fee based on the average daily net assets of the Fund
at the rate of 0.45% for the first $50 million in assets, 0.40% for the next $50
million in assets, and 0.30% for assets over $100 million. BIAM's Strategy Group
makes all the investment decisions for the International Equity Fund, and no
person(s) is primarily responsible for making recommendations to that Group.

WILKE/THOMPSON CAPITAL MANAGEMENT, INC. serves as subadviser for the
Emerging Opportunities Fund. Its Corporate offices are at 3800 Norwest Center,
90 South 7th Street, Minneapolis, MN 55402-3934. Wilke/Thompson serves as an
investment adviser to a variety of individual and institutional investors. As of
December 31, 1995, Wilke/Thompson managed more than $1.2 billion of assets. The
Manager (not the Fund) pays Wilke/Thompson on a monthly basis, an annual
advisory fee based on the average daily net assets of the Fund at the rate of
0.40% for the first $100 million in assets plus 0.30% for assets over $100
million. The following individuals are responsible for the day-to-day management
of the Emerging Opportunities Fund:

Mark A. Thompson co-founded Wilke/Thompson in June 1987 and was Portfolio
Manager until January 1991 when he became Chief Investment Officer. Prior to
Wilke/Thompson, he was with IDS Financial Corporation, where he served as a
securities analyst and the Associate Portfolio Manager of the IDS New Dimensions
Fund. Mr. Thompson has 14 years experience in growth stock investing.

23
<PAGE> 29

Dana L. Feick, C.F.A. joined Wilke/Thompson as a Portfolio Manager in
January 1992. He has served as a Senior Portfolio Manager since January 1994 and
is responsible for securities analysis and management of the Fund. From April
1990 through December 1991, he served as a Research Analyst with IDS Financial
Corporation. Mr. Feick has 10 years experience in growth stock investing.

Stephen M. Kensinger, M.B.A., C.P.A., C.F.A. joined Wilke/Thompson in
February 1994 as Senior Portfolio Manager. Mr. Kensinger, along with Mr. Feick,
is responsible for securities analysis and management of the Fund. From July
1987 through February 1994, Mr. Kensinger served as Vice President and Senior
Portfolio Manager of Norwest Bank Minnesota, N.A., where he was responsible for
the management of balanced endowment, foundation, and other tax-exempt
portfolios. He was a member of the Norwest Growth Equity Team, which is
responsible for overall equity selection and strategy. Mr. Kensinger has 16
years experience in professional money management.

EQUINOX CAPITAL MANAGEMENT, INC. serves as subadviser for the Core Equity
Fund. Its Corporate offices are at 590 Madison Avenue, New York, NY 10022.
Equinox serves as an investment adviser to a variety of individual and
institutional investors. As of December 31, 1995, Equinox managed more than
$5.17 billion of assets. The Manager (not the Fund) pays Equinox, on a monthly
basis, an annual advisory fee based on the average daily net assets of the Fund
at the rate of 0.35% for the first $100 million in assets plus 0.30% for assets
over $100 million. The following individuals are responsible for the day-to-day
management of the Core Equity Fund:

Ronald J. Ulrich founded Equinox in 1989 and has served as President and
Chief Investment Officer since the firm's inception. He oversees the firm's
portfolio construction and stock selection committees. Prior to Equinox, Mr.
Ulrich was with Morgan Stanley Asset Management, which he co-founded. He served
as Managing Director at Morgan Stanley, Inc. and was responsible for equity
management in their asset management division. Mr. Ulrich has over 24 years
experience in the investment management field.

Wendy D. Lee, C.F.A. joined Equinox in June 1992 as a Principal and Senior
Equity Analyst responsible for coverage of the consumer and basic materials
sectors. She was subsequently promoted in January 1994 to Managing Director and
Director of Research. Ms. Lee, together with Mr. Ulrich, oversees portfolio
construction and stock selection. From May 1985 through June 1992, she was a
Partner and Senior Equity Analyst at Brinson Partners. Ms. Lee has over 15 years
experience in the investment management field.

WESTERN ASSET MANAGEMENT COMPANY AND WLO GLOBAL MANAGEMENT serve as
subadvisers for the Long-Term Bond Fund. Western Asset Management serves as an
investment adviser to a variety of individual and institutional investors,
including mutual funds. As of December 31, 1995, Western Asset Management
managed more than $19.9 billion of assets. WLO is a joint venture of a wholly-
owned subsidiary of Western Asset Management Company and a wholly-owned
subsidiary of Lombard Odier Portfolio Management International Limited. WLO was
created in mid-1992 with an objective of providing advisory services regarding
bonds denominated in foreign currencies. WLO, however, is not currently managing
any assets of the Long-Term Bond Fund, and there are no current plans for WLO to
do so. The Corporate offices of both Western Asset Management and WLO are at 117
East Colorado Boulevard, Pasadena, CA 91105. The Manager (not the Fund) pays
Western Asset

24
<PAGE> 30

Management, on a monthly basis, an annual advisory fee based on the average
daily net assets of the Fund at the rate of 0.25% for the first $250 million of
U.S. assets and 0.15% for U.S. assets over $250 million, plus 0.45% for the
first $250 million of non-U.S. assets and 0.35% for non-U.S. assets over $250
million. The following individuals are responsible for the day-to-day management
of the Long-Term Bond Fund:

Kent S. Engel has been with Western Asset since its inception in 1971 and
currently serves as Chief Investment Officer. He is responsible for overseeing
the decisions of the Investment Strategy Committee. Mr. Engel has 24 years
experience with fixed income investing.

S. Kenneth Leech joined Western Asset in May 1990 and currently serves as
Director of Portfolio Management. He is responsible for overseeing the
implementation of the firm's investment strategy. Mr. Leech has 18 years
experience with fixed income investing.

TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION ("TAMIC") serves as
subadviser for the Intermediate-Term Bond Fund. TAMIC is a wholly-owned
subsidiary of Travelers Group Inc. Its corporate offices are at One Tower
Square, Hartford, CT 06183. It serves as an investment adviser to a variety of
individual and institutional investors, including mutual funds and variable
annuity portfolios. As of December 31, 1995, TAMIC managed more than $4.6
billion of assets. The Manager (not the Fund) pays TAMIC, on a monthly basis, an
annual advisory fee based on the average daily net assets of the Fund at the
rate of 0.25% for the first $100 million in assets, 0.20% for the next $100
million in assets, and 0.15% for assets over $200 million. The following
individuals are responsible for the day-to-day management of the
Intermediate-Term Bond Fund:

F. Denney Voss joined The Travelers in 1980. Mr. Voss is a Senior Vice
President of The Travelers and a Vice President of TAMIC and has served as the
Fund's portfolio manager since March 1995. Mr. Voss has also managed TAMIC's
Quality Bond Account for Variable Annuities since March 1995 and has been
responsible for managing the Travelers portfolios backing general account
insurance products since August 1994. Prior to transferring to the Travelers
Securities Department in 1994, Mr. Voss performed various sales and trading
functions for Smith Barney Inc., a Travelers Group subsidiary.

David A. Tyson, Ph.D., C.F.A. joined The Travelers in 1985. Since January
1995, Mr. Tyson has served as a Senior Vice President of The Travelers and has
headed up the Securities Department Portfolio Management Group since March 1993.
He has been a Senior Vice President of TAMIC since April 1990 and its Chief
Investment Officer since March 1994. In addition to assisting Mr. Voss in the
management of this Fund, Mr. Tyson is also responsible for managing TAMIC's
Managed Assets Trust Account for Variable Annuities. Since April 1990, he has
managed the Travelers convertible portfolio, several Travelers business line
portfolios, and several TAMIC outside insurance portfolios. His previous
responsibilities have included managing the Travelers Derivatives, Mortgage-
Backed, and Quantitative Investment Groups.

SMITH GRAHAM & CO. ASSET MANAGERS, L.P. serves as subadviser for the
Short-Term Bond Fund. Its Corporate offices are at 6900 Texas Commerce Tower,
600 Travis Street, Houston, TX 77002-3007. Smith Graham serves as an investment
adviser to a variety of individual and institutional

25
<PAGE> 31

investors, including mutual funds. As of December 31, 1995, Smith Graham managed
more than $1.7 billion of assets. The Manager (not the Fund) pays Smith Graham,
on a monthly basis, an annual advisory fee based on the average daily net assets
of the Fund at the rate of 0.25% for the first $100 million in assets, plus
0.15% for assets over $100 million. The following individuals are responsible
for the day-to-day management of the Short-Term Bond Fund:

Ladell Graham co-founded Smith Graham in 1990 and currently serves as
President and Chief Investment Officer. Prior to Smith Graham, he was most
recently with American Capital Asset Management, Inc. as an Investment Vice
President; Dean Witter Inter-Capital Division as an Assistant Vice President;
and Associates Corporation as a portfolio and risk manager. Mr. Graham has over
13 years experience in fixed income investing.

Brian L. Stine joined Smith Graham in January 1993 and currently serves as
a Portfolio Manager. From October 1990 to September 1992 he was in Institutional
Sales at Dean Witter and from December 1989 to October 1990 he was at Shearson
Lehman, where he was a portfolio strategist responsible for risk analysis on
mortgage-backed securities, CMOs, and other derivative products. Mr. Stine has
over 13 years experience in fixed income investing.

Mark Delaney joined Smith Graham in November 1994 and currently serves as a
Portfolio Manager. From July 1988 to November 1994 he was a Senior Portfolio
Manager for Transamerica Fund Management. Mr. Delaney has over 14 years
experience in fixed income investing.

EXPENSE LIMITATIONS

The Manager has agreed to continue, at least until May 1, 1997, to waive
fees or reimburse expenses for the Short-Term Bond Fund to the extent the Fund's
total expense ratio (excluding interest, taxes, brokerage, other expenses which
are capitalized in accordance with generally accepted accounting principles, and
extraordinary expenses, but including the Manager's investment advisory fees),
exceeds 0.75%. The Manager, in its discretion, may continue to extend this
period. Thereafter, the Fund will reimburse the Manager for any fees it waived
or expenses it reimbursed pursuant to the above expense limitation; however, no
reimbursement will be made if it would result in the Fund's total expense ratio
in any year exceeding the expense limitation set forth above.

CUSTODIAN AND TRANSFER AGENT

Investors Bank and Trust Company, 89 South Street, Boston, Massachusetts
02111, is custodian of the assets of the Funds of the Company and maintains
certain records and books in connection therewith. The Bank of New York, 48 Wall
Street, New York, New York 10286, was custodian of the assets of the Funds of
the Company, and maintained certain records and books in connection therewith,
until June 30, 1995.

The Manager, Two Tower Center, P.O. Box 1063, East Brunswick, NJ
08816-1063, is the transfer agent and dividend disbursing agent for the Funds
and in those capacities maintains certain records and books for them.

26
<PAGE> 32

PURCHASE AND REDEMPTION OF SHARES

Principal Underwriter. Copeland Equities, Inc., Two Tower Center, P.O. Box
1063, East Brunswick, NJ 08816-1063, serves as the principal underwriter of the
shares of the Company. It is a wholly-owned, indirect subsidiary of Travelers
Group Inc.

Purchase. Shares of the Company are sold at net asset value of the shares
next determined after receipt of the purchase order. There is no sales charge or
sales load on the purchase of any shares.

Redemption. The Company is required to redeem its shares for cash, within
7 days of receipt of proper notice of redemption or sooner if required by law.
The redemption price is the net asset value next determined after the initial
receipt of a proper request for redemption. There is no redemption charge. The
right to redeem shares or to receive payment with respect to any redemption may
be suspended only for any period during which trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission
("SEC") or when such exchange is closed (other than customary weekend and
holiday closings), for any period during which an emergency exists as defined by
the SEC as a result of which disposal of a Fund's securities or determination of
the net asset value of each Fund is not reasonably practicable, and for such
other periods as the SEC may by order permit for the protection of shareholders
of each Fund.

Net Asset Value. The net asset value of the shares of each Fund is
determined once daily, as of 4:15 p.m. New York City time, on each day during
which the New York Stock Exchange is open for business. The net asset value per
share of each Fund is computed by adding the sum of the value of the securities
held by that Fund plus any cash or other assets it holds, subtracting all its
liabilities, and dividing the result by the total number of shares outstanding
of that Fund at such time. Expenses, including the investment management fee,
are accrued daily. Equity securities, options, and futures contracts are
generally valued based on market quotations. Debt obligations securities (other
than debt obligations with remaining maturities of less than 60 days when
purchased, which are based on an amortized cost basis) are valued utilizing an
independent pricing service. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents at the current rate obtained
by a recognized bank or dealer. Forward contracts are valued at the current cost
of covering or offsetting such contracts. Securities or assets for which market
quotations are not readily available will be valued at fair value as determined
by the Manager and/or the subadvisers under the direction of the Board of
Directors of the Company.

PERFORMANCE INFORMATION

From time to time the Funds may advertise their total return, average
annual total return, or yield. These performance figures are based upon
historical results and are not intended to indicate future performance.

A Fund's total return for any given period measures the Fund's overall
change in value over that period, including share price movements, and assumes
all dividends and capital gains have been reinvested. Average annual total
return is that rate of return which, if earned uniformly over standard one-,
five- or ten-year periods (or shorter periods depending on the length of time
during which the

27
<PAGE> 33

Fund has operated), would have resulted in the Fund's actual total return for
that period. Other reported total return figures may differ in that they may
report non-standard periods or represent aggregate or cumulative returns over
stated lengths of time.

The yield of a Fund refers to the income generated by a hypothetical
investment in the Fund over a specific 30-day period. This income is then
annualized, which means that the income generated during the 30-day period is
assumed to be generated every 30 days during a one-year period and is shown as a
percentage of the hypothetical investment. For further information regarding the
calculation of total return and yield see PERFORMANCE INFORMATION in the
Statement of Additional Information.

Comparative performance information may be used from time to time in
advertising the Funds' shares, including data from independent fund reporting
services, such as Lipper Analytical Services, Inc., from unmanaged market
indices, such as the Morgan Stanley Capital International EAFE Index, the
Russell 2500 Index, the Standard & Poor's 500 Stock Index, the Salomon Core +
Five Index, the Lehman Brothers Government/Corporate Intermediate Bond Index,
the Lehman Brothers Government/Corporate 1-5 Year Bond Index, and industry or
financial publications of general interest such as Business Week, Forbes and
Money.

Purchasers of variable contracts which offer the American Odyssey Funds as
an investment option should not compare the Funds' performance information with
funds that offer their shares directly to the public because the performance
figures provided by the American Odyssey Funds do not reflect charges of the
insurance company issuing the variable contract. Purchasers of variable
contracts should therefore consult their contract prospectus to learn more about
those charges.

FEDERAL INCOME TAXES

The Funds intend to qualify as regulated investment companies under certain
provisions of the Internal Revenue Code (the "Code"). Under such provisions, the
Funds are not subject to federal income tax on the part of their net ordinary
income and net realized capital gains that they distribute. They intend to
distribute as dividends substantially all their net investment income, if any.
They also declare and distribute annually all their net realized capital gains.
Such dividends and distributions are automatically reinvested in additional
shares of the Funds.

The Long-Term Bond Fund did not qualify as a regulated investment company
for 1993 because during that year it had substantial short-term capital gains
and was not able to meet the requirement that no more than 30% of the Fund's
investment income may be from realized capital gains on the sale of securities
held for less than three months. While the Fund incurred a federal income tax of
approximately $155,000, the investment subadviser to the Long-Term Bond Fund
reimbursed the Fund for the taxes and related legal expenses, so no shareholder
of the Fund was affected. The Long-Term Bond Fund qualified in 1994 and 1995 as
a regulated investment company and intends to do so in future years as well.

For a discussion of the tax consequences to the owners of variable
contracts that invest in the Funds, see the prospectus for the variable
contract.

28
<PAGE> 34

The provisions of the Code and the Treasury Regulations that apply to
qualified retirement plans are complex and vary according to the type of plan
and its terms and conditions. Accordingly, this prospectus provides only general
tax information, and participants in qualified retirement plans that invest
directly in the Funds should consult a qualified tax adviser before purchasing
or redeeming any Fund shares. In general, assuming that a plan adheres to the
applicable limitations of the Code and Treasury Regulations, payments for the
purchase of Fund shares (other than after-tax employee payments) will be
deductible (or not includable in income) up to certain amounts each year.
Federal income tax currently is not imposed upon the investment income and
realized gains until redemption. When Fund shares are redeemed for the purpose
of making payments to plan participants, all or a portion of the payment is
normally taxable as ordinary income. Some redemptions may also be subject to
penalty tax. For more information contact a qualified tax adviser.

OTHER INFORMATION

Voting Rights. The shares of the Funds have equal voting rights, except
that certain issues will be voted on separately by the shareholders of each
Fund. Pursuant to current SEC requirements and staff interpretations, insurance
companies will vote Fund shares held in registered separate accounts in
accordance with voting instructions received from variable contract owners or
payees having the right to give such instructions. Fund shares for which
contract owners or payees are entitled to give voting instructions, but as to
which no voting instructions are received, and shares owned by an insurance
company in its general and unregistered separate accounts, will be voted in
proportion to the shares for which voting instructions have been received by
that company. Under state insurance law and federal regulations, there are
certain circumstances under which the insurance companies may disregard such
voting instructions. If voting instructions are ever ignored, the insurance
companies will so advise contract owners in the next semiannual report. The
Company currently does not intend to hold annual meetings of shareholders unless
required to do so under applicable law.

Portfolio Brokerage. A subadviser may employ an affiliated broker to
execute brokerage transactions on behalf of the Fund as long as the commissions
are reasonable and fair compared to the commissions received by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
The Funds may not engage in any transaction in which a subadviser or its
affiliates act as principal, including over-the-counter purchases and negotiated
trades in which such party acts as a principal.

Monitoring for Possible Conflict. Shares are sold to separate accounts of
insurers to fund variable annuity contracts, to separate accounts of insurers to
fund variable life insurance contracts, and to qualified retirement plans as
permitted by Treasury Regulation sec.1.817-5. There is a possibility that
material conflicts may arise between or among the interests of variable life
insurance contract owners, variable annuity contract owners, and participants in
qualified retirement plans. The Board of Directors of the Company will monitor
events for the existence of any such material conflicts and determine what
action, if any, should be taken in response to any such conflict.

Additional Information. For further information, shareholders may contact
the Company's office, the address and telephone number of which are set forth on
page 1 of this prospectus.

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<PAGE> 35

APPENDIX

ADDITIONAL INFORMATION REGARDING MONEY MARKET INSTRUMENTS

Bank Obligations. Bank obligations include certificates of deposit,
bankers' acceptances, and time deposits of domestic banks, foreign branches of
U.S. banks, U.S. branches of foreign banks, foreign offices of foreign banks,
savings and loan associations, or savings banks. Certificates of deposit are
certificates evidencing the indebtedness of a bank to repay funds deposited with
it for a definite period of time (usually from 14 days to 1 year). Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft which has been drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Time deposits are non-negotiable deposits in a bank
for a fixed period of time. Certificates of deposit include both Eurodollar
certificates of deposit, which are traded in the over-the-counter market, and
Eurodollar time deposits, for which there is generally not a market. Eurodollars
are dollars deposited in banks outside the United States.

Commercial Paper. Commercial paper is a high-quality short-term promissory
note of a large corporation issued to finance its current obligations. The Funds
may invest in commercial paper which at the time of the investment is (1) rated
in the two highest categories by Moody's (Prime-1 and Prime-2) or by S&P (A-1
and A-2), or (2) unrated but determined by the subadviser to be of comparable
quality.

Repurchase Agreements. When a Fund purchases money market securities, it
may on occasion enter into a repurchase agreement with the seller wherein the
seller and the buyer agree at the time of sale to a repurchase of the security
at a mutually agreed upon time and price. The period of maturity is usually
quite short, possibly overnight or a few days, although it may extend over a
number of months. The resale price is in excess of the purchase price,
reflecting an agreed upon market rate effective for the period of time the
Fund's money is invested in the security, and is not related to the coupon rate
of the purchase security. Repurchase agreements may be considered loans of money
to the seller of the underlying security, which are collateralized by the
securities underlying the repurchase agreement. A Fund will not enter into
repurchase agreements unless the agreement is fully collateralized (i.e., the
value of the securities is, and during the entire term of the agreement remains,
at least equal to the amount of the loan including interest). The Fund will take
possession of the securities underlying the agreement and will value them daily
to assure that this condition is met. In the event that a seller defaults on a
repurchase agreement, the Fund may incur loss in the market value of the
collateral, as well as disposition costs; and, if a party with whom the Fund has
entered into a repurchase agreement becomes involved in a bankruptcy proceeding,
the Fund's ability to realize on the collateral may be limited or delayed and a
loss may be incurred if the collateral securing the repurchase agreement
declines in value during the bankruptcy proceeding.

