AMERICAN ODYSSEY FUNDS INC /MD/, 485APOS, 1997-02-28

AMERICAN ODYSSEY FUNDS INC /MD/
485APOS, 1997-02-28

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997

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. 6
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 7

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

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:

Christopher E. Palmer

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,
1996 ON FEBRUARY 27, 1997.

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

<TABLE>
<S> <C>
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485
[ ] ON MAY 1, 1997 PURSUANT TO PARAGRAPH (B) OF RULE 485
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1) OF RULE 485
[X] ON MAY 1, 1997 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
</TABLE>

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

PART B: INFORMATION REQUIRED IN CAPTION IN STATEMENT OF
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION ADDITIONAL INFORMATION
- ---------------------------------------------------------------------------------------

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
1

AMERICAN ODYSSEY FUNDS, INC.
PROSPECTUS

MAY 1, 1997

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.

<PAGE> 6

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

PAGE
----
<TABLE>
<S> <C>
Summary of Expenses.................................................... 5

Financial Highlights................................................... 7

General InformatioN.................................................... 8

Investment Objectives and Programs..................................... 9

American Odyssey International Equity Fund....................... 10

American Odyssey Emerging Opportunities Fund..................... 12

American Odyssey Core Equity Fund................................ 14

American Odyssey Long-Term Bond Fund............................. 16

American Odyssey Intermediate-Term Bond Fund..................... 19

American Odyssey Short-Term Bond Fund............................ 21

Additional Investment Information...................................... 23

Options.......................................................... 23

Futures Contracts................................................ 24

Preferred Stocks, Convertible Securities, and Warrants........... 25

Short Sales Against the Box...................................... 25

When-Issued and Delayed Delivery Securities...................... 26

Lending of Portfolio Securities.................................. 26

Investment Restrictions.......................................... 26

Management of the Funds................................................ 27
</TABLE>

<PAGE> 8

<TABLE>

<S> <C>
Directors and Officers........................................... 27

Manager.......................................................... 27

Subadvisers...................................................... 30

Expense Limitations.............................................. 35

Custodian and Transfer Agent..................................... 36

Purchase and Redemption of Shares...................................... 36

Performance Information................................................ 38

Federal Income Taxes................................................... 39

Other Information...................................................... 40

Voting Rights.................................................... 40

Portfolio Brokerage.............................................. 41

Monitoring for Possible Conflict................................. 41

Additional Information........................................... 41

Appendix............................................................... 42

Additional Information Regarding
Money Market Instruments........................................ 42

Ratings of Corporate Debt Securities............................. 44

Ratings of Commercial Paper...................................... 45
</TABLE>

<PAGE> 9

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.

Int'l Emerging Core LT IT ST
Equity Opp. Equity Bond Bond Bond
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load onPurchases........................... 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..................................
12b-1 Fees....................................... None None None None None None
Other
Expenses.........................................
TOTAL FUND OPERATING EXPENSES....................
</TABLE>

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. 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.

EXAMPLE

<PAGE> 10

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:

Emerging Core Long- Intermediate-
Int'l Equity Opportunities Equity Term Term Bond Short-Term
Fund Fund Fund Bond Fund Fund Bond Fund
------------ ------------- ------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
1 year........ $ $ $ $ $ $
3 years....... $ $ $ $ $ $
5 years....... $ $ $ $ $ $
10 years...... $ $ $ $ $ $
</TABLE>

<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.

[To be added by post-effective amendment pursuant to Rule 485(b).]

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

<PAGE> 12

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. 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. The Company's
shareholders have appproved a proposal that would permit the Board of Directors
to change subadvisers or amend existing subadvisory agreements without
shareholder approval. Before that arrangement can be implemented, it must be
approved by the Securities and Exchange Commission. For more information, see
Changing Subadvisers Without Shareholder Approval on page ___. The current
subadvisers are set forth below:

FUND SUBADVISER(S)
- ---- -------------
<S> <C>
American Odyssey International Bank of Ireland Asset Management (U.S.)
Equity Fund Limited

American Odyssey Emerging Wilke/Thompson Capital Management, Inc.
Opportunities Fund and Cowen Asset Management
</TABLE>

<PAGE> 13

<TABLE>
<S> <C>
American Odyssey Core Equity Fund Equinox Capital Management, Inc.

American Odyssey Long-Term Bond Fund Western Asset Management Company

American Odyssey Intermediate-Term Travelers Asset Management International
Bond Fund 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 ___.

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.

<PAGE> 14

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

<PAGE> 15

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 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

<PAGE> 16

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.

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

<PAGE> 17

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

<PAGE> 18

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.

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 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.

<PAGE> 19

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.

<PAGE> 20

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.

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.

<PAGE> 21

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.

<PAGE> 22

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 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

<PAGE> 23

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

<PAGE> 24

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 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.

<PAGE> 25

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

<PAGE> 26

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. 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

<PAGE> 27

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

<PAGE> 28

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 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)

<PAGE> 29

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.

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

<PAGE> 30

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

<PAGE> 31

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 ___) 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 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

<PAGE> 32

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

<PAGE> 33

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 retains consultants to provide assistance in monitoring and
evaluating the performance of the subadvisers and to provide assistance in the
administration of the Company. 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 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:

Manager's Fee Paid by Manager
Fund Fee to the Subadviser
- ---- --------- -------------------
<S> <C> <C>
International - 0.70% for first - 0.45% for first
Equity Fund $50 million in $50 million in
</TABLE>

