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SEMI-ANNUAL REPORT
AND NOTICE OF
SUBADVISER CHANGE
June 30, 1998
AMERICAN ODYSSEY
- ----------------
Global High-Yield Bond Fund
International Equity Fund
Emerging Opportunities Fund
Core Equity Fund
Long-Term Bond Fund
Intermediate-Term Bond
[LOGO APPEARS HERE]
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Dear American Odyssey Fund Participants:
It is with great pleasure that I present you with the 1998 semi-annual report
for the American Odyssey Funds. The past six months have brought many
interesting developments in our funds and in the asset classes they represent.
In particular, two changes within the American Odyssey Funds stand out.
First, Chartwell Investment Partners was selected to replace Wilke Thompson
Capital Management as co-subadviser for the Emerging Opportunities Fund, our
small capitalization offering. This change was made as a result of a detailed
examination of the performance of Chartwell Investment Partners and Wilke
Thompson compared to other money managers that follow the same investment
strategy.
The second change that occurred was the conversion of the Short-Term Bond Fund
into the Global High-Yield Bond Fund. This change was implemented in order to
strengthen our fund offerings by broadening the asset classes that the American
Odyssey Funds represent. With the change in this Fund's name and investment
objective comes a change in the investment management team. The new subadviser
is BEA Associates, whose outstanding track record in domestic and global debt
management make them an ideal candidate to manage the Fund going forward.
In addition to these important changes, it should be noted that the American
Odyssey International Fund, Core Equity Fund, Long-Term Bond Fund and
Intermediate-Term Bond Fund all posted excellent performances for the first half
of the year. Complete performance information and each subadviser's assessment
of the year-to-date is contained in the report that follows.
We have also included on pages 2-10 a notice explaining a recent change in
ownership involving Cowen & Co., one of the two subadvisers for the Emerging
Opportunities Fund. Cowen & Co. was recently acquired by Societe Generale and is
now known as SG Cowen Securities Corporation. The notice contains details about
this change.
As always, we appreciate your continued participation in the American Odyssey
Funds. We look forward to serving your investment needs now and in the future.
Very truly yours,
(insert signature here)
ROBERT C. DUGHI
Chairman of the Board and President
American Odyssey Funds Management, Inc.
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Notice of New Subadviser
for the Emerging Opportunities Fund
American Odyssey Funds, Inc. ("AOF") wants you to know about a change in
ownership involving Cowen & Co., one of the two subadvisers to the American
Odyssey Emerging Opportunities Fund.
Cowen & Co. was recently acquired by Societe Generale and is now known as
SG Cowen Securities Corporation ("SG Cowen"). Because of this change in
ownership, the federal securities laws require that the Emerging Opportunities
Fund's investment subadvisory agreement with Cowen & Co. end and that AOF enter
into a new subadvisory agreement with SG Cowen. Accordingly, the Board of
Directors of AOF (the "Board") has approved a new subadvisory agreement with SG
Cowen.
The new subadvisory agreement will not result in any significant changes
for the Emerging Opportunities Fund. In particular:
. American Odyssey Funds Management, Inc. (the "Manager") will continue to
allocate the Fund's assets between the SG Cowen and Chartwell Investment
Partners, the Fund's two subadvisers.
. The personnel and the nature of the services SG Cowen provides will not
change. SG Cowen, through its investment management division, now known as
SG Cowen Asset Management, will continue to provide the same investment
advisory services to the Emerging Opportunities Fund as before.
. The new subadvisory agreement with SG Cowen is exactly the same as the old
agreement with Cowen & Co. except for the name of the subadviser and the
date. Advisory and subadvisory fees will not change.
. SG Cowen will pay for the costs of entering into the new subadvisory
agreement, including the cost of providing you with this notice. The Fund
will not pay for any of these costs.
We are not asking you for voting instructions, and you are requested not to
send us voting instructions. In accordance with an order issued by the
Securities and Exchange Commission (the "SEC"), shareholders do not need to
approve the new subadvisory agreement, and we therefore have not scheduled a
special shareholders meeting. Instead, we are sending you this notice which
gives the same information you would have received if we had asked you to vote
on the agreement. We began distribution of this notice on approximately August
14, 1998.
As you can see, we have included this notice with our semi-annual report
dated June 30, 1998. Upon request, we will send you a free copy of our most
recent annual report, which was dated December 31, 1997. If you would like a
copy, please write to American Odyssey Funds Management, Inc., Two Tower Center,
East Brunswick, New Jersey 08816, or call 1-800-242-7884.
The following pages contain additional information about SG Cowen and the
new subadvisory agreement. If you have any questions, please call us at
1-800-242-7884.
Why the Old Subadvisory Agreement Ended
On July 1, 1998, a wholly-owned subsidiary of Societe Generale called
Societe Generale Securities Corporation acquired the business of Cowen & Co. and
became SG Cowen. Societe Generale is a leading
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international commercial and investment bank established in 1864. Societe
Generale is headquartered in France and has a global network of offices in over
eighty countries.
The federal securities laws require that when a mutual fund's investment
adviser or subadviser has a change in ownership, the fund's agreement with that
adviser or subadviser must end. If the mutual fund wants the adviser or
subadviser to continue to provide investment advisory services, the fund and the
adviser or subadviser must enter into a new agreement. Because of this rule, the
Emerging Opportunities Fund's subadvisory agreement with Cowen & Co. ended on
July 1.
Why the Board Approved the New Subadvisory Agreement
Cowen & Co. has served as a subadviser to the Emerging Opportunities
Fund since May 1, 1997. We wanted Cowen & Co. to continue to serve in this role,
regardless whether Societe Generale acquired it. For that reason, on May 28,
1998, the Board both re-approved the existing agreement with Cowen & Co. and
approved a new subadvisory agreement with SG Cowen to be executed when Societe
Generale completed the acquisition. (On July 1, 1998, Societe Generale did
complete the acquisition. On that day, Cowen & Co. became SG Cowen, the old
subadvisory agreement with Cowen & Co. ended, and the new agreement with SG
Cowen became effective.) Approving the new agreement was an easy decision for
the Board, because the new agreement simply maintains the status quo. We
summarize four key points below.
First, the new subadvisory agreement with SG Cowen is virtually identical
to the old subadvisory agreement with Cowen & Co. The old agreement with Cowen &
Co. became effective on May 1, 1998. (Between May 1, 1997 and April 30, 1998, a
very similar agreement was in effect.) Shareholders had approved the old
agreement on April 23, 1997. The new agreement with SG Cowen has two differences
from the old agreement: the new agreement says "SG Cowen Securities Corporation"
instead of "Cowen & Co.," and it is dated July 1 instead of May 1, 1998.
Otherwise, the terms of the two agreements are the same, including the
subadvisory fee the Emerging Opportunities Fund pays to the subadviser.
While re-approving the old agreement, the Board compared the subadvisory fee to
the fees other investment advisers receive. The Board concluded that the fee
remains reasonable and within the range of fees charged for similar services.
Second, SG Cowen will provide the Emerging Opportunities Fund with the
same services it provided before as Cowen & Co. The Board considered information
about Societe Generale's acquisition of Cowen & Co. Personnel at SG Cowen
providing investment advisory services to the Fund remain the same as before the
acquisition. In particular, William Church has had responsibility for the
day-to-day management of the portion of the Emerging Opportunities Fund managed
by Cowen & Co. since it became a subadviser to the Fund. Mr. Church continues in
that role for SG Cowen.
Third, the Fund does not have to pay for the costs of entering into the
new subadvisory agreement. SG Cowen is paying for these costs, including the
cost of sending you this notice.
Fourth, entering into the new agreement with SG Cowen permits the Manager
to continue its strategy of allocating the Emerging Opportunities Fund's assets
between the Fund's two subadvisers. SG Cowen follows primarily a "value"
approach to investing, while Chartwell Investment Partners, the Fund's other
subadviser, takes a more "growth"-oriented approach. The Board believes that the
added diversification provided by dividing the Fund's assets between subadvisers
using contrasting investment styles benefits the Fund and you as an investor in
it.
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Why Shareholders Do Not Have to Approve the New Agreement
AOF operates under a Manager/Subadviser structure for investment advisory
services. The Manager manages the investment operations of AOF, including the
Emerging Opportunities Fund. As part of its responsibilities, the Manager
monitors and oversees the performance of the subadvisers, who make the
day-to-day investment decisions for the Funds. The Manager also recommends
changes in subadvisers if warranted.
In part because it operates under the Manager/Subadviser structure, AOF has
received permission from the SEC for the Board to add or change subadvisers and
enter into new subadvisory agreements without shareholder approval. The Board
will only make these types of changes if it concludes that doing so is in the
Fund's best interest. The Board has concluded here that entering into the new
subadvisory agreement with SG Cowen on the same terms as the old agreement with
Cowen & Co. is in the Fund's best interest.
Information About the New Subadvisory Agreement
As we have explained, the new subadvisory agreement with SG Cowen is the
same as the old agreement with Cowen & Co., except for SG Cowen's name and the
date. We summarize here the key terms of the agreement. We have also included
the complete text of the new agreement as an appendix to this notice.
The agreement provides:
. That, subject to the supervision of the Manager and the Board, SG Cowen
will manage the investment operations of the assets of the Emerging
Opportunities Fund that the Manager allocates to it.
. That SG Cowen will comply with the Fund's investment objectives, policies,
and applicable law.
. That SG Cowen will keep certain of the Fund's books and records and will
furnish information to the Manager, the Board, and the Fund's custodian.
. That, as required by the federal securities laws, the agreement can
continue indefinitely if the Board of Directors re-approves the agreement
annually after the agreement's second year.
. That AOF, the Manager, and SG Cowen each has the right to terminate the
agreement upon at least thirty days' notice.
. That if SG Cowen breaches its fiduciary duty, intentionally engages in
wrongdoing, or is grossly negligent or acts in reckless disregard of its
duties to the Fund, it will be liable for any resulting loss to the
Emerging Opportunities Fund. SG Cowen otherwise has no liability to the
Fund.
. And finally, that the Emerging Opportunities Fund will pay SG Cowen a
subadvisory fee at an annual rate equal to:
. 0.50% of the first $50 million of the Fund's assets allocated to SG
Cowen, plus
. 0.45% of the next $50 million of the Fund's assets allocated to SG
Cowen, plus
. 0.40% of the Fund's assets over $100 million allocated to SG Cowen.
This is the same subadvisory fee that Cowen & Co. received under the old
agreement. (For the Emerging Opportunities Fund's assets allocated to
Chartwell Investment Partners, the Fund's other subadviser, the Fund pays
Chartwell a separate subadvisory fee at a slightly higher rate. The Fund
also pays a fee to the Manager equal to an annual rate of 0.25% of the
Fund's assets.)
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Additional Information about SG Cowen
The following chart provides information about the directors and
officers of SG Cowen.
[CAPTION]
<TABLE>
<S> <C> <C>
Name Position with SG Cowen Principal Occupation
- ---- ---------------------- ---------------------
Joseph M. Cohen Director and Chairman of the Board Chairman of the Board of SG Cowen
Curtis Welling Chief Executive Officer and Chief Executive Officer and
President President of SG Cowen
James Kelly Chief Operating Officer Chief Operating Officer of SG
Cowen
Ray Moran Senior Managing Director Senior Managing Director of SG Cowen
James M. Walsh Director Head of the Private Client and
Industry Services Group of SG Cowen
Jacques Bouhet Director Deputy Chief Executive Officer,
International & Finance Division
and Member of the Management
Committee of Societe Generale
Jean-Bernard Guillebert Director Counselor to the President of
Societe Generale
Jean Huet Director Chief Executive Officer of Societe
Generale Americas and Member of the
Management Committee of Societe
Generale
Alain Joyet Director President of Societe Generale
(Canada) Montreal
Gerald Lacaze Director Deputy Director of Societe Generale
Robert Le Roux Director Director of Societe Generale
Jean-Paul Oudot Director Director of Societe Generale and
Member of the Management Committee
of Societe Generale
Yves Tuloup Director Chief Executive Officer,
International & Finance Division of
Societe Generale and Member of the
Management Committee of Societe
Generale
</TABLE>
The address for Messrs. Cohen and Moran is Financial Square, New York,
New York 10005. The address for Messrs. Welling, Kelly, Walsh, and Huet is 1221
Avenue of the Americas, New York, New York 10020. The
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address for the other individuals listed in the chart (and for Societe Generale
as well) is Tour Societe Generale, 17 Cours Valmy, 92972 Paris B La Defense,
France.
SG Cowen serves as investment adviser to one other mutual fund that
invests primarily in small-capitalization stocks. That mutual fund is the SG
Cowen Opportunity Fund, which is a series of SG Cowen Funds, Inc. As of June 30,
1998, the SG Cowen Opportunity Fund had approximately $86 million in assets. The
Cowen Opportunity Fund pays SG Cowen an advisory fee at an annual rate of 0.90%
of net assets.
SG Cowen (and its predecessor) buys and sells securities for the
Emerging Opportunities Fund primarily through brokers that provide "soft dollar"
credits, which SG Cowen can use to obtain research services. SG Cowen may use
these brokers if SG Cowen determines that commissions paid to the brokers are
reasonable compared to the services the brokers provide. The Board monitors SG
Cowen's commission practices, including its use of soft dollars.
Other Information
American Odyssey Funds Management, Inc., the Manager, is located at Two
Tower Center, East Brunswick, New Jersey 08816. The Manager serves as the
overall investment adviser to each of the American Odyssey Funds, including the
Emerging Opportunities Fund. RogersCasey Sponsor Services ("RogersCasey"), 1
Parklands Drive, Darien, Connecticut 06820, assists the Manager in monitoring
the performance of the subadvisers and comparing that performance to that of
other investment managers. The Manager pays RogersCasey's fees. RogersCasey does
not receive a fee from the Emerging Opportunities Fund.