Reverse Repurchase Agreements. The Funds may enter into reverse repurchase
agreements with banks, which agreements have the characteristics of borrowing
and involve the sale of securities held by a Fund with an agreement to
repurchase the securities at an agreed-upon price and date, which reflect a rate
of interest paid for the use of funds for the period. Generally, the effect of
such a transaction is that the Fund can recover all or most of the cash invested
in the securities involved

30
<PAGE> 36

during the term of the reverse repurchase agreement, while in many cases it will
be able to keep some of the interest income associated with those securities.
Such transactions are only advantageous if the Fund has an opportunity to earn a
greater rate of interest on the cash derived from the transaction than the
interest cost of obtaining that cash. The Fund may be unable to realize a return
from the use of the proceeds equal to or greater than the interest required to
be paid. Opportunities to achieve this advantage may not always be available,
and the Funds intend only to use the reverse repurchase technique when it
appears to be to their advantage to do so. The use of reverse repurchase
agreements may magnify any increase or decrease in the value of a Fund's
securities. The Fund's custodian bank will maintain in a separate account
securities of the Fund that have a value equal to or greater than the Fund's
commitments under reverse repurchase agreements. The value of the securities
subject to reverse purchase agreements will not exceed 10% of the value of the
Fund's total assets.

RATINGS OF CORPORATE DEBT SECURITIES

Moody's Investors Service, Inc.

Aaa -- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged."

Aa -- Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.

A -- Bonds rated A possess many favorable investment attributes and are
generally considered as upper medium grade obligations.

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

Ba -- Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterize
bonds in this class.

B -- Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa -- Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca -- Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

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<PAGE> 37

Standard & Poor's Corporation

AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal, and differ from the highest rated issues in small degree.

A -- Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

BBB -- Bonds rated BBB are regarded as having adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in the higher rated categories.

BB, B, CCC, CC -- Bonds rated BB, B, CCC, and CC are regarded on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

RATINGS OF COMMERCIAL PAPER

Moody's Investors Service, Inc.

Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers
rated Prime-1 (or supporting institutions) are considered to have a superior
capacity for repayment of short-term promissory obligations. Issuers rated
Prime-2 (or supporting institutions) are considered to have a strong capacity
for repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics of issuers rated Prime-1 but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.

Standard & Poor's Corporation

Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative degree
of safety is not as high as for issues designated A-1.

32
<PAGE> 38

[AMERICAN ODYSSEY FUNDS LOGO]

American Odyssey Funds Management, Inc.
Two Tower Center
East Brunswick, NJ 08816
1-800-232-7884

AMERICAN ODYSSEY and the Sailing Ship Logo are
registered trademarks of American Odyssey Funds Management, Inc.
(C) Copyright 1996 American Odyssey Funds Management, Inc.

<PAGE> 39

PART B

INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 40

- ----------------------===================================-----------------------

A M E R I C A N O D Y S S E Y F U N D S , I N C .
STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1996

Shares of American Odyssey Funds, Inc. may be sold only to: (1) life
insurance company separate accounts to serve as the underlying investment
vehicle for variable annuity and variable life insurance contracts; (2)
qualified retirement plans, as permitted by Treasury Regulations; and (3) life
insurance companies and their affiliates.

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

This statement of additional information is not a prospectus. It
should be read in conjunction with the American Odyssey Funds, Inc.'s
prospectus dated May 1, 1996. It is available without charge upon written
request to American Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063, East
Brunswick, New Jersey 08816-1063, or by calling (908) 214-2000.

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

American Odyssey Funds, Inc.
Two Tower Center, P.O. Box 1063
East Brunswick, New Jersey 08816-1063
Telephone: (908) 214-2000

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
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Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Objectives and Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Options on Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Options on Stock Indices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Options on Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Options on Foreign Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Stock Index Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Interest Rate Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Foreign Currency Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . 14
Options on Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Forward Foreign Currency Exchange Contracts . . . . . . . . . . . . . . . . . . . . 16

Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Management of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Investment Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Other Service Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Net Asset Value of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>

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INVESTMENT OBJECTIVES AND PROGRAMS

The investment objectives of the various Funds, and their programs for
achieving those objectives, are described in the prospectus. This section
supplements that description.

OPTIONS ON EQUITY SECURITIES

The International Equity Fund, the Emerging Opportunities Fund, and
the Core Equity Fund may purchase and write (i.e., sell) put and call options
on equity securities that are traded on national securities exchanges or that
are listed on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"). A call option is a short-term contract pursuant
to which the purchaser or holder, in return for a premium paid, has the right
to buy the equity security underlying the option at a specified exercise price
(the strike price) at any time during the term of the option. The writer of
the call option, who received the premium, has the obligation, upon exercise of
the option, to deliver the underlying equity security against payment of the
strike price. A put option is a similar contract which gives the purchaser or
holder, in return for a premium, the right to sell the underlying equity
security at a specified exercise price (the strike price) during the term of
the option. The writer of the put, who receives the premium, has the
obligation to buy the underlying equity security at the strike price upon
exercise by the holder of the put.

A Fund will write call options on stocks only if they are covered, and
such options must remain covered so long as the Fund is obligated as a writer.
A call option is "covered" if: (1) the Fund owns the security underlying the
option; or (2) the Fund has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio; or (3) the Fund holds on a
share-for-share basis a call on the same security as the call written where the
strike price of the call held is equal to or less than the strike price of the
call written or greater than the strike price of the call written if the
difference is maintained by the Fund in cash, Treasury bills or other liquid
high-grade short-term debt obligations in a segregated account with its
custodian.

A Fund will write put options on stocks only if they are covered, and
such options must remain covered so long as the Fund is obligated as a writer.
A put option is "covered" if: (1) the Fund holds in a segregated account cash,
Treasury bills, or other liquid high-grade short-term debt obligations of a
value equal to the strike price; or (2) the Fund holds on a share-for-

3
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share basis a put on the same security as the put written where the strike
price of the put held is equal to or greater than the strike price of the put
written or less than the strike price of the put written if the difference is
maintained by the Fund in cash, Treasury bills, or other liquid high-grade
short-term obligations in a segregated account with its custodian.

A Fund may purchase "protective puts," i.e., put options acquired for
the purpose of protecting a portfolio security from a decline in market value.
In exchange for the premium paid for the put option, the Fund acquires the
right to sell the underlying security at the strike price of the put regardless
of the extent to which the underlying security declines in value. The loss to
the Fund is limited to the premium paid for, and transaction costs in
connection with, the put plus the initial excess, if any, of the market price
of the underlying security over the strike price. However, if the market price
of the security underlying the put rises, the profit the Fund realizes on the
sale of the security will be reduced by the premium paid for the put option
less any amount (net of transaction costs) of which the put may be sold.

A Fund may purchase call options for hedging and investment purposes.
No Fund intends to invest more than 5% of its net assets at any one time in the
purchase of call options on stocks.

If the writer of an option wishes to terminate the obligation, he or
she may effect a "closing purchase transaction" by buying an option of the same
series as the option previously written. Similarly, the holder of an option may
liquidate his or her position by exercising the option or by effecting a
"closing sale transaction," i.e., selling an option of the same series as the
option previously purchased. A Fund may effect closing sale and purchase
transactions. A Fund will realize a profit from a closing transaction if the
price of the transaction is less than the premium received from writing the
option or is more than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction with respect to a call option is likely to be
offset in whole or in part by appreciation of the underlying equity security
owned by the Fund. There is no guarantee that closing purchase or closing sale
transactions can be effected.

A Fund's use of options on equity securities is subject to certain
special risks, in addition to the risk that the market value of the security
will move adversely to the Fund's option position. An option position may be
closed out only on an exchange, board of trade or other trading facility which
provides a secondary market for an option of the same series. Although a Fund
will generally purchase or write only those options for which there appears to
be an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option, or at any
particular time, and for some options no

4
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secondary market on an exchange or otherwise may exist. In such event it might
not be possible to effect closing transactions in particular options, with the
result that the Fund would have to exercise its options in order to realize any
profit and would incur brokerage commissions upon the exercise of such options
and upon the subsequent disposition of the underlying securities acquired
through the exercise of call options or upon the purchase of underlying
securities or the exercise of put options. If a Fund as a covered call option
writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.

Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in
certain options; (ii) restrictions imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or a clearing corporation may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in the class
or series of options) would cease to exist, although outstanding options on
that exchange that had been issued by a clearing corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms. There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facility of any of the clearing corporations inadequate, and thereby result in
the institution by an exchange of special procedures which may interfere with
the timely execution of customers' orders. However, The Option Clearing
Corporation, based on forecasts provided by the U.S. exchanges, believes that
its facilities are adequate to handle the volume of reasonably anticipated
options transactions, and such exchanges have advised such clearing corporation
that they believe their facilities will also be adequate to handle reasonable
anticipated volumes.

5
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AMERICAN ODYSSEY FUNDS, INC.
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OPTIONS ON STOCK INDICES

The International Equity Fund, the Emerging Opportunities Fund, and
the Core Equity Fund may purchase and sell (i.e., write) put and call options
on stock indices traded on national securities exchanges or listed on NASDAQ.
Options on stock indices are similar to options on stock except that, rather
than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon
which the option is based is greater than (in the case of a call) or less than
(in the case of a put) the strike price of the option. This amount of cash is
equal to such difference between the closing price of the index and the strike
price of the option times a specified multiple (the "multiplier"). If the
option is exercised, the writer is obligated, in return for the premium
received, to make delivery of this amount. Unlike stock options, all
settlements are in cash, and gain or loss depends on price movements in the
stock market generally (or in a particular industry or segment of the market)
rather than price movements in individual stocks.

A Fund will write call options on stock indices only if they are
covered, and such options remain covered as long as the Fund is obligated as a
writer. A call option is covered if the Fund follows the segregation
requirements set forth in this paragraph. When a Fund writes a call option on
a broadly based stock market index, the portfolio will segregate or put into
escrow with its custodian or pledge to a broker as collateral for the option,
cash, Treasury bills or other liquid high-grade short-term debt obligations, or
"qualified securities" (defined below) with a market value at the time the
option is written of not less than 100% of the current index value times the
multiplier times the number of contracts. A "qualified security" is an equity
security which is listed on a national securities exchange or listed on NASDAQ
against which the Fund has not written a stock call option and which has not
been hedged by the Fund by the sale of stock index futures. When a Fund writes
a call option on an industry or market segment index, it will segregate or put
into escrow with its custodian or pledge to a broker as collateral for the
option, cash, Treasury bills or other liquid high-grade short-term debt
obligations, or at least five qualified securities, all of which are stocks of
issuers in such industry or market segment, with a market value at the time the
option is written of not less than 100% of the current index value times the
multiplier times the number of contracts. Such stocks will include stocks
which represent at least 50% of the weighting of the industry or market segment
index and will represent at least 50% of the portfolio's holdings in that
industry or market segment. No individual security will represent more than
15% of the amount so segregated, pledged or escrowed in the case of broadly
based stock market stock

6
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AMERICAN ODYSSEY FUNDS, INC.
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options or 25% of such amount in the case of industry or market segment index
options. If at the close of business on any day the market value of such
qualified securities so segregated, escrowed, or pledged falls below 100% of
the current index value times the multiplier times the number of contracts, the
fund will so segregate, escrow, or pledge an amount in cash, Treasury bills, or
other liquid high-grade short-term obligations equal in value to the
difference. In addition, when a Fund writes a call on an index which is
in-the-money at the time the call is written, the Funds will segregate with its
custodian or pledge to the broker as collateral, cash or U.S. government or
other liquid high-grade short-term debt obligations equal in value to the
amount by which the call is in-the-money times the multiplier times the number
of contracts. Any amount segregated pursuant to the foregoing sentence may be
applied to the Fund's obligation to segregate additional amounts in the event
that the market value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of contracts. A call
option is also covered and the Fund need not follow the segregation
requirements set forth in this paragraph if the Fund holds a call on the same
index as the call written where the strike price of the call held is equal to
or less than the strike price of the call written or greater than the strike
price of the call written if the difference is maintained by the Fund in cash,
Treasury bills or other liquid high-grade short-term obligations in a
segregated account with its custodian.

A Fund will write put options on stock indices only if they are
covered, and such options must remain covered so long as the Fund is obligated
as a writer. A put option is covered if: (1) the Fund holds in a segregated
account cash, Treasury bills, or other liquid high-grade short-term debt
obligations of a value equal to the strike price times the multiplier times the
number of contracts; or (2) the Fund holds a put on the same index as the put
written where the strike price of the put held is equal to or greater than the
strike price of the put written or less than the strike price of the put
written if the difference is maintained by the Fund in cash, Treasury bills, or
other liquid high-grade short-term debt obligations in a segregated account
with its custodian.

A Fund may purchase put and call options for hedging and investment
purposes. No Fund intends to invest more than 5% of its net assets at any one
time in the purchase of puts and calls on stock indices. A Fund may effect
closing sale and purchase transactions, as described above in connection with
options on equity securities.

The purchase and sale of options on stock indices will be subject to
the same risks as options on equity securities, described above. In addition,
the distinctive characteristics of options on indices create certain risks that
are not present with stock options. Index prices may be

7
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distorted if trading of certain stocks included in the index is interrupted.
Trading in the index options also may be interrupted in certain circumstances,
such as if trading were halted in a substantial number of stocks included in
the index. If this occurred, the Fund would not be able to close out options
which it had purchased or written and, if restrictions on exercise were
imposed, may be unable to exercise an option it holds, which could result in
substantial losses to the Fund. It is the policy of each Fund to purchase or
write options only on stock indices which include a number of stocks sufficient
to minimize the likelihood of a trading halt in options on the index.

Although the markets for certain index option contracts have developed
rapidly, the markets for other index options are still relatively illiquid.
The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index options contracts. No
Fund will purchase or sell any index option contract unless and until, in the
subadviser's opinion, the market for such options has developed sufficiently
that the risk in connection with such transactions is no greater than the risk
in connection with options on stocks.

Price movements in a Fund's equity security portfolio probably will
not correlate precisely with movements in the level of the index and,
therefore, in writing a call on a stock index a Fund bears the risk that the
price of the securities held by the Fund may not increase as much as the index.
In such event, the Fund would bear a loss on the call which is not completely
offset by movement in the price of the Fund's equity securities. It is also
possible that the index may rise when the Fund's securities do not rise in
value. If this occurred, the Fund would experience a loss on the call which is
not offset by an increase in the value of its securities portfolio and might
also experience a loss in its securities portfolio. However, because the value
of a diversified securities portfolio will, over time, tend to move in the same
direction as the market, movements in the value of the Fund's securities in the
opposite direction as the market would be likely to occur for only a short
period or to a small degree.

When a Fund has written a call, there is also a risk that the market
may decline between the time the Fund has a call exercised against it, at a
price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell stocks in its portfolio. As
with stock options, the Fund will not learn that an index option has been
exercised until the day following the exercise date but, unlike a call on stock
where the Fund would be able to deliver the underlying securities in
settlement, the Fund may have to sell part of its stock portfolio in order to
make settlement in cash, and the price of such stocks might decline

8
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before they can be sold. This timing risk makes certain strategies involving
more than one option substantially more risky with options in stock indices
than with stock options.

There are also certain special risks involved in purchasing put and
call options on stock indices. If the Fund holds an index option and exercises
it before final determination of the closing index value for that day, it runs
the risk that the level of the underlying index may change before closing. If
such a change causes the exercised option to fall out-of-the-money, the Fund
will be required to pay the difference between the closing index value and the
strike price of the option (times the applicable multiplier) to the assigned
writer. Although the Fund may be able to minimize the risk by withholding
exercise instructions until just before the daily cutoff time or by selling
rather than exercising an option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the
cutoff times for index options may be earlier than those fixed for other types
of options and may occur before definitive closing index values are announced.

OPTIONS ON DEBT SECURITIES

The Funds (other than the Emerging Opportunities and the Core Equity
Funds) may purchase and write (i.e., sell) put and call options on debt
securities (including U.S. government debt securities) that are traded on
national securities exchanges or that result from privately negotiated
transactions with primary U.S. government securities dealers recognized by the
Federal Reserve Bank of New York ("OTC options"). Options on debt are similar
to options on stock, except that the option holder has the right to take or
make delivery of a debt security, rather than stock.

A Fund will write options only if they are covered, and such options
must remain covered so long as the Fund is obligated as a writer. An option on
debt securities is covered in the same manner as explained in connection with
options on equity securities, except that, in the case of call options on U.S.
Treasury bills, a Fund might own U.S. Treasury bills of a different series from
those underlying the call option, but with a principal amount and value
corresponding to the option contract amount and a maturity date no later than
that of the securities deliverable under the call option. The principal reason
for a Fund to write an option on one or more of its securities is to realize
through the receipt of the premiums paid by the purchaser of the option a
greater current return than would be realized on the underlying security alone.
Calls on debt securities will not be written when, in the opinion of the
subadviser, interest rates are likely to decline significantly, because under
those circumstances the premium received by

9
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writing the call likely would not fully offset the foregone appreciation in the
value of the underlying security.

A Fund may also write straddles (i.e., a combination of a call and a
put written on the same security at the same strike price where the same issue
of the security is considered "cover" for both the put and the call). In such
cases, the Fund will also segregate or deposit for the benefit of the Fund's
broker cash or liquid high-grade debt obligations equivalent to the amount, if
any, by which the put is in-the-money. Each Fund's use of straddles will be
limited to 5% of its net assets (meaning that the securities used for cover or
segregated as described above will not exceed 5% of the Fund's net assets at
the time the straddle is written). The writing of a call and a put on the same
security at the same strike price where the call and the put are covered by
different securities is not considered a straddle for purposes of this limit.

A Fund may purchase "protective puts" in an effort to protect the
value of a security that they own against a substantial decline in market
value. Protective puts are described in OPTIONS ON EQUITY SECURITIES, page 3.

A Fund may also purchase call options on debt securities for hedging
or investment purposes. No Fund intends to invest more than 5% of its net
assets at any one time in the purchase of call options on debt securities.

If the writer of an exchange-traded option wishes to terminate the
obligation, he or she may effect a closing purchase or sale transaction in a
manner similar to that discussed above in connection with options on equity
securities. Unlike exchange-traded options, OTC options generally do not have
a continuous liquid market. Consequently, a Fund will generally be able to
realize the value of an OTC option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes an
OTC option, it generally will be able to close out the OTC option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the Fund originally wrote the OTC option. While the Funds will seek
to enter into OTC options only with dealers who agree to and which are expected
to be able to be capable of entering into closing transactions with the Fund,
there can be no assurance that the Fund will be able to liquidate an OTC option
at a favorable price at any time prior to expiration. In the event of
insolvency of the other party, the Fund may be unable to liquidate an OTC
option. There is, in general, no guarantee that closing purchase or closing
sale transactions can be effected.

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As explained in INVESTMENT RESTRICTIONS on page 19, no Fund may invest
more than 10% of its total assets (determined at the time of investment) in
illiquid securities, including debt securities for which there is not an
established market. The staff of the Securities and Exchange Commission has
taken the position that purchased OTC options and the assets used as "cover"
for written OTC options are illiquid securities. However, pursuant to the
terms of certain no-action letters issued by the staff, the securities used as
cover for written OTC options may be considered liquid provided that the Fund
sells OTC options only to qualified dealers who agree that the Fund may
repurchase any OTC option its writes for a maximum price to be calculated by a
predetermined formula. In such cases, the OTC option would be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option.

The Funds' purchase and sale of exchange-traded options on debt
securities will be subject to the risks described in OPTIONS ON EQUITY
SECURITIES on page 3.

OPTIONS ON FOREIGN CURRENCIES

The Funds may purchase and write put and call options on foreign
currencies traded on U.S. or foreign securities exchanges or boards of trade
for hedging purposes. Options on foreign currencies are similar to options on
stock, except that the option holder has the right to take or make delivery of
a specified amount of foreign currency, rather than stock.

A Fund may purchase and write options to hedge its securities
denominated in foreign currencies. If there is a decline in the dollar value
of a foreign currency in which a Fund's securities are denominated, the dollar
value of such securities will decline even though the foreign currency value
remains the same. To hedge against the decline of the foreign currency, a Fund
may purchase put options on such foreign currency. If the value of the foreign
currency declines, the gain realized on the put option would offset, in whole
or in part, the adverse effect such decline would have on the value of the
Fund's securities. Alternatively, a Fund may write a call option on the
foreign currency. If the foreign currency declines, the option would not be
exercised and the decline in the value of the portfolio securities denominated
in such foreign currency would be offset in part by the premium the Fund
received for the option.