<PAGE> 34

<TABLE>
<S> <C> <C>
assets, plus assets, plus
- 0.65% for next - 0.40% for next
$50 million in $50 million in
assets, plus assets, plus
- 0.55% for assets - 0.30% for assets
over $100 million over $100 million
Emerging - 0.75% for first - 0.50% for first
Opportunities Fund $50 million in assets $50 million in assets
allocated to Cowen, plus allocated to Cowen, plus
- 0.70% for next $50 - 0.45% for next $50
million in assets allocated million in assets allocated
to Cowen, plus to Cowen, plus
- 0.65% for assets over - 0.40% for assets over
$100 million allocated $100 million allocated
to Cowen to Cowen
- 0.65% for first $100 million - 0.40% for first $100 million
in assets allocated to in assets allocated to
Wilke/Thompson Wilke/Thompson
- 0.55% for assets over $100 - 0.30% for assets over $100
million allocated to million allocated to
Wilke/Thompson Wilke/Thompson

Core Equity Fund - 0.60% for first - 0.35% for first
$100 million in $100 million in
assets, plus assets, plus
- 0.55% for assets - 0.30% for assets
over $100 million over $100 million

Long-Term - 0.50% for first - 0.25% for first
Bond Fund $250 million of $250 million of
assets, plus assets, plus
- 0.40% for - 0.15% for
assets over $250 assets over $250
million, plus million, plus

Intermediate- - 0.50% for first $100 - 0.25% for first $100
Term million in assets, plus million in assets, plus
Bond Fund - 0.45% for next - 0.20% for next
$100 million in $100 million in
assets, plus assets, plus
- 0.40% for assets - 0.15% for assets
over $200 million over $200 million
</TABLE>

<PAGE> 35

<TABLE>
<S> <C> <C>
Short-Term - 0.50% for first - 0.25% for first
Bond Fund $100 million in $100 million in
assets, plus assets, plus
- 0.40% for assets - 0.15% for assets
over $100 million over $100 million
</TABLE>

During 1996, 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.___%; Emerging Opportunities Fund,
0.___%; Core Equity Fund, 0.___%; Long-Term Bond Fund, 0.___%,
Intermediate-Term Bond Fund, 0.___%; and Short-Term Bond Fund, 0.___%.

During 1996, the subadviser's fees (which were paid by the Manager) were
the following percentages of the Funds' average net assets: International
Equity Fund, 0.___%; Emerging Opportunities Fund, 0.___%; Core Equity Fund,
0.___%; Long-Term Bond Fund, 0.___%; Intermediate-Term Bond Fund, 0.___%; and
Short-Term Bond Fund, 0.___%.

The Company's shareholders have approved a proposal that would permit the
Board of Directors to change subadvisers or amend existing subadvisory
agreements without shareholder approval. In connection with that proposal, the
shareholders approved a new Management Agreement under which each Fund would
pay the Manager a fee of 0.25% (the Manager's current net fee) and pay the
subadviser(s) for that Fund directly (rather than through the Manager). The
new Management Agreement would permit the Board to approve new subadvisory
agreements with fees that are 0.10% higher than the highest current subadviser
fee for the Fund. This new arrangement must be approved by the Securities and
Exchange Commission before the arrangement (including the new Management
Agreement) will be effective. For more information, see Changing Subadvisers
Without Shareholder Approval on page ___.

SUBADVISERS

<PAGE> 36

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 Two 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, 1996, the Bank of Ireland managed over $7.5 billion in global
securities for U.S. clients. The Manager (not the Fund) currently 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 a subadviser for the
Emerging Opportunities Fund. Its Corporate offices are at 3800 Norwest Center,
90 South 7th Street,

<PAGE> 37

Minneapolis, MN 55402-3934. Wilke/Thompson serves as an investment adviser to
a variety of individual and institutional investors. As of December 31, 1996,
Wilke/Thompson managed more than $1.4 billion of assets. The Manager (not the
Fund) currently 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 15 years experience in growth stock
investing.

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 11 years experience in growth stock
investing.

Stephen M. Kensinger, 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 17
years experience in professional money management.

<PAGE> 38

COWEN ASSET MANAGEMENT. Cowen & Co., through its investment management
division, Cowen Asset Management ("Cowen"), serves as a subadviser for the
Emerging Opportunities Fund. Its principal offices are at Financial Square,
New York, NY 10005. Cowen serves as investment adviser to a variety of
individual and institutional investors, including mutual funds. As of December
31, 1996, Cowen managed more than $___ in assets. The Manager (not the Fund)
currently pays Cowen, on a monthly basis, an annual advisory fee based on the
average daily net assets managed by Cowen at the rate of 0.50% for the first
$50 million in assets, 0.45% for the next $50 million in assets, and 0.40% for
assets over $100 million. The following individual is responsible for the
day-to-day investment management of the portion of the Fund managed by Cowen:

William Church, Vice President and Senior Investment Officer of Cowen &
Co. and Chief Investment Officer of Cowen Asset Management, has been with Cowen
& Co. since 1982.

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, 1996, Equinox managed more than
$7.2 billion of assets. The Manager (not the Fund) currently 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.

<PAGE> 39

and was responsible for equity management in their asset management division.
Mr. Ulrich has over 25 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 16 years experience in the investment management field.

WESTERN ASSET MANAGEMENT COMPANY serves as subadviser for the Long-Term
Bond Fund. Its Corporate offices are at 117 East Colorado Boulevard, Pasadena,
CA 91105. Western Asset Management serves as an investment adviser to a
variety of individual and institutional investors, including mutual funds. As
of December 31, 1996, Western Asset Management managed more than $25 billion of
assets. The Manager (not the Fund) currently pays Western Asset 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 assets and 0.15%
for 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 25 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 19 years
experience with fixed income investing.

<PAGE> 40

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, 1996, TAMIC managed more than $4
billion of assets. The Manager (not the Fund) currently 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 both The Travelers and 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.

<PAGE> 41

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 investors,
including mutual funds. As of December 31, 1996, Smith Graham managed more
than $2 billion of assets. The Manager (not the Fund) currently 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 14 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 14 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 15 years
experience in fixed income investing.