The Manager provides accounting services to and keeps the accounts and
records of the Emerging Opportunities Fund (other than those maintained by
Investors Bank and Trust Company). The Manager also serves as transfer agent and
dividend disbursing agent. Investors Bank and Trust Company, 200 Clarendon
Street, Boston, Massachusetts 02116, serves as the custodian of the assets and
is also the accounting services agent for the Fund. The Emerging Opportunities
Fund pays the fees for those services. Investors Bank and Trust Company also
assists the Manager in providing certain administrative services for the Fund.
The Manager, not the Fund, pays the fees for these administrative services. As
of August 1, 1998, Copeland Equities, Inc., an affiliate of the Manager, also
located at Two Tower Center, East Brunswick, New Jersey 08816, serves as the
principal underwriter of the Emerging Opportunities Fund. It is expected that in
the near future, CFBDS, Inc., 21 Milk Street, Boston, Massachusetts 02109, an
indirect wholly-owned subsidiary of Signature Financial Group, Inc., will assume
the role of principal underwriter of the Fund. PricewaterhouseCoopers L.L.P.,
One Post Office Square, Boston, Massachusetts 02109, serves as AOF's independent
accountants and provides audit services.
Like SG Cowen, Chartwell Investment Partners serves as a subadviser to
the Emerging Opportunities Fund. Chartwell is located at 1235 Westlakes Drive,
Suite 330, Berwyn, Pennsylvania 19312.
In 1997, the Emerging Opportunities Fund paid a total of $1,405,303 in
advisory fees. Of this amount, Cowen & Co. received $290,218.
In 1997, the Emerging Opportunities Fund did not pay any commissions to
any brokers affiliated with the Emerging Opportunities Fund, its subadvisers, or
the Manager.
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APPENDIX
The full text of the new subadvisory agreement with SG Cowen Securities
Corporation appears below.
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 1st day of July, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and SG Cowen
Securities Corporation, a New York corporation (the "Subadviser").
WHEREAS, American Odyssey Funds Management, Inc. has entered into a
management agreement (the "Management Agreement") with the Series Fund, a
diversified open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"), pursuant to which American
Odyssey Funds Management, Inc. will act as Manager of the Series Fund.
WHEREAS, the Series Fund is currently divided into six separate series
or Funds, 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 Manager has the responsibility of evaluating,
recommending, and supervising investment advisers to each Fund and, in
connection therewith, desires to retain the Subadviser to provide investment
advisory services to the American Odyssey Emerging Opportunities Fund (the
"Fund"), the Series Fund has the responsibility of compensating the investment
advisers to each Fund and desires to retain the Subadviser to provide investment
advisory services to the Fund, and the Subadviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Board of
Directors of the Series Fund, the Subadviser shall manage the
investment operations of the assets of the Fund allocated by the
Manager to the Subadviser (such assets referred to as the "Allocated
Assets"), including the purchase, retention and disposition of
portfolio investments, in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Prospectus (such
Prospectus and Statement of Additional Information as currently in
effect and as amended or supplemented from time to time, being herein
called the "Prospectus") and subject to the following understandings:
(i) The Subadviser shall consult periodically with
the Manager and they shall agree upon the current investment
strategy for the Allocated Assets in the light of anticipated
cash flows.
(ii) The Subadviser shall provide supervision of the
Allocated Asset's investments and determine from time to time
what securities, options, futures contracts, and other
investments included in the Allocated Assets will be
purchased, retained, sold, or loaned by the Fund, and what
portion of the Allocated Assets will be invested or held
uninvested as cash.
(iii) In the performance of its duties and
obligations under this Agreement, the Subadviser shall act in
conformity with the Articles of Incorporation, By-Laws, and
Prospectus of
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the Series Fund and with the instructions and
directions of the Manager and of the Board of Directors of the
Series Fund and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of
1986, and all other applicable federal and state laws and
regulations.
(iv) The Subadviser will place orders for the
securities, options, futures contracts, and other investments
to be purchased or sold as part of the Allocated Assets with
or through such persons, brokers, dealers, or futures
commission merchants (including but not limited to persons
affiliated with the Manager) as the Subadviser may select in
order to carry out the policy with respect to brokerage set
forth in the Series Fund's Registration Statement and
Prospectus or as the Board of Directors may direct from time
to time. In providing the Fund with investment advice and
management, the Subadviser will give primary consideration to
securing the most favorable price and efficient execution.
Within the framework of this policy, the Subadviser may
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
futures commission merchants, and the brokerage and research
services they provide to the Subadviser or the Fund. The
parties agree that it is desirable for the Fund that the
Subadviser have access to supplemental investment and market
research and security and economic analysis that certain
brokers or futures commission merchants are able to provide.
The parties further agree that brokers and futures commission
merchants that provide such research and analysis may execute
brokerage transactions at a higher cost to the Fund than would
result if orders to execute such transactions had been placed
with other brokers on the sole basis of ability to obtain the
most favorable price and efficient execution. Therefore,
notwithstanding the second sentence of this paragraph
1(a)(iv), the Subadviser is authorized to place orders for the
purchase and sale of securities, options, futures contracts,
and other investments for the Fund with brokers or futures
commission merchants who provide the Subadviser with such
research and analysis, subject to review by the Manager and
the Series Fund's Board of Directors from time to time with
respect to the extent and continuation of this practice. The
Series Fund and the Manager acknowledge that the services
provided by such brokers or futures commission merchants may
be useful to the Subadviser in connection with the
Subadviser's services to other clients.
When the Subadviser deems the purchase or sale of a
security, option, futures contract, or other investment to be
in the best interest of the Fund as well as other clients of
the Subadviser, the Subadviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities, options, futures
contracts, or other investments to be sold or purchased in
order to obtain the most favorable price or lower brokerage
commissions and efficient execution and to allocate the shares
purchased or sold among the Series Fund and the Subadviser's
other clients on a fair and nondiscriminatory basis, in a
manner consistent with the Subadviser's fiduciary obligations
to the Fund and to such other clients.
(v) The Subadviser shall maintain all books and
records with respect to the portfolio transactions of the
Allocated Assets required by subparagraphs (b)(5), (6), (7),
(9), (10) and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act and by Rule 17e-1(c)(2) under the 1940 Act and shall
render to the Series Fund such periodic and special reports as
its Board of Directors or the Manager may reasonably request.
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(vi) The Subadviser shall provide the Series Fund's
custodian on each business day with information relating to
all transactions concerning the Allocated Assets and shall
provide the Manager with such information upon request of the
Manager.
(vii) The investment management services provided by
the Subadviser hereunder are not exclusive, and the Subadviser
shall be free to render similar services to others.
(b) Services to be furnished by the Subadviser under this
Agreement may be furnished through the medium of any directors,
officers, or employees of the Subadviser or its affiliates.
(c) The Subadviser shall keep the books and records with
respect to the Allocated Assets required to be maintained by the
Subadviser pursuant to paragraph 1(a)(v) hereof and shall timely
furnish to the Manager or the Series Fund's custodian all information
relating to the Subadviser's services hereunder needed to keep the
other books and records of the Fund required by Rules 17e-1(c)(2) and
31a-1 under the 1940 Act. The Subadviser agrees that all records which
it maintains for the Fund are the property of the Fund and the
Subadviser will surrender promptly to the Fund any of such records upon
the Fund's request, provided however that the Subadviser may retain a
copy of such records. The Subadviser further agrees to preserve for the
periods prescribed by Rules 17e-1(c)(2) and 31a-2 under the 1940 Act
any such records as are required to be maintained by it pursuant to
paragraph 1(a)(v) hereof.
(d) The Subadviser agrees to maintain procedures adequate to
ensure its compliance with the 1940 Act, the Investment Advisers Act of
1940 (the "Advisers Act"), and other applicable state and federal laws
and regulations.
(e) The Subadviser shall furnish to the Manager, upon the
Manager's reasonable request, copies of all records prepared in
connection with (i) the performance of this Agreement and (ii) the
maintenance of compliance procedures pursuant to paragraph 1(d) hereof.
(f) The Subadviser agrees to provide upon reasonable request
of the Manager or the Series Fund, information regarding the
Subadviser, including but not limited to background information about
the Subadviser and its personnel and performance data, for use in
connection with efforts to promote the Series Fund and the sale of its
shares.
2. The Manager shall continue to have responsibility for all services
to be provided to the Fund pursuant to the Management Agreement and shall
oversee and review the Subadviser's performance of its duties under this
Agreement.
3. The Series Fund shall pay the Subadviser, for the services provided
and the expenses assumed pursuant to this Subadvisory Agreement, a fee at an
annual rate of 0.50% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.45% of the average
daily Net Allocated Assets over $50 million and up to and including $100
million, plus a fee at an annual rate of 0.40% of the average daily Net
Allocated Assets over $100 million. The term "Net Allocated Assets" means the
Allocated Assets less related liabilities as determined by the Manager or its
designee. This fee will be computed daily and paid monthly.
4. 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 this Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation
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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 loss, 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 loss, 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.
5. 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 in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the
Series Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at any
time, without the payment of any 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) or
upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any
of the Subadviser's directors, officers, or employees to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit the Subadviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual, or association,
except as described in Paragraph 1(a)(vii) above.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Subadviser in any
way, prior to use thereof and not to use material if the Subadviser reasonably
objects in writing five business days (or such other time as may be mutually
agreed) after receipt thereof. Such materials may be furnished to the Subadviser
hereunder by first class mail, overnight delivery service, facsimile
transmission equipment, or hand delivery.
8. 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.
9. Except as otherwise specifically provided in this Agreement, 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 the American Odyssey
Funds, Inc. at Two Tower Center, East Brunswick, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management, Inc. at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to SG Cowen
Securities Corporation, at Financial Square, New York, New York 10005,
Attention: President.
10. This Agreement shall be governed by the laws of the State of New
Jersey.
11. This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
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AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
The American Odyssey Global High-Yield Bond Fund returned 1.96% for the
six months ended June 30, 1998. The Lehman Government/Corporation 1-5 Year Bond
Index returned 2.01% for the period January 1, 1998 to April 30, 1998 and the
First Boston High-Yield Bond Index returned 0.51% for the period May 1, 1998 to
June 30, 1998. For the period January 1, 1998 to April 30, 1998 the Fund was
named the Short-Term Bond Fund and had a substantially different investment
objective and investment program. During that time the Fund was managed by Smith
Graham & Company Asset Managers, L.P. For the period May 1, 1998 to June 30,
1998 the Fund was managed by BEA Associates.
Going forward, our fundamental domestic high yield strategy will be to
emphasize industry sectors that we believe have a good operating outlook and
deleveraging potential, and could benefit from consolidation trends. We are
cautious on those (e.g., paper and forest products) that could be negatively
impacted by the volatility in Asian and Latin American markets. Currently, we
are most positive on selected gaming companies and the cable industry, each of
which we believe has strong potential for continued merger activity; and many
parts of the telecommunications industry, from which we expect good revenue
growth and further consolidation.
Our emerging markets investment discipline combines "top-down" asset
allocation with "bottom-up" security selection and is based on risk-adjusted
analysis of relative yield. Broad diversification across regions and security
sectors is utilized to reduce portfolio risk and enhance potential returns.
Investment decisions are not strictly based on benchmark wieghtings, meaning
that the Fund's emerging markets portion may show considerable deviation from
the configuration of the benchmark.
We remain cautious on emerging markets, as we expect global factors to
continue to drive spread product in general. Our current emphasis is on
higher-quality and improving credits in Central Europe and Latin America
(particularly Poland, Argentina and Mexico) and, selectively, local-currency
instruments.
With regard to asset allocation, our six- to nine-month outlook should
lead us to overweight the portfolio in emerging markets relative to the
benchmark, due to our undiminished belief that emerging markets have greater
appreciation potential than high yield. In the near term, however, the emerging
market sector also appears to have greater downside risk.
.
BEA Associates
Investment Subadviser to the American Odyssey Global High-Yield Bond Fund
11
<PAGE>
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
The American Odyssey International Equity Fund returned 15.59% for the
six months ended June 30, 1998. The MSCI EAFE Index returned 16.08% for the same
period.
Stocks in the Growth in Telecommunications theme have been the largest
contributors to the portfolio's positive performance for the year to date.
German-quoted Mannesmann led the charge of the telecom-related stocks on the
back of ever-increasing earnings as a result of a massive expansion of its
customer base. Vodafone in the UK is also benefiting from the increasing
cellular penetration around the world. There was also good news from stocks in
Leading Consumer Franchises theme. Nestle, the world's largest foodmaker,
announced that its sales during the first four months of 1998 rose by 6.2%. In
addition to sales growth, analysts are predicting that the company will reap
substantial cost savings from some of its recent acquisitions, which will drive
profit growth over the coming years. Cadbury Schweppes continued its good 1998
performance. Rising sales of its Dr. Pepper and 7-Up beverages are helping to
offset a slowdown in chocolate sales growth. Cadbury Schweppes' recent
acquisition of two bottlers in the US should give the company increased control
over drinks distributions in key markets.
European financial stocks have been the linchpins of the strong equity
market performance for the past two years. This run up in financial stocks has
been driven by the prospect of continued economic recovery buoyed by low
interest rates, as well as investor expectations of further consolidation within
the overbanked European region. This continued into 1998, and among portfolio
holdings Banco de Santander was a stand out. The Spanish bank performed in line
with expectations in 1997, but its decision to acquire another Spanish bank was
greeted very positively by the market.
Most of the portfolio's negative contributions came from stocks either
quoted in or with significant earnings' exposure to Asia. Topping the list of
disappointments were stocks quoted in Expanding Financial Services in Developing
Markets theme. Development Bank of Singapore has had a tough year, during which
it was revealed that Singapore's six largest banks had bad loans and investments
in Indonesia totaling U.S. $3.9 billion at the end of April. Although this
figure is a source of concern, it is almost 30% less that the figure at the end
of 1997 because of provisioning.