If, on the other hand, a subadviser anticipates purchasing a foreign
security and also anticipates a rise in such foreign currency (thereby
increasing the cost of such security), a Fund may purchase call options on the
foreign currency. The purchase of such options could

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offset, at least partially, the effects of the adverse movements of the
exchange rates. Alternatively, a Fund could write a put option on the currency
and, if the exchange rates move as anticipated, the option would expire
unexercised.

A Fund's successful use of currency exchange options on foreign
currencies depends upon the subadviser's ability to predict the direction of
the currency exchange markets and political conditions, which requires
different skills and techniques than predicting changes in the securities
markets generally. For instance, if the currency being hedged has moved in a
favorable direction, the corresponding appreciation of the Fund's securities
denominated in such currency would be partially offset by the premiums paid on
the options. Further, if the currency exchange rate does not change, the
Fund's net income would be less than if the Fund had not hedged since there are
costs associated with options.

The use of these options is subject to various additional risks. The
correlation between movements in the price of options and the price of the
currencies being hedged is imperfect. The use of these instruments will hedge
only the currency risks associated with investments in foreign securities, not
market risks. A Fund's ability to establish and maintain positions will depend
on market liquidity. The ability of a Fund to close out an option depends upon
a liquid secondary market. There is no assurance that liquid secondary markets
will exist for any particular option at any particular time.

STOCK INDEX FUTURES CONTRACTS

To the extent permitted by applicable regulations, the International
Equity Fund, the Emerging Opportunities Fund, and the Core Equity Fund may buy
and sell for hedging purposes stock index futures contracts traded on a
commodities exchange or board of trade. A stock index futures contract is an
agreement in which the seller of the contract agrees to deliver to the buyer an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made. When the futures contract is
entered into, each party deposits with a broker or in a segregated custodial
account approximately 5% of the contract amount, called the "initial margin."
Subsequent payments to and from the broker, called "variation margin," will be
made on a daily basis as the price of the underlying stock index fluctuates,
making the long and short positions in the futures contracts more or less
valuable, a process known as "marking to the market."

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A Fund may sell stock index futures to hedge against a decline in the
value of equity securities it holds. A Fund may also buy stock index futures
to hedge against a rise in the value of equity securities it intends to
acquire. To the extent permitted by federal regulations, a Fund may also
engage in other types of hedging transactions in stock index futures that are
economically appropriate for the reduction of risks inherent in the ongoing
management of the Fund's equity securities.

A Fund's successful use of stock index futures contracts depends upon
the subadviser's ability to predict the direction of the market and is subject
to various additional risks. The correlation between movement in the price of
the stock index future and the price of the securities being hedged is
imperfect and the risk from imperfect correlation increases as the composition
of the Fund's securities portfolio diverges from the composition of the
relevant index. In addition, the ability of a Fund to close out a futures
position depends on a liquid secondary market. There is no assurance that
liquid secondary markets will exist for any particular stock index futures
contract at any particular time.

Under regulations of the Commodity Futures Trading Commission
("CFTC"), investment companies registered under the Investment Company Act of
1940 are excluded from regulation as commodity pools or commodity pool
operators if their use of futures is limited in certain specified ways. The
Funds will use futures in a manner consistent with the terms of this exclusion.
Among other requirements, no more than 5% of any Fund's assets may be committed
as initial margin on futures contracts.

INTEREST RATE FUTURES CONTRACTS

To the extent permitted by applicable regulations, the Funds (other
than the Emerging Opportunities and the Core Equity Funds) may buy and sell for
hedging purposes futures contracts on interest bearing securities (such as U.S.
Treasury Bonds, U.S. Treasury Notes, 3-month U.S. Treasury Bills, and GNMA
certificates) or interest rate indices. Futures contracts on interest bearing
securities and interest rate indices are referred to collectively as "interest
rate futures contracts." The portfolios will engage in transactions in only
those futures contracts that are traded on a commodities exchange or board of
trade.

A Fund may sell an interest rate futures contract to hedge against a
decline in the market value of debt securities it owns. A Fund may purchase an
interest rate futures contract to hedge against an anticipated increase in the
value of debt securities it intends to acquire. To the extent permitted by
applicable federal regulations, a Fund may also engage in other types

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of transactions in interest rate futures contracts that are economically
appropriate for the reduction of risks inherent in the ongoing management of
its futures.

A Fund's successful use of interest rate futures contracts depends
upon the subadviser's ability to predict interest rate movements. Further,
because there are a limited number of types of interest rate futures contracts,
it is likely that the interest rate futures contracts available to a Fund will
not exactly match the debt securities the Fund intends to hedge or acquire. To
compensate for differences in historical volatility between securities a Fund
intends to hedge or acquire and the interest rate futures contracts available
to it, a Fund could purchase or sell futures contracts with a greater or lesser
value than the securities it wished to hedge or intended to purchase. Interest
rate futures contracts are subject to the same risks regarding closing
transactions and the CFTC limits as described in STOCK INDEX FUTURES CONTRACTS
on page 12.

FOREIGN CURRENCY FUTURES CONTRACTS

To the extent permitted by applicable regulations, a Fund may buy and
sell for hedging purposes futures contracts on foreign currencies or groups of
foreign currencies such as the European Currency Unit. A European Currency
Unit is a basket of specified amount of the currencies of certain member states
of the European Economic Community, a Western European economic cooperative
organization including France, Germany, The Netherlands, and the United
Kingdom. A Fund will engage in transactions in only those futures contracts
and options thereon that are traded on a commodities exchange or a board of
trade. See STOCK INDEX FUTURES CONTRACTS on page 12 for a general description
of futures contracts. A Fund intends to engage in transactions involving
futures contracts as a hedge against changes in the value of the currencies in
which they hold investments or in which they expect to pay expenses or pay for
future purchases. To the extent permitted by federal regulations, a Fund may
also engage in such transactions when they are economically appropriate for the
reduction of risks inherent in their ongoing management.

The use of these futures contracts is subject to risks similar to
those involved in the use of options on foreign currencies and the use of any
futures contract. A Fund's successful use of foreign currency futures
contracts depends upon the subadviser's ability to predict the direction of
currency exchange markets and political conditions. In addition, the
correlation between movements in the price of futures contracts and the price
of currencies being hedged is imperfect, and there is no assurance that liquid
markets will exist for any particular futures

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contract at any particular time. Those risks are discussed more fully under
OPTIONS ON FOREIGN CURRENCIES on page 11 and STOCK INDEX FUTURES CONTRACTS on
page 12.

OPTIONS ON FUTURES CONTRACTS

The Funds may, to the extent permitted by applicable regulations,
enter into certain transactions involving options on futures contracts. An
option on a futures contract gives the purchaser or holder the right, but not
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a
specified price at any time during the option exercise period. The writer of
the option is required upon exercise to assume an offsetting futures position
(a short position if the option is a call and a long position if the option is
a put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accomplished by
delivery of the accumulated balance in the writer's futures margin account
which represents the amount by which the market price of the futures contract,
at exercise, exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract. As an
alternative to exercise, the holder or writer of an option may terminate a
position by selling or purchasing an option of the same series. There is no
guarantee that such closing transactions can be effected. The Funds intend to
utilize options on futures contracts for the same purposes that it intends to
use the underlying futures contracts.

Options on futures contracts are subject to risks similar to those
described above with respect to options and futures contracts. There is also
the risk of imperfect correlation between the option and the underlying futures
contract. If there were no liquid secondary market for a particular option on
a futures contract, a Fund might have to exercise an option it held in order to
realize any profit and might continue to be obligated under an option it had
written until the option expired or was exercised. If a Fund were unable to
close out an option it had written on a futures contract, it would continue to
be required to maintain initial margin and make variation margin payments with
respect to the option position until the option expired or was exercised
against the Fund.

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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Funds may enter into forward foreign currency exchange contracts
in several circumstances. When a Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when a Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Fund may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. By entering into a forward contract for
a fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Fund will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during
the period between the date on which the security is purchased or sold, or on
which the dividend or interest payment is declared, and the date on which such
payments are made or received.

Additionally, when a subadviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Fund may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
forward contract is entered into and the date it matures. The projection of
short-term currency market movement is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain. The Funds will
not enter into such forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate a Fund to
deliver an amount of foreign currency in excess of the value of the securities
or other assets denominated in that currency held by the Fund. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the long-term investment decisions made with regard to
overall diversification strategies. However, the Funds believe that it is
important to have the flexibility to enter into such forward contracts when it
is determined that the best interests of the Funds will thereby be served. A
Fund's custodian will place cash or liquid, high-grade equity or debt
securities into a segregated account of the portfolio in an amount equal to the
value of the Fund's total assets committed to the consummation of forward
foreign currency exchange contracts. If the value of the securities placed in
the segregated account declines, additional cash or securities will be

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placed in the account on a daily basis so that the value of the account will
equal the amount of the Fund's commitments with respect to such contracts.

The Funds generally will not enter into a forward contract with a term
of greater than 1 year. At the maturity of a forward contract, a Fund may
either sell the portfolio security and make delivery of the foreign currency or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.

It is impossible to forecast with absolute precision the market value
of a particular portfolio security at the expiration of the contract.
Accordingly, it may be necessary for a Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency that
the Fund is obligated to deliver and if a decision is made to sell the security
and make delivery of the foreign currency.

If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. Should forward
prices decline during the period between the Fund's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent that the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.

The Fund's dealing in forward foreign currency exchange contracts will
be limited to the transactions described above. Of course, the Funds are not
required to enter into such transactions with regard to their foreign
currency-denominated securities. It also should be realized that this method
of protecting the value of the portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities which are unrelated to exchange rates. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, at the same time they tend to limit any potential gain
which might result should the value of such currency increase.

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Although the Funds value their assets daily in terms of U.S. dollars,
they do not intend physically to convert their holdings of foreign currencies
into U.S. dollars on a daily basis. They will do so from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the dealer.

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AMERICAN ODYSSEY FUNDS, INC.
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INVESTMENT RESTRICTIONS

Certain investment restrictions are fundamental to the operations of
American Odyssey Funds, Inc. and may not be changed without the approval of the
holders of a majority of the outstanding shares of the affected Fund, or if it
is less, 67% of the shares represented at a meeting of shareholders at which
the holders of 50% or more of the shares are represented.

As a result of these restrictions, none of the Funds will:

1. Buy or sell real estate and mortgages, although the Funds may buy and
sell securities that are secured by real estate and securities of real
estate investment trusts and of other issuers that engage in real
estate operations.

2. Buy or sell commodities or commodity contracts, except that the Funds
may purchase and sell futures contracts and related options.

3. Buy or sell the securities of other investment companies, except by
purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 5% of the Fund's
total assets (taken at current value) would be invested in such
securities, or except as part of a merger, consolidation or other
acquisition.

4. Acquire securities for the purpose of exercising control or management
of any company except in connection with a merger, consolidation,
acquisition, or reorganization.

5. Make a short sale of securities or maintain a short position, except
that the International Equity Fund, the Emerging Opportunities Fund,
and the Core Equity Fund may make short sales against-the-box.
Collateral arrangements entered into by the Funds with respect to
futures contracts and related options and the writing of options are
not deemed to be short sales.

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6. Purchase securities on margin or otherwise borrow money or issue
senior securities except that a Fund may enter into reverse repurchase
agreements and purchase securities on a when-issued or a delayed
delivery basis. A Fund may also obtain such short-term credit as it
needs for the clearance of securities transactions and may borrow from
a bank as a temporary measure to facilitate redemptions (but not for
leveraging or investment) or to exercise an option, provided that the
amount borrowed does not exceed 5% of the value of the Fund's total
assets (including the amount owed as a result of the borrowing) at the
time the borrowing is made. Investment securities will not be
purchased while borrowings are outstanding. Interest paid on
borrowings will not be available for investment. Collateral
arrangements entered into by a Fund with respect to futures contracts
and related options and the writing of options are not deemed to be
the issuance of a senior security or the purchase of a security on
margin.

7. Enter into reverse repurchase agreements if, as a result, the Fund's
obligations with respect to reverse repurchase agreements would exceed
10% of the Fund's net assets (defined to mean total assets at market
value less liabilities other than reverse repurchase agreements).

8. Pledge or mortgage assets, except that not more than 10% of the value
of any Fund may be pledged (taken at the time the pledge is made) to
secure borrowings made in accordance with item 6 above and that a Fund
may enter into reverse repurchase agreements in accordance with item 7
above. Collateral arrangements entered into by a Fund with respect to
futures contracts and related options and the writing of options are
not deemed to be the pledge of assets.

9. Lend money, except that loans of up to 10% of the value of each Fund
may be made through the purchase of privately placed bonds,
debentures, notes, and other evidences of indebtedness of a character
customarily acquired by institutional investors that may or may not be
convertible into stock or accompanied by warrants or rights to acquire
stock. Repurchase agreements and the purchase of publicly traded debt
obligations are not considered to be "loans" for this purpose and may
be entered into or purchased by a Fund in accordance with its
investment objectives and policies.

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10. Underwrite the securities of other issuers, except where the Fund may
be deemed to be an underwriter for purposes of certain federal
securities laws in connection with the disposition of Fund securities
and with loans that a Fund may make pursuant to item 9 above.

11. Make an investment unless, when considering all its other investments,
75% of the value of a Fund's assets would consist of cash, cash items,
obligations of the United States government, its agencies or
instrumentalities, and other securities. For purposes of this
restriction, "other securities" are limited for each issuer to not
more than 5% of the value of a Fund's assets and to not more than 10%
of the issuer's outstanding voting securities held by American Odyssey
Funds, Inc. as a whole. Some uncertainty exists as to whether
certain of the types of bank obligations in which a Fund may invest,
such as certificates of deposit and bankers' acceptances, should be
classified as "cash items" rather than "other securities" for purposes
of this restriction, which is a diversification requirement under the
1940 Act. Interpreting most bank obligations as "other securities"
limits the amount a Fund may invest in the obligations of any one bank
to 5% of its total assets. If there is an authoritative decision that
any of these obligations are not "securities" for purposes of this
diversification test, this limitation would not apply to the purchase
of such obligations.

12. Purchase securities of a company in any industry if, as a result of
the purchase, a Fund's holdings of securities issued by companies in
that industry would exceed 25% of the value of the Fund, except that
this restriction does not apply to purchases of obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities
or issued by domestic banks. For purposes of this restriction,
neither finance companies as a group nor utility companies as a group
are considered to be a single industry and will be grouped instead
according to their services; for example, gas, electric, and telephone
utilities will each be considered a separate industry.

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13. Invest in illiquid securities (including repurchase agreements
maturing in more than 7 days) or in the securities of issuers (other
than U.S. government agencies or instrumentalities) having a record,
together with predecessors, of less than 3 years' continuous operation
if, regarding all such securities, more than 10% of the Fund's total
assets would be invested in them. For purposes of this restriction,
illiquid securities are those that are subject to legal or contractual
restrictions on resale or for which no readily available market
exists. Restricted securities that have not been registered but may
be sold and resold to institutional investors are not considered
illiquid for purposes of this restriction, provided that there is
dealer or institutional trading market in such securities.

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MANAGEMENT OF THE FUNDS

DIRECTORS AND OFFICERS

The directors and principal officers of American Odyssey Funds, Inc.
(the "Company"), their business addresses and principal occupations for the
past five years are set forth in the following table. Those Directors who are
"interested persons" (as defined in the 1940 Act) by virtue of their
affiliation with the Company, are indicated by an asterisk (*).

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE COMPANY DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert C. Dughi* Chairman of the Chairman of the Board and Chief
Two Tower Center Board Executive Officer, The Copeland
East Brunswick, NJ Companies. Also: Chairman of the
08816 Board of Copeland Financial Services,
Inc. ("CFS"), the Manager, and
Copeland Equities, Inc.

Kent A. Kelley* Director President and Chief Executive Officer,
One Tower Square The Travelers Investment Management
Hartford, CT Company ("TIMCO"); prior to November
06183 1992, Executive Vice President of
TIMCO.

Linda Walker Bynoe Director President and Chief Operating Officer,
875 N. Michigan Avenue Telemat, Ltd.
Suite 2505
Chicago, IL
60611

Steven I. Weinstein Director Deputy General Counsel, Foster Wheeler
Perryville Corp. Park Corporation; President and Director,
Clinton, NJ Foster Wheeler Real Estate Development
08809 Corporation.
</TABLE>

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<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE COMPANY DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jane DiRenzo Pigott Director Partner, Environmental Law Department,
35 West Wacker Drive Winston & Strawn. Prior to May 1993,
Suite 4000 Partner and Chairperson of
Chicago, IL Environmental Law Dept., Katten Muchin
60601 & Zavis.

Mark M. Skinner* Director Executive Vice President, Chief
Two Tower Center Marketing Officer, The Copeland
East Brunswick, NJ Companies. Also: President of
08816 Copeland Equities, Inc. and Executive
Vice President of CFS and the Manager

John G. Beam, Jr. Director Chairman of the Board,
501 South 2nd Street Harris & Harris of Kentucky, Inc.
Louisville, KY
40202

Nicholas D. Yatrakis Director Physician in private practice
1 Wedgewood Way
Scotch Plains, NJ
07076

George Vlaisavljevich* President and Director Executive Vice President, The Copeland
Two Tower Center Companies. Also: President of CFS
East Brunswick, NJ and the Manager, and Executive Vice
08816 President of Copeland Equities, Inc.

Michael R. Zarelli Senior Vice President Senior Vice President, Finance, Chief
Two Tower Center and Treasurer Financial Officer, and Treasurer, The
East Brunswick, NJ Copeland Companies. Also: Senior Vice
08816 President, Chief Financial Officer and
Treasurer of CFS, the Manager, and
Copeland Equities, Inc.
</TABLE>

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<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE COMPANY DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paul S. Feinberg Senior Vice President Senior Vice President and General
Two Tower Center and Secretary Counsel, The Copeland Companies.
East Brunswick, NJ Also: Senior Vice President and
08816 General Counsel of CFS, the Manager,
and Copeland Equities, Inc.

Mark E. Freemyer Vice President Vice President, The Copeland
Two Tower Center Companies. Also: Vice President of
East Brunswick, NJ CFS, the Manager, and Copeland
08816 Equities, Inc. Prior to February 1995,
Vice President, Kidder, Peabody & Co.,
Incorporated.

Jeffrey R. Hug Vice President, Vice President, The Copeland
Two Tower Center Controller, and Companies. Also: Vice President of
East Brunswick, NJ Compliance Officer CFS and the Manager. Prior to
08816 December 1993, Senior Vice President
and Controller, Travelers Investment
Management Company.
</TABLE>

As of May 1, 1996, the directors and officers owned in the aggregate less than
1% of the outstanding shares of each Fund.

INVESTMENT ADVISERS

For the years 1993, 1994 and 1995, the International Equity Fund paid
the Manager fees of $35,856, $271,013, and $488,474, respectively, and the
Manager paid the subadviser $23,050, $174,167, and $310,189, respectively. In
addition, in the years 1993 and 1994 the Manager paid the Fund $26,345 and
$42,912, respectively, under the Manager's agreement to limit expenses to 1.25%
of average net assets. In 1995, the Fund paid the Manager $69,257 as a
repayment of expenses previously reimbursed.

For the years 1993, 1994, and 1995, the Emerging Opportunities Fund
paid the Manager fees of $54,027, $382,046, and $811,641, respectively, and the
Manager paid the subadviser

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$33,247, $235,098, and $487,651, respectively. In addition, in 1993 the
Manager paid the Fund $18,755 under the Manager's agreement to limit expenses
to 1.00% of average net assets. In 1994 the Fund paid the Manager $7,210 as a
repayment of expenses previously reimbursed.

For the years 1993, 1994, and 1995, the Core Equity Fund paid the
Manager fees of $70,165, $442,721, and $855,725, respectively, and the Manager
paid the subadviser $40,930, $258,232, and $489,333, respectively. In
addition, in 1993 the Manager paid the Fund $13,517 under the Manager's
agreement to limit expenses to 1.00% of average net assets. In 1994 the Fund
paid the Manager $2,689 as a repayment of expenses previously reimbursed.