CHANGING SUBADVISERS WITHOUT SHAREHOLDER APPROVAL

<PAGE> 42

The Company's shareholders have approved a proposal that would permit the
Board of Directors to change subadvisers or amend existing subadvisory
agreements without shareholder approval. This arrangement must be approved by
the Securities and Exchange Commission (the "SEC") before it will be effective.
If the SEC does not approve the arrangement, it will not become effective
(unless the law changes to permit the arrangement without SEC approval).

As part of the proposal, the shareholders approved a new Management
Agreement and new subadvisory agreements with each of the current subadvisers.
Those new agreements will become effective only with the SEC approval referred
to above. They provide that each Fund will pay the Manager a fee of 0.25% (the
Manager's current net fee) and will pay the subadviser(s) for that Fund
directly (rather than through the Manager). The new Management Agreement would
permit the Board to approve new subadvisory agreements with fees that are 0.10%
higher that the highest current subadviser fee for the Fund. In particular,
the new Management Agreement would set the following maximums for subadviser
fees: International Equity Fund (0.55%); Emerging Opportunities Fund (0.60%);
Core Equity Fund (0.45%); Long-Term Bond Fund (0.35%); Intermediate-Term Bond
Fund (0.35%); and Short-Term Bond Fund (0.35%). Subadviser fees above those
maximums would require shareholder approval.

Under the new arrangement, the Company will send shareholders an
informational statement when and if it hires a new subadviser or materially
amends a current subadvisory agreement. This arrangement will not permit the
Board, without shareholder approval, to enter into

<PAGE> 43

a subadvisory agreement with a subadviser that is an "affiliated person" (as
defined in the Investment Company Act of 1940) of the Company (other than by
reason of serving as a subadviser).

EXPENSE LIMITATIONS

The Manager has agreed to continue, at least until _______, 19___, 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 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.

<PAGE> 44

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

<PAGE> 45

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 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.

<PAGE> 46

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.

<PAGE> 47

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 1994-1996 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.

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

<PAGE> 48

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

<PAGE> 49

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 Section 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.

<PAGE> 50

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

<PAGE> 51

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 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

<PAGE> 52

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.

<PAGE> 53

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.

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.

<PAGE> 54

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.

<PAGE> 55

PART B
------

INFORMATION REQUIRED IN A
-------------------------

STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------

<PAGE> 56

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

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, 1997

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, 1997. 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

<PAGE> 57

TABLE OF CONTENTS

PAGE
<TABLE> ----
<S> <C>
INVESTMENT OBJECTIVES AND PROGRAM........................................ 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>

<PAGE> 58

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
<PAGE> 59

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
<PAGE> 60

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 the
ir facilities will also be adequate to handle reasonable anticipated volumes.

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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

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<PAGE> 62

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

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<PAGE> 63

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 before

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<PAGE> 64

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 writing the

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<PAGE> 65

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.

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

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<PAGE> 66

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 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.

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<PAGE> 67

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."

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

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<PAGE> 68

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 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

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<PAGE> 69

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 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

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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 will cover its obligations under forward contracts by (i) holding the
underlying foreign currency, a security denominated in the foreign currency, or
an offsetting forward contract; or (ii) placing in a segregated account cash or
liquid securities.

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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.

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

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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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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.

19
<PAGE> 75

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.

20
<PAGE> 76

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.

21
<PAGE> 77

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.

22
<PAGE> 78

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 (*).

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 and Executive Officer, The Copeland
Financial Services, President Companies. Also: Chairman of the
East Brunswick, NJ Board and President of Copeland
08816 Financial Services, Inc. ("CFS")
and the Manager, and Chairman
of the Board of Copeland
Equities, Inc.

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

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

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

23
<PAGE> 79

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

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

</TABLE>

24
<PAGE> 80

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.

</TABLE>

As of May 1, 1997, the directors and officers owned in the aggregate less
than 1% of the outstanding shares of each Fund.

INVESTMENT ADVISERS

For the years 1994, 1995 and 1996, the International Equity Fund paid the
Manager fees of $271,013, $488,474, and $823,891 respectively, and the Manager
paid the subadviser $174,167, $310,189, and $506,087 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 1994, 1995, and 1996, the Emerging Opportunities Fund paid
the Manager fees of $382,046, $811,641, and $1,169,885 respectively, and the
Manager paid the subadviser $235,098, $487,651, and $683,573 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 1994, 1995, and 1996, the Core Equity Fund paid the Manager
fees of $442,721, $855,725, and $1,362,267 respectively, and the Manager paid
the subadviser

25
<PAGE> 81

$258,232, $489,333, and $765,782 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 1994, 1995, and 1996, the Long-Term Bond Fund paid the
Manager fees of $247,872, $486,896, and $718,488 respectively, and the Manager
paid the subadviser $123,928, $243,334, and $359,244 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 1994, 1995, and 1996, the Intermediate-Term Bond Fund paid
the Manager fees of $180,136, $317,000, and $442,594 respectively, and the
Manager paid the subadviser $90,068, $158,441, and $221,298 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 1994, 1995, and 1996, the Short-Term Bond Fund paid the Manager
fees of $69,569, $113,867, and $161,395 respectively, and the Manager paid the
subadviser $34,785, $56,916, and $80,698 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 and 1996, the Fund paid the Manager $1,531 and
$10,895, respectively, as a repayment of expenses previously reimbursed.

26
<PAGE> 82

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

OTHER SERVICE PROVIDERS

Investors Bank & 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 & 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 1996,
the Company paid $671,232 to Investors Bank & 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
<PAGE> 83

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., One Post Office Square, Boston, MA 02109 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 $50,000 in 1994, $50,000 in 1995 and $135,000 in 1996.

Investors Bank and Trust Company assists the Manager in providing certain
administrative services for the Company. For this assistance, the Manager (not
the Company) paid Investors Bank & Trust Company a fee of $116,550 in 1996.
Investors Bank & Trust Company did not serve in this capacity before 1996.

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.

<PAGE> 84

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, 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-

<PAGE> 85

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 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.