The portfolio's hedging program remains in place and has added value
over the year to date. We maintain hedges against the Japanese yen, the German
deutschemark, the Swiss franc and the British pound.
MARKET REVIEW
UK equities also began the year in strong fashion helped by the
domestic bond market, where yields hit their lowest levels in over 30 years. A
feature of the UK market during January was the large-scale rotation by British
fund managers out of industrial and cyclical stocks, which had underperformed
during 1997, into financials and pharmaceuticals. The UK equity market continued
to power ahead for the remainder of the quarter. The UK equity market lost
ground in May, although the mid-cap sector continued its outperformance of the
large-cap stocks. The Bank of England gave the market a jolt at the beginning of
June with a surprise 25 basis points increase in interest rates.
12
<PAGE>
Peripheral European markets were the biggest gainers early in the year
with countries such as Italy and Spain performing especially well. Continental
European markets continued their stellar performance during February. Low bond
yields, the receding Asian crisis, a positive Wall Street backdrop and surging
liquidity all played a part in pushing the markets higher. Satisfactory
corporate earnings announcements and the prospect of further consolidation also
contributed to the strong performance of European equities. Continental European
equities had a mixed start to the second quarter. Interest-rate fears caused a
sharp selloff in the European markets, particularly in Germany.
May was a strong month for continental European equity markets with
Germany and Italy leading the way. The strong share-price performance was
underpinned by a shift in pension portfolios to equities and corporate
restructuring in advance of the upcoming single currency. Economic activity in
Germany remained strong during June, but there were signs that this strength is
abating somewhat. In January, on the back of even more evidence of economic
weakness, the Japanese government proposed a number of measures aimed at
restoring confidence and boosting economic activity. This and other moves by the
government helped some underperforming sectors of the Japanese market such as
the banks and steel companies, but hurt the export-oriented stocks, which had
showed stronger performance in 1997. By the end of February, however, sentiment
about the Japanese market turned negative again, following yet another
uninspiring Japanese government package. The Japanese market fell back during
March and this decline was exacerbated for US investors by the fact that the yen
continued to weaken against the dollar throughout the month.
In April the Japanese government announced a new fiscal package which
was greeted with a large degree of skepticism by the financial markets. Japan
was relatively flat in local terms during May, but the weakness of the yen
against the US dollar, translated into negative returns for American investors.
Japan's unemployment rate hit a record high of 4.1% in May, while overtime hours
had their biggest drop since 1993. Overall, total employment fell by 0.5%, the
biggest such drop since 1975. The US is worried that further yen weakness could
trigger a wave of competitive devaluations across Asia.
OUTLOOK
European economies remain on the recovery track and industrial
production is growing strongly in Spain, France and the Netherlands. The
recovery in the German domestic economy continues, and consumer and business
confidence is buoyant. On the negative side, however, inflation data in the
Netherlands during the quarter was somewhat disappointing, and order books have
also dipped across the European Union. Notwithstanding this, Europe continues to
be the beneficiary of global cash flows. International fund managers have cut
back their allocations to Asia, and as a result Europe is acting as a magnet for
this surplus liquidity.
Asia remains mired in turmoil, but investors will be closely watching
Japan to see what changes, if any, are implemented in the aftermath of elections
there in mid-July. We continue to see signs of reform on the margins in Japan.
For example, some 954 Japanese companies have announced share buybacks, a
concept that was alien to corporate Japan just a few years ago. The current raft
of mergers & acquisitions, together with the ongoing corporate restructuring
gives us cause for optimism about Japan on a company-by-company basis. However,
we will remain very selective in our approach to the rest of Asia for the medium
term.
Consequently, our outlook for international equity markets remains much
as it was at the start of 1998. We believe that slowing earnings growth is the
biggest threat to further stock market progress around the world. Industrial
13
<PAGE>
cyclicals as a group have been particularly badly hit by the currency and demand
collapse that has occurred in Asia over the last 12 months. Indeed,
approximately 40% of the global economy is now facing a period of decelerating
growth or even recession as a result of these problems.
Despite the bearish outlook for growth in global demand from current
levels, equity markets around the world appear to be discounting a best of all
worlds scenario with ongoing low interest rates and robust earnings growth in
North America and Europe. As a result, there is a danger that markets could
correct or move sideward for a period if reality catches up with these
optimistic expectations. Nevertheless, the positive liquidity picture may act as
a buffer to this. We are currently examining our portfolio with a view to
selling any companies where we perceive a high potential downside risk of
earnings disappointment.
Our focus remains primarily on European-quoted companies, particularly
in the telecom, pharmaceutical and financial sectors. We believe that in the
short-term these companies are best poised to benefit from the improved earnings
data and the convergence of valuations in the forthcoming single currency
environment.
Bank of Ireland Asset Management (U.S.) Limited
Investment Subadviser to the American Odyssey International Equity Fund
14
<PAGE>
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
The American Odyssey Emerging Opportunities Fund returned 3.77% for the
six months ended June 30, 1998. The Russell 2500 Index returned 5.66% for the
same period.
The following commentary has been provided by Chartwell Investment
Partners, co-investment subadviser to the American Odyssey Emerging
Opportunities Fund. Chartwell Investment Partners has been co-investment adviser
for the period May 1, 1998 to June 30, 1998. Previously, Wilke/Thompson Capital
Management acted as co-investment adviser. Chartwell managed 52% of the
portfolio as of June 30, 1998.
The second quarter resulted in the growth index giving back nearly half
of its first quarter gains (11.88%). The negative performance plagued all but
the financial services sector. Commercial services provided both the greatest
positive contribution at approximately 75 basis points and the greatest sector
out-performance. Our overweighting of the sector aided our fund's total
performance. American Disposal Services and Rental Service Corp. were two of the
top five contributors due to strong business trends. Financial services also
provided strong absolute out-performance; however, our underweighting of the
sector limited its contribution to the fund. While energy was the most absolute
negative performer for the index, our underweighting and stock selection
resulted in approximately 42bp of contribution out-performance.
Healthcare was decidedly the most disappointing sector for both our
fund and the benchmark. Issues range from uncertainty regarding the new
prospective payment system for long term care operators and their out-sourcers
to potential over-building and slower facility fill rates for assisted living
facilities.
The following commentary has been provided by Cowen Asset Management,
co-investment subadviser to the American Odyssey Emerging Opportunities Fund.
Cowen Asset Management managed 48% of the portfolio as of June 30, 1998.
The small capitalization market continues to lag the market averages in
1998. The Asian economic crisis is leading domestic and foreign investors to
large U.S. brand name companies with the ground swell of fund flows seeking
maximum liquidity.
While small cap stocks have underperformed large cap stocks for nearly
four years, sixty years of capital market history suggest that this trend will
reverse. Historically, small caps outperform by about 2% per year. However,
rather than smooth and predictable performance, this outperformance comes in
waves. Given the recent period of underperformance and the striking valuation
and growth dynamics in favor of small caps, we believe the next wave of
outperformance is close at hand.
In our continuing search for opportunities, we are finding dozens of
companies with good business values poised for growth. While many of these
stocks have been recognized by the market and risen, the recent
under-appreciation by the market for smaller companies has led many of these
management's to sell their businesses to other companies in order to realize
value for their shareholders. This is occurring in our portfolio this year as
nearly a dozen of our portfolio holdings have been acquired or merged. While an
acquisition at a premium is always good news, these transactions also signify
that our investment discipline is on track. When large companies within the same
15
<PAGE>
industry acquire smaller companies it signals the underlying value is there even
when it is not yet appreciated by the marketplace. In addition, our individual
company analysis often leads us to attractively valued industry sectors.
The Fund continues to be strategically invested in small cap energy.
While this overweighting dampened overall performance in 1998, with oil prices
down, we use our research and analysis to differentiate between tangible
fundamentals versus short-term psychological effects of temporary commodity
price weakness. We are optimistic about specific situations within the energy
industry.
Our pharmaceutical sector has been a bright spot led by one of our
largest holdings, Mylan Labs, a generic drug company, which was up over 40%
during the last six months. In addition, advances in biotech continue to yield
good growth opportunities and this continues to be an exciting area in which to
invest. Recent additions in biotech include KOS Pharmaceuticals, whose lead drug
combats high cholesterol, and Columbia Laboratories, which is developing
innovative hormone therapies.
In technology, business enterprise software and internet companies
posted strong results in the first six months. One such example is Novell, which
is up 70% year-to-date. In general, however, small cap technology companies have
been poor performers over the last two and a half years as shortened product
cycles and competitive pressures from large companies have chilled their
prospects. Nonetheless expectations have reached very low levels which can lead
to sharp share price rebounds as businesses succeed.
While current low valuations, strong growth rates and a "peppering" of
small cap takeovers give us continuing conviction in the energy sector, we have
been adding selectively to the health care and technology areas along with
several special situation opportunities.
While market volatility is always uncomfortable, it does provide
investment opportunities that otherwise might have been out of reach. Our
investment discipline searches for companies poised for growth. We believe the
dynamics that have recently favored large cap growth managers is reaching an
inflection point and the reemergence of small cap outperformance is close at
hand.
Russell 2500 is a registered trademark of Frank Russell Company
16
<PAGE>
AMERICAN ODYSSEY CORE EQUITY FUND
The American Odyssey Core Equity Fund returned 15.66% for the six months
ended June 30, 1998. The S&P 500 Index returned 17.71% for the same period.
Equity markets surged ahead during the first six months of 1998, although
the most substantial gains were realized during the first quarter. The increase
in stock prices occurred in fits and starts as investors reacted to ongoing
concerns over Asia's impact on earnings growth and the risk of rising interest
rates as consumer spending continued to propel our economy forward. Allaying
these concerns, however, were the moderating impact on inflation pressures
resulting from the global downturn in producer prices (driven largely by the
devaluation of Asian currencies and heightened price competition) and better
than expected profitability as corporate America turned in its first quarter
report card. In addition, strong cash flows into our equity markets helped boost
stock prices as investors worldwide looked to our markets as safe havens in
which to invest.
The equity markets were characterized by two prominent trends during the
first half of the year. First, the narrowness of stock outperformance continued
with very large capitalization stocks, such as General Electric, dominating the
S&P 500's returns while smaller capitalization issues lagged. Secondly, there
was a wide divergence between the performance of the growth and value investment
styles. Returns to the Growth Index, which has high exposure to medical stocks
such as Pfizer and consumer stocks such as Coca-Cola, exceeded the Value Index
results by more than eight hundred basis points. The latter index has greater
weight in the more economy sensitive categories of industrial commodities and
capital goods, both which have suffered from the Asian turmoil.
The American Odyssey Core Equity Fund had a strong performance during the
first six months of 1998 and compared favorably against its value style
benchmark, topping it by more than four hundred basis points. Both stock
selection and sector exposures contributed positively to the comparison. In
general, the portfolio's exposure to financial stocks and the consumer spending
dependent categories of retailers, autos, and durables aided outperformance.
Individual stocks with particularly favorable returns included Ford, Morgan
Stanley/Dean Witter, Worldcom, Chase Manhattan, and Schering Plough.
Our outlook is for inflation to remain at modest levels as downward
pressure on prices continues due to heightened competition from Asia. We
anticipate that growth in GDP will slow further over the next couple of quarters
as the trend of lower demand for US exports spreads beyond Asia to our other
global trading partners around the world. Corporate earnings will continue to
grow, albeit at a slower pace, and will rely more heavily on cost reductions,
asset restructurings and share repurchases. Interest rates are likely to decline
across the yield curve as a result of moderating economic growth combined with
low rates of inflation. Overall, the environment should be favorable for stocks,
particularly for sectors which have a high domestic exposure, e.g., retailing,
or are consolidating, e.g., finance and telecommunications. Sectors with greater
vulnerability to a global economic downturn are less likely to realize favorable
results over the next couple of quarters. The Fund is well positioned to take
advantage of these trends as it continues to emphasize the finance and
telecommunications sectors while underweighting industrial goods.
Equinox Capital Management, L.L.P.
Investment Subadviser to the American Odyssey Core Equity Fund
S&P is a registered trademark of Standard & Poor's Corporation
17
<PAGE>
AMERICAN ODYSSEY LONG-TERM BOND FUND
The American Odyssey Long-Term Bond Fund returned 4.30% for the six
months ended June 30, 1998. The Salomon Core +5 Index returned 4.25% for the
same period.
The portfolio's long duration posture throughout the period was the
principal contributor to performance, since interest rates fell throughout the
period. Yield curve exposure also made a significant contribution to
performance, as the portfolio's barbell exposure to maturities benefited from a
pronounced flattening of the yield curve, as long-term rates fell while
short-term rates held fairly steady.
The fund's modest underexposure to mortgages had little impact on
returns, since the mortgage sector recorded weak relative performance which was
offset by the portfolio's emphasis on discount coupons which was rewarded. The
fund's overexposure to the corporate sector also had little impact on returns;
although spreads widened in the wake of the mounting Asian economic crisis, this
was offset by issue selection--particularly an emphasis on the cable and media
sector--which was rewarded with strong relative performance. The principal
negative impact on returns was a moderate exposure to emerging market debt which
suffered from a significant widening of spreads.
For most of this year, fixed-income markets have been dominated by
events overseas. Following a first-quarter remission, the Asian flu broke out
once again, and the emerging markets joined the list of victims. The U.S.
launched a surprise bailout of the Japanese yen in an attempt to limit the
spread of the disease. Global economic tensions rose as the yen fell, commodity
prices fell, Asian economies plummeted to the depths of recession, and emerging
market debt spreads widened to near-default levels. With global turmoil
increasing the chances of a U.S. slowdown, U.S. bond yields fell to historic
lows.