For the years 1993, 1994, and 1995, the Long-Term Bond Fund paid the
Manager fees of $48,844, $247,872, and $486,896, respectively, and the Manager
paid the subadviser $24,422, $123,928, and $243,334, respectively. In
addition, in 1993 the Manager paid the Fund $53,415 under the Manager's
agreement to limit expenses to 0.75% of average net assets. In 1994 and 1995,
the Fund paid the Manager $11,413 and $40,770, respectively, as a repayment of
expenses previously reimbursed.

For the years 1993, 1994 and 1995, the Intermediate-Term Bond Fund
paid the Manager fees of $39,179, $180,136, and $317,000, respectively, and the
Manager paid the subadviser $19,589, $90,068, and $158,441, respectively. In
addition, in 1993 the Manager paid the Fund $48,471 under the Manager's
agreement to limit expenses to 0.75% of average net assets. In 1994 and 1995,
the Fund paid the Manager $1,777 and $46,612, respectively, as a repayment of
expenses previously reimbursed.

The expense limitation agreement is no longer in effect for the
International Equity Fund, the Emerging Opportunities Fund, the Core Equity
Fund, the Long-Term Bond Fund and the Intermediate-Term Bond Fund. These Funds
have repaid the Manager for all expenses previously reimbursed.

For the years 1993, 1994, and 1995, the Short-Term Bond Fund paid the
Manager fees of $17,839, $69,569, and $113,867, respectively, and the Manager
paid the subadviser $8,919, $34,785, and $56,916, respectively. In addition,
in the years 1993 and 1994, the Manager paid the Fund $34,717 and $35,718,
respectively, under the Manager's agreement to limit expenses to 0.75% of
average net assets. In 1995, the Fund paid the Manager $1,531 as a repayment
of expenses previously reimbursed.

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For more information regarding investment advisers, see MANAGEMENT OF
THE FUNDS in the prospectus.

OTHER SERVICE PROVIDERS

Investors Bank and Trust Company, 89 South Street, Boston, MA 02111
is the custodian of the assets and is also the accounting services agent for
the Funds of the Company. In that capacity Investors Bank and Trust Company
provides custodial and accounting services to, and keeps the accounts and
records of, the Company. The Company pays a monthly fee based upon the total
assets of the Funds at the end of the month at an annual rate of between 0.04%
and 0.08% plus reimbursement of out-of-pocket expenses for obtaining
information from pricing services and securities transaction charges. For both
U.S. and non-U.S. assets, the annual rate is 0.08% for assets up to $250
million, 0.06% for assets over $250 million and up to $500 million, and 0.04%
for assets over $500 million. For non-U.S. assets, the Company paid additional
custodial expenses at annual rates of 0.04% and 0.13%, based upon the country.
For the year 1995, the Company paid $265,520 to Investors Bank and Trust
Company as custodian and accounting services agent.

The Bank of New York, 48 Wall Street, New York, New York, 10286 was
custodian of the assets of the Funds of the Company and maintained certain
records and books in connection therewith, until June 30, 1995.

The Bank of New York was also the accounting services agent for the
Funds of the Company until that date. In that capacity the Bank of New York
provided accounting services to, and kept the accounts and records of, the
Company. Each Fund paid a monthly fee based on the Fund's net asset value at
the end of the month at an annual rate of between 0.03% and 0.08% plus
reimbursement of out-of-pocket expenses for obtaining information from pricing
services. For U.S. assets, the annual rate is 0.05% for assets up to $50
million, 0.04% for assets over $50 million and up to $100 million, and 0.03%
for assets over $100 million. For non-U.S. assets, the annual rate is 0.08%
for assets up to $50 million, 0.06% for assets over $50 million and up to $100
million, and 0.04% for assets over $100 million. The minimum monthly fee was
$2,000 for U.S. Funds and $3,400 for international Funds. For the years 1993,
1994, and 1995, the Company paid $52,058, $183,614, and $117,045, respectively,
to the Bank of New York as accounting services agent.

American Odyssey Funds Management, Inc. (the "Manager"), Two Tower
Center, P.O. Box 1063, East Brunswick, NJ 08816-1063, serves as transfer agent
and dividend disbursing agent

27
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

for the Company. The Company does not pay a separate fee for this service;
rather, it reimburses the Manager for reasonable out-of-pocket expenses
incurred in connection with providing the service.

Coopers & Lybrand, L.L.P., 1301 Avenue of the Americas, New York, NY
10019 serves as the Company's independent accountants, providing audit
services.

Copeland Equities, Inc., Two Tower Center, East Brunswick, NJ 08816,
serves as principal underwriter of the shares of the Company. It is an
indirect, wholly-owned subsidiary of Travelers Group Inc.

Rogers, Casey and Associates ("Rogers-Casey"), 85 Old Kings Highway
North, Darien, CT 06520, assists the Manager in monitoring the performance of
the subadvisers and comparing that performance to that of other investment
managers. For this assistance, the Manager (not the Company) paid Rogers-Casey
a fee of approximately $40,000 in 1993, $50,000 in 1994, and $50,000 in 1995.

PORTFOLIO TRANSACTIONS

Each Fund's subadviser is responsible for the selection of brokers and
dealers to effect that Fund's transactions and the negotiation of brokerage
commissions, if any. Transactions on a stock exchange in equity securities
will be executed primarily through brokers who will receive a commission paid
by the Fund. Fixed income securities, as well as securities traded in the
over-the-counter market, on the other hand, will not normally involve any
brokerage commissions. The securities are generally traded on a "net" basis
with the dealer acting as principal for its own account without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed priced
that includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain of these
securities may be purchased directly from an issuer, in which case neither
commissions nor discounts are paid.

In purchasing and selling a Fund's portfolio securities, it is the
subadvisers' policy to seek quality execution at the most favorable prices
through responsible broker-dealers and, in the case of agency transactions, at
competitive commission rates. In selecting broker-dealers to execute a Fund's
portfolio transactions, the subadviser will consider such factors as the price
of the security, the rate of the commission, the size and difficulty of the
order, the reliability,

28
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

integrity, financial condition, general execution and operational capabilities
of competing broker-dealers, and the brokerage and research services they
provide to the subadviser or the Fund.

Notwithstanding the above, under certain conditions, the Funds are
authorized to pay higher brokerage commissions in return for brokerage and
research services, although they have no current arrangement to do so. The
subadvisers may cause a Fund to pay a broker-dealer who furnishes brokerage
and/or research services a commission or price for executing a transaction that
is in excess of the commission or price another broker would have received for
executing the transaction if it is determined that such commission or price is
reasonable in relation to the value of the brokerage and/or research services
which have been provided. In some cases, research services are generated by
third parties, but are provided to the subadviser or through broker-dealers.

The subadvisers may receive a wide range of research services from
broker-dealers, including information on securities markets, the economy,
individual companies, statistical information, accounting and tax law
interpretations, technical market action, pricing and appraisal services, and
credit analyses. Research services are received primarily in the form of
written reports, telephone contacts, personal meetings with security analysts,
corporate and industry spokespersons, economists, academicians, and government
representatives, and access to various computer-generated data. Research
services received from broker-dealers are supplemental to each investment
adviser's own research efforts and, when utilized, are subject to internal
analysis before being incorporated into the investment process.

In allocating brokerage for the Funds, the subadvisers may annually
assess the contribution of the brokerage and research services provided by
broker-dealers, and allocate a portion of the brokerage business of its clients
on the basis of these assessments. In addition, broker-dealers sometimes
suggest a level of business they would like to receive in return for the
various brokerage and research services they provide. Actual brokerage
received by any firm may be less than the suggested allocations, but can exceed
the suggestions because total brokerage is allocated on the basis of all the
considerations described above. In no instance is a broker-dealer excluded
from receiving business because it has not been identified as providing
research services.

The subadvisers cannot readily determine the extent to which net
prices or commission rates charged by broker-dealers reflect the value of their
research services. However, net prices and commissions are periodically
reviewed to determine whether they are reasonable in relation to the services
provided. In some instances, the subadvisers receive research services

29
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

they might otherwise have had to perform for themselves. The research
services provided by broker-dealers can be useful to the subadvisers, in
serving the Funds, as well as to their other clients.

A subadviser may employ an affiliated broker to execute brokerage
transactions on behalf of the Fund as long as the commissions are reasonable
and fair compared to the commissions received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. The Funds
may not engage in any transaction in which a subadviser or its affiliates act
as principal, including over-the-counter purchases and negotiated trades in
which such party acts as a principal.

On occasion, an investment opportunity may be appropriate for more
than one entity for which a subadviser serves as investment manager or adviser.
On those occasions, one entity will not be favored over another and allocations
of investments among them will be made in an impartial manner believed to be
equitable to each entity involved. The allocations will be based on each
entities investment objectives and its current cash and investment positions.

The subadvisers may enter into certain commission recapture
arrangements with broker-dealers. Under these arrangements, the broker-dealer
agrees to return a portion of the brokerage commission for the benefit of the
fund, either in the form of a cash refund or by payment of a fund expense such
as custodial expenses. Subadvisers will execute trades under such arrangements
only when it is consistent with the policy to seek best execution.

The following charts provide the aggregate amount of brokerage
commissions paid by each Fund during the last three years.

INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
- ---- ----------------- ------------------ ------------------
<S> <C> <C> <C>
1993 $53,482 0% 0%
1994 $185,665 0% 0%
1995 $161,675 0% 0%
- ------------------------------------------------------------------------------------------------
</TABLE>

Commissions in the amount of $0 in 1993, $356 in 1994, and $0 in 1995
were paid to Smith Barney Inc., an affiliate of the Manager.

30
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

EMERGING OPPORTUNITIES FUND
<TABLE>
<CAPTION>
% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
- ---- ----------------- ------------------ ------------------
<S> <C> <C> <C>
1993 $17,467 100% 100%
1994 $43,899 100% 100%
1995 $65,993 100% 100%
- ------------------------------------------------------------------------------------------------
</TABLE>

CORE EQUITY FUND
<TABLE>
<CAPTION>
% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
- ---- ----------------- ------------------ ------------------
<S> <C> <C> <C>
1993 $70,147 77% 77%
1994 $190,450 73% 73%
1995 $207,159 78% 78%
- ------------------------------------------------------------------------------------------------
</TABLE>

Commissions in the amount of $966 in 1993, $582 in 1994, and $0 in
1995 were paid to The Robinson-Humphrey Company, Inc., an affiliate of the
Manager. The Fund also paid commissions in the amount of $498 in 1993, $2,952
in 1994, and $0 in 1995 to Smith Barney Inc., an affiliate of the Manager.

LONG-TERM BOND FUND
<TABLE>
<CAPTION>
% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
- ---- ----------------- ------------------ ------------------
<S> <C> <C> <C>
1993 $3,160 0% 0%
1994 $42,115 0% 0%
1995 $30,903 0% 0%
- ------------------------------------------------------------------------------------------------
</TABLE>

31
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
% of Transactions
% Paid to Brokers through Brokers
Year Total Commission Providing Research Providing Research
- ---- ---------------- ------------------ ------------------
<S> <C> <C> <C>
1993 $0 0% 0%
1994 $0 0% 0%
1995 $0 0% 0%
- ------------------------------------------------------------------------------------------------
</TABLE>

SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
- ---- ----------------- ------------------ ------------------
<S> <C> <C> <C>
1993 $0 0% 0%
1994 $0 0% 0%
1995 $1,447 100% 100%
- ------------------------------------------------------------------------------------------------
</TABLE>

Brokerage commissions were higher in 1994 than in 1993 because (1) the
Funds commenced operations in May 1993 and (2) the Funds had more assets during
1994.

The annual portfolio turnover rate for the International Equity,
Emerging Opportunities, Core Equity and Intermediate-Term Bond Funds are
expected to be less than 100%. The annual portfolio turnover rate for the
Long-Term Bond and Short-Term Bond Funds are expected to be more than 100%.
See INVESTMENT OBJECTIVES AND PROGRAMS of those Funds in the prospectus for
more information. For a listing of last year's portfolio turnover rates for
all the Funds, see FINANCIAL HIGHLIGHTS in the prospectus.

NET ASSET VALUE OF SHARES

The net asset value of the shares of each Fund is determined once
daily, as of 4:15 p.m. New York City time, on each day during which the New
York Stock Exchange ("NYSE") is open for business. The NYSE is open for
business Monday through Friday except for the days on which the following
holidays are observed: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The

32
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

net asset value per share of each Fund is computed by adding the sum of the
value of the securities held by that Fund plus any cash or other assets it
holds, subtracting all its liabilities, and dividing the result by the total
number of shares outstanding of that Fund at such time. Expenses, including
the investment management fee, are accrued daily.

Equity securities for which the primary market is on an exchange are
generally valued at the last sale price on such exchange as of the close of the
NYSE (which is currently 4:00 p.m. New York City time) or, in the absence of
recorded sales, at the mean between the most recently quoted bid and asked
prices. NASDAQ National Market System equity securities are valued at the last
sale price or, if there was no sale on such day, at the mean between the most
recently quoted bid and asked prices. Other over-the-counter equity securities
are valued at the mean between the most recently quoted bid and asked prices.
Convertible debt securities that are actively traded in the over-the-counter,
including listed securities for which the primary market is believed to be
over-the-counter, are valued at the mean between the most recently quoted bid
and asked prices.

Debt obligations (other than those with remaining maturities of less
than 60 days when purchased) are valued utilizing an independent pricing
service to determine valuations for normal institutional size trading units of
securities. The pricing service considers such factors as security prices,
yields, maturities, call features, ratings, and developments relating to
specific securities. Debt obligations with remaining maturities of less than
60 days when purchased will be valued at amortized cost. This means that each
obligation will be valued initially at its purchase price and thereafter by
amortizing any discount or premium uniformly to maturity, unless this method
does not represent fair market value. In such cases, the security will be
valued at its fair value as determined by the Manager and/or the subadvisers
under the direction of the Board of Directors of the Company.

Options traded on national securities exchanges are valued at their
last sale price as of the close of option trading on such exchanges (which is
currently 4:10 p.m. New York City time). Futures contracts are marked to
market daily, and options thereon are valued at their last sale price, as of
the close of the applicable commodities exchanges (which is currently 4:15 p.m.
New York City time). Quotations of foreign securities in a foreign currency
are converted to U.S. dollar equivalents at the current rate obtained by a
recognized bank or dealer. Forward contracts are valued at the current cost of
covering or offsetting such contracts.

33
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

Securities or assets for which market quotations are not readily
available will be valued at fair value as determined by the Manager and/or the
subadvisers under the direction of the Board of Directors of the Company.

Generally, trading in foreign securities, as well as corporate bonds,
U.S. government securities, and money market instruments, is substantially
completed each day at various times prior to the close of the NYSE. The value
of any such securities are determined as of such times for purposes of
computing a Fund's net asset value. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. If an extraordinary event
occurs after the close of an exchange on which that security is traded, the
security will be valued at fair value as determined in good faith by the
applicable subadviser under procedures established by and under the general
supervision of the Company's Board of Directors.

PERFORMANCE INFORMATION

The Funds may quote their performance in various ways. All
performance information supplied by the Funds is historical and is not intended
to indicate future performance. A Fund's share prices, yields, and total
returns fluctuate in response to market conditions and other factors, and the
value of Fund shares when redeemed may be more or less than their original
cost.

Performance information for a Fund includes the effect of deducting
that Fund's expenses, but does not include charges and expenses attributable to
any particular insurance product.

Yields quoted in advertising are computed by dividing that Fund's
interest and dividend income for a given 30-day period, net of expenses, by the
average number of shares entitled to receive dividends during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purposes of
yield quotations in accordance with standardized methods applicable to all
stock and bond funds. Dividends for equity investments are treated as if they
were accrued on a daily basis, solely for the purposes of yield calculations.
In general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at a
discount by adding

34
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

a portion of the discount to daily income. Capital gains and losses generally
are excluded from the calculation.

Income calculated for the purpose of determining the Funds' yields
differs from income as determined for other accounting purposes. Because of
the different accounting methods used, and because of the semiannual
compounding assumed in yield calculations, the yields quoted for the Funds may
differ from the income the Funds paid over the same period or the rate of
income reported in the Funds' financial statements.

Total returns quoted in advertising reflect all aspects of a Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value per share (NAV)
over the period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in the
Fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of growth
or decline in value had been constant over the period. For example, a total
return of 100% over ten years would require an average annual return of 7.18%,
which is the steady annual rate that would equal 100% growth on a compounded
basis in ten years. While average annual total returns are a convenient means
of comparing investment alternatives, investors should realize that a Fund's
performance is not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to the
actual year-to-year performance.

In addition to average annual total returns, the Funds may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions, over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns, yield and other performance
information may be quoted numerically or in a table, graph or similar
illustration.

35
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

TAXES

This section supplements the tax disclosure in the section FEDERAL TAXES in the
prospectus.

Section 817(h) of the Internal Revenue Code requires that assets
underlying variable life insurance and variable annuity contracts must meet
certain diversification requirements if the contracts are to qualify as life
insurance and annuity contracts. The diversification requirements ordinarily
must be met within 1 year after contract owner funds are first allocated to the
particular Fund, and within 30 days after the end of each calendar quarter
thereafter. In order to meet the diversification requirements set forth in
Treasury Regulations issued pursuant to Section 817(h), each Fund must meet one
of two alternative tests. Under the first test, no more than 55% of the Fund's
assets can be invested in any one investment; no more than 70% of the assets
can be invested in any two investments; no more than 80% of the assets can be
invested in any three investments; and no more than 90% can be invested in any
four investments. Under the second test, the Fund must meet the tax law
diversification requirements for a regulated investment company and no more
than 55% of the value of the Fund's assets can be invested in cash, cash items,
government securities, and securities of other regulated investments.

For purposes of determining whether a variable account is adequately
diversified, each United States government agency or instrumentality is treated
as a separate issuer for purposes of determining whether a Fund is adequately
diversified. The Company's compliance with the diversification requirements
will generally limit the amount of assets that may be invested in federally
insured certificates of deposit and all types of securities issued or
guaranteed by each United States government agency or instrumentality.

The International Equity Fund may be required to pay withholding or
other taxes to foreign governments. If so, the taxes will reduce the Fund's
dividends. Foreign tax withholding from dividends and interest (if any) is
typically set at a rate between 10% and 15% if there is a treaty with the
foreign government which addresses this issue. If no such treaty exists, the
foreign tax withholding would be 30%. While contract owners will thus bear the
cost of foreign tax withholding, they will not be able to claim a foreign tax
credit or deduction for foreign taxes paid by the Fund.

36
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

OWNERSHIP OF SHARES

The Company currently issues six classes of stock: (1) American
Odyssey Core Equity Fund Stock; (2) American Odyssey Emerging Opportunities
Fund Stock; (3) American Odyssey International Equity Fund Stock; (4) American
Odyssey Long-Term Bond Fund Stock; (5) American Odyssey Intermediate-Term Bond
Fund Stock; and (6) American Odyssey Short-Term Bond Fund Stock. For more
information, see GENERAL INFORMATION in the prospectus.