30
<PAGE> 86

INTERNATIONAL EQUITY FUND

% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
---- ----------------- ------------------- ------------------
<S> <C> <C> <C>
1994 $185,665 0% 0%
1995 $161,675 0% 0%
1996 $249,106 0% 0%
</TABLE>

Commissions in the amount of $356 in 1994, $0 in 1995, and $0 in 1996 were
paid to Smith Barney Inc., an affiliate of the Manager.

EMERGING OPPORTUNITIES FUND

% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
---- ----------------- ------------------- ------------------
<S> <C> <C> <C>

1994 $43,899 100% 100%
1995 $65,993 100% 100%
1996 $90,013 60% 60%

</TABLE>

Commissions in the amount of $273 in 1996 were paid to The
Robinson-Humphrey Company, Inc., an affiliate of the Manager. In 1996, ___% of
total commissions were paid to The Robinson-Humphrey Company, Inc., and those
commissions related to ___ % of the Fund's transactions.

CORE EQUITY FUND

% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
---- ----------------- ------------------- ------------------
<S> <C> <C> <C>

1994 $190,450 73% 73%
1995 $207,159 78% 78%
1996 $333,930 63% 63%
</TABLE>

Commissions in the amount of $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 $2,952 in 1994, $0 in 1995, and $186 in 1996
to Smith Barney Inc., an affiliate of the Manager. In 1996, ___% of total
commissions were paid to Smith Barney, Inc., and those commissions related
to ___% of the Fund's transactions.

31
<PAGE> 87

LONG-TERM BOND FUND

% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
---- ----------------- ------------------- ------------------
<S> <C> <C> <C>

1994 $42,115 0% 0%
1995 $30,903 0% 0%
1996 $66,218 0% 0%
</TABLE>

INTERMEDIATE-TERM BOND FUND

SHORT-TERM BOND FUND

% of Transactions
% Paid to Brokers through Brokers
Year Total Commissions Providing Research Providing Research
---- ----------------- ------------------- ------------------
<S> <C> <C> <C>
1994 $ 0 0% 0%
1995 $1,447 100% 100%
1996 $ 0 0% 0%
</TABLE>

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.

32
<PAGE> 88

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 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

33
<PAGE> 89

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.

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

34
<PAGE> 90

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 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
<PAGE> 91

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
<PAGE> 92

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.

[Financial statements to be added by post-effective amendment pursuant to Rule
485(b).]

37
<PAGE> 93
PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(A). FINANCIAL STATEMENTS [To be filed by post-effective amendment
pursuant to Rule 485(b).]

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 (8)

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)

1
<PAGE> 94

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

(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. (8)

(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)

<PAGE> 95

11. Consent of Independent Accountants [To be filed by
post-effective amendment pursuant to Rule 485(b).]

12. Not Applicable

13. Not Applicable

14. Not Applicable

15. Not Applicable

16. Not Applicable

17. Financial Data Schedules [To be filed by post-effective
amendment pursuant to Rule 485(b).]

18. Not Applicable

19. Powers of Attorney:

Robert C. Dughi (1)
Kent A. Kelley (1)
Steven I. Weinstein (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 27, 1997.

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

(7) Incorporated by reference to Post-Effective Amendment No. 5 filed April 29,
1996.
(8) Filed herewith.

3
<PAGE> 96

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

Not Applicable

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
American Odyssey International Equity Fund 5

American Odyssey Emerging Opportunities Fund 6

American Odyssey Core Equity Fund 5

American Odyssey Long-Term Bond Fund 5

American Odyssey Intermediate-Term Bond Fund 5

American Odyssey Short-Term Bond Fund 5
</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 negligent act or error of
judgment of the Manager in connection with the matters of 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

4
<PAGE> 97

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 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 indemnify 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

5
<PAGE> 98

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.

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.

Name and Address Position with AOFM Principal Occupation
- ---------------- ------------------ --------------------
<S> <C> <C>
Robert C. Dughi Chairman of the Board and Board of Directors and Chief
President 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.

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

Paul S. Feinberg Senior Vice President, Senior Vice President,
General Counsel and General Counsel and
Secretary, and Director Secretary, The Copeland
Companies and various
affiliates

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

6
<PAGE> 99

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, Chief Senior Vice President, Chief
Financial Officer, and Financial Officer, and
Treasurer, and Director 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 (File No. 801-30224), as most recently amended, the text of
which is incorporated herein by reference.

(d) EQUINOX CAPITAL MANAGEMENT, INC.

7
<PAGE> 100

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) 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.

(g) 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.

<PAGE> 101

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

Mark M. Skinner Director and President Director and Executive
Vice 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, Senior Vice President
General Counsel and and Secretary
Secretary, and Director
Mark E. Freemyer Vice President Vice President

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 None
Training and Development

Peter J. Gulia Vice President and Counsel, None
and Assistant Secretary
Charles Katz Vice President, Education None
Markets

Robert C. Kniceley Senior Vice President, None
Government Markets

Mary F. Nolan Vice President, Marketing None

</TABLE>

<PAGE> 102

<TABLE>
<S> <C> <C>
Marcellous J. Reed Senior Vice President 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, Chief Senior Vice President
Financial Officer and and Treasurer
Treasurer, and Director
</TABLE>

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

<PAGE> 103

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.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 28th day of February, 1997.

AMERICAN ODYSSEY FUNDS, INC.

By: /s/ Robert C. Dughi
-----------------------------------
Robert C. Dughi
Chairman of the Board and 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 February 28, 1997.

Signature and Title

<TABLE>
<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/ 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> 104

/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 and Treasurer; (Attorney-in-Fact)
Principal Financial Officer;
Principal Accounting Officer
</TABLE>

<PAGE> 105

EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION PAGE NUMBERS
- -------------- ----------- ------------
<S> <C> <C>
2 By-Laws C-14

6(b) Distribution Agreement C-24
</TABLE>

<PAGE> 1

AMERICAN ODYSSEY FUNDS, INC.