After many years of tight money, the Fed has succeeded in sharply
reducing the rate of inflation, but it has also set in motion two major and
conflicting forces: tight labor markets and the rising wages that accompany them
are clashing with zero pricing power to gradually put the squeeze on corporate
earnings. Low inflation has fueled investment-led growth and technology-led
productivity gains, making labor scarce as it becomes more valuable. But a
strong dollar and falling commodity prices place severe limits on the pricing
power of most businesses. This conflict eventually will be resolved in the form
of slower growth in corporate earnings, a moderation in the pace of hiring, and
finally, a moderation in the pace of overall growth. Via its impact on global
economies, tight money has begun to inflict some damage on our own economy, as
evidenced by a sharp drop-off in exports and a pronounced slowdown in the
manufacturing sector. Falling prices and lower interest costs have kept retail
sales fairly robust, but it's hard to imagine that our economy can continue much
longer to avoid the fallout from the devastation in Asia, one-third of global
GDP. Once the cracks in the U.S. economy begin to widen, the door will open to
the possibility of the Federal Reserve easing interest rates. This will allow
short-term rates to fall, but long-term rates are likely to lag, thus leading to
a gradual steepening of the yield curve over time.
We thus plan to continue to overweight duration, to benefit from an
expected ongoing decline in yields, and are transitioning portfolios from a
barbell to a bullet yield curve exposure to benefit from an expected eventual
steepening. In the belief that volatility will remain somewhat subdued as rates
fall, mortgage exposure is neutral to somewhat overweight, but with a heavy
emphasis on discount coupons. Corporate exposure is moderately overweight, with
an emphasis on cable and wireless issues. Emerging market exposure is
aggressively overweight, though well diversified, to benefit from an eventual
resolution of the Asian crisis and the very attractive spreads it has helped
generate.
Western Asset Management Company
Investment Subadviser to the American Odyssey Long-Term Bond Fund
18
<PAGE>
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
The American Odyssey Intermediate-Term Bond Fund returned 3.51% for the
six months ended June 30, 1998. The Lehman Government/Corporate Intermediate
Bond Index returned 3.46% for the same period.
Our long duration bet paid dividends as the five year treasury yield
fell 9 basis points and the ten year dropped 11 basis points. Spread widening in
the corporate sector negated our duration benefits as corporate bonds widened
5-15 basis points. While we continue to see reasonable value in the corporate
sector, a huge supply of new issue product could keep spreads from narrowing
dramatically.
Federal Reserve policy remains neutral. They continue to weigh the
dilemma of too rapid economic growth-5.4% first quarter GDP-versus continued
economic weakness in Asia. Recently, evidence has surfaced to indicate that the
Pacific Rim is starting to create some drag on our economy. The trade deficit
jumped to $14.5 billion in April, for example, and the unemployment rate inched
up to 4.5% from 4.3%. Our best estimate at the moment is that these factors
should help second quarter GDP to slow to a more sustainable 2-2.5%.
We expect inflation to remain muted, but will watch closely for upward
pressures on service sector prices and wages. We also will monitor the
activities of Asia closely. Stability in that area should enable the Federal
Reserve to more closely follow U.S. economic activity. Lastly, Japan's ability
to deal with its banking crisis could stem the flow of assets out of that
country thereby reducing their demand for U.S. treasury securities.
Travelers Asset Management International Corporation
Investment Subadviser to the American Odyssey Intermediate-Term Bond Fund
19
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
American Odyssey Funds, Inc./June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Emerging Intermediate
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
----------- ------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities,
at cost ....................... $74,253,902 $219,628,897 $278,672,414 $330,876,595 $230,478,116 $118,319,753
- -------------------------------------------------------------------------------------------------------------------------------
Investments in securities, at
value (see accompanying
Portfolio of Investments)
(Note 2) ...................... $73,605,137 $281,695,294 $267,370,187 $461,245,307 $236,020,250 $118,568,115
Cash ............................ 7,195,406 16,762,941 13,800,498 6,474,218 2,553,081 2,236
Cash, denominated in foreign
currency (cost, $4,136,177) ... -- 4,117,790 -- -- -- --
Receivables for:
Investment securities sold .... 3,169,265 -- 637,436 1,081,959 -- --
Unrealized appreciation on
forward foreign currency
contracts (Note 8) .......... -- 614,260 -- -- -- --
Interest ...................... 1,042,515 72,512 55,886 38,347 3,109,660 1,147,398
Dividends ..................... -- 695,036 62,070 685,961 -- --
Foreign tax reclaims .......... -- 319,281 -- -- -- --
Prepaid expense ................. -- -- -- 40,419 -- --
----------- ------------ ------------ ------------ ------------ ------------
Total assets .................. 85,012,323 304,277,114 281,926,077 469,566,211 241,682,991 119,717,749
----------- ------------ ------------ ------------ ------------ ------------
LIABILITIES
Payables for:
Investment securities
purchased ................... 2,685,956 8,853,281 1,665,103 220,500 -- --
Unrealized depreciation on
forward foreign currency
contracts (Note 8) .......... -- 131,178 -- -- -- --
Variation margin on open
futures contracts (Note 6) .. -- -- -- -- 33,750 --
Options written (premiums
received $272,045) (Note 7) . -- -- -- -- 215,837 --
Payable to Adviser .............. 48,327 149,159 181,383 223,523 105,111 51,720
Accrued expenses ................ 21,185 58,266 40,588 29,786 30,161 26,267
----------- ------------ ------------ ------------ ------------ ------------
Total liabilities ............. 2,755,468 9,191,884 1,887,074 473,809 384,859 77,987
----------- ------------ ------------ ------------ ------------ ------------
NET ASSETS ...................... $82,256,855 $295,085,230 $280,039,003 $469,092,402 $241,298,132 $119,639,762
=========== ============ ============ ============ ============ ============
Capital shares outstanding ...... 7,823,269 17,411,401 18,832,785 22,733,307 21,949,394 11,261,241
=========== ============ ============ ============ ============ ============
Net asset value per share ....... $10.51 $16.95 $14.87 $20.63 $10.99 $10.62
=========== ============ ============ ============ ============ ============
COMPOSITION OF NET ASSETS
Capital shares at par ........... $ 78,233 $ 174,114 $ 188,328 $ 227,333 $ 219,494 $ 112,612
Additional paid-in-capital ...... 80,879,494 234,861,044 237,985,728 294,142,834 226,089,181 115,002,484
Undistributed net investment
income (distributions in
excess of net investment
income) ....................... 1,867,184 1,206,418 (340,685) 2,945,407 6,513,292 3,391,586
Accumulated net realized gain
(loss) on investments, futures
contracts, option contracts
and foreign currency
transactions .................. 80,709 (3,680,825) 53,507,859 41,408,116 2,924,079 884,718
Net unrealized appreciation
(depreciation) on investments,
translation of assets and
liabilities in foreign
currencies, futures contracts
and option contracts .......... (648,765) 62,524,479 (11,302,227) 130,368,712 5,552,086 248,362
----------- ------------ ------------ ------------ ------------ ------------
$82,256,855 $295,085,230 $280,039,003 $469,092,402 $241,298,132 $119,639,762
=========== ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
American Odyssey Funds, Inc./For the six months ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Emerging Intermediate
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------- -------------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ................................ $ -- $ 2,882,263(1) $ 447,740(2) $ 4,104,901(3) $ -- $ --
Interest ................................. 2,089,324 305,831 387,596 183,342 7,193,709 3,740,038
------------ ------------ ------------- ------------ ----------- -----------
Total income .......................... 2,089,324 3,188,094 835,336 4,288,243 7,193,709 3,740,038
------------ ------------ ------------- ------------ ----------- -----------
EXPENSES
Management fees (Note 3) ................. 181,379 795,359 949,585 1,268,764 571,237 281,553
Audit fees ............................... 8,383 11,075 11,075 11,571 10,579 9,588
Director's fees & expenses ............... 2,697 10,842 11,908 19,177 9,924 4,958
Custodian fees ........................... 19,615 135,182 89,233 103,553 62,216 33,515
Legal fees ............................... 1,765 6,018 7,872 9,381 7,571 5,197
Printing expense ......................... 6,853 13,376 99,289 14,390 12,397 9,426
Amortization of organization expense ..... 1,856 1,898 1,826 1,827 1,834 1,856
Miscellaneous expense .................... 1,288 5,006 5,233 8,680 4,659 2,357
------------ ------------ ------------- ------------ ----------- -----------
Total expenses before directed
brokerage arrangements ............... 223,836 978,756 1,176,021 1,437,343 680,417 348,450
------------ ------------ ------------- ------------ ----------- -----------
Less:
Expenses paid under directed brokerage
arrangements (Note 4) ................ -- (17,868) -- (94,511) -- --
------------ ------------ ------------- ------------ ----------- -----------
Net expenses ........................... 223,836 960,888 1,176,021 1,342,832 680,417 348,450
------------ ------------ ------------- ------------ ----------- -----------
Net investment income (loss) .......... 1,865,488 2,227,206 (340,685) 2,945,411 6,513,292 3,391,588
------------ ------------ ------------- ------------ ----------- -----------
REALIZED and UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on security
transactions ........................... 331,632 (5,370,132) 54,906,841 41,408,116 2,630,716 911,045
Net realized loss on futures contracts... -- -- -- -- (100,538) --
Net realized gain on option contracts ... -- -- -- -- 262,950 --
------------ ------------ ------------- ------------ ----------- -----------
Net realized gain (loss) on security
transactions, futures contracts and
option contracts ...................... 331,632 (5,370,132) 54,906,841 41,408,116 2,793,128 911,045
Net realized gain on foreign currency
transactions .......................... -- 2,316,608 -- -- -- --
Net increase (decrease) in unrealized
appreciation of investments, futures
contracts and option contracts ........ (1,032,672) 39,056,528 (44,490,256) 21,685,642 554,995 (338,874)
Net unrealized depreciation from
translation of assets and liabilities
in foreign currencies ................. -- (405,739) -- -- -- --
------------ ------------ ------------- ------------ ----------- -----------
Net realized and unrealized gain
(loss) on investments ................. (701,040) 35,597,265 10,416,585 63,093,758 3,348,123 572,171
------------ ------------ ------------- ------------ ----------- -----------
Net increase in net assets from
operations............................. $ 1,164,448 $37,824,471 $ 10,075,900 $66,039,169 $9,861,415 $3,963,759
============ ============ ============= ============ =========== ===========
</TABLE>
(1) Net of withholding taxes of $385,547.
(2) Net of withholding taxes of $279.