37
<PAGE> 77

- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
American Odyssey Funds, Inc. / December 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Emerging Intermediate
International Opportunities Core Equity Long-Term Term Short-Term
Equity Fund Fund Fund Bond Fund Bond Fund Bond Fund
----------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at cost...... $83,059,291 $127,623,898 $155,963,226 $129,126,120 $75,501,231 $28,148,762
- ------------------------------------------------------------------------------------------------------------------
Investments in securities, at value..... $92,683,740 $163,863,684 $191,376,838 $133,254,506 $77,248,767 $28,644,541
Cash.................................... -- -- -- -- 4,657 --
Cash, denominated in foreign currency
(cost $676,770)....................... 673,748 -- -- -- -- --
Receivables for:
Capital stock subscriptions........... 362,966 541,842 539,044 357,440 211,565 52,813
Investment securities sold............ -- 299,200 -- -- -- --
Forward foreign currency contracts.... 164,097 -- -- -- -- --
Interest.............................. 1,740 8,153 1,009 1,673,850 852,167 251,089
Dividends............................. 234,608 16,437 517,578 -- -- --
Foreign tax reclaims.................. 65,674 -- -- -- -- --
Prepaid organization expense............ 11,862 11,666 11,535 11,637 11,710 11,863
----------- ------------ ------------ ------------ ----------- -----------
Total Assets.......................... 94,198,435 164,740,982 192,446,004 135,297,433 78,328,866 28,960,306
----------- ------------ ------------ ------------ ----------- -----------
LIABILITIES
Payables for:
Capital stock redemptions............. 42,640 31,678 52,508 27,055 28,984 18,138
Investment securities purchased....... 1,036,158 750,231 -- 10,038,281 -- 1,754,102
Distributions payable................. 896,810 6,627,286 8,516,343 10,236,499 4,749,913 1,291,083
Forward foreign currency contracts.... 5,772 -- -- -- -- --
Variation margin...................... -- -- -- 76,874 -- --
Options written (premiums received
$206,422)........................... -- -- -- 207,031 -- --
Payable to advisor...................... -- -- -- -- -- 2,330
Accrued expenses........................ 102,510 138,903 142,344 99,271 69,487 39,340
----------- ------------ ------------ ------------ ----------- -----------
Total liabilities..................... 2,083,890 7,548,098 8,711,195 20,685,011 4,848,384 3,104,993
----------- ------------ ------------ ------------ ----------- -----------
NET ASSETS.............................. $92,114,545 $157,192,884 $183,734,809 $114,612,422 $73,480,482 $25,855,313
=========== ============ ============ ============ =========== ===========
Capital shares outstanding.............. 7,264,073 10,462,738 13,795,844 10,887,947 7,081,020 2,530,211
=========== ============ ============ ============ =========== ===========
Net asset value per share............... $12.68 $15.02 $13.32 $10.53 $10.38 $10.22
===== ===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Capital shares at par................... $ 72,641 $ 104,627 $ 137,958 $ 108,879 $ 70,810 $ 25,302
Additional paid-in capital.............. 82,562,200 121,373,173 148,103,558 110,719,634 72,030,396 25,528,922
Undistributed net investment income..... 48,120 -- 84,510 1,552,790 2,125 18,374
Accumulated net realized gain........... (341,067) (524,702) (4,829) (1,077,489) (370,385) (213,064)
Net unrealized appreciation on
investments, translation of assets and
liabilities in foreign currencies,
futures contracts and option
contracts............................. 9,772,651 36,239,786 35,413,612 3,308,608 1,747,536 495,779
----------- ------------ ------------ ------------ ----------- -----------
$92,114,545 $157,192,884 $183,734,809 $114,612,422 $73,480,482 $25,855,313
=========== ============ ============ ============ =========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE> 78

- --------------------------------------------------------------------------------
Statements of Operations
American Odyssey Funds, Inc. / For the year ended December 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Emerging Intermediate-
International Opportunities Core Equity Long-Term Term Short-Term
Equity Fund Fund Fund Bond Fund Bond Fund Bond Fund
------------- ------------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends......................... $ 1,814,443(1) $ 285,925 $ 4,234,723(2) $ -- $ -- $ --
Interest.......................... 103,910 369,746 182,076 7,077,335 4,325,070 1,477,536
------------- ------------- ------------- ------------- ------------- ----------
Total income.................... 1,918,353 655,671 4,416,799 7,077,335 4,325,070 1,477,536
------------- ------------- ------------- ------------- ------------- ----------
EXPENSES
Management fees................... 488,474 811,641 855,725 486,896 317,000 113,867
Professional fees................. 19,444 25,100 21,442 27,529 21,690 16,696
Accounting fees................... 48,801 30,657 35,334 27,714 22,468 15,676
Director's fees................... 15,796 29,182 32,233 21,661 14,353 5,190
Custodian fees.................... 114,410 61,513 66,234 45,848 31,443 11,525
Amortization of organization
expense......................... 4,975 4,913 4,847 4,895 4,920 4,983
Legal fees........................ 4,140 7,907 8,396 5,822 3,817 1,410
Printing expense.................. 9,340 10,495 9,587 9,266 7,702 2,472
Miscellaneous..................... 3,427 5,960 7,148 4,854 3,290 1,188
------------- ------------- ------------- ------------- ------------- ----------
Total expenses before
reimbursement................. 708,807 987,368 1,040,946 634,485 426,683 173,007
------------- ------------- ------------- ------------- ------------- ----------
Reimbursement repaid to
Management Company............ 69,257 -- -- 40,770 46,612 1,531
Less:
Expenses Paid under Directed
Brokerage Arrangements........ (10,269) -- (19,106) -- -- --
------------- ------------- ------------- ------------- ------------- ----------
Net expenses.................... 767,795 987,368 1,021,840 675,255 473,295 174,538
------------- ------------- ------------- ------------- ------------- ----------
Net investment income
(loss)...................... 1,150,558 (331,697) 3,394,959 6,402,080 3,851,775 1,302,998
------------- ------------- ------------- ------------- ------------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on
security transactions, futures
contracts and option
contracts....................... (89,338) 5,474,396 5,743,147 5,267,011 1,006,551 124,873
Net realized gain on foreign
currency transactions........... 51,021 -- -- -- -- --
Net increase in unrealized
appreciation of investments,
futures contracts and option
contracts....................... 11,151,771 28,661,663 37,716,285 7,628,153 3,848,473 860,681
Net unrealized appreciation from
translation of assets and
liabilities in foreign
currencies...................... 148,756 -- -- -- -- --
------------- ------------- ------------- ------------- ------------- ----------
Net realized and unrealized gain
on investments................ 11,262,210 34,136,059 43,459,432 12,895,164 4,855,024 985,554
------------- ------------- ------------- ------------- ------------- ----------
Net increase in net assets from
Operations...................... $ 12,412,768 $33,804,362 $ 46,854,391 $ 19,297,244 $ 8,706,799 $2,288,552
=========== =========== =========== =========== =========== ==========
</TABLE>

(1) Net of withholding taxes of $267,519.

(2) Net of withholding taxes of $31,675.

The accompanying notes are an integral part of the financial statements.

17
<PAGE> 79

- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
International Equity Fund Emerging Opportunities Fund
---------------------------- -----------------------------
Year ended Year ended Year ended Year ended
December 31, December December 31, December 31,
1995 31, 1994 1995 1994
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss)................................... $ 1,150,558 $ 365,911 $ (331,697 ) $ (190,458 )
Net realized gain (loss) on security transactions, futures
contracts and
option contracts.............................................. (89,338 ) 1,239,116 5,474,396 2,171,563
Net realized gain (loss) on foreign currency transactions...... 51,021 (244,125 ) -- --
Net increase (decrease) in unrealized appreciation
(depreciation) of investments, translation of assets and
liabilities in foreign currencies, futures contracts and
option contracts.............................................. 11,300,527 (4,193,762 ) 28,661,663 4,991,641
------------ ----------- ------------ ------------
Net increase (decrease) in net assets from operations......... 12,412,768 (2,832,860 ) 33,804,362 6,972,746
------------ ----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.......................................... 896,810 121,786 -- --
Net realized gain from investment transactions................. -- 1,228,907 6,102,584 1,184,820
Distribution in excess of net investment income or realized
gains......................................................... -- 493,510 524,702 --
------------ ----------- ------------ ------------
Net decrease from distributions............................... 896,810 1,844,203 6,627,286 1,184,820
------------ ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares................................... 40,065,473 46,031,785 71,673,203 64,998,681
Dividends reinvested........................................... 1,844,203 -- 1,184,820 --
Cost of shares repurchased..................................... 13,023,416 9,620,503 31,518,544 11,222,930
------------ ----------- ------------ ------------
Net increase from capital share transactions.................. 28,886,260 36,411,282 41,339,479 53,775,751
------------ ----------- ------------ ------------
Net increase in net assets..................................... 40,402,218 31,734,219 68,516,555 59,563,677
NET ASSETS
Beginning of year.............................................. 51,712,327 19,978,108 88,676,329 29,112,652
------------ ----------- ------------ ------------
End of year.................................................... 92,114,545 51,712,327 157,192,884 88,676,329
=============== ============== =============== ===============
Undistributed (excess distribution) net investment income...... $ 48,120 $ (205,628 ) $ -- $ --
=============== ============== =============== ===============
CAPITAL SHARES
Capital Shares Outstanding, beginning of year.................. 4,805,255 1,668,085 7,487,091 2,661,650
Capital Shares Issued.......................................... 3,411,396 3,970,715 5,090,663 5,823,835
Dividends Reinvested........................................... 171,394 -- 101,180 --
Capital Shares Redeemed........................................ (1,123,972 ) (833,545 ) (2,216,196 ) (998,394 )
------------ ----------- ------------ ------------
Capital Shares Outstanding, end of year........................ 7,264,073 4,805,255 10,462,738 7,487,091
=============== ============== =============== ===============
</TABLE>

The accompanying notes are an integral part of the financial statements.

18
<PAGE> 80

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

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Core Equity Fund Long-Term Bond Fund Intermediate-Term Bond Fund
----------------------------- ----------------------------- -----------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 1995 1994 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 3,394,959 $ 1,675,406 $ 6,402,080 $ 3,496,863 $ 3,851,775 $ 1,927,175
5,743,147 (475,610 ) 5,267,011 (1,391,897 ) 1,006,551 (509,840 )
-- -- -- -- -- --
37,716,285 (2,562,226 ) 7,628,153 (4,176,708 ) 3,848,473 (2,211,787 )
------------ ------------ ------------ ------------ ------------ ------------
46,854,391 (1,362,430 ) 19,297,244 (2,071,742 ) 8,706,799 (794,452 )
------------ ------------ ------------ ------------ ------------ ------------
3,323,421 1,667,504 6,255,797 2,371,885 3,883,129 1,903,243
5,188,093 -- 2,903,213 139,081 496,399 --
4,829 -- 1,077,489 -- 370,385 --
------------ ------------ ------------ ------------ ------------ ------------
8,516,343 1,667,504 10,236,499 2,510,966 4,749,913 1,903,243
------------ ------------ ------------ ------------ ------------ ------------
64,224,865 79,020,934 46,464,747 54,487,073 29,022,622 37,129,807
1,667,504 223,604 1,892,963 2,443,214 1,903,243 335,798
22,087,221 11,978,866 13,165,269 7,760,181 9,973,176 6,094,260
------------ ------------ ------------ ------------ ------------ ------------
43,805,148 67,265,672 35,192,441 49,170,106 20,952,689 31,371,345
------------ ------------ ------------ ------------ ------------ ------------
82,143,196 64,235,738 44,253,186 44,587,398 24,909,575 28,673,650
101,591,613 37,355,875 70,359,236 25,771,838 48,570,907 19,897,257
------------ ------------ ------------ ------------ ------------ ------------
183,734,809 101,591,613 114,612,422 70,359,236 73,480,482 48,570,907
=============== =============== =============== =============== =============== ===============
$ 84,510 $ 12,972 $ 1,552,790 $ 1,406,507 $ 2,125 $ 33,479
=============== =============== =============== =============== =============== ===============
10,093,660 3,614,936 7,508,227 2,495,430 5,054,210 1,935,856
5,359,111 7,608,497 4,434,521 5,569,393 2,790,359 3,693,061
165,756 21,709 202,456 240,805 198,255 32,761
(1,822,683 ) (1,151,482 ) (1,257,257 ) (797,401 ) (961,804 ) (607,468 )
------------ ------------ ------------ ------------ ------------ ------------
13,795,844 10,093,660 10,887,947 7,508,227 7,081,020 5,054,210
=============== =============== =============== =============== =============== ===============

Short-Term
Bond Fund
------------
Year ended Year ended
December 31, December 31,
1995 1994
------------ ------------
<S> <C>
$ 1,302,998 $ 729,955
124,873 (319,270 )
-- --
860,681 (406,109 )
------------ ------------
2,288,552 4,576
------------ ------------
1,291,083 684,280
-- --
-- --
------------ ------------
1,291,083 684,280
------------ ------------
12,788,292 14,394,171
684,280 166,204
6,243,719 4,432,923
------------ ------------
7,228,853 10,127,452
------------ ------------
8,226,322 9,447,748
17,628,991 8,181,243
------------ ------------
25,855,313 17,628,991
=============== ===============
$ 18,374 $ 6,459
=============== ===============
1,821,850 812,593
1,246,378 1,434,103
70,763 16,521
(608,780) (441,367 )
------------ ------------
2,530,211 1,821,850
=============== ===============
</TABLE>

19
<PAGE> 81

- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
International Equity Fund
-----------------------------------------------
May 17, 1993(1)
Year ended Year ended to
December 31, December 31, December 31,
1995 1994 1993
------------ ------------ ---------------
<S> <C> <C> <C>
NET ASSET VALUE
Beginning of period................................................. $ 10.76 $ 11.98 $ 10.00
------------ ------------ ---------------
OPERATIONS
Net investment income (loss) (2).................................... 0.17 (0.05 ) 0.03
Net realized and unrealized gain (loss) on investments.............. 1.87 (0.78 ) 1.95
------------ ------------ ---------------
Total from investment operations.................................... 2.04 (0.83 ) 1.98
------------ ------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends........................................................... 0.12 0.03 --
Distributions....................................................... -- 0.26 --
Distributions in excess of net investment income or realized
gains............................................................. -- 0.10 --
------------ ------------ ---------------
Total distributions................................................. 0.12 0.39 --
------------ ------------ ---------------
NET ASSET VALUE
End of period....................................................... $ 12.68 $ 10.76 $ 11.98
=========== =========== ==============
TOTAL RETURN (3)...................................................... 19.00% (6.98%) 19.80%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period......................................... $92,114,545 $51,712,327 $19,978,108
Ratios of expenses to average net assets:
Before repayments and directed brokerage arrangements............. 1.00% 1.36% 1.76%(4)
After repayments and directed brokerage arrangements (6).......... 1.08% 1.25% 1.25%(4)
Ratio of net investment income (loss) to average net assets:
Before repayments and directed brokerage arrangements............. 1.70% 0.83% 0.34%(4)
After repayments and directed brokerage arrangements.............. 1.62% 0.94% 0.85%(4)
Portfolio turnover rate............................................. 31.40% 50.25% 9.20%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Commencement of operations.

(2) Net of expense reimbursement, repayments and directed brokerage
arrangements.

(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period.

(4) Annualized.

(5) The Long-Term Bond Fund did not qualify in 1993 as a regulated investment
company for federal income tax purposes because it had substantial
short-term capital gains during this period and was not able to meet the
requirement that no more than 30% of the Fund's investment income may be
from realized capital gains on the sale of securities held for less than
three months. While the Fund incurred a federal income tax of approximately
$155,000, the investment adviser to the Long-Term Bond Fund reimbursed the
Fund for the taxes and related legal expenses, so no shareholder of the Fund
was affected. The ratio of expenses to average net assets would have been
2.58% had the adviser not agreed to reimburse the Fund for these expenses.
The Fund qualified in 1994 and 1995 as a regulated investment company and
intends to do so in future years as well.

The accompanying notes are an integral part of the financial statements.

20
<PAGE> 82

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

<TABLE>
<CAPTION>
Emerging Opportunities Fund Core Equity Fund
-------------------------------------------------- -------------------------------------------------
May 17, 1993(1) May 17, 1993(1)
Year ended Year ended to Year ended Year ended to
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1995 1994 1993
------------ ------------ ---------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
$ 11.84 $ 10.94 $ 10.00 $ 10.06 $ 10.33 $ 10.00
------------ ------------ ---------------- ------------ ------------ ---------------
-- -- (0.01) 0.25 0.16 0.06
3.81 1.06 0.95 3.63 (0.26) 0.33
------------ ------------ ---------------- ------------ ------------ ---------------
3.81 1.06 0.94 3.88 (0.10) 0.39
------------ ------------ ---------------- ------------ ------------ ---------------
-- -- -- 0.24 0.17 0.06
0.58 0.16 -- 0.37 -- --
0.05 -- -- 0.01 -- --
------------ ------------ ---------------- ------------ ------------ ---------------
0.63 0.16 -- 0.62 0.17 0.06
------------ ------------ ---------------- ------------ ------------ ---------------
$ 15.02 $ 11.84 $ 10.94 $ 13.32 $ 10.06 $ 10.33
============ =========== ============== ============ ============ ==============
32.23% 9.69% 9.40% 38.56% (1.01%) 3.90%
$157,192,884 $88,676,329 $ 29,112,652 $183,734,809 $101,591,613 $37,355,875
0.77% 0.91% 1.23%(4) 0.72% 0.84% 1.12%(4)
0.77% 0.92% 1.00%(4) 0.70% 0.85% 1.00%(4)
(0.26%) (0.31%) (0.60%)(4) 2.32% 2.27% 1.84%(4)
(0.26%) (0.32%) (0.38%)(4) 2.33% 2.27% 1.96%(4)
36.02% 27.40% 8.70% 38.44% 48.16% 48.00%
--------------------------------------------------------------------------------------------------------
</TABLE>

21
<PAGE> 83

<TABLE>
<CAPTION>
Long-Term Bond Fund
-----------------------------------------------
May 17, 1993(1)
Year ended Year ended to
December 31, December 31, December 31,
1995 1994 1993
------------ ------------ ---------------
<S> <C> <C> <C>
NET ASSET VALUE
Beginning of period............................................. $ 9.37 $ 10.33 $ 10.00
------------ ------------ ---------------
OPERATIONS
Net investment income (loss) (2)................................ 0.53 0.37 0.62
Net realized and unrealized gain (loss) on investments.......... 1.57 (0.97 ) 0.45
------------ ------------ ---------------
Total from investment operations................................ 2.10 (0.60 ) 1.07
------------ ------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends....................................................... 0.57 0.34 0.18
Distributions................................................... 0.27 0.02 0.56
Distributions in excess of net investment income or realized
gains......................................................... 0.10 -- --
------------ ------------ ---------------
Total distributions............................................. 0.94 0.36 0.74
------------ ------------ ---------------
NET ASSET VALUE
End of period................................................... $ 10.53 $ 9.37 $ 10.33
============ =========== ==============
TOTAL RETURN (3).................................................. 22.44% (5.79%) 10.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period..................................... $114,612,422 $70,359,236 $25,771,838
Ratios of expenses to average net assets:
Before repayments and directed brokerage arrangements......... 0.66% 0.73% 1.30%(4)(5)
After repayments and directed brokerage arrangements (6)...... 0.70% 0.75% 0.75%(4)
Ratio of net investment income (loss) to average net assets:
Before repayments and directed brokerage arrangements......... 6.67% 7.08% 15.19%(4)
After repayments and directed brokerage arrangements.......... 6.63% 7.05% 15.73%(4)
Portfolio turnover rate......................................... 381.53% 152.91% 589.40%
</TABLE>

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

(1) Commencement of operations.

(2) Net of expense reimbursement, repayments and directed brokerage
arrangements.

(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period.

(4) Annualized.

(5) The Long-Term Bond Fund did not qualify in 1993 as a regulated investment
company for federal income tax purposes because it had substantial
short-term capital gains during this period and was not able to meet the
requirement that no more than 30% of the Fund's investment income may be
from realized capital gains on the sale of securities held for less than
three months. While the Fund incurred a federal income tax of approximately
$155,000, the investment adviser to the Long Term Bond Fund reimbursed the
Fund for the taxes and related legal expenses, so no shareholder of the Fund
was affected. The ratio of expenses to average net assets would have been
2.58% had the adviser not agreed to reimburse the Fund for these expenses.
The Fund qualified in 1994 and 1995 as a regulated investment company and
intends to do so in future years as well.

The accompanying notes are an integral part of the financial statements.