BY-LAWS

ARTICLE I
STOCKHOLDERS

SECTION 1. Annual Meetings. Annual meetings of the stockholders of the
Corporation shall be held at the registered office of the Corporation, or at
such other place within the United States as may be determined by the Board of
Directors and as shall be designated in the notice of said meeting, for the
purpose of electing Directors and for the transaction of such other business as
may properly be brought before the meeting; provided, however, the Corporation
shall not be required to hold an annual meeting in any year in which the
election of directors is not required to be acted upon by stockholders under
the Investment Company Act of 1940. If an annual meeting is held, such meeting
shall be held during the month of April on such date and at such time as shall
be specified by the Board of Directors; provided, however, that if the
Corporation is required under this Section 1 to hold a meeting to elect
directors, the meeting shall be held as provided in Section 10 of Article II or
as otherwise required under law.

SECTION 2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Articles of Incorporation ("Charter"), may be held at any place
within the United States, and may be called at any time by the Board of
Directors or by the President, and shall be called by the President or
Secretary at the request in writing of a majority of the Board of Directors or
by the Secretary at the request in writing of stockholders entitled to cast at
least twenty-five percent (25%) of the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of the proposed
meeting.

SECTION 3. Notice of Meetings. Written or printed notice of the purpose
or purposes and of the time and place of every meeting of the stockholders
shall be given by the Secretary of the Corporation to each stockholder of
record entitled to vote at the meeting, by placing such notice in the mail at
least ten days, but not more than ninety (90) days, and in any event within the
period prescribed by law, prior to the date named for the meeting addressed to
each stockholder at his or her address appearing on the books of the
Corporation or supplied by him or her to the Corporation for the purpose of
notice. The notice of every meeting of stockholders may be accompanied by a
form of proxy approved by the Board of Directors in favor of such actions or
persons as the Board of Directors may select.

<PAGE> 2

- 2 -

SECTION 4. Record Date. The Board of Directors may fix a date not more
than ninety (90) days preceding the date of any meeting of stockholders, or the
date fixed for the payment of any dividend, or the date of the allotment of
rights or the date when any change or conversion or exchange of shares shall go
into effect, as a record date for the determination of stockholders entitled to
notice of, or to vote at, any such meeting or entitled to receive payment of
any dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be. In such case, only shareholders of record at the
close of business on the date so fixed shall be entitled to vote, to receive
notice, or receive rights, or to exercise rights, notwithstanding any
subsequent transfer on the books of the Corporation. The Board of Directors
shall not close the books of the Corporation against transfers of shares during
the whole or any part of such period. In the case of a meeting of
stockholders, the record date shall be fixed not less than ten (10) days prior
to the date of the meeting. In no case shall the record date be prior to the
close of business on the day the record date is fixed.

SECTION 5. Quorum. Except as otherwise provided by statute or by the
Charter, the presence in person or by proxy of stockholders of the Corporation
entitled to cast at least a majority of the votes to be cast shall constitute a
quorum at each meeting of the stockholders and all questions shall be decided
by majority vote of the shares so represented in person or by proxy at the
meeting and entitled to vote. In the absence of a quorum, the stockholders
present in person or by proxy, by majority vote and without notice other than
by announcement, may adjourn the meeting from time to time as provided in
Section 7 of this Article I until a quorum shall attend. The stockholders
present at any duly organized meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.

SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his or her absence, the President, or in his or
her absence, a Vice President, or in the absence of the President and all the
Vice Presidents, a chairman chosen by the stockholders, shall act as chairman;
and the Secretary, or in his or her absence, a person appointed by the
chairman, shall act as Secretary.

SECTION 7. Adjournment. Any meeting of the stockholders may be adjourned
from time to time, without notice other than by announcement at the meeting at
which such adjournment is taken, and at any such adjourned meeting any action
may be taken that could have been taken at the meeting originally called;
provided that, the meeting may not be adjourned to a date more than 120 days
after the original record date for the meeting, and if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned meeting.

<PAGE> 3

- 3 -

ARTICLE II
BOARD OF DIRECTORS

SECTION 1. Election and Powers. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the Directors then in office; provided, however, that the number of
directors shall in no event be less than three nor more than fifteen. The
business, affairs and property of the Corporation shall be managed under the
direction of the Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Charter or by these By-laws required to be exercised or done by the
stockholders. The members of the Board of Directors shall be elected by the
stockholders at their annual meeting and each Director shall hold office until
the annual meeting next after his or her election and until his or her
successor shall be duly chosen and qualified, until he or she shall have
resigned, or until he or she shall have been removed as provided in Section 11
hereof.

SECTION 2. First Regular Meeting. After each meeting of the stockholders
at which a Board of Directors shall have been elected, the Board of Directors
so elected shall meet as soon as practicable for the purpose of organization
and the transaction of other business, at such time and place as may be
designated by the President. No notice of such first meeting shall be
necessary if held immediately following the annual meeting of shareholders and
in the same place.

SECTION 3. Additional Regular Meetings. In addition to the first regular
meeting, regular meetings of the Board of Directors shall be held on such dates
as may be fixed, from time to time, by the Board of Directors.

<PAGE> 4

- 4 -

SECTION 4. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the President or by a majority of the
directors either in writing or by vote at a meeting.

SECTION 5. Place of Meetings. The Board of Directors may hold its
regular and special meetings at such place or places within or without the
State of Maryland as it may from time to time determine.

SECTION 6. Notice of Meetings. Notice of the place, day and hour of
every regular and special meeting shall, at least one day before the meeting, be
either: (i) delivered personally to each director; (ii) mailed, telegraphed, or
cabled to each director at his or her address listed in the books of the
Corporation; (iii) sent by facsimile transmission to each director at his or
her facsimile number listed in the books of the Corporation; or (iv)
communicated personally to each director over the telephone. It shall not be
requisite to the validity of any meeting of the Board of Directors that notice
thereof shall have been given to any director who is present thereat, or, if
absent, waives notice thereof in writing filed with the records of the meeting
either before or after the holding thereof. No notice of any adjourned meeting
of the Board of Directors need be given.