(3) Net of withholding taxes of $5,910.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global High-Yield Bond Fund International Equity Fund
------------------------------ ---------------------------
Period ended Period ended
June 30, Year ended June 30, Year ended
1998 December 31, 1998 December 31,
unaudited 1997 unaudited 1997
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) ........................... $ 1,865,488 $ 2,959,840 $ 2,227,206 $ 3,549,725
Net realized gain (loss) on security transactions,
futures contracts and option contracts ............... 331,632 (148,187) (5,370,132) 9,593,909
Net realized gain (loss) on foreign currency
transactions ......................................... -- -- 2,316,608 5,039,668
Net increase (decrease) in unrealized appreciation
(depreciation) of investments, translation of assets
and liabilities in foreign currencies, futures
contracts and option contracts ....................... (1,032,672) 473,223 38,650,789 (7,971,426)
----------- ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations ......................................... 1,164,448 3,284,876 37,824,471 10,211,876
----------- ----------- ------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................. (20,259) (3,005,205) (5,154,657) (3,549,725)
From net realized gains on investment transactions ..... -- -- (10,221,210) (862,014)
In excess of net investment income or realized gains ... -- -- -- (886,397)
----------- ----------- ------------ -----------
Total distributions to shareholders .................. (20,259) (3,005,205) (15,375,867) (5,298,136)
----------- ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares .......................... 24,594,893 10,266,744 25,345,434 43,198,871
Distributions reinvested ............................... 20,259 4,750,901 15,375,867 9,953,160
Cost of shares repurchased ............................. (2,323,032) (5,149,686) (4,655,732) (8,603,962)
----------- ----------- ------------ -----------
Net increase from capital share transactions ......... 22,292,120 9,867,959 36,065,569 44,548,069
----------- ----------- ------------ -----------
Net increase in net assets ............................. 23,436,309 10,147,630 58,514,173 49,461,809
NET ASSETS
Beginning of year ...................................... 58,820,546 48,672,916 236,571,057 187,109,248
----------- ----------- ------------ -----------
End of year ............................................ $82,256,855 $58,820,546 $295,085,230 $236,571,057
=========== =========== ============ ===========
Undistributed (excess distribution) net investment
income ............................................... $ 1,867,184 $ 21,955 $ 1,206,418 $ 4,133,869
=========== =========== ============ ===========
CAPITAL SHARES
Capital shares outstanding, beginning of year .......... 5,704,494 4,754,313 15,277,557 12,410,280
Capital shares issued .................................. 2,338,613 975,165 1,486,269 2,764,223
Capital shares from distributions reinvested ........... 1,926 462,176 918,510 652,615
Capital shares redeemed ................................ (221,764) (487,160) (270,935) (549,561)
=========== =========== ============ ===========
Capital shares outstanding, end of year ................ 7,823,269 5,704,494 17,411,401 15,277,557
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Emerging Opportunities Intermediate-Term Bond
Fund Core Equity Fund Long-Term Bond Fund Fund
-------------------------- ------------------------- ------------------------- --------------------------
Period Period Period Period
ended Year ended ended Year ended ended Year ended ended Year ended
June 30, December June 30, December June 30, December June 30, December
1998 31, 1998 31, 1998 31, 1998 31,
unaudited 1997 unaudited 1997 unaudited 1997 unaudited 1997
------------ ------------ ------------ ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (340,685) $ (446,526) $ 2,945,411 $ 4,944,217 $6,513,292 $11,765,388 $ 3,391,588 $5,828,989
54,906,841 4,178,737 41,408,116 48,900,932 2,793,128 4,536,058 911,045 632,431
-- -- -- -- -- -- -- --
(44,490,256) 13,026,859 21,685,642 42,788,687 554,995 5,890,460 (338,874) 785,322
------------ ------------ ------------ ------------ ----------- ----------- ------------ -----------
10,075,900 16,759,070 66,039,169 96,633,836 9,861,415 22,191,906 3,963,759 7,246,742
------------ ------------ ------------ ------------ ----------- ----------- ------------ -----------
-- -- (40,202) (4,951,911) (114,595) (11,872,559) (37,668) (5,989,855)
-- -- (48,900,936) (4,293,241) (4,441,593) (188,073) (542,497) (475,876)
-- -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ----------- ----------- ------------ -----------
-- -- (48,941,138) (9,245,152) (4,556,188) (12,060,632) (580,165) (6,465,731)
------------ ------------ ------------ ------------ ----------- ----------- ------------ -----------
19,665,711 66,649,338 29,998,374 63,233,692 16,222,768 31,371,836 9,067,871 13,449,251
-- 14,364,919 48,941,138 25,394,006 4,556,188 20,235,996 580,165 11,446,064
(8,589,036) (10,165,115) (41,643,236) (35,089,813) (3,640,402) (3,579,271) (1,987,502) (3,465,766)
------------ ------------ ------------ ------------ ----------- ----------- ------------ -----------
11,076,675 70,849,142 37,296,276 53,537,885 17,138,554 48,028,561 7,660,534 21,429,549
------------ ------------ ------------ ------------ ----------- ----------- ------------ -----------
21,152,575 87,608,212 54,394,307 140,926,569 22,443,781 58,159,835 11,044,128 22,210,560
258,886,428 171,278,216 414,698,095 273,771,526 218,854,351 160,694,516 108,595,634 86,385,074
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$280,039,003 $258,886,428 $469,092,402 $414,698,095 $241,298,132 $218,854,351 $119,639,762 $108,595,634
============ ============ ============ ============ ============ ============ ============ ============
$ (340,685) -- $ 2,945,407 $ 40,198 $ 6,513,292 $ 114,595 $ 3,391,586 $ 37,666
============ ============ ============ ============ ============ ============ =========== ============
18,071,430 12,764,369 20,812,710 17,673,755 20,383,564 15,828,492 10,531,347 8,470,117
1,327,224 4,984,206 1,391,029 3,512,120 1,481,561 2,958,292 863,740 1,276,376
-- 1,087,428 2,387,373 1,520,884 414,953 1,934,930 54,630 1,114,771
(565,869) (764,573) (1,857,805) (1,894,049) (330,684) (338,150) (188,476) (329,917)
============ ============ ============ ============ =========== =========== ============ ===========
18,832,785 18,071,430 22,733,307 20,812,710 21,949,394 20,383,564 11,261,241 10,531,347
============ ============ ============ ============ =========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Global High-Yield Bond Fund
------------------------------------------------------------
Period
ended
June 30, Year ended December 31,
1998
-------------------------------------------------
unaudited 1997 1996 1995 1994 1993(1)
--------- -------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ........................... $ 10.31 $ 10.24 $ 10.22 $ 9.68 $ 10.07 $ 10.00
------- -------- ------- ------- -------- -------
OPERATIONS
Net investment income (2)...................... 0.24 0.55 0.37 0.51 0.45 0.19
Net realized and unrealized gain (loss) on (0.04) 0.08 0.02 0.54 (0.46) 0.08
investments .................................
------- -------- ------- ------- -------- -------
Total from investment operations .............. 0.20 0.63 0.39 1.05 (0.01) 0.27
------- -------- ------- ------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .......... 0.00* (0.56) (0.37) (0.51) (0.38) (0.14)
Distributions from net realized gains on
investments ................................. -- -- -- -- -- (0.01)
Distributions in excess of net investment
income or realized gains .................... -- -- -- -- -- (0.05)
------- -------- ------- ------- -------- -------
Total distributions ........................... -- (0.56) (0.37) (0.51) (0.38) (0.20)
------- -------- ------- ------- -------- -------
NET ASSET VALUE
End of period ................................. $ 10.51 $ 10.31 $ 10.24 $ 10.22 $ 9.68 $ 10.07
======= ======= ======= ======= ======== =======
TOTAL RETURN (3)................................. 1.96% 6.11% 3.80% 10.86% (0.14)% 2.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) ... $82,257 $ 58,821 $48,673 $25,855 $ 17,629 $ 8,181
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements ........... 0.70%(4) 0.66% 0.68% 0.76% 1.02% 1.72%(4)
After repayments/reimbursements and directed
brokerage arrangements (5)................. 0.70%(4) 0.74% 0.75% 0.75% 0.75% 0.75%(4)
Ratios of net investment income to average net
assets:
Before repayments/reimbursements and
directed brokerage arrangements ........... 5.80%(4) 5.53% 5.54% 5.77% 4.99% 3.52%(4)
After repayments/reimbursements and directed
brokerage arrangements .................... 5.80%(4) 5.45% 5.47% 5.78% 5.25% 4.49%(4)
Portfolio turnover rate ....................... 149.83% 200.78% 154.51% 93.37% 233.25% 144.30%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period May 17, 1993 (commencement of operations) to December 31,
1993.
(2) Net of expense reimbursements and repayments.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) Annualized.
(5) The After repayments/reimbursements and directed brokerage arrangements
figure may be greater than the Before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
* Less than 0.01 per share.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund
------------------------------------------------------------
Period
ended
June 30, Year ended December 31,
1998 ------------------------------------------------
unaudited 1997 1996 1995 1994 1993(1)
----------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ......................... $ 15.48 $ 15.08 $ 12.68 $ 10.76 $ 11.98 $ 10.00
------- -------- ------- ------ ------- -------
OPERATIONS
Net investment income (loss) (2)............. 0.11 0.57 0.29 0.17 (0.05) 0.03
Net realized and unrealized gain (loss) on
investments ............................... 2.29 0.19 2.48 1.87 (0.78) 1.95
------- -------- ------- ------ ------- -------
Total from investment operations ............ 2.40 0.76 2.77 2.04 (0.83) 1.98
------- -------- ------- ------ ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ........ (0.31) (0.24) (0.30) (0.12) (0.03) --
Distributions from net realized gains on
investments .............................. (0.62) (0.06) (0.07) -- (0.26) --
Distributions in excess of net investment
income or realized gains .................. -- (0.06) -- -- (0.10) --
------- -------- ------- ------ ------- -------
Total distributions ......................... (0.93) (0.36) (0.37) (0.12) (0.39) --
------- -------- ------- ------ ------- -------
NET ASSET VALUE
End of period ............................... $ 16.95 $ 15.48 $ 15.08 $ 12.68 $ 10.76 $ 11.98
======= ======== ======= ====== ======= =======
TOTAL RETURN (3)............................... 15.59% 5.04% 21.93% 19.00% (6.98)% 19.80%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) . $295,085 $236,571 $187,109 $92,115 $51,712 $19,978
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements ......... 0.73%(4) 0.79% 0.86% 1.00% 1.36% 1.76%(4)
After repayments/reimbursements and
directed brokerage arrangements (5)...... 0.72%(4) 0.77% 0.83% 1.08% 1.25% 1.25%(4)
Ratios of net investment income to average
net assets:
Before repayments/reimbursements and
directed brokerage arrangements ......... 1.66%(4) 1.61% 1.51% 1.70% 0.83% 0.34%(4)
After repayments/reimbursements and
directed brokerage arrangements ......... 1.67%(4) 1.63% 1.54% 1.62% 0.94% 0.85%(4)
Portfolio turnover rate ..................... 11.76% 23.08% 21.54% 31.40% 50.25% 9.20%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period May 17, 1993 (commencement of operations) to December 31,
1993.
(2) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) Annualized.
(5) The After repayments/reimbursements and directed brokerage arrangements
figure may be greater than the Before repayments/ reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Opportunities Funds
-----------------------------------------------------------------
Period ended
June 30, Year ended December 31,
1998 ----------------------------------------------------
unaudited 1997 1996 1995 1994 1993(1)
---------- --------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ........................ $ 14.33 $ 13.42 $ 15.02 $ 11.84 $ 10.94 $ 10.00
-------- -------- -------- --------- ------- -------
OPERATIONS
Net investment loss (2)..................... (0.02) -- -- -- -- (0.01)
Net realized and unrealized gain (loss) on 0.56 0.91 (0.47) 3.81 1.06 0.95
investments ..............................
-------- -------- -------- --------- ------- -------
Total from investment operations ........... 0.54 0.91 (0.47) 3.81 1.06 0.94
-------- -------- ------- --------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized gains on
investments .............................. -- -- (1.13) (0.58) (0.16) --
Distributions in excess of net investment
income or realized gains ................. -- -- -- (0.05) -- --
-------- -------- -------- --------- ------- -------
Total distributions ........................ -- -- (1.13) (0.63) (0.16) --
-------- -------- -------- --------- ------- -------
NET ASSET VALUE
End of period .............................. $ 14.87 $ 14.33 $ 13.42 $ 15.02 $ 11.84 $ 10.94
======== ======== ======== ========= ======= =======
TOTAL RETURN (3).............................. 3.77% 6.78% (3.03)% 32.23% 9.69% 9.40%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) $280,039 $258,886 $171,278 $ 157,193 $88,676 $29,113
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements ........ 0.86%(4) 0.86% 0.72% 0.77% 0.91% 1.23%(4)
After repayments/reimbursements and
directed brokerage arrangements (5)..... 0.86%(4) 0.86% 0.72% 0.77% 0.92% 1.00%(4)
Ratios of net investment loss to average
net assets:
Before repayments/reimbursements and
directed brokerage arrangements ........ (0.25)%(4) (0.20)% (0.34)% (0.26)% (0.31)% (0.60)%(4)
After repayments/reimbursements and
directed brokerage arrangements ........ (0.25)%(4) (0.20)% (0.34)% (0.26)% (0.32)% (0.38)%(4)
Portfolio turnover rate .................... 88.78% 80.36% 43.00% 36.02% 27.40% 8.70%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period May 17, 1993 (commencement of operations) to December 31,
1993.
(2) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) Annualized.
(5) The After repayments/reimbursements and directed brokerage arrangements
figure may be greater than the Before repayments/ reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements
26
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Core Equity Fund
---------------------------------------------------------------
Period
ended
June 30, Year ended December 31,
1998
--------------------------------------------------
unaudited 1997 1996 1995 1994 1993(1)
----------- --------- --------- -------- -------- ------
NET ASSET VALUE
Beginning of period ....................... $ 19.93 $ 15.49 $ 13.32 $ 10.06 $ 10.33 $ 10.00
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (2).................. 0.13 0.24 0.26 0.25 0.16 0.06
Net realized and unrealized gain (loss) on
investments ............................. 2.97 4.65 2.83 3.63 (0.26) 0.33
--------- --------- --------- -------- -------- --------
Total from investment operations .......... 3.10 4.89 3.09 3.88 (0.10) 0.39
--------- --------- --------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ...... -- (0.24) (0.27) (0.24) (0.17) (0.06)
Distributions from net realized gains on
investments ............................. (2.40) (0.21) (0.65) (0.37) -- --
Distributions in excess of net investment
income or realized gains ................ -- -- -- (0.01) -- --
--------- --------- --------- -------- -------- --------
Total distributions ....................... (2.40) (0.45) (0.92) (0.62) (0.17) (0.06)
--------- --------- --------- -------- -------- --------
NET ASSET VALUE
End of period ............................. $ 20.63 $ 19.93 $ 15.49 $ 13.32 $ 10.06 $ 10.33
========= ========= ========= ======== ======== ========
TOTAL RETURN (3)............................. 15.66% 31.67% 23.20% 38.56% (1.01)% 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's
omitted) ................................ $469,092 $414,698 $273,772 $183,735 $101,592 $37,356
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements ....... 0.63%(4) 0.67% 0.68% 0.72% 0.84% 1.12%(4)
After repayments/reimbursements and
directed brokerage arrangements (5).... 0.59%(4) 0.65% 0.66% 0.70% 0.85% 1.00%(4)
Ratios of net investment income to average
net assets:
Before repayments/reimbursements and
directed brokerage arrangements ....... 1.26%(4) 1.36% 1.93% 2.32% 2.27% 1.84%(4)
After repayments/reimbursements and
directed brokerage arrangements ....... 1.30%(4) 1.38% 1.95% 2.33% 2.27% 1.96%(4)
Portfolio turnover rate ................... 26.34% 45.54% 45.73% 38.44% 48.16% 48.00%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period May 17, 1993 (commencement of operations) to December 31,
1993.
(2) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) Annualized.