22
<PAGE> 84

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

<TABLE>
<CAPTION>
Intermediate Term Bond Fund Short-Term Bond Fund
-------------------------------------------------- -------------------------------------------------
May 17, 1993(1) May 17, 1993(1)
Year ended Year ended to Year ended Year ended to
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1995 1994 1993
------------ ------------ ---------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 9.61 $ 10.28 $ 10.00 $ 9.68 $ 10.07 $ 10.00
------------ ------------ ---------------- ------------ ------------ ---------------
0.54 0.38 0.17 0.51 0.45 0.19
0.90 (0.67 ) 0.28 0.54 (0.46 ) 0.08
------------ ------------ ---------------- ------------ ------------ ---------------
1.44 (0.29 ) 0.45 1.05 (0.01 ) 0.27
------------ ------------ ---------------- ------------ ------------ ---------------
0.55 0.38 0.17 0.51 0.38 0.14
0.07 -- -- -- -- 0.01
0.05 -- -- -- -- 0.05
------------ ------------ ---------------- ------------ ------------ ---------------
0.67 0.38 0.17 0.51 0.38 0.20
------------ ------------ ---------------- ------------ ------------ ---------------
$ 10.38 $ 9.61 $ 10.28 $ 10.22 $ 9.68 $ 10.07
=========== =========== ============== =========== =========== ==============
15.01% (2.85%) 4.50% 10.86% (0.14%) 2.70%
$73,480,482 $48,570,907 $ 19,897,257 $25,855,313 $17,628,991 $ 8,181,243
0.68% 0.75% 1.37%(4) 0.76% 1.02% 1.72%(4)
0.75% 0.75% 0.75%(4) 0.75% 0.75% 0.75%(4)
6.19% 5.35% 3.73%(4) 5.77% 4.99% 3.52%(4)
6.11% 5.35% 4.35%(4) 5.76% 5.25% 4.49%(4)
137.14% 22.72% -- 93.37% 233.25% 144.30%
</TABLE>

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

23
<PAGE> 85

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------

<S> <C> <C>
COMMON STOCKS -- 97.7%
AVIATION -- 1.2%
130,200 British Airways............. $ 942,010
5,320 KLM Royal Dutch Air......... 187,180
--------------
1,129,190
--------------
BANKS -- 15.4%
33,790 ABN AMRO Holdings........... 1,540,902
66,050 Allied Irish Banks Plc...... 359,946
19,465 Banco de Santander.......... 977,131
117,200 Bangkok Bank Co., Ltd....... 1,423,746
178,400 Barclay's Plc............... 2,046,908
170,250 Development Bank of
Singapore................... 2,118,387
264,510 Grupo Financiero Banamex.... 440,806
275,000 DCB Holdings................ 801,515
219,024 Lloyds TSB Group Plc........ 1,127,273
248,700 National Australia Bank
Ltd......................... 2,238,474
1,075 Swiss Bank Corp............. 220,017
84,000 Thai Farmers Bank........... 847,022
--------------
14,142,127
--------------
BUILDING & MATERIALS -- 2.6%
243,000 Hume Industries............. 1,167,664
188,000 Indocement Tunggal.......... 631,072
11,100 Siam Cement................. 615,168
--------------
2,413,904
--------------
CHEMICALS -- 1.2%
9,550 Akzo Dutch.................. 1,105,734
--------------
COMMODITIES -- 5.5%
37,950 British Petroleum Co. Plc... 317,288
157,600 Broken Hill Proprietary
Co.......................... 2,227,424
17,360 Societe National ELF
Aquitaine................... 1,280,777
194,800 Western Mining Corp......... 1,251,980
--------------
5,077,469
--------------
CONGLOMERATES -- 5.2%
360,961 B.T.R. Ltd.................. 1,843,789
434,700 Hanson Trust Plc............ 1,299,188
617,000 Sime-Darby Berhad........... 1,640,356
25,000 Gadjah Tunggal.............. 13,941
--------------
4,797,274
--------------
<CAPTION>
Shares Value
- ------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS & SERVICES -- 9.1%
289,280 B.A.T. Industries........... $ 2,548,846
181,120 Cadbury Schweppes Plc....... 1,496,015
81,200 Grand Metropolitan Plc...... 584,965
91,000 Gudang Garam................ 951,222
208,000 Han Man Sampoerna........... 2,165,125
854,000 Mayora Indah................ 616,289
--------------
8,362,462
--------------
ENERGY -- 2.3%
188,610 British Gas Corp............ 743,802
243,990 Scottish Power Plc.......... 1,401,625
--------------
2,145,427
--------------
ENGINEERING -- 9.5%
122,390 Chubb Security Plc.......... 605,218
257,420 General Electric Plc........ 1,418,822
4,060 Mannesmann AG............... 1,294,921
66,900 Philips Electronics NV...... 2,420,602
243,520 Siebe Plc................... 3,002,017
--------------
8,741,580
--------------
FOOD MANUFACTURERS -- 2.1%
126,000 Fraser and Neave Ltd........ 1,603,426
4,640 Nutricia Verenidge
Bedrijven................... 375,718
--------------
1,979,144
--------------
INSURANCE -- 5.8%
90,300 General Accident Plc........ 912,698
22,080 Int'l Nederlanden Group..... 1,476,600
220,180 Prudential Corp............. 1,418,664
1,327 Schw Ruckverischer.......... 1,547,676
--------------
5,355,638
--------------
LEISURE -- 0.7%
275,950 Ladbroke Group.............. 627,648
--------------
MEDIA -- 9.3%
146,500 Elsevier NV................. 1,955,775
19,000 Granada Group Plc........... 190,270
422,700 News Corporation Ltd........ 2,257,598
110,800 Singapore Press Holdings
Ltd......................... 1,958,335
93,450 Thorn EMI Plc............... 2,201,018
--------------
8,562,996
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

24
<PAGE> 86

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1995
(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------

<S> <C> <C>
MINING -- 0.9%
576,520 MIM Holdings Ltd............ $ 797,615
--------------
PHARMACEUTICALS -- 10.5%
3,006 Ciba Geigy AG............... 2,651,622
75,800 Glaxo Wellcome Plc.......... 1,076,830
5,100 Hoechst AG.................. 1,389,668
143,000 Kalbe Farma................. 484,708
155,400 Medeva Plc.................. 646,604
322 Roche Holding AG............ 2,553,555
45,400 Zeneca Group Plc............ 878,277
--------------
9,681,264
--------------
REAL ESTATE DEVELOPMENT -- 1.7%
214,000 City Developments........... 1,558,305
--------------
RETAIL -- 1.1%
162,400 Argyll Group................ 857,277
90,000 Hero Supermarket............ 192,877
--------------
1,050,154
--------------
PAPER & PACKAGING -- 3.3%
11,500 Assidoman AB................ 249,879
63,200 Repola OY................... 1,193,545
601,600 Smurfit (Jefferson) Group... 1,417,370
13,000 Stora Kopparbergs........... 153,005
--------------
3,013,799
--------------
SHIPPING -- 0.3%
99,000 Malaysian Int'l Shipping
Corp........................ 259,301
--------------
TECHNOLOGY -- 1.4%
70,000 Canon Inc................... 1,269,002
--------------
TELECOMMUNICATIONS -- 5.6%
79,946 Ericsson Series B........... 1,568,229
257,000 Telekomunikasi.............. 337,207
16,725 Royal PTT Nederland NV...... 608,280
591,550 Stet........................ 1,674,264
265,000 Vodafone Group Plc.......... 948,356
--------------
5,136,336
--------------
TEXTILES -- 0.9%
305,430 Coats Viyella Plc........... $ 829,853
--------------
TRANSPORTATION -- 0.1%
5,400 Volvo AB Series B........... 110,816
--------------
MISCELLANEOUS -- 2.0%
2,283 Alusuisse Lonza Holdings.... 1,813,463
--------------
TOTAL COMMON STOCKS
(cost $80,425,789)...................... 89,960,501
--------------
PREFERRED STOCK -- 0.5%
104,200 News Corporation Ltd.
(cost $397,804) 487,541
--------------
Principal Amount

REPURCHASE AGREEMENT -- 2.4%
$2,235,698 Repurchase Agreement with
Cantor Fitzgerald, dated
12/29/1995, due 01/2/1996,
proceeds at maturity of
$2,236,920 (collateralized
by 2,234,000 US Treasury
Notes, 0.00%-7.25%, due
11/30/96-09/30/97, with a
market value of $2,285,441)
(cost $2,235,698)........... 2,235,698
--------------
TOTAL INVESTMENTS -- 100.6%
(cost $83,059,291)...................... 92,683,740
Liabilities in excess of other
assets -- (.6%)......................... (569,195)
--------------
NET ASSETS -- 100.0% $ 92,114,545
=============
</TABLE>

The accompanying notes are an integral part of the financial statements.

25
<PAGE> 87

- --------------------------------------------------------------------------------
Investments By Country
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of
Net
COUNTRY Assets
- --------------------------------------------------------
<S> <C>
Australia 10.1
Finland 1.3
France 1.4
Germany 2.9
Indonesia 5.9
Ireland 1.9
Italy 1.8
Japan 1.4
Malaysia 4.2
Mexico 0.5
Netherlands 10.5
Singapore 7.8
Spain 1.1
Sweden 2.3
Switzerland 9.5
Thailand 3.1
United Kingdom 32.5
United States 2.4
-------
TOTAL 100.6%
======
</TABLE>

The accompanying notes are an integral part of the financial statements.

26
<PAGE> 88

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 97.7%
BUSINESS SERVICES -- 19.8%
89,300 BISYS Group, Inc.*....... $ 2,745,975
94,700 Corporate Express,
Inc.*.................... 2,852,838
82,500 Fair Issaac & Co. ....... 2,134,688
197,900 Fiserv, Inc.*............ 5,937,000
124,700 Gartner Group, Inc. Cl.
A.*...................... 5,970,012
49,500 On Assignment, Inc.*..... 1,621,125
89,025 Paychex, Inc............. 4,440,121
42,600 SITEL*................... 1,304,625
145,000 Sungard Data Systems,
Inc.*.................... 4,132,500
----------------
31,138,884
----------------
COMPUTER EQUIPMENT -- 7.1%
90,600 CDW Computer Centers,
Inc.*.................... 3,669,300
83,600 Micro Warehouse, Inc.*... 3,615,700
260,100 Tech Data Corp.*......... 3,901,500
----------------
11,186,500
----------------
CONSUMER PRODUCTS -- 2.0%
94,150 Dreyers Grand Ice Cream,
Inc...................... 3,130,488
----------------
ELECTRONICS -- 9.6%
98,200 Avid Technology, Inc.*... 1,865,800
100,300 Macromedia, Inc.*........ 5,240,675
136,200 Unitrode Corp.*.......... 3,847,650
113,565 Zilog, Inc.*............. 4,159,318
----------------
15,113,443
----------------
HEALTHCARE -- 9.0%
64,850 Advantage Health Corp.*.. 2,829,081
90,650 Elan Corp. Plc.* (1)..... 4,407,856
189,300 Perrigo Company*......... 2,247,938
93,300 R.P. Scherer*............ 4,583,363
----------------
14,068,238
----------------
INDUSTRIAL SERVICES -- 8.1%
166,680 Fastenal Company......... 7,042,230
230,800 Grossman's, Inc.*........ 259,650
81,700 Itron Incorporation*..... 2,757,375
117,000 Watts Industries, Inc.
CL. A.................... 2,720,250
----------------
12,779,505
----------------

MISCELLANEOUS -- 5.6%
187,140 Idexx Labs
Corporation*............. $ 8,795,580
----------------
RESTAURANTS -- 5.8%
90,400 Applebee's International,
Inc...................... 2,056,600
261,910 Buffets, Inc.*........... 3,601,262
202,900 Landrys Seafood
Restaurant*.............. 3,461,981
----------------
9,119,843
----------------
RETAIL -- 11.5%
158,650 Best Buy Company*........ 2,578,062
73,000 Gymboree Corp.*.......... 1,505,625
114,900 The Men's Wearhouse,
Inc.*.................... 2,958,675
77,490 Quality Food Centers,
Inc.*.................... 1,704,780
111,700 The Sports Authority,
Inc.*.................... 2,275,888
107,500 Talbots, Inc............. 3,090,625
78,000 Tiffany & Co............. 3,929,250
----------------
18,042,905
----------------
SOFTWARE & SERVICES -- 17.3%
35,910 BGS Systems, Inc......... 1,328,670
84,280 Boole & Babbage, Inc.*... 2,064,860
106,200 Broderbund Software,
Inc.*.................... 6,451,650
123,300 Datalogix International,
Inc.*.................... 1,556,662
147,100 Electronic Arts*......... 3,842,988
81,600 Expert Software, Inc.*... 1,142,400
120,000 Manugistics Group,
Inc.*.................... 1,770,000
90,250 Minnesota Educational
Computer Corp.*.......... 2,256,250
87,400 Pinnacle Systems Inc.*... 2,163,150
76,700 Progress Software
Corp.*................... 2,876,250
99,900 Quick Response Services,
Inc.*.................... 1,835,663
----------------
27,288,543
----------------
SPECIALTY CHEMICALS -- 1.9%
83,460 H.B. Fuller Co........... 2,900,235
----------------
TOTAL COMMON STOCKS
(cost $117,324,378) 153,564,164
----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

27
<PAGE> 89

<TABLE>
<CAPTION>
Principal Amount Value
- ------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 6.5%
$10,299,520 Repurchase Agreement with
Cantor Fitzgerald, dated
12/29/1995, due
01/2/1996, proceeds at
maturity of $10,305,150
(collateralized by
10,197,000 US Treasury
Notes, 0%-5.75%, due
09/30/97-08/15/03, with a
market value of
$10,513,955)
(cost $10,299,520)....... $ 10,299,520
----------------
TOTAL INVESTMENTS -- 104.2%
(cost $127,623,898) 163,863,684
Liabilities in excess of other
assets -- (4.2%)...................... $ (6,670,800)
----------------
NET ASSETS -- 100.0% $ 157,192,884
============
</TABLE>

(1) American Depository Receipt
* Non-income producing security

The accompanying notes are an integral part of the financial statements.

28
<PAGE> 90

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund / December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 103.4%
AUTO & HOUSING -- 4.0%
80,900 General Motors Corp. .......... $ 4,277,588
71,400 Weyerhaeuser Co. .............. 3,088,050
------------
7,365,638
------------
BANKS -- 10.2%
47,900 BancOne Corp. ................. 1,808,225
44,100 BankAmerica Corp. ............. 2,855,475
45,100 Barnett Banks, Inc. ........... 2,660,900
38,400 Chase Manhattan Corp. ......... 2,328,000
54,200 Chemical Banking Corp. ........ 3,184,250
48,703 First Chicago NBD Corp. ....... 1,923,768
57,200 Nationsbank Corp. ............. 3,982,550
------------
18,743,168
------------
CAPITAL EQUIPMENT -- 4.7%
66,300 General Electric Co. .......... 4,773,600
77,600 Tenneco Inc. .................. 3,850,900
------------
8,624,500
------------
CONSUMER CYCLICAL --
EXCEPT RETAILERS -- 3.5%
128,100 Brinker International ,
Inc.*.......................... 1,937,512
30,000 Tribune Co. ................... 1,833,750
50,900 Whirlpool Corp. ............... 2,710,425
------------
6,481,687
------------
CONSUMER NONDURABLES -- 12.4%
101,500 American Stores Co. ........... 2,715,125
46,000 Anheuser-Busch Co., Inc. ...... 3,076,250
213,800 Archer-Daniels-Midland, Co. ... 3,848,400
103,400 Dial Corp. .................... 3,063,225
53,600 Philip Morris Co., Inc. ....... 4,850,800
105,400 Sara Lee Corp. ................ 3,359,625
57,600 Supervalu Inc. ................ 1,814,400
------------
22,727,825
------------
DEFENSE -- 3.4%
55,700 Boeing Co. .................... 4,365,487
42,000 Raytheon Co. .................. 1,984,500
------------
6,349,987
------------

<CAPTION>
Shares Value
- ------------------------------------------------------
<S> <C> <C>
ENERGY -- 11.3%
58,000 Amoco Corp. ................... $ 4,168,750
23,056 British Petroleum, P. (1)...... 2,354,594
33,000 Mobil Corp. ................... 3,696,000
25,100 Royal Dutch Petroleum, Plc.
(1)............................ 3,542,238
67,500 Texaco Inc. ................... 5,298,750
60,200 Unocal Corp. .................. 1,753,325
------------
20,813,657
------------
FINANCIAL -- EXCEPT BANKS -- 8.7%
54,483 Allstate Corp. ................ 2,240,613
39,000 Chubb Corp. ................... 3,773,250
66,112 Dean Witter Discover & Co. .... 3,107,264
39,500 Federal National Mtg Assn.
Corp. ......................... 4,902,937
34,300 Unum Corp...................... 1,886,500
------------
15,910,564
------------
GAS & ELECTRIC UTILITIES -- 10.5%
66,700 Dominion Resources Inc. ....... 2,751,375
54,200 Detroit Edison Co. ............ 1,869,900
45,500 FPL Group Inc. ................ 2,110,063
111,600 General Public Utilities....... 3,794,400
99,900 Texas Utilities Co. ........... 4,108,388
139,900 Unicom Corp. .................. 4,581,725
------------
19,215,851
------------
INDUSTRIAL COMMODITIES -- 7.2%
18,500 Air Products & Chemicals,
Inc. .......................... 975,875
111,900 Bethlehem Steel Corp.*......... 1,566,600
52,200 Dow Chemical Co. .............. 3,673,575
49,000 B. F. Goodrich Co. ............ 3,338,125
50,100 Great Lakes Chemical Corp. .... 3,607,200
------------
13,161,375
------------
MEDICAL -- 7.4%
50,300 Bristol Myers Squibb Co. ...... 4,319,512
58,100 Columbia/HCA Healthcare
Corp. ......................... 2,948,575
51,700 Schering Plough Corp. ......... 2,830,575
36,000 Warner Lambert Co. ............ 3,496,500
------------
13,595,162
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

29
<PAGE> 91

TOTAL COMMON STOCKS
(cost $154,507,178) $189,920,790
Principal Amount
REPURCHASE AGREEMENT -- 0.8%
$1,456,048 Repurchase agreement with
Cantor Fitzgerald, dated
12/29/1995, due 01/02/96,
proceeds at maturity of
$1,456,844 (collateralized
by 1,392,000 US Treasury
Notes, 0%-6.375%, due
09/30/97-08/15/02,
with a market value
of $1,490,089) (cost
$1,456,048)............... 1,456,048
---------------
TOTAL INVESTMENTS -- 104.2%
(cost $155,963,226) 191,376,838
Liabilities in excess of other
assets -- (4.2%)...................... (7,642,029)
---------------
NET ASSETS -- 100.0% $ 183,734,809
============
(1) American Depository Receipt
* Non-income producing security
</TABLE>

The accompanying notes are an integral part of the financial statements.

30
<PAGE> 92

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount Value
- ------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS and NOTES -- 12.6%
$ 800,000 AMR Corp.
10.00% 02/01/01........... $ 919,040
600,000 American Home Products
7.70% 02/15/00............ 641,994
500,000 Banque Paribas
6.875% 03/01/09........... 501,680
446,917 Citicorp Mortgage Trust
Series 3-A3
9.00% 12/25/17............ 451,663
350,000 Commonwealth Edison Co.
1st Mortgage Series 88
8.375% 02/15/23........... 376,677
500,000 Commonwealth Edison Co.
8.625% 02/01/22........... 527,500
400,000 Dean Witter Discover & Co.
6.25% 03/15/00............ 408,300
350,000 General Motors
Acceptance Corp.
9.625% 12/15/01........... 411,772
1,000,000 Lehman Brothers Holding
9.75% 04/01/96............ 1,007,720
600,000 Loews Corp.
7.625% 06/01/23........... 619,440
1,350,000 Long Island Lighting Co.
7.125% 06/01/05........... 1,274,967
700,000 National Bank of Detroit
8.25% 11/01/24............ 856,639
400,000 News America
Holdings Corp.
8.45% 08/01/34............ 461,464
500,000 Niagara Mohawk Power
6.625% 07/01/05........... 447,845
850,000 Paine Webber Group
7.625% 02/15/14........... 873,282
400,000 Quebec Province
7.50% 07/15/23............ 419,328
580,000 RJR Nabisco, Inc.
8.75% 08/15/05............ 594,100
1,000,000 Sears Overseas Finance
0.00% 07/12/98............ 867,500
400,000 Southern Union Company
7.60% 02/01/24............ 416,768
394,130 GG1B Funding Corp.
7.43% 01/15/11............ 392,423
800,000 Telecommunications Inc.
7.875% 08/01/13........... 822,808
500,000 Unisys Corp
8.875% 07/15/97........... 442,500
500,000 United Airlines
11.21% 05/01/14........... 661,825
---------------
TOTAL CORPORATE BONDS AND NOTES
(cost $13,367,108) 14,397,235
---------------
U.S. GOVERNMENT and AGENCIES -- 89.5%
Mortgage Backed Securities
1,000,000 Federal Home Loan Bank
7.87% 04/19/00............ 1,007,030
3,000,000 Federal Home Loan Bank
5.92% 06/29/00............ 3,044,520
3,000,000 Federal Home Loan Bank
6.285% 07/28/00........... 3,082,980
3,000,000 Federal National Mortgage
Association
6.14% 11/25/05............ 3,043,140
3,508,544 Federal National Mortgage
Association
7.00% 02/01/24............ 3,538,191
6,492,824 Federal National Mortgage
Association
7.00% 12/01/24............ 6,547,689
3,000,000 Federal Home Loan Mortgage
Corp.
6.783% 08/18/05........... 3,188,910
10,000,000 Federal Home Loan Mortgage
Corp. -- Gold 30 Year
7.00% 01/01/26 (+)........ 10,090,600
3,469,095 GNMA
8.50% 01/15/25............ 3,644,907
998,307 GNMA
8.50% 06/15/25............ 1,048,901
9,761,409 GNMA
7.50% 07/01/25............ 10,050,347
</TABLE>

The accompanying notes are an integral part of the financial statements.