SECTION 7. Quorum. One-third of the members of the Board of Directors
then in office, but in no case less than two (2) directors, shall be necessary
to constitute a quorum for the transaction of business at every meeting of the
Board of Directors and the action of a majority of the directors present at a
meeting at which a quorum is present shall be the action of the Board; but if
at any meeting there be less than a quorum present, a majority of those present
may adjourn the meeting from time to time, but not for a period over thirty
(30) days at any one time, without notice other than by announcement at the
meeting until a quorum shall attend. At any such adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified.

SECTION 8. Chairman. The Board of Directors may at any time appoint one
of its members as Chairman of the Board, who shall serve at the pleasure of the
Board and who shall perform and execute such duties and powers as the Board
shall from time to time prescribe, but who shall not by reason of performing
and executing these duties and powers, be deemed an officer or employee of the
Corporation.

SECTION 9. Organization. At every meeting of the Board of Directors, the
Chairman of the Board, if one has been selected and is present, and, if not,
the President, or in the absence of the Chairman of the Board and the
President, a chairman chosen by a majority of the directors present shall
preside; and the Secretary, or in his or her absence, a person appointed by the
chairman, shall act as secretary.

<PAGE> 5

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SECTION 10. Vacancies. If any vacancies occur in the Board of
Directors by reason of resignation, removal or otherwise (except by reason of
increase in the number of directors), the Directors then in office shall
continue to act, and such vacancies may be filled by a majority of the
Directors then in office, whether or not the Directors constitute a quorum
under Section 7 of this Article; and if the authorized number of Directors is
increased, such vacancies may be filled by a majority of the entire Board of
Directors; provided that, immediately after filling such vacancy, at least
two-thirds of the Directors then holding office shall have been elected to such
office by the stockholders of the Corporation. In the event that at any time,
other than the time preceding the first meeting of stockholders, less than a
majority of the Directors of the Corporation holding office at that time were
elected by the stockholders, a meeting of the stockholders shall be held
promptly, and in any event within sixty (60) days, for the purpose of electing
Directors to fill any existing vacancies on the Board of Directors unless the
Securities and Exchange Commission shall by order extend such period. But in
no event shall such period be extended for more than an additional 60 days.
Subject to Section 11 of this Article, any Director chosen to fill a vacancy
shall hold office until the next annual meeting of stockholders and until his
or her successor shall have been duly elected and qualified.

SECTION 11. Removal. Any director may be removed from office, with or
without cause, by the stockholders by written declaration or the affirmative
vote of a majority of all the votes entitled to be cast for the election of
directors, and another may be elected in place of the person so removed, to
serve the remainder of his or her term. The Secretary shall promptly call a
meeting of stockholders for the purpose of voting on the question of removal of
a director when requested in writing to do so by stockholders entitled to cast
not less than ten percent (10%) of the votes.

SECTION 12. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board, designate one or more committees of
the Board of Directors, each consisting of two or more directors. To the
extent provided in such resolution, and permitted by law, such committee or
committees shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member.

SECTION 13. Telephone Conference. Members of the Board of Directors or
any committee thereof may participate in a meeting of the Board or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons

<PAGE> 6

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participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at the meeting.

SECTION 14. Compensation of Directors. Each director shall be entitled
to receive such compensation, if any, as may from time to time be fixed by the
Board of Directors, including a fee, if any is so fixed, for each meeting of
the Board or any committee thereof, regular or special, attended by him or her.
Directors may also be reimbursed by the Corporation for all reasonable
expenses incurred in traveling to and from the place of each meeting of the
Board of any such committee. Directors need not abstain from voting on matters
that affect their own compensation.

ARTICLE III
OFFICERS

SECTION 1. Number. The officers of the Corporation shall be a President,
a Secretary and a Treasurer, and may include one or more Vice Presidents, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as the Board of Directors may from time to time determine.

SECTION 2. Election and Term of Office. The officers of the Corporation
shall be elected by the Board of Directors and, subject to earlier termination
of office, each officer shall hold office for one year and until his or her
successor shall have been elected and qualified.

SECTION 3. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President, or the Secretary
of the Corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.

SECTION 4. Removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors, upon a finding that the best interests of the corporation will be
served by such removal.

SECTION 5. President. The President shall be the chief executive officer
of the Corporation and shall have general supervision over the business and
operations of the Corporation, subject, however, to the control of the Board of
Directors. The President, or such person as the President shall designate,
shall sign, execute and acknowledge, in the name of the Corporation, deeds,
mortgages, bonds, contracts and other instruments authorized by the Board of
Directors, except in the case where the signing and execution thereof shall be
delegated by

<PAGE> 7

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the Board to some other officer or agent of the Corporation; and
the President shall perform such other duties as from time to time may be
assigned to the President by the Board.

SECTION 6. The Vice Presidents. In the absence or disability of the
President or when so directed by the President, any Vice President designated
by the Board of Directors may perform all the duties of the President, and,
when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President; provided, however, that no Vice President
shall act as a member of or as chairman of any special committee of which the
President is a member or chairman by designation of ex-officio, except when
designated by the Board. The Vice Presidents shall perform such other duties
as from time to time may be assigned to them respectively by the Board or the
President.

SECTION 7. The Secretary. The Secretary shall record all the votes of
the stockholders and of the directors and the minutes of the meetings of the
stockholders and of the Board of Directors in a book or books to be kept for
that purpose; the Secretary shall see that notices of meetings of the
stockholders and the Board are given and that all records and reports are
properly kept and filed by the Corporation as required by law; the Secretary
shall be the custodian of the seal of the Corporation; and, in general, the
Secretary shall perform all duties incident to the office of Secretary, and
such other duties as may from time to time be assigned to the Secretary by the
Board or the President.