(5) The After repayments/reimbursements and directed brokerage arrangements
figure may be greater than the Before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long-Term Bond Fund
--------------------------------------------------------------
Period ended
June 30,
1998 Year ended December 31,
-------------------------------------------------
unaudited 1997 1996 1995 1994 1993(1)
------------ --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period........................................ $ 10.74 $ 10.15 $ 10.53 $ 9.37 $10.33 $10.00
-------- -------- -------- --------- ------- -------
OPERATIONS
Net investment income (2).................................. 0.30 0.61 0.50 0.53 0.37 0.62
Net realized and unrealized gain (loss) on investments..... 0.17 0.61 (0.36) 1.57 (0.97) 0.45
-------- -------- -------- --------- ------- -------
Total from investment operations........................... 0.47 1.22 0.14 2.10 (0.60) 1.07
-------- -------- -------- --------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income....................... (0.01) (0.62) (0.52) (0.57) (0.34) (0.18)
Distributions from net realized gains on investments....... (0.21) (0.01) -- (0.27) (0.02) (0.56)
Distributions in excess of net investment income or
realized gains........................................... -- -- -- (0.10) -- --
-------- -------- -------- --------- ------- -------
Total distributions........................................ (0.22) (0.63) (0.52) (0.94) (0.36) (0.74)
-------- -------- -------- --------- ------- -------
NET ASSET VALUE
End of period.............................................. $ 10.99 $ 10.74 $ 10.15 $ 10.53 $ 9.37 $10.33
======== ======== ======== ========= ======= =======
TOTAL RETURN (3)............................................. 4.30% 12.01% 1.34% 22.44% (5.79)% 10.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)................ $241,298 $218,854 $160,695 $114,612 $70,359 $25,772
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements................................. 0.60%(4) 0.62% 0.63% 0.66% 0.73% 1.30%(4)(5)
After repayments/reimbursements and directed
brokerage arrangements (6)............................. 0.60%(4) 0.62% 0.63% 0.70% 0.75% 0.75%(4)
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements................................. 5.70%(4) 6.22% 5.88% 6.67% 7.08% 15.19%(4)
After repayments/reimbursements and directed
brokerage arrangements................................. 5.70%(4) 6.22% 5.88% 6.63% 7.05% 15.73%(4)
Portfolio turnover rate.................................... 130.08% 358.67% 369.32% 381.53% 152.91% 589.40%
</TABLE>
(1) For the period May 17, 1993 (commencement of operations) to December 31,
1993.
(2) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) Annualized.
(5) The Long-Term Bond Fund did not qualify in 1993 as a regulated investment
company for federal income tax purposes because it had substantial
short-term capital gains during this period and was not able to meet the
requirement that no more than 30% of the Fund's investment income may be
from realized capital gains on the sale of securities held for less than
three months. While the Fund incurred a federal income tax of approximately
$155,000, the investment adviser to the Long-Term Bond Fund reimbursed the
Fund for the taxes and related legal expenses, so no shareholder of the Fund
was affected. The ratio of expenses to average net assets would have been
2.58% had the adviser not agreed to reimburse the Fund for these expenses.
The Fund qualified in 1994, 1995, 1996 and 1997 as a regulated investment
company and intends to do so in future years as well.
(6) The After repayments/reimbursements and directed brokerage arrangements
figure may be greater than the Before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
------------------------------------------------------------
Period ended
June 30, Year ended December 31,
1998
-----------------------------------------------
unaudited 1997 1996 1995 1994 1993(1)
------------ --------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period........................................ $ 10.31 $ 10.20 $10.38 $ 9.61 $ 10.28 $ 10.00
OPERATIONS
Net investment income (2).................................. 0.30 0.59 0.61 0.54 0.38 0.17
Net realized and unrealized gain (loss) on investments..... 0.06 0.17 (0.20) 0.90 (0.67) 0.28
-------- --------- ------- ------- -------- --------
Total from investment operations........................... 0.36 0.76 0.41 1.44 (0.29) 0.45
-------- --------- ------- ------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income....................... -- (0.60) (0.59) (0.55) (0.38) (0.17)
Distributions from net realized gains on investments....... (0.05) (0.05) -- (0.07) -- --
Distributions in excess of net investment income or
realized gains........................................... -- -- -- (0.05) -- --
-------- --------- ------- ------- -------- --------
Total distributions........................................ (0.05) (0.65) (0.59) (0.67) (0.38) (0.17)
-------- --------- ------- ------- -------- --------
NET ASSET VALUE
End of period.............................................. $ 10.62 $ 10.31 $10.20 $10.38 $ 9.61 $ 10.28
======== ========= ======= ======= ======== ========
TOTAL RETURN (3)............................................. 3.51% 7.50% 3.95% 15.01% (2.85)% 4.50%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)................ $119,640 $108,596 $86,385 $73,480 $48,571 $19,897
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements................................. 0.61%(4) 0.63% 0.66% 0.68% 0.75% 1.37%(4)
After repayments/reimbursements and directed
brokerage arrangements (5)............................. 0.61%(4) 0.63% 0.66% 0.75% 0.75% 0.75%(4)
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements................................. 5.96%(4) 5.90% 5.77% 6.19% 5.35% 3.73%(4)
After repayments/reimbursements and directed
brokerage arrangements................................. 5.96%(4) 5.90% 5.77% 6.11% 5.35% 4.35%(4)
Portfolio turnover rate.................................... 165.95% 215.97% 191.20% 137.14% 22.72% --
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period May 17, 1993 (commencement of operations) to December 31,
1993.
(2) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) Annualized.
(5) The After repayments/reimbursements and directed brokerage arrangements
figure may be greater than the Before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / June 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
FOREIGN OBLIGATIONS -- 27.5%
Corporate Debt -- 12.7%
$ 350,000 Ainsworth Lumber Co.
(Yankee), PIK
12.500%, 07/15/07 .......... $ 376,250
1,000,000 Banco Nac'l de
Desenvolvimento Economico
e Social
11.126%, 06/16/08 .......... 990,000
400,000 Canadian Airlines
Corp. (Yankee)
10.000%, 05/01/05 .......... 406,000
400,000 Cenargo International Plc, 144A
9.750%, 06/15/08 ........... 392,500
400,000 Clearnet Communications
(Yankee), Step Up
0.000%, 12/15/05 ........... 334,000
450,000 Companhia Brasileira de
Petroleo Ipiranga (Euro),
Variable Rate, Step Up
10.625%, 02/25/02 .......... 444,938
500,000 Diamond Cable
Communications Plc
(Yankee), Step Up
0.000%, 02/15/07 ........... 370,000
150,000 Disco SA, (Euro)
9.875%, 05/15/08 ........... 141,375
500,000 Dolphin Telecom Plc, 144A,
Step Up
0.000%, 06/01/08 ........... 282,500
100,000 Hidroelectricia Piedra del
Aguila SA, 144A
10.625%, 10/09/01 .......... 103,875
400,000 HMV Media Group Plc, 144A
10.250%, 05/15/08 .......... 406,000
400,000 International Utility
Structures, Inc., 144A
10.750%, 02/01/08 .......... 410,000
$ 400,000 Lodestar Holdings, Inc.,
144A
11.500%, 05/15/05 .......... $ 404,000
400,000 Marsulex, Inc., 144A
9.625%, 07/01/08 ........... 408,500
500,000 MetroNet Communications
Corp., 144A, Step Up
0.000%, 06/15/08 ........... 311,875
500,000 Microcell
Telecommunication, Inc.,
Series B, (Yankee),
Step Up
0.000%, 06/01/06 ........... 373,750
400,000 Millar Western Forest
Products, 144A, Step Up
9.875%, 05/15/08 ........... 392,000
400,000 Petroleo Brasileiro SA,
(Euro)
8.250%, 04/06/01 ........... 392,000
500,000 Rabobank Nederland (Euro)
7.500%, 08/18/00 ........... 502,500
400,000 Regional Independent
Media, 144A
10.500%, 07/01/08 .......... 408,000
400,000 Stena Line AB (Yankee)
10.625%, 06/01/08 .......... 407,000
400,000 TeleWest Communication Plc,
(Yankee), Step Up
0.000%, 10/01/07 ........... 330,000
250,000 TeleWest Communications
Plc, (Yankee)
9.625%, 10/01/06 ........... 263,750
2,100,000 Vnesheconombank,
Variable Rate
6.625%, 12/15/15 ........... 1,144,500
430,000 VTB Finance Ltd. - Jersey
(Euro), Variable Rate
8.173%, 09/26/99 ........... 408,500
------------
10,403,813
------------
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- ---------------------------------------------------------------------
Government Obligations -- 14.8%
$ 993,548 Brazil-Trust Certificates,
Variable Rate
6.688%, 09/15/07 ...................... $ 815,952
500,000 Bulgaria FLIRB Series A,
Variable Rate
2.250%, 07/28/12 ...................... 301,875
1,000,000 Bulgaria Government
Discount Series A, Variable
Rate
6.563%, 07/28/24 ...................... 751,880
250,000 Ecuador Discount Note,
Variable Rate
6.625%, 02/28/25 ...................... 172,188
350,000 Ecuador-Par, Step Up
3.500%, 02/28/25 ...................... 188,125
1,000,000 Mexican Discount Bond
Series D, Variable Rate
6.602%, 12/31/19 ...................... 893,130
300,000 Ministry of Finance
Russia (Euro)
11.750%, 06/10/03 ..................... 273,000
600,000 Ministry of Finance
Russia, 144A
11.750%, 06/10/03 ..................... 517,500
600,000 Poland - Global Discount
Bond, Variable Rate
6.688%, 10/27/24 ...................... 587,628
975,000 Poland - Global Registered D
3.000%, 10/27/24 ...................... 637,406
350,000 Poland - Global Registered D,
RSTA, Step Up
3.750%, 10/27/24 ...................... 253,750
450,000 Republic of Argentina
(Yankee), Variable Rate
9.150%, 11/30/02 ...................... 451,125
3,660,000 Republic of Argentina
Series L-GP, Step Up
5.750%, 03/31/23 ...................... 2,710,705
498,750 Republic of Argentina,
Variable Rate
6.625%, 03/31/05 ...................... 439,523
436,602 Republic of Brazil - C
Bond, Variable Rate
8.000%, 04/15/14 ...................... 317,082
380,000 Republic of Brazil Discount
Bond ZL, Variable Rate
6.625%, 04/15/24 ...................... 291,175
200,000 Republic of Colombia
8.625%, 04/01/08 ...................... 189,000
250,000 Republic of Panama
8.875%, 09/30/27 ...................... 236,250
150,000 United Mexican States
Global Bond
8.625%, 03/12/08 ...................... 144,750
2,000,000 United Mexican States
Series B
6.250%, 12/31/19 ...................... 1,648,760
428,571 Venezuela-FLIRB Series B,
Variable Rate
6.625%, 03/31/07 ...................... 356,520
------------
12,177,324
------------
Total Foreign Obligations
(Cost $23,278,670) ............................. 22,581,137
------------
U.S. CORPORATE OBLIGATIONS -- 55.6%
Asset Backed and Mortgage Backed -- 2.0%
1,625,000 Equicredit Home Equity
Trust, REMIC
6.840%, 09/15/11 ..................... 1,655,249
-----------
Corporate Bonds & Notes -- 53.6%
400,000 Adelphia Communications
Corp. Series B
8.375%, 02/01/08 ...................... 396,000
400,000 Allied Holdings, Inc.
Series B
8.625%, 10/01/07 ...................... 406,000
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
$ 400,000 American Cellular Corp.,
144A
10.500%, 05/15/08 .......... $ 400,000
400,000 American Communication
Lines L.L.C./ACL, 144A
10.250%, 06/30/08 .......... 407,000
400,000 American ECO Corp., 144A
9.625%, 05/15/08 ........... 406,000
400,000 American Lawyer Media,
Inc., 144A
9.750%, 12/15/07 ........... 416,000
400,000 Ameristar Casinos, Inc.
Series B
10.500%, 08/01/04 .......... 416,000
400,000 Aurora Foods Inc., 144A
8.750%, 07/01/08 ........... 400,000
400,000 Bayou Steel Corp., 144A
9.500%, 05/15/08 ........... 398,500
400,000 CapStar Broadcasting,
Step Up
0.000%, 02/01/09 ........... 304,000
300,000 Casino America, Inc.
12.500%, 08/01/03 .......... 339,000
400,000 Casino Magic-Louisiana
Corp. Series B
13.000%, 08/15/03 .......... 465,000
500,000 Century Communications
Corp. Series B, Step Up
0.000%, 01/15/08 ........... 226,875
400,000 CEX Holdings, Inc., 144A
9.625%, 06/01/08 ........... 408,000
400,000 Clearview Cinema Group,
Inc., 144A
10.875%, 06/01/08 .......... 409,000
400,000 Comcast Cellular Holdings
Series B
9.500%, 05/01/07 ........... 415,000
400,000 Cumulus Media, Inc.
10.375%, 07/01/08 .......... 400,000
400,000 Dawson Production
Services, Inc.
9.375%, 02/01/07 ........... 404,000
400,000 Diamond Brands, Inc., 144A
10.125%, 04/15/08 .......... 403,000
400,000 Diva Systems Corp., 144A,
Unit, Step Up
0.000%, 03/01/08 ........... 188,000
400,000 Dobson Communications Corp.
11.750%, 04/15/07 .......... 434,000
400,000 Dobson Wireline
Company, 144A
12.250%, 06/15/08 .......... 390,000
500,000 e. Spire Communications
Inc., Step Up
0.000%, 11/01/05 ........... 416,250
400,000 Eagle Family Foods, 144A
8.750%, 01/15/08 ........... 392,000
400,000 EchoStar Satellite
Broadcast, Step Up
0.000%, 03/15/04 ........... 367,500
400,000 Empress Entertainment,
Inc., 144A
8.125%, 07/01/06 ........... 401,000
400,000 Exodus Communications,
Inc., 144A
11.250%, 07/01/08 .......... 400,000
300,000 Fitzgerald Gaming Corp., 144A
12.250%, 12/15/04 .......... 295,500
400,000 Fleming Companies, Inc.,
Series B
10.500%, 12/01/04 .......... 416,000
500,000 Focal Communications Corp.,
144A, Step Up
0.000%, 02/15/08 ........... 300,000
940,000 Ford Holdings, Inc.
9.250%, 03/01/00 ........... 988,072
400,000 Fresh Foods, Inc., 144A
10.750%, 06/01/06 .......... 402,000
The acompanying notes are an integral part of the financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
$ 400,000 Friendly Ice Cream Corp.
10.500%, 12/01/07 .......... $ 422,000
400,000 Galey & Lord, Inc., 144A
9.125%, 03/01/08 ........... 385,000
350,000 Gaylord Container Corp.