31
<PAGE> 93

(+) "When issued" security.
* This security has been segregated with the custodian
to cover open futures contracts.

The accompanying notes are an integral part of the financial statements.

32
<PAGE> 94

<S> <C> <C>
CORPORATE BONDS and NOTES -- 78.4%
$ 289,937 American Southwest Financial
9.00% 03/01/18.............. $ 301,079
2,800,000 AT&T Capital Corp.
6.10% 08/31/98.............. 2,831,976
1,000,000 Bacardi Martini
5.75% 07/23/98.............. 998,750
3,500,000 Banponce Financial
6.69% 09/21/00.............. 3,585,369
1,500,000 Becton Dickinson
8.80% 03/01/01.............. 1,689,555
1,000,000 Bomt 1995-A B
6.30% 07/15/02.............. 1,015,930
1,000,000 Carco 1991-3 A
7.875% 08/15/96............. 1,013,750
1,180,895 Cfat 1995-A CTFS
6.45% 08/25/01.............. 1,191,594
1,000,000 Champion International
9.70% 05/01/01.............. 1,125,490
1,000,000 Crane Co.
7.25% 06/15/99.............. 1,033,560
3,500,000 DQU II Funding
7.23% 12/01/99.............. 3,615,325
2,000,000 Electronic Data
Systems 144A
7.125% 05/15/05............. 2,133,460
3,000,000 Equitable Life
6.95% 12/01/05.............. 3,037,500
1,500,000 First Deposit Master Trust
5.75% 06/15/01.............. 1,509,375
3,000,000 Fleet Financial Group
9.90% 06/15/01.............. 3,510,600
500,000 Florida Gas Transmission
7.75% 11/01/97.............. 516,745
1,500,000 General Motors
Acceptance Corp.
6.625% 10/01/02............. 1,541,160
4,000,000 Grand Metropolitan
Inv Corp
0.00% 01/06/04.............. 2,420,440
$1,500,000 Household Private Label
Credit Card Master Trust II
1994-2, Cl. B
8.00% 09/20/03.............. $ 1,580,145
550,000 Houston Power & Lighting
5.25% 01/01/97.............. 545,490
3,000,000 Hydro-Quebec
7.375% 02/01/03............. 3,203,730
768,765 IBM Credit Receivables
Leased Asset Mst
6.55% 07/16/01.............. 783,701
2,900,000 ITT Corp (New)
6.25% 11/15/00.............. 2,919,068
1,100,000 Mellon Financial
7.625% 11/15/99............. 1,169,388
500,000 Premier Auto Trust
1994-3, Cl. A-6
6.85% 03/02/99.............. 510,465
1,000,000 Premier Auto Trust 1995-3
6.25% 08/06/01.............. 1,016,749
1,000,000 Signet Credit Card
Master Trust
7.35% 09/15/02.............. 1,047,810
3,000,000 Six Flags Ent
0.00% 12/15/99.............. 2,272,500
1,500,000 System Energy Resources
6.00% 04/01/98.............. 1,501,290
1,690,000 Transco Energy INC
9.125% 05/01/98............. 1,805,697
3,500,000 TCI Communications
7.31% 08/24/01.............. 3,653,476
1,000,000 United Illuminating
7.00% 01/15/97.............. 1,005,160
1,500,000 United Illuminating
7.375% 01/15/98............. 1,531,350
--------------
TOTAL CORPORATE BONDS AND NOTES
(cost $56,287,871) 57,617,677
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

33
<PAGE> 95

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / December 31, 1995
(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount Value
- ------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT and AGENCIES -- 24.8%
$3,880,112 FNMA
7.50% 10/01/25.............. $ 3,979,539
980,000 GNMA
7.50% 12/15/25.............. 1,008,787
1,500,000 FNMA
5.75% 09/25/18.............. 1,481,715
500,000 FNMA
7.55% 06/10/04.............. 525,390
2,226,007 FHLMC-GNMA
5.15% 08/25/12.............. 2,173,829
9,000,000 U.S. Treasury Note
5.50% 02/28/99.............. 9,061,830
--------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $17,813,360) 18,231,090
--------------
REPURCHASE AGREEMENT -- 1.9%
$1,400,000 Repurchase Agreement with
Merrill Lynch, dated
12/29/1995, 5.50%, due
01/2/1996, proceeds at
maturity of $1,400,856
(collateralized by 1,410,000
US Treasury Note, 5.625%,
due 10/31/97, with a market
value of $1,420,575) (cost
$1,400,000)................. $ 1,400,000
--------------
TOTAL INVESTMENTS -- 105.1%
(cost $75,501,231) 77,248,767
Liabilities in excess of other
assets -- (5.1%)........................ (3,768,285)
--------------
NET ASSETS -- 100.0% $ 73,480,482
=============
</TABLE>

The accompanying notes are an integral part of the financial statements.

34
<PAGE> 96

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Short-Term Bond Fund / December 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Principal Amount Value
------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENTS and AGENCIES -- 80.3%
Mortgage Backed Securities
$1,278,537 FHLMC
6.00% 08/15/20............. $ 1,274,139
614,478 FHLMC
9.50% 01/15/19............. 630,989
U.S. Government Agencies
2,050,000 FHLB Note
8.25% 06/25/96............. 2,077,859
2,755,000 FAMC
6.80% 05/27/97............. 2,807,951
3,200,000 FNMA Note
6.77% 04/14/97............. 3,241,632
425,000 FHLB Note
5.87% 11/21/00............. 430,045
580,000 FNMA Note
6.27% 10/26/00............. 588,700
U.S. Treasury Notes
378,000 5.375% 05/31/98............ 379,240
250,000 5.625% 10/31/97............ 251,835
2,284,000 6.50% 04/30/99............. 2,367,503
4,704,000 6.75% 04/30/00............. 4,950,207
1,750,000 5.50% 12/31/00 (+)......... 1,759,030
-------------
TOTAL U.S. GOVERNMENTS AND AGENCIES
(cost $20,457,504) 20,759,130
-------------
ASSET-BACKED SECURITIES -- 5.3%
600,000 Contimortgage Hel Trust
6.86% 07/15/10............. 608,063
750,000 Equicredit Home Equity
Trust
6.45% 11/15/08............. 753,523
-------------
TOTAL ASSET-BACKED SECURITIES
(cost $1,347,938) 1,361,586
-------------
CORPORATE NOTES -- 14.6%
500,000 Associates Corp N.A.
8.25% 12/1/99.............. 539,615
500,000 Conagra, Inc.
9.75% 11/1/97.............. 532,925
200,000 Carolina Power & Light
5.375% 07/1/98............. 198,770
200,000 Nippon
9.50% 07/27/98............. 218,428
500,000 Tenneco, Inc.
10.00% 08/1/98............. 549,650
300,000 Arizona Public Service
7.625% 06/15/99............ 312,669
150,000 Republic of Ireland
7.875% 12/1/01............. 165,006
395,000 Norwest Corp.
8.15% 11/1/01.............. 437,644
500,000 Southern New England Tel.
6.50% 08/15/00............. 514,005
300,000 WMX Technologies
6.65% 05/15/05............. 311,742
-------------
TOTAL CORPORATE NOTES
(cost $3,599,949) 3,780,454
-------------
U.S. GOVERNMENTS --
SHORT TERM -- 0.6%
150,000 U.S. Treasury Bills
5.28% 02/22/96
(cost $147,492)............ 147,492
-------------
REPURCHASE AGREEMENT -- 10.0%
2,595,879 Repurchase agreement with
Cantor Fitzgerald, dated
12/29/1995, due 01/02/1996,
proceeds at maturity of
$2,597,298 (collateralized
by 2,592,000 US Treasury
Note, 0.00%, due 9/30/97,
with a market value of
$2,650,715) (cost
$2,595,879)................ 2,595,879
-------------
TOTAL INVESTMENTS -- 110.8%
(cost $28,148,762) 28,644,541
Liabilities in excess of other
assets -- (10.8%)...................... (2,789,228)
-------------
NET ASSETS -- 100.0% $ 25,855,313
===========
</TABLE>
(+) "When issued" security

The accompanying notes are an integral part of the financial statements.

35
<PAGE> 97

- --------------------------------------------------------------------------------
Notes to Financial Statements
American Odyssey Funds, Inc./December 31, 1995
- --------------------------------------------------------------------------------

NOTE 1. ORGANIZATION
American Odyssey Funds, Inc., (the "Company"), was organized as a Maryland
corporation in December, 1992. It is registered under the Investment Company Act
of 1940 as an open-end diversified management investment company. It consists of
six separate funds (the "Fund(s)"): International Equity Fund, Emerging
Opportunities Fund, Core Equity Fund, Long-Term Bond Fund, Intermediate-Term
Bond Fund, and Short-Term Bond Fund. Shares of the Funds are offered only to
life insurance companies and their affiliates for their separate and general
accounts, and to qualified retirement plans.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.

A) SECURITIES VALUATION
Securities traded on a national exchange and those traded on
over-the-counter markets are valued at the last sales price; if there was no
sale on such day, the securities are valued at the mean between the most
recently quoted bid and asked prices. Securities for which market quotations are
not readily available are valued in good faith at fair value using methods
determined by the Board of Directors. Securities which mature in 60 days or less
are valued at amortized cost, which approximates market value, unless this
method does not represent fair market value, at which time the security will be
valued at their fair value as determined in good faith by the Board of
Directors.
Futures contracts and options are valued based upon their quoted daily
settlement prices.

B) OFF BALANCE SHEET RISK
The Funds may utilize futures contracts, options, and forward foreign
currency contracts for hedging purposes. The primary risks associated with the
use of these financial instruments for hedging purposes are (a) an imperfect
correlation between the change in market value of the other securities held by
the Funds and the change in market value of these financial instruments, and (b)
the possibility of an illiquid market. As a result, the use of these financial
instruments may involve, to a varying degree, elements of market risk in excess
of the amount recognized in the Statement of Assets and Liabilities.

C) FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker. During the period the futures contract
is open, changes in the value of the contract are recognized as unrealized gains
or losses by "marking to market" on a daily basis to reflect the value of the
contract at the end of each day's trading. Variation margin payments are made or
received and recognized as assets due from or liabilities to the broker
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or

36
<PAGE> 98

cost of) the closing transaction and its basis in the contract.

D) OPTIONS
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's Statement of Assets and Liabilities as an investment and
subsequently "marked to market" to reflect the current market value of the
option purchased. The current market value of a purchased option is the last
reported sale price on the principal exchange on which such option is traded. If
an option which the Fund has purchased expires on its stipulated expiration
date, the Fund realizes a loss in the amount of the cost of the option. If the
Fund enters into a closing transaction, it realizes a gain or loss, depending on
whether the proceeds from the sale are greater or less than the cost of the
option. If the Fund exercises a put option, it realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. If the Fund exercises a call option,
the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
The premium received for a written option is recorded as an asset with an
equivalent liability. The liability is marked-to-market based on the option's
quoted daily settlement price. When an option expires or the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss if the cost of
the closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is eliminated. When a written
call option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the Fund
purchased.

E) FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund may enter into forward foreign currency
contracts to hedge future movements in certain foreign currency exchange rates.
A forward currency contract is a commitment to purchase or sell a foreign
currency at a future date at a set price. The forward currency contracts are
valued at the forward rate and are marked-to-market daily. The change in market
value is recorded by the Fund as a unrealized gain or loss. When the contract is
closed, the Fund records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at the time it
was closed. Risks arise from the possible inability of counterparties to meet
the terms of their contracts and from movements in currency values and interest
rates.

F) REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements (on an individual Fund basis
or in conjunction with the other Funds) with the seller wherein the seller and
the buyer agree at the time of sale to a repurchase of the security at a
mutually agreed upon time and price. The Funds will not enter into repurchase
agreements unless the agreement is fully collateralized. Securities purchased
subject to the repurchase agreement are deposited with a custodian and, pursuant
to the terms of the repurchase agreement, must have an aggregate market value at
least equal to the repurchase price plus accrued interest. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
interest, the seller is required to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obliga-

37
<PAGE> 99

tion, the Funds maintain the right to sell the underlying securities at market
value and may claim any resulting loss against the seller. Repurchase agreements
could involve certain risks in the event of default or insolvency of the other
party, including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities.

G) CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the rate of exchange at the end of the respective fiscal
yearends. Purchases and sales of securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income is
translated at rates of exchange prevailing when accrued.
The Fund 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 with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.

H) ORGANIZATION EXPENSES
Organization expenses totaling $147,450 have been deferred and are being
amortized on a straight-line basis through May, 1998. If any of the initial
shares of the Company are redeemed by any shareholder during the period of
amortization of organization expenses, the redemption proceeds will be reduced
by the pro rata amount of unamortized organization expenses based on the number
of initial shares being redeemed to the number of initial shares outstanding at
the time of redemption.

I) TAXES
It is the Company's policy to comply with the provisions of the Internal
Revenue Code applicable to a regulated investment company. Under such
provisions, the Company will not be subject to federal income tax as the Company
intends to distribute as dividends substantially all of the net investment
income, if any, of each Fund. The Company also intends to distribute annually
all of its net realized capital gains. Such dividends and distributions are
automatically reinvested in additional shares of the Funds.
Dividends from net investment income and capital gain distributions are
determined in accordance with U.S. federal income tax regulations which may
differ from generally accepted accounting principles. As a result, dividends and
distributions differed from net investment income and net realized capital gains
due to timing differences, primarily the deferral of wash sales and the deferral
of net realized capital losses recognized subsequent to October. In addition, at
December 31, 1995, the Emerging Opportunity Fund decreased additional paid-in
capital by $331,697 and increased undistributed net investment income by
$331,697. This reclassification was due to the Fund's inability to carry net
operating losses forward to future years.

38
<PAGE> 100

J) SECURITIES TRANSACTIONS
Securities transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are determined on the identified
cost basis. Dividend income is recorded on the ex-dividend date. Interest income
is accrued daily as earned.

NOTE 3. MANAGEMENT, TRANSFER AGENCY AND SUBADVISORY AGREEMENTS AND
TRANSACTIONS WITH AFFILIATES
The Company has entered into a management agreement with American Odyssey
Funds Management, Inc. (AOFM), pursuant to which AOFM manages the investment
operations of the Company and administers the Company's affairs. AOFM has
entered into subadvisory agreements for investment advisory services in
connection with the management of each of the Funds. AOFM supervises the
subadvisers' performance of advisory services and will make recommendations to
the Company's Board of Directors with respect to the retention or renewal of the
subadvisory agreements. AOFM pays for the costs pursuant to the subadvisory
agreements, the cost of compensating officers of the Company, occupancy, and
certain clerical and accounting costs of the Company. The Company bears all
other costs and expenses.
Under the terms of the management agreement, the Funds pay AOFM a
management fee based on average daily net assets as follows: International
Equity Fund, .70% for the first $50 million in assets, .65% for the next $50
million in assets, and .55% for the assets over $100 million; Emerging
Opportunities Fund, .65% for the first $100 million in assets and .55% for the
assets over $100 million; Core Equity Fund, .60% for the first $100 million in
assets and .55% for the assets over $100 million; Long-Term Bond Fund, .50% and
.70% for the first $250 million in U.S. and non-U.S. assets, respectively, and
.40% and .60% for U.S. and non-U.S. assets, respectively, over $250 million;
Intermediate-Term Bond Fund, .50% for the first $100 million in assets, .45% for
the next $100 million in assets, and .40% for assets over $200 million;
Short-Term Bond Fund, .50% for the first $100 million in assets and .40% for
assets over $100 million.
AOFM has agreed to limit the expenses for each Fund and reimburse expenses
to the extent that each Fund's aggregate expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceeds the expense limitation
for that Fund through May 1996. The expense limitations for the Funds, as a
percentage of the average daily net assets, are as follows: International Equity
Fund, 1.25%; Emerging Opportunities Fund, 1.00%; Core Equity Fund, 1.00%;
Long-Term Bond Fund, .75%; Intermediate-Term Bond Fund, .75%; and Short-Term
Bond Fund, .75%. AOFM, at its discretion, may extend this period past May 1996.
Thereafter, each Fund is required to reimburse AOFM for any fees it waived or
expenses it reimbursed pursuant to these expense limitations, provided that such
reimbursement would not cause the total expense ratio to exceed the expense
limitations set forth above. AOFM's management fees for 1994 were $1,593,356, of
which $55,541 was reimbursed to the Funds. AOFM's management fees for 1995 were
$3,073,603. An additional $158,170 was paid to AOFM for reimbursement of
previous fees waived and expenses reimbursed. As of December 31, 1995, the
International Equity Fund, Emerging Opportunities Fund, Core Equity Fund,
Long-Term Bond Fund and Intermediate-Term Bond Fund have reimbursed AOFM for all
fees it waived and expenses it reimbursed. The Short-Term Bond Fund is currently
reimbursing AOFM and has a potential future liability to reimburse AOFM
amounting to $64,090. AOFM has acknowledged that upon termination of the
Investment Management Agreement be-

39
<PAGE> 101

tween AOFM and the Funds, the portfolio's would not be liable for any waived or
reimbursed fees which have not been repaid.
The Company has entered into a transfer agency agreement with AOFM pursuant
to which AOFM is responsible for shareholders' record keeping and
communications. AOFM does not currently charge any additional fees for these
services.
Under the subadvisory agreements, AOFM pays each subadviser a fee that is
computed daily and paid monthly at the annual rates based on the value of the
Fund's average daily net assets as follows: International Equity Fund, .45% for
the first $50 million in assets, .40% for the next $50 million in assets, and
.30% for assets over $100 million; Emerging Opportunities Fund, .40% for the
first $100 million in assets and .30% for assets over $100 million; Core Equity
Fund, .35% for the first $100 million in assets and .30% for assets over $100
million; Long-Term Bond Fund, .25% and .45% for the first $250 million in U.S.
and non-U.S. assets, respectively, and .15% and .35% for U.S.and non-U.S.
assets, respectively, over $250 million: Intermediate-Term Bond Fund, .25% for
the first $100 million in assets, .20% for the next $100 million in assets, and
.15% for assets over $200 million; and Short-Term Bond Fund, .25% for the first
$100 million in assets and .15% for assets over $100 million.
Travelers Asset Management International Corporation, an affiliate of AOFM,
serves as subadviser for the Intermediate-Term Bond Fund.

NOTE 4. DIRECTED BROKERAGE
ARRANGEMENTS
The International Equity Fund and Core Equity Fund have entered into
brokerage service arrangements with certain broker-dealers. The broker-dealers
have agreed to pay certain Fund expenses in exchange for the Fund directing a
portion of the fund brokerage to these broker dealers. In no event would the
Fund pay additional brokerage or receive inferior execution of transactions for
fund brokerage so allocated.
Under these arrangements for the year ended December 31, 1995,
broker-dealers paid custodian expenses for the International Equity Fund and
Core Equity Fund of $10,269 and $19,106 respectively.

NOTE 5. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of investment securities
(excluding short-term investments and repurchase agreements), for the year ended
December 31, 1995, were:

40
<PAGE> 102

At December 31, 1995, the cost of securities for federal income tax purposes and
the unrealized appreciation (depreciation) of investments for federal income tax
purposes for each Fund was as follows:

NOTE 6. FUTURES CONTRACTS
At December 31, 1995, the Long-Term Bond Fund had entered into the
following futures contracts:

<TABLE>
<CAPTION>
Unrealized
Number Underlying Expiration Nominal Nominal Appreciation/
of Contracts Face Value Security Date Cost Value (Depreciation)
--------------- ----------- -------------------------------- ---------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Short Position
-------------
150 $15,000,000 5 Year U.S. Treasury Notes 3/20/96 $(16,433,250) $(16,560,938) $ (127,688)
135 13,500,000 30 Year U.S. Treasury Bonds 3/20/96 (15,706,800) (16,398,281) (691,481)
------------ ------------ --------------
Total Short Position $(32,140,050) $(32,959,219) $ (819,169)
============ ============ ============
</TABLE>

NOTE 7. WRITTEN OPTIONS
The Long Term Bond Fund's activity in written options during the year ended
December 31, 1995 was as follows:

<TABLE>
<CAPTION>
Number of
Options Premiums
--------- ---------
<S> <C> <C>
Options Outstanding at December 31, 1994.................................................. -- --
Options Written....................................................................... 700 $ 912,860
Options Cancelled in Closing Transactions............................................. (175) (134,625)
Options Expired....................................................................... (250) (198,125)
Options Exercised..................................................................... (175) (373,688)
--------- ---------
Options Outstanding at December 31, 1995.................................................. 100 206,422
========= =========
Cost of Closing Transactions.............................................................. 53,516
</TABLE>

41
<PAGE> 103

NOTE 8. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund had forward foreign currency contracts which
contractually obligates the Fund to deliver currencies at specified future
dates. The following contracts were open at December 31, 1995:

<TABLE>
<CAPTION>
Foreign
Contract Settlement Unrealized
Contract to Deliver Value Date Value Depreciation
- ------------------------------------------------------------- -------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Swiss Franc.................................................. 7,799,600 1/16/96 $ 6,772,163 $ 27,837
Netherlands Guilder.......................................... 12,658,000 1/30/96 7,886,102 113,898
French Franc................................................. 5,406,000 2/13/96 1,102,888 1,391
Japanese Yen................................................. 113,000,000 2/22/96 1,099,661 20,971
German Deutsche Marx......................................... 3,566,000 3/27/96 2,493,303 (5,772)
----------- ------------
Total.................................................... $19,354,117 $158,325
=========== ==========
</TABLE>

NOTE 9. FEDERAL INCOME TAXES
For federal income tax purposes, the Funds indicated below have capital
loss carryforwards as of December 31, 1995 which are available to offset future
capital gains, if any.