SECTION 8. Assistant Secretaries. In the absence or disability of the
Secretary or when so directed by the Secretary, any Assistant Secretary may
perform all the duties of the Secretary, and, when so acting, shall have all
the powers of, and be subject to all restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them respectively by the Board of Directors, the President, or
the Secretary.

SECTION 9. The Treasurer. Subject to the provisions of any contract
which may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
its funds and securities; the Treasurer shall have full authority to receive
and give receipts for all money due and payable to the Corporation, and to
endorse checks, drafts and warrants, in its name and on its behalf and to give
full discharge for the same; the Treasurer shall deposit all funds of the
Corporation, except such as may be required for current use, in such banks or
other places of deposit as the Board of Directors may from time to time
designate; and, in general, the Treasurer shall perform all duties incident to
the office of Treasurer and such other duties as may from time to time be
assigned to the Treasurer by the Board or the President.

SECTION 10. Assistant Treasurers. In the absence or disability of the
Treasurer or when so directed by the Treasurer, any Assistant Treasurer may
perform all the

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duties of the Treasurer, and, when so acting, shall have all the powers of and
be subject to all the restrictions upon, the Treasurer. The Assistant
Treasurers shall perform all such other duties as from time to time may be
assigned to them respectively by the Board of Directors, the President or the
Treasurer.

SECTION 11. Compensation of Officers and Others. The Compensation of
all officers shall be fixed from time to time by the Board of Directors, or any
committee or officer authorized by the Board so to do. No officer shall be
precluded from receiving such compensation by reason of the fact that he or she
is also a director of the Corporation.

ARTICLE IV
STOCK

SECTION 1. Certificates. Each stockholder shall be entitled upon written
request to a stock certificate or certificates, certifying the number and kind
of whole shares owned by him or her, signed by the President or a Vice
President and the Treasurer or an Assistant Treasurer, which signatures may be
either manual or facsimile signatures, and sealed with the seal of the
Corporation, which seal may be either facsimile or any other form of seal.
Stock certificates shall be in such form, not inconsistent with law or with the
Charter as shall be approved by the Board of Directors.

SECTION 2. Transfer of Shares. Transfers of shares shall be made on the
books of the Corporation at the direction of the person named as the holder
thereof on the Corporation's books or named in the certificate for shares (if
issued), or by such person's duly authorized attorney, and upon surrender of
the certificate for such shares (if issued) properly endorsed, together with a
proper request for redemption, to the Corporation or its redemption agent, with
such evidence of the authenticity of such transfer, authorization and other
matters as the Corporation or its agents may reasonably require, and subject to
such other reasonable conditions and requirements as may be required by the
Corporation or its agents, or, if the Board of Directors shall by resolution so
provide, transfer of shares may be made in any other manner provided by law.

SECTION 3. Transfer Agents and Registrars. The Corporation may have one
or more transfer agents and one or more registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a transfer agent, if
the Corporation shall have a transfer agent, or until registered by the
registrar, if the Corporation shall have a registrar. The duties of transfer
agent and registrar may be combined.

SECTION 4. Mutilated, Lost or Destroyed Certificates. The Board of
Directors, by standing resolution or by resolutions with respect to particular
cases, may authorize the issue of new stock certificates in lieu of stock
certificates lost, destroyed or

<PAGE> 9

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mutilated, upon such terms and conditions as the Board may direct. The Board
may in its discretion refuse to issue such new certificates, unless ordered to
do so by a court of competent jurisdiction.

SECTION 5. Stock Ledgers. The Corporation shall not be required to keep
original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the respective offices
of the transfer agents of the Corporation's capital stock, or at such other
office of the Corporation as the Board of Directors may designate from time to
time.

ARTICLE V
SEAL

The seal of the Corporation shall be in such form as the Board of
Directors shall prescribe.

ARTICLE VI
SUNDRY PROVISIONS

SECTION 1. Amendments.

(a) By Stockholders. These By-laws may be amended or
repealed in the manner provided in Section 5 of Article I hereof at any annual
or special meeting of the stockholders.

(b) By Directors. These By-laws may be amended or repealed
in the manner provided in Section 7 of Article II hereof at any regular meeting
of the Board of Directors, or at any special meeting thereof if notice of such
amendment or repeal be contained in the notice of such special meeting.

SECTION 2. Indemnification of Directors and Officers.

(a) Indemnification. Any person who was or is a party or
is threatened to be made a defendant or respondent in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director or officer of the Corporation, or is or was serving while a
director or officer of the Corporation at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall
be indemnified by the Corporation against judgments, penalties, fines,
settlements and reasonable expenses (including attorney's fees)

<PAGE> 10

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actually incurred by such person in connection with such action, suit or
proceeding to the full extent permissible under the General Laws of the State
of Maryland now or hereafter in force, except that such indemnity shall not
protect any such person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.

(b) Advances. Any person claiming indemnification within
the scope of this Section 2 shall be entitled to advances from the Corporation
for payment of the expenses of defending actions against such person in the
manner and to the full extent permissible under the General Laws of the State
of Maryland now or hereafter in force.

(c) Procedure. On the request of any person requesting
indemnification or an advance under this Section 2, the Board of Directors
shall determine whether the standards required by this Section 2 have been met,
or such determination shall be made by independent legal counsel if the Board so
directs or if the Board is not empowered by statute to make such determination.

SECTION 3. Independent Accountant. In accordance with the Investment
Company Act of 1940, the Corporation shall employ an independent public
accountant or firm of independent public accountants as its accountant to
examine the accounts of the Corporation and to sign and certify financial
statements of the Corporation.