Series B
9.750%, 06/15/07 ........... 344,750
400,000 General Binding Corp., 144A
9.375%, 06/01/08 ........... 410,000
1,575,000 General Motors
9.625%, 12/01/00 ........... 1,700,590
400,000 Globalstar L.P., 144A
11.500%, 06/01/05 .......... 390,000
400,000 Granite Broadcasting
Corp., 144A
8.875%, 05/15/08 ........... 407,000
400,000 Great Lakes Carbon
Corp., 144A
10.250%, 05/15/08 .......... 410,000
200,000 Gulf States Steel-Alabama
13.500%, 04/15/03 .......... 196,000
350,000 Helicon Group Ltd. Series B
11.000%, 11/01/03 .......... 372,750
450,000 Hollinger International
Publishing, Inc.
9.250%, 02/01/06 ........... 470,813
400,000 Hollywood Casino Corp.
12.750%, 11/01/03 .......... 438,000
400,000 Hollywood Park, Inc. Series
B 9.500%, 08/01/07 ......... 410,000
400,000 Home Products
International, Inc., 144A
9.625%, 05/15/08 ........... 400,000
350,000 Horseshoe Gaming L.L.C.
Series B
9.375%, 06/15/07 ........... 370,563
400,000 Hyperion Telecommunications
Series B, Step Up
0.000%, 04/15/03 ........... 298,000
$ 400,000 ICN Pharmaceuticals Inc.
Series B
9.250%, 08/15/05 ........... $ 426,000
400,000 Impac Group Inc., 144A
10.125%, 03/15/08 .......... 401,000
400,000 Insight Health Services
Corp., 144A
9.625%, 06/15/08 ........... 399,000
400,000 Interep National Radio
Sales, 144A
10.000%, 07/01/08 .......... 400,000
500,000 Intermedia Communication,
Inc., 144A
8.600%, 06/01/08 ........... 503,750
400,000 International Home Foods,
Inc.
10.375%, 11/01/06 .......... 436,000
400,000 Iridium L.L.C.
10.875%, 07/15/05 .......... 399,000
400,000 ITC DeltaCom, Inc.
8.875%, 03/01/08 ........... 407,000
400,000 IXC Communications,
Inc., 144A
9.000%, 04/15/08 ........... 402,000
400,000 James Cable Partners L.P.
Series B
10.750%, 08/15/04 .......... 426,000
400,000 Jones Intercable Inc.
8.875%, 04/01/07 ........... 428,000
400,000 Jordan Telecommunications
Products Series B
9.875%, 08/01/07 ........... 410,000
400,000 Keystone Consolidated
Industries, Inc.
9.625%, 08/01/07 ........... 411,000
400,000 L-3 Communications Corp.
8.500%, 05/15/08 ........... 404,000
500,000 Level 3 Communications,
Inc., 144A
9.125%, 05/01/08 ........... 486,250
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------
$ 400,000 Magellan Health Services,
Inc., 144A
9.000%, 02/15/08 ..................... $ 397,000
300,000 Majestic Star Casino L.L.C.
12.750%, 05/15/03 .................... 328,875
500,000 Marcus Cable Company L.P.,
Step Up
0.000%, 12/15/05 ..................... 465,000
400,000 Maxim Group Inc. Series B
9.250%, 10/15/07 ..................... 411,000
250,000 MCII Holdings, Step Up
0.000%, 11/15/02 ..................... 230,625
500,000 McLeod USA, Inc., Step Up
0.000%, 03/01/07 ..................... 371,250
500,000 Nextel Communications,
Inc., 144A, Step Up
0.000%, 02/15/08 ..................... 318,750
400,000 Niagara Mohawk Power
Series F
7.625%, 10/01/05 ..................... 401,696
400,000 Northland Cable Television
10.250%, 11/15/07 .................... 429,000
500,000 NTL, Inc., 144A, Step Up
0.000%, 04/01/08 ..................... 327,500
400,000 Outboard Marine Corp., 144A
10.750%, 06/01/08 .................... 406,000
400,000 Oxford Health Plans,
Inc., 144A
11.000%, 05/15/05 .................... 412,000
400,000 P & L Coal Holdings
Corp., 144A
9.625%, 05/15/08 ..................... 413,000
400,000 Pathmark Stores, Inc.
9.625%, 05/01/03 ..................... 404,000
400,000 Philipp Brothers Chemical,
Inc., 144A
9.875%, 06/01/08 ..................... 404,500
200,000 Players International, Inc.
10.875%, 04/15/05 .................... 216,000
50,000 Krystal Co.
10.250%, 10/01/07 .................... 51,813
400,000 Price Communications
Wireless, Inc., 144A
9.125%, 12/15/06 ..................... 401,500
400,000 Primus Telecommunications
Group, Inc., 144A
9.875%, 05/15/08 ..................... 392,000
500,000 Qwest Communications
International, Inc., Step Up
0.000%, 10/15/07 ..................... 375,000
400,000 Regal Cinemas, Inc., 144A
9.500%, 06/01/08 ..................... 401,500
400,000 Republic Engineered Steels, Inc.
9.875%, 12/15/01 ..................... 392,000
450,000 Revlon Worldwide Corp.
Series B, Step Up
0.000%, 03/15/01 ..................... 349,875
200,000 Rural Cellular Corp., 144A
9.625%, 05/15/08 ..................... 201,000
350,000 S.D. Warren Company
Series B
12.000%, 12/15/04 .................... 386,750
400,000 Sabreliner Corp., 144A
11.000%, 06/15/08 .................... 402,000
400,000 Salem Communications Corp.
Series B
9.500%, 10/01/07 ..................... 416,000
1,500,000 Salomon, Inc.
7.250%, 05/01/01 ..................... 1,542,555
400,000 Samsonite Corp., 144A
10.750%, 06/15/08 .................... 399,000
250,000 SITEL Corp., 144A
9.250%, 03/15/06 ..................... 250,000
400,000 Sprint Spectrum L.P.
11.000%, 08/15/06 .................... 463,000
400,000 Startec Global Communications
Corp., 144A (Units)
12.000%, 05/15/08 .................... 390,000
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
$ 400,000 Styling Technology Corp.,
144A 10.875%, 07/01/08 ..... $ 408,000
400,000 Tenet Healthcare Corp., 144A
8.125%, 12/01/08 ........... 401,000
400,000 Thermadyne Manufacturing
L.L.C., 144A
9.875%, 06/01/08 ........... 403,000
400,000 Trans World Airlines, Inc.,
144A 11.375%, 03/01/06 ..... 402,500
400,000 Tri-State Outdoor Media,
144A 11.000%, 05/15/08 ..... 407,000
400,000 Tropical Sportswear
International Corp., 144A
11.000%, 06/15/08 .......... 405,000
400,000 U.S. Office Products Co.,
144A 9.750%, 06/15/08 ...... 396,000
500,000 United International
Holdings, Inc., Series B,
Step Up 0.000%, 02/15/08 ... 308,750
400,000 Waste Systems
International, Inc., 144A
7.000%, 05/13/05 ........... 410,000
400,000 WCI Steel Inc. Series B
10.000%, 12/01/04 .......... 411,000
500,000 Winstar Communications,
Inc., Step Up
0.000%, 10/15/05 ........... 415,000
400,000 Young Broadcasting, Inc.
Series B
8.750%, 06/15/07 ........... 418,000
------------
44,109,602
------------
Total U.S. Corporate Obligations
(Cost $45,721,766) .................. 45,764,851
------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 5.7%
U.S. Treasury Notes -- 5.7%
4,615,000 U.S. Treasury Note
6.250%, 10/31/01 ........... 4,710,899
------------
4,710,899
------------
Total U.S. Government and Agency
Obligations
(Cost $4,703,091) ................... 4,710,899
------------
Shares Value
- ----------------------------------------------------
PREFERRED STOCKS -- 0.7%
200 Benedek Communications,
144A, PIK, 11.5% ......... $ 196,500
200 Rural Cellular Corp.,
144A, (PIK) .............. 201,000
3,000 S.D. Warren Company
Series B, 14% ............ 150,750
Total Preferred Stocks
(Cost $550,375) ..................... 548,250
------------
Total Investments -- 89.5%
(Cost $74,253,902) 73,605,137
Other assets in excess of liabilities 8,651,718
-- 10.5% ============
Total Net Assets-- 100.0% $82,256,855
============
Notes to the Portfolio of Investments:
REMIC -- Real Estate Mortgage Investment Conduit
FLIRB -- Front Loaded Interest Reduction Bond
Euro -- Securities issued offshore that pay interest and principal
in U.S. Dollars.
Step Up -- Security is a "step up" bond where the coupon
increases or steps up on predetermined date(s).
Variable Rate -- The rates shown on variable rate securities
reflect the current interest rate at June 30, 1998, which are
subject to change based upon the terms of the security, including
varying reset dates.
Yankee -- U.S. Dollar denominated bonds issued by non-U.S.
companies in the U.S.
PIK -- Payment in Kind
144A -- Securities restricted for resale to Qualified
Institutional Buyers
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./International Equity Fund/ June 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------
COMMON STOCKS -- 95.2%
AUTOMOTIVE -- 3.2%
1,686 Bayerische Motoren Werke
AG (BMW) ..................... $ 1,700,913
505 Bayerische Motoren Werke AG
New Shares ................... 502,391
131,000 Honda Motor Co., Ltd. ........ 4,662,893
44,345 Michelin B ................... 2,559,762
-------------
9,425,959
-------------
BANKING -- 14.4%
107,226 ABN Amro Holdings ............ 2,509,046
204,060 Banco De Santander ........... 5,231,792
695,000 Bangkok Bank Co., Ltd ........ 854,364
286,725 Barclay's Plc ................ 8,281,105
36,240 Bayerische Vereinsbank AG .... 3,081,846
487,825 Development Bank of Singapore. 2,699,721
436,824 Lloyds TSB Group Plc ......... 6,100,378
396,900 National Australia Bank Ltd. . 5,235,071
69,385 National Westminster Bank Plc* 1,239,882
30,300 Royal Bank of Canada ......... 1,823,509
14,375 UBS AG - Registered .......... 5,345,094
-------------
42,401,808
-------------
BEVERAGES, FOOD & TOBACCO-- 9.4%
843,510 B.A.T. Industries ............ 8,423,207
208,130 Cadbury Schweppes Plc ........ 3,222,602
389,406 Diageo Plc ................... 4,635,762
260,800 Fraser & Neave Ltd. .......... 700,822
4,017 Nestle ....................... 8,596,442
42,840 Nutricia Verenigde
Bedrijven NV ................. 1,340,948
520,650 San Miguel Corp. B ........... 686,685
-------------
27,606,468
-------------
BUILDING MATERIALS -- 0.5%
419,000 City Developments ............ 1,170,560
278,000 Hume Industries .............. 209,112
-------------
1,379,672
-------------
COMMERCIAL SERVICES -- 2.0%
17,540 CIE Generale des Eaux ........ 3,745,290
140,000 Dai Nippon Printing Co., Ltd. 2,234,386
-------------
5,979,676
-------------
COMMUNICATIONS -- 8.6%
15,985 Alcatel Alsthom .............. 3,254,621
313,550 Cable & Wireless ............. 3,808,566
77,900 Koninklijke - KPN NV ......... 2,998,472
644,196 Telecom Italia SpA ........... 4,742,056
721,650 Telstra Corporation Ltd. ..... 1,850,022
77,900 TNT Post Group* .............. 1,991,319
534,250 Vodafone Group Plc ........... 6,783,479
-------------
25,428,535
-------------
CONGLOMERATES -- 1.2%
2,392 Alusuisse Lonza Holdings ..... 3,034,133
757,000 Sime-Darby Berhad ............ 521,952
-------------
3,556,085
-------------
ELECTRIC UTILITIES -- 2.9%
36,225 EDP - Electricidade de
Portugal SA .................. 842,083
134,315 Scottish Power Plc ........... 1,185,504
60,150 Veba AG ...................... 4,098,783
3,313 Viag AG ...................... 2,279,594
-------------
8,405,964
-------------
ELECTRICAL EQUIPMENT -- 2.0%
13,600 Keyence Corp. ................ 1,479,698
224,770 Siebe Plc .................... 4,496,591
-------------
5,976,289
-------------
ELECTRONICS -- 4.1%
63,000 Murata Manufacturing Co, Ltd.. 2,042,725
24,000 Rohm Co. Ltd. ................ 2,464,241
88,750 Sony Corp. ................... 7,641,757
-------------
12,148,723
-------------
ENTERTAINMENT & LEISURE -- 3.0%
328,950 Granada Group Plc ............ 6,048,338
519,700 Ladbroke Group ............... 2,867,964
-------------
8,916,302
-------------
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./International Equity Fund/ June 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------
FINANCIAL SERVICES -- 1.4%
595,510 Grupo Financiero Banamex* .... $ 1,127,896
126,600 HSBC Holdings Plc ............ 3,096,142
-------------
4,224,038
-------------
FOOD RETAILERS -- 1.4%
55,175 Koninklijke Ahold NV ......... 1,771,156
327,150 TI Group Plc ................. 2,483,592
-------------
4,254,748
-------------
FOREST PRODUCTS & PAPER -- 0.1%
98,000 Jefferson Smurfit Group Plc... 291,148
-------------
HEAVY MACHINERY -- 3.8%
111,340 Mannesmann AG ................ 11,294,162
-------------
INSURANCE -- 10.0%
26,870 Axa .......................... 3,022,082
179,075 International Nederlanden
Groep......................... 11,725,740
471,030 Prudential Corp. ............. 6,208,694
3,337 Schw Ruckversicher ........... 8,439,237
-------------
29,395,753
-------------
MEDIA - BROADCASTING
& PUBLISHING -- 3.6%
171,600 Elsevier NV .................. 2,589,736
791,900 News Corp. Ltd. .............. 6,463,171
253,837 Singapore Press Holdings Ltd.. 1,697,763
-------------
10,750,670
-------------
MEDICAL SUPPLIES -- 2.0%
225,000 Takeda Chemical
Industries Ltd. .............. 5,982,255
-------------
OFFICE EQUIPMENT -- 2.5%
321,000 Canon ........................ 7,285,705
-------------
OIL & GAS -- 5.2%
222,877 Ente Nazionale Idrocarburi
SpA................................... 1,460,714
58,080 Royal Dutch Petroleum Co. .... 3,220,600
743,550 Shell Transport & Trading .... 5,235,336
42,790 Total SA - Series B .......... 5,562,811
-------------
15,479,461
-------------
PHARMACEUTICALS -- 10.3%
231,000 Glaxo Wellcome Plc ........... $ 6,933,765
75,205 Hoechst AG ................... 3,753,925
5,464 Novartis ..................... 9,092,188
395 Roche Holding AG ............. 3,878,877
154,200 Zeneca Group ................. 6,625,018
-------------
30,283,773
-------------
RETAILERS -- 3.1%
169,000 KAO Corp. .................... 2,605,896
135,300 Kingfisher ................... 2,178,465
371,700 Safeway Plc .................. 2,443,481
157,000 Shiseido Co., Ltd. ........... 1,782,829
-------------
9,010,671
-------------
TELEPHONE SYSTEMS -- 0.5%
11,360 Tele Danmark A/S - B ......... 1,090,240
8,400 Telefonica SA ................ 389,026
-------------
1,479,266
-------------
Total Common Stocks
(Cost $219,231,093) .................. 280,957,131
-------------
PREFERRED STOCKS -- 0.3%
MEDIA - BROADCASTING
& PUBLISHING -- 0.3%
104,200 News Corp. Ltd. .............. 738,163
-------------