<TABLE>
<CAPTION>
Capital Loss Expiration
Carryforward Date
------------ ----------
<S> <C> <C>
International Equity Fund................................................................. $ 89,338 2003
Short Term Bond Fund...................................................................... 180,767 2002
</TABLE>

42
<PAGE> 104

REPORT OF INDEPENDENT ACCOUNTANTS

To The Shareholders and
Board of Directors of the
American Odyssey Funds, Inc.:

We have audited the accompanying statements of assets and liabilities,
including the statements of portfolio of investments, of the American Odyssey
Funds, Inc., comprising, respectively, the International Equity, Emerging
Opportunities, Core Equity, Long-Term Bond, Intermediate-Term Bond, and
Short-Term Bond Funds, (the "Fund"), as of December 31, 1995, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the two years in the period then ended, and for the
period from May 17, 1993 (commencement of operations) to December 31, 1993.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and 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
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting American Odyssey Funds, Inc. as of
December 31, 1995, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for the periods referred to above, in conformity
with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
February 1, 1996
<PAGE> 105

PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a). FINANCIAL STATEMENTS

1. Financial Statements included in the Prospectus
constituting Part A of this Registration Statement:

Financial Highlights

2. Financial Statements included in the Statement of
Additional Information constituting Part B of this
Registration Statement:

Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Financial Highlights
Portfolios of Investments
Notes to Financial Statements
Report of Independent Accountants

(b). EXHIBITS

1. (a) Articles of Incorporation (1)

(b) Amendment to Articles of Incorporation (3)

2. By-Laws (1)

3. Not Applicable

4. Not Applicable

5. (a) Form of Management Agreement between
Registrant and American Odyssey Funds Management,
Inc. (1)

(b) Subadvisory Agreement among Registrant,
American Odyssey Funds Management, Inc. and Equinox
Capital Management, Inc. (2)

(c) Subadvisory Agreement among Registrant,
American Odyssey Funds Management, Inc. and
Wilke/Thompson Capital Management, Inc. (2)

1
<PAGE> 106

(d) Subadvisory Agreement among Registrant,
American Odyssey Funds Management, Inc. and Bank of
Ireland Asset Management Ltd. (2)

(e) Subadvisory Agreement among Registrant,
American Odyssey Funds Management, Inc., Western
Asset Management Company, and WLO Global Management
(2)

(f) Form of Subadvisory Agreement among
Registrant, American Odyssey Funds Management, Inc.
and Travelers Asset Management International
Corporation (2)

(g) Subadvisory Agreement among Registrant,
American Odyssey Funds Management, Inc. and Smith
Graham & Co. Asset Managers, L.P. (2)

6. (a) Form of Participation Agreement among
Registrant, Copeland Equities, Inc. and The Travelers
Insurance Company (2)

(b) Distribution Agreement between Registrant and
Copeland Equities, Inc. (3)

(c) Amendment No. 1 to the Participation
Agreement among Registrant, Copeland Equities, Inc.
and The Travelers Insurance Company (4)

7. Not Applicable

8. (a) Form of Custodian Contract between Registrant
and The Bank of New York (1)

(b) Custodian Agreement between Registrant and
Investors Bank & Trust Company (6)

9. (a) Form of Accounting Services Agreement between
Registrant and The Bank of New York (1)

(b) Form of Transfer Agency Agreement between
Registrant and American Odyssey Funds Management,
Inc. (2)

10. Opinion of Counsel (5)

11. Consent of Independent Accountants (7)

<PAGE> 107
12. Not Applicable

13. Not Applicable

14. Not Applicable

15. Not Applicable

16. Not Applicable

17. Financial Data Schedules (7)

18. Not Applicable

19. Powers of Attorney:

Robert C. Dughi (1)
Kent A. Kelley (1)
Steven I. Weinstein (1)
George Vlaisavljevich (1)
Michael R. Zarelli (1)
Linda Walker Bynoe (2)
John G. Beam, Jr. (2)
Nicholas D. Yatrakis (2)
Jane DiRenzo Pigott (3)
Mark M. Skinner (3)

- -------------------
(1) Incorporated by reference to the initial registration statement filed
January 27, 1993.
(2) Incorporated by reference to the Pre-Effective Amendment filed April
22, 1993.
(3) Incorporated by reference to Post-Effective Amendment No. 1 filed
November 24, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 2 filed
March 1, 1994.

(5) Incorporated by reference to Post-Effective Amendment No. 1 filed
November 24, 1993 and the Rule 24f-2 Notice filed February 29, 1996.

(6) Incorporated by reference to Post-Effective Amendment No. 4 filed
April 28, 1995.

(7) Filed herewith.

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

Not Applicable

<PAGE> 108
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
American Odyssey International Equity Fund 4

American Odyssey Emerging Opportunities Fund 4

American Odyssey Core Equity Fund 4

American Odyssey Long-Term Bond Fund 4

American Odyssey Intermediate-Term Bond Fund 4

American Odyssey Short-Term Bond Fund 4
</TABLE>

ITEM 27. INDEMNIFICATION.

Article VII, paragraph (3) of the Registrant's Articles of
Incorporation provides: "Each director and each officer of the Corporation
shall be indemnified by the Corporation to the full extent permitted by the
General Laws of the State of Maryland and the Investment Company Act of 1940,
now or hereafter in force, including the advance of related expenses.: Article
IX provides in pertinent part: "No provision of these Articles of
Incorporation shall be effective to (i) require a waiver of compliance with any
provision of of the Securities Act of 1933, as amended, or the Investment
Company Act of 1940, as amended, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder or (ii) protect or purport to
protect any director or officer of the Corporation against any liability to the
corporation or its security holders to which he would otherwise be subject to
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office." Article II,
Section 2 of Registrant's By-Laws contain similar provisions.

The agreement between the Registrant (the "Series Fund") and American
Odyssey Funds Management, Inc. (the "Manager") provides:

"The Manager shall not be liable for any loss suffered by the Series
Fund as the result of any neglignet act or error of judgment of the
Manager in connection with the matters ot which this Agreement
relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set
forth in Section 36(b)(3) of the 1940 Act) or loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Series Fund shall
indemnify the Manager and hold it harmless from all

<PAGE> 109
cost, damage and expenses, including reasonable expenses for legal
counsel, incurred by the Manager resulting from actions for which for
which it is relieved of responsibility by this paragraph. The Manager
shall indemnigy the Series Fund and hold it harmless from all cost,
damage and expense, including reasonable expenses for legal counsel,
incurred by the Series Fund resulting from actions for which the
Manager is not relieved of responsibility by this paragraph."

The agreement among the Registrant (the "Series Fund"), American
Odyssey Funds Management, Inc. (the "Manager"), and the Subadvisers provide:

"The Subadviser shall not be liable for any loss suffered by the
Series Fund or the Manager as a result of any negligent act or error
of judgment of the Subadviser in connection with the matters to which
the Agreement relates, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the
period and the amount set forth in Section 36(b)(3) of the 1940 Act)
or loss resulting from willful misfeasance, bad faith or gross
negligence on the Subadviser's part in the performance of its duties
or from its reckless disregard of its obligations and duties under
this Agreement. The Series Fund shall indemnify the Subadviser and
hold it harmless from all cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Subadviser
resulting from actions from which it is relieved of responsibility by
this paragraph. The Subadviser shall indemnify the Series Fund and
the Manager and hold them harmless from all cost, damage and expense,
including reasonable expenses for legal counsel, incurred by the
Series Fund and the Manager resulting from actions from which the
Subadviser is not relieved of responsibility by this paragraph."

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

<PAGE> 110
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

(a) AMERICAN ODYSSEY FUNDS MANAGEMENT, INC. ("AOFM")

See "Management of the Funds" both in the Prospectus constituting Part
A of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.

The business and other connections of AOFM's directors and officers
are set forth below. Except as otherwise indicated, the address of each person
is Two Tower Center, P.O. Box 1063, East Brunswick, NJ 08816-1063.

<TABLE>
<CAPTION>
Name and Address Position with AOFM Principal Occupation
- ---------------- ------------------ --------------------
<S> <C> <C>
Robert C. Dughi Chairman of the Board Board of Directors and Chief
Executive Officer, The Copeland
Companies and various affiliates

Mark M. Skinner Director and Executive Vice Executive Vice President and
President Chief Marketing Officer, The
Copeland Companies; President,
Copeland Equities, Inc.;
Executive Vice President,
Copeland Financial Services,
Inc.

George Vlaisavljevich Director and President Executive Vice President, The
Copeland Companies; President,
Copeland Financial Services,
Inc.; Executive Vice President,
Copeland Equities, Inc.

Mark E. Freemyer Vice President Vice President, The Copeland
Companies and various affiliates

Paul S. Feinberg Senior Vice President, General Senior Vice President, General
Counsel and Secretary Counsel and Secretary, The
Copeland Companies and various
affiliates
</TABLE>

<PAGE> 111

<TABLE>
<S> <C> <C>
Peter J. Gulia Vice President and Counsel, and Vice President and Counsel, and
Assistant Secretary Assistant Secretary, The
Copeland Companies and various
affiliates

Jeffrey R. Hug Vice President, Financial Vice President, Financial
Administration Administration, The Copeland
Companies and various affiliates

Lori M. Renzulli Assistant Secretary Legal Assistant, The Copeland
Companies and various affiliates

Donna S. Webber Assistant Secretary Assistant General Counsel, The
Copeland Companies and various
affiliates

Michael R. Zarelli Senior Vice President, Finance, Senior Vice President, Finance,
Chief Financial Officer, and Chief Financial Officer, and
Treasurer Treasurer, The Copeland
Companies and various affiliates
</TABLE>

(b) BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED

Information as to Bank of Ireland Asset Management (U.S.) Limited's
directors and executive officers is included in its Form ADV filed with the
Securities and Exchange Commission (File No. 801-29606), as most recently
amended, the text of which is incorporated herein by reference.

Information as to Wilke/Thompson Capital Management's directors and
executive officers is included in its Form ADV filed with the Securities and
Exchange Commission

<PAGE> 112

(File No. 801-30224), as most recently amended, the text of which is
incorporated herein by reference.

(d) EQUINOX CAPITAL MANAGEMENT, INC.

Information as to Equinox Capital Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-34524), as most recently amended, the text of which is
incorporated herein by reference.

(e) WESTERN ASSET MANAGEMENT COMPANY

Information as to Western Asset Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-08162), as most recently amended, the text of which is
incorporated herein by reference.

(f) WLO GLOBAL MANAGEMENT

Information as to WLO Global Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-41573), as most recently amended, the text of which is
incorporated herein by reference.

(g) TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION

Information as to Travelers Asset Management International
Corporation's directors and executive officers is included in its Form ADV
filed with the Securities and Exchange Commission (File No. 801-17003), as most
recently amended, the text of which is incorporated herein by reference.

<PAGE> 113
(h) SMITH GRAHAM & CO. ASSET MANAGERS, L.P.

Information as to Smith Graham & Co. Asset Managers, L.P.'s directors
and executive officers is included in its Form ADV filed with the Securities
and Exchange Commission (File No. 801-34685), as most recently amended, the
text of which is incorporated herein by reference.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Copeland Equities, Inc. does not act as principal underwriter,
depositor or investment adviser of any other investment company.

(b) Information concerning the directors and officers of Copeland
Equities, Inc. is set forth below. Except as otherwise indicated, the address
of each person is Two Tower Center, P.O. Box 1063, East Brunswick, NJ
08816-1063.

<TABLE>
<CAPTION>
Name Positions and Offices with Positions and Offices with
- ---- -------------------------- --------------------------
Underwriter Registrant
----------- ----------
<S> <C> <C>
Robert C. Dughi Chairman of the Board of Chairman of the Board of
Directors Directors

Mark M. Skinner Director and President Director and Executive Vice
President

George Vlaisavljevich Director and Executive Vice President
President

Steven M. Bresler Senior Vice President None

Dennis M. Casey Senior Vice President, None
Administrative Operations

Paul S. Chong Vice President None

Paul S. Feinberg Senior Vice President, General Senior Vice President and
Counsel and Secretary Secretary

Mark E. Freemyer Vice President Vice President
</TABLE>

<PAGE> 114

<TABLE>
<S> <C> <C>
Gary E. Ganakas Senior Vice President None

Harvey J. Gannon Vice President, Client None
Communications and Services

William M. Gardner Senior Vice President None

Sage D. Grumbach Vice President, Field Training None
and Development

Peter J. Gulia Vice President and Counsel, and None
Assistant Secretary

Charles Katz Vice President, Professional None
Education and Development

Robert C. Kniceley Senior Vice President, None
Government Markets

Mary F. Nolan Vice President, Marketing None

Lori M. Renzulli Assistant Secretary None

George A. Ryan Assistant Secretary None
One Tower Square
Hartford, CT 06183

William P. Schwarzkopf Senior Vice President None

Michael L. St. Clair Senior Vice President None

Donna S. Webber Assistant Secretary None

Michael R. Zarelli Senior Vice President, Finance, Senior Vice President and
Chief Financial Officer and Treasurer
Treasurer
</TABLE>

<PAGE> 115
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the Rules thereunder are
maintained at the offices of (1) the Registrant and American Odyssey Funds
Management, Inc., Two Tower Center, P.O. Box 1063, East Brunswick, NJ
08816-1063; (2) Bank of Ireland Asset Management (U.S.) Limited, 26 Fitzwilliam
Place, Dublin 2, Ireland and 2 Greenwich Plaza, Greenwich, CT 06830; (3)
Wilke/Thompson Capital Management, Inc., 3800 Norwest Center, 90 South 7th
Street, Minneapolis, MN 55402-3934; (4) Equinox Capital Management, Inc., 590
Madison Avenue, New York, NY 10022; (5) Western Asset Management and WLO
Global Management, 117 East Colorado Boulevard, Pasadena, CA 91105; (6)
Travelers Asset Management International Corporation, One Tower Square,
Hartford, CT 06183; (7) Smith Graham & Co. Asset Managers, L.P., 6900 Texas
Commerce Tower, 600 Travis Street, Houston, TX 77002-3007; and (8) Investors
Bank and Trust Company, 89 South Street, Boston, MA 02111.

ITEM 31. MANAGEMENT SERVICES

Not Applicable

ITEM 32. UNDERTAKINGS

The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.

<PAGE> 116
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1993 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of East Brunswick, and the State of New Jersey on
the 29th day of April, 1996.

AMERICAN ODYSSEY FUNDS, INC.

By: /s/ George Vlaisavljevich
----------------------------------
George Vlaisavljevich
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on April 29, 1996.

<TABLE>
<CAPTION>
Signature and Title
-------------------
<S> <C>
/s/ Robert C. Dughi By: /s/ Paul S. Feinberg
------------------- --------------------
Robert C. Dughi Paul S. Feinberg
Chairman of the Board of Directors (Attorney-in-Fact)

/s/ George Vlaisavljevich By: /s/ Paul S. Feinberg
------------------------- --------------------
George Vlaisavljevich Paul S. Feinberg
President and Director (Attorney-in-Fact)

/s/ John G. Beam, Jr. By: /s/ Paul S. Feinberg
--------------------- --------------------
John G. Beam, Jr. Paul S. Feinberg
Director (Attorney-in-Fact)

/s/ Linda Walker Bynoe By: /s/ Paul S. Feinberg
---------------------- --------------------
Linda Walker Bynoe Paul S. Feinberg
Director (Attorney-in-Fact)

/s/ Jane DiRenzo Pigott By: /s/ Paul S. Feinberg
----------------------- --------------------
Jane DiRenzo Pigott Paul S. Feinberg
Director (Attorney-in-Fact)

/s/ Kent A. Kelley By: /s/ Paul S. Feinberg
------------------ --------------------
Kent A. Kelley Paul S. Feinberg
Director (Attorney-in-Fact)
</TABLE>

<PAGE> 117

<TABLE>
<S> <C>
/s/ Mark M. Skinner By: /s/ Paul S. Feinberg
- ------------------- --------------------
Mark M. Skinner Paul S. Feinberg
Executive Vice President and Director (Attorney-in-Fact)

/s/ Nicholas D. Yatrakis By: /s/ Paul S. Feinberg
- ------------------------ --------------------
Nicholas D. Yatrakis Paul S. Feinberg
Director (Attorney-in-Fact)

/s/ Steven I. Weinstein By: /s/ Paul S. Feinberg
- ----------------------- --------------------
Steven I. Weinstein Paul S. Feinberg
Director (Attorney-in-Fact)

/s/ Michael R. Zarelli By: /s/ Paul S. Feinberg
- ---------------------- --------------------
Michael R. Zarelli Paul S. Feinberg
Senior Vice President, Finance (Attorney-in-Fact)
Principal Financial Officer;
Principal Accounting Officer
</TABLE>

<PAGE> 118
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NUMBERS
- -------------- ----------- ------------
<S> <C> <C>
11 Consent of Independent C-15
Accountants

17 Financial Data Schedules C-16
</TABLE>

<PAGE> 1
Exhibit 11

[COOPERS & LYBRAND LETTERHEAD]

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in Post-Effective Amendment No. 5 to the
Registration Statement No. 33-57536 on Form N-1A of our report dated
February 1, 1996, on our audits of the financial statements and financial
highlights of American Odyssey Funds, Inc.

We also consent to the reference to our Firm in the Prospectus under the
caption, "Financial Highlights" and in the Statement of Additional Information
under the caption, "Other Service Providers".

/s/ COOPERS & LYBRAND L.L.P.
---------------------------
Coopers & Lybrand L.L.P.

New York, New York
April 25, 1996

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from December 31,
1995 Annual Report.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 83,059,291
<INVESTMENTS-AT-VALUE> 92,682,740
<RECEIVABLES> 829,085
<ASSETS-OTHER> 685,610
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,198,435
<PAYABLE-FOR-SECURITIES> 1,036,158
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,047,732
<TOTAL-LIABILITIES> 2,083,890
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82,634,841
<SHARES-COMMON-STOCK> 7,264,073
<SHARES-COMMON-PRIOR> 4,805,255
<ACCUMULATED-NII-CURRENT> 48,120
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 341,067
<ACCUM-APPREC-OR-DEPREC> 9,772,651
<NET-ASSETS> 92,114,545
<DIVIDEND-INCOME> 1,814,443
<INTEREST-INCOME> 103,910
<OTHER-INCOME> 0
<EXPENSES-NET> 767,795
<NET-INVESTMENT-INCOME> 1,150,558
<REALIZED-GAINS-CURRENT> (38,317)
<APPREC-INCREASE-CURRENT> 11,300,527
<NET-CHANGE-FROM-OPS> 12,412,768
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 896,810
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,411,396
<NUMBER-OF-SHARES-REDEEMED> 1,123,972
<SHARES-REINVESTED> 171,394
<NET-CHANGE-IN-ASSETS> 2,458,818
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 205,628
<OVERDIST-NET-GAINS-PRIOR> 302,750
<GROSS-ADVISORY-FEES> 488,474
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 708,807
<AVERAGE-NET-ASSETS> 71,150,141
<PER-SHARE-NAV-BEGIN> 10.76
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 1.87
<PER-SHARE-DIVIDEND> 0.12
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>