SECTION 4. Conflict. When a provision in these By-laws is in conflict
with any valid federal law, rule, regulation, or order, technical compliance
with the provision shall yield to the dictates of such law, rule, regulation,
or order.

<PAGE> 1
DISTRIBUTION AGREEMENT

Agreement, made this 14th day of November, 1996 between American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), and Copeland Equities,
Inc., a New Jersey corporation (the "Distributor").

WHEREAS, the Series Fund is a diversified, open-end mangement investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act") and currently offers its shares to certain separate accounts to
fund variable life insurance contracts and variable annuity contracts; certain
qualified plans, and life insurance companies and their affiliates; and

WHEREAS, the Series Fund is currently divided into six separate series
(each a "Fund"), each of which is established pursuant to a resolution of the
Board of Directors of the Series Fund, and the Series Fund may in the future
add additional Funds; and

WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and

WHEREAS, the Series Fund desires that the Distributor continue to act as
the Series Fund's principal underwriter, and the Distributor is willing to
accept such appointment;

NOW, THEREFORE, the parties agree as follows:

1. APPOINTMENT OF THE DISTRIBUTOR
The Series Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Series Fund, and the Distributor hereby
accepts such appointment.

2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of the Series
Fund to act as principal underwriter and distributor.

3. PURCHASE OF SHARES FROM THE SERIES FUND
(a) The Series Fund will offer, and the Distributor shall have the
right to buy, the Series Fund shares needed to fill unconditional orders for
shares of the Series Fund placed with the Distributor by the authorized
purchasers. The price which the Distributor shall pay for shares of each Fund
so purchased shall be the net asset value per share of such Fund, as determined
in accordance with the method set forth in the prospectus and Statement of
Additional Information (collectively, the "Prospectus") of the Series Fund.

1
<PAGE> 2

(b) The shares of each Fund are to be resold by the Distributor to
the Accounts at the net asset value per share of such Fund.

(c) The Series Fund agrees to make its shares available
indefinitely for purchase by the Distributor on those days on which the Series
Fund calculates its net asset value pursuant to rules of the Securities and
Exchange Commission ("SEC"). The Series Fund shall use reasonable efforts to
calculate such net asset value on each day which the New York Stock Exchange
is open for trading. Notwithstanding the foregoing, the Series Fund may
refuse to sell shares of any Fund to any person, or suspend or terminate the
offering of shares of any Fund if such action is required by law of by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board of Directors of the Series Fund acting in good faith and in light of
their fiduciary duties under federal any any applicable state laws, necessary
in the best interests of the shareholders of such Fund.

4. REDEMPTION OF SHARES BY THE FUND
(a) Any of the outstanding shares of each Fund may be tendered for
redemption at any time, and the Series Fund agrees to redeem any such shares so
tendered in accordance with the applicable provisions of the Series Fund's
Prospectus and Articles of Incorporation. The redemption price is the net
asset value per share next determined after the initial receipt of proper
notice of redemption.

(b) The right to redeen shares or to receive payment with respect
to any redemption may be suspended only for any period by the SEC as a result
of which disposal of a Fund's securities or determination of the net asset
value of a Fund is not reasonably practicable, and for such other periods as
the SEC may order permit for the protection of shareholders of the Fund(s).

5. DUTIES OF THE SERIES FUND
(a) The Series Fund shall furnish to the Distributor copies of all
information, financial statements, and other papers which the Distributor may
reasonably request for use in connection with the distribution of the shares of
the Series Fund.

(b) The Series Fund shall take, from time to time, subject to the
necessary approval of its shareholders, all necessary action to fix the number
of its authorized shares and to register shares under the Securities Act of
1933, in order that there will be available for sale such number of shares as
investors may reasonably be expected to purchase.

(c) The Series Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of shares of each of its
Funds for sale under the securities laws of such states as the Distributor and
the Series Fund may approve, if such qualification is required by such
securities laws. Any such qualification may be withheld, terminated, or
withdrawn by the Series Fund at any time in its discretion.

<PAGE> 3

6. DUTIES OF THE DISTRIBUTOR
In selling the shares of the Series Fund, the Distributor shall use
its best efforts to conform with the requirements of all federal and state laws
and regulations, and the regulations of the NASD, relating to the sale of such
securities. The Distributor is not authorized by the Series Fund to give any
information or make any representations, other than those contained in the
registration statement for the Series Fund and its shares, the Prospectus, and
any sales literature specifically approved by the Series Fund. Nothing
contained in this Agreement shall prevent the Distributor from entering into
distribution arrangements with other investment companies.

7. DURATION AND TERMINATION OF THE AGREEMENT
This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually by the Board of Directors of the Series Fund or by a
vote of a majority of the outstanding voting securities of the Series Fund in
conformity with the requirements of the 1940 Act; provided, however, that this
Agreement may be terminated by the Series Fund without the payment of any
penalty, by the Board of Directors of the Series Fund or by vote of a majority
of the Series Fund's outstanding voting securities, or by the Distributor at
any time, with the payment of a penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the 1940
Act).

8. MISCELLANEOUS PROVISIONS
(a) This Agreement may be amended by mutual consent, but the
consent of the Series Fund must be obtained in conformity with the requirements
of the 1940 Act.

(b) Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by certified
or registered mail, return receipt requested and postage prepaid, (1) to
Copeland Equities, Inc. at Two Tower Center, East Brunswick, NJ 08816,
Attention: Secretary; or (2) to American Odyssey Funds, Inc. at Two Tower
Center, East Brunswick, NJ 08816, Attention: President.

(d) This Agreement may be executed in two or more counterparts,
which taken together shall constitute one and the same instrument.

(e) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.

3
<PAGE> 4

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

AMERICAN ODYSSEY FUNDS, INC.

By:
- ------------------------------- ------------------------------
Witness Paul S. Feinberg
Senior Vice President

COPELAND EQUITIES, INC.

By:
- ------------------------------- ------------------------------
Witness Paul S. Feinberg
Senior Vice President