Total Preferred Stocks
(Cost $397,804) ...................... 738,163
-------------
Total Investments -- 95.5%
(Cost $219,628,897) 281,695,294
Other assets in excess of liabilities
-- 4.5% 13,389,936
=============
Total Net Assets -- 100.0% $295,085,230
=============
Notes to the Portfolio of Investments:
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
- --------------------------------------------------------------------------------
Investments by Country
American Odyssey Funds, Inc. / International Equity Fund / June 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
Percentage of
COUNTRY Net Assets
------------------------------------------------------------------------
Great Britain 30.2
Switzerland 13.0
Japan 12.9
Netherlands 9.5
Germany 9.1
France 6.2
Australia 4.8
Singapore 2.1
Italy 2.1
Spain 1.9
Hong Kong 1.1
Canada 0.6
Mexico 0.4
Denmark 0.4
Thailand 0.3
Portugal 0.3
Malaysia 0.3
Philippines 0.2
Ireland 0.1
-------
Total 95.5%
=======
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Emerging Opportunities Fund/June 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.5%
AEROSPACE & DEFENSE -- 2.6%
120,938 AAR Corp. ................................................. $3,575,230
124,200 Kellstrom Industries, Inc.* ............................... 3,597,913
------------
7,173,143
------------
APPAREL RETAILERS -- 2.2%
102,200 AnnTaylor Stores Corp.* ................................... 2,165,363
13,100 Brylane, Inc.* ............................................ 602,600
35,100 Claire's Stores, Inc. ..................................... 719,550
178,600 The Sports Authority, Inc.* ............................... 2,667,838
------------
6,155,351
------------
AUTOMOTIVE -- 1.3%
19,800 Keystone Automotive Industries, Inc.* ..................... 457,875
112,495 Republic Industries, Inc.* ................................ 2,812,375
15,000 Wabash National Corp. ..................................... 386,250
------------
3,656,500
------------
BANKING -- 1.6%
30,500 Alliance Bancorp, Inc. .................................... 728,188
12,600 Bank of Commerce-San Diego ................................ 236,250
25,100 Bank Plus Corporation* .................................... 307,475
27,900 Bay Bancshares, Inc. ...................................... 544,050
9,900 Community Capital Corp.* .................................. 155,925
53,800 IBS Financial Corp. ....................................... 1,022,200
17,100 Roslyn Bancorp, Inc. ...................................... 381,544
44,140 Sovereign Bancorp, Inc. ................................... 721,411
22,700 Union Bancorp, Inc. ....................................... 419,950
------------
4,516,993
------------
BEVERAGES, FOOD & TOBACCO -- 0.8%
59,800 Aquapenn Spring Water Co., Inc.* .......................... 515,775
21,000 Armanino Foods of Distinction, Inc.* ...................... 17,063
44,450 Flowers Industries, Inc. .................................. 908,447
53,100 Scheid Vineyards, Inc. Class A* ........................... 368,381
27,750 Tasty Baking .............................................. 431,859
------------
2,241,525
------------
BUILDING MATERIALS -- 1.2%
50,500 American Residential
Services, Inc.* ........................................... 568,125
15,600 Associated Materials, Inc.* ............................... 208,650
13,000 Comfort Systems USA, Inc.* ................................ 303,875
182,200 Dravo Corp.* .............................................. 1,673,963
19,200 Group Maintenance America Corp.* .......................... 345,600
10,000 Service Experts, Inc.* .................................... 345,000
------------
3,445,213
------------
CHEMICALS -- 1.0%
23,600 Calgon Carbon Corp. ....................................... 234,525
70,100 EVI Weatherford, Inc.* .................................... 2,602,463
------------
2,836,988
------------
COMMERCIAL SERVICES -- 11.0%
168,443 Allied Waste Industries, Inc.* ............................ 4,042,604
49,895 Ambassadors International, Inc.* .......................... 1,512,442
59,500 American Banknote Corp.* .................................. 182,219
68,185 American Disposal Services, Inc.* ......................... 3,196,172
28,700 ATG, Inc.* ................................................ 218,838
99,755 Budget Group, Inc. - Class A* ............................. 3,185,925
81,000 Caribiner International, Inc.* ............................ 1,417,500
112,197 Concord EFS, Inc. ......................................... 2,931,147
25,100 GTS Duratek, Inc.* ........................................ 260,413
16,200 Healthworld Corp.* ........................................ 200,475
170,100 ICF International, Inc. Class A* .......................... 372,094
70,700 Interim Services, Inc. .................................... 2,271,238
149,500 Laidlaw Environmental Services* ........................... 541,938
118,800 Lo-Jack Corp.* ............................................ 1,477,575
17,400 Madison Gas & Electric Co. ................................ 398,025
191,334 Personnel Group of American, Inc. ......................... 3,826,680
81,362 Rental Service Corp.* ..................................... 2,735,797
68,100 Sotheby's, Inc. ........................................... 1,523,738
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Emerging Opportunities Fund/June 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
25,700 St. Joseph Light & Power ................................. $ 478,663
-------------
30,773,483
-------------
COMMUNICATIONS -- 1.0%
159,430 PairGain Technologies, Inc.* ............................. 2,780,061
-------------
COMPUTER SERVICES -- 1.8%
84,500 BISYS Group, Inc.* ....................................... 3,464,500
11,231 Cadence Design Systems, Inc. ............................. 350,969
3,300 Gerber Scientific, Inc. .................................. 75,075
23,800 Mentor Graphics Corp.* ................................... 251,388
70,700 Red Brick Systems, Inc.* ................................. 291,638
44,600 Sequent Computer* ........................................ 537,988
-------------
4,971,558
-------------
COMPUTER SOFTWARE -- 5.6%
41,500 Information Resources, Inc.* ............................. 767,750
68,695 Intuit, Inc.* ............................................ 4,207,569
15,300 Marcam Solutions, Inc.* .................................. 275,400
109,417 Midway Games, Inc.* ...................................... 1,709,641
329,700 Novell, Inc.* ............................................ 4,203,675
52,500 Object Design, Inc.* ..................................... 315,000
88,133 PRI Automation, Inc.* .................................... 1,503,769
29,600 Santa Cruz Operation, Inc.* .............................. 140,600
145,217 Summit Design, Inc.* ..................................... 2,132,875
91,800 Versant Object Technology Corp. .......................... 367,200
-------------
15,623,479
-------------
ELECTRIC UTILITIES -- 1.7%
21,700 Cleco Corp. .............................................. 645,575
16,700 DPL, Inc. ................................................ 302,688
10,200 Eastern Utilities Associates ............................. 267,750
14,300 Empire District Electric Co. ............................. 298,513
179,700 Niagara Mohawk Power Corp.* .............................. 2,684,269
22,400 TNP Enterprises, Inc. .................................... 691,600
-------------
4,890,395
-------------
ELECTRICAL EQUIPMENT -- 0.2%
16,700 General Signal Corp. ..................................... 601,200
-------------
ELECTRONICS -- 3.3%
72,470 Hutchinson Technology, Inc.* ............................. 1,974,808
98,236 PMC-Sierra, Inc.* ........................................ 4,604,813
145,720 Semtech Corp. ............................................ 2,577,423
-------------
9,157,044
-------------
ENTERTAINMENT & LEISURE -- 2.2%
50,200 Bally Total Fitness Holdings Corp.* ...................... 1,807,200
66,911 King World Productions, Inc. ............................. 1,706,231
39,199 Premier Parks, Inc.* ..................................... 2,611,633
-------------
6,125,064
-------------
ENVIRONMENTAL CONTROLS -- 0.1%
22,800 AIM Safety Co.* .......................................... 178,301
-------------
FINANCIAL SERVICES -- 0.1%
32,350 First Alliance Corp. ..................................... 226,450
-------------
FOOD RETAILERS -- 1.6%
140,448 General Nutrition Co.,
Inc.* .................................................... 4,371,444
-------------
HEALTH CARE PROVIDERS -- 6.8%
143,154 American Retirement Corp.* ............................... 2,540,984
106,180 Atria Communities, Inc.* ................................. 1,831,605
64,166 Health Management Associates, Inc. - Class A ............. 2,145,551
288,200 Mid Atlantic Medical Services* ........................... 3,314,300
90,289 Phycor, Inc.* ............................................ 1,495,412
101,800 Physician Reliance Network, Inc.* ........................ 1,164,338
115,892 Province Healthcare Company* ............................. 3,208,760
96,854 Sunrise Assisted Living, Inc.* ........................... 3,329,356
-------------
19,030,306
-------------
HEAVY MACHINERY -- 1.9%
32,469 Kennametal, Inc. ......................................... 1,355,581
13,700 Smith International Inc.* ................................ 476,931
34,500 Stewart & Stevenson Services, Inc. ....................... 621,000
42,700 Tokheim Corp.* ........................................... 875,350
17,600 U.S. Filter Corp.* ....................................... 493,900
13,600 Varco International, Inc. ................................ 269,450
19,000 Watsco, Inc. ............................................. 668,563
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Emerging Opportunities Fund/June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
10,800 YORK International Corp. ................................. $ 470,475
-------------
5,231,250
-------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES--0.3%
22,500 American Woodmark Corp. .................................. 615,938
17,500 Global-Tech Appliances, Inc.* ............................ 251,563
-------------
867,501
-------------
INSURANCE -- 2.2%
101,000 Annuity And Life Re (Holdings), Ltd.* .................... 2,234,625
16,800 Gryphon Holdings, Inc.* .................................. 277,200
54,736 Hartford Life, Inc. - Class A ............................ 3,116,531
29,800 Motor Club of America* ................................... 454,450
-------------
6,082,806
-------------
LODGING -- 4.3%
104,431 CapStar Hotel Co.* ....................................... 2,924,068
287,514 Extended Stay America, Inc.* ............................. 3,234,533
142,893 Prime Hospitality Corp.* ................................. 2,491,697
72,568 Sun International Hotels Ltd.* ........................... 3,301,844
-------------
11,952,142
-------------
MEDIA - BROADCASTING & PUBLISHING -- 2.5%
31,300 Central European Media Enterprises Ltd.* ................. 676,863
110,000 Readers Digest Association, Inc. ......................... 2,983,750
130,166 USA Networks, Inc. ....................................... 3,270,421
-------------
6,931,034
-------------
MEDICAL & BIO-TECHNOLOGY -- 0.1%
40,200 NeoPath, Inc.* ........................................... 288,938
20,000 RiboGene, Inc.* .......................................... 138,750
-------------
427,688
-------------
MEDICAL SUPPLIES -- 0.6%
104,465 Schick Technologies, Inc.* ............................... 1,612,678
-------------
METALS -- 3.6%
6,958 Alumax, Inc. ............................................. 322,677
73,400 Armco, Inc.* ............................................. 467,925
266,600 Battle Mountain Gold Co. ................................. 1,582,938
60,300 Birmingham Steel Corp. ................................... 746,213
66,200 Cambior, Inc. ............................................ 388,925
27,000 Cyprus Amax Minerals Co. ................................. 357,750
74,200 Hecla Mining Co.* ........................................ 394,188
117,200 Homestake Mining Co. ..................................... 1,215,950
25,300 Howmet International, Inc.* .............................. 379,500
95,800 Kaiser Aluminum Corp.* ................................... 916,088
26,400 LTV Corp. ................................................ 252,450
54,700 Newmont Mining Corp. ..................................... 1,292,288
393,200 TVX Gold, Inc.* .......................................... 1,204,175
33,900 Worthington Industries, Inc. ............................. 510,619
-------------
10,031,686
-------------
OIL & GAS DISTRIBUTION -- 1.1%
23,400 Eastern Enterprises ...................................... 1,003,275
17,300 MarketSpan Corporation* .................................. 517,919
19,200 MCN Energy Group Inc. .................................... 477,600
7,200 NICOR, Inc. .............................................. 288,900
10,600 Peoples Energy Corp. ..................................... 409,425
15,400 Washington Gas Light Co. ................................. 411,950
-------------
3,109,069
-------------
OIL & GAS EXPLORATION -- 9.5%
80,700 Barrett Resources Corp.* ................................. 3,021,206
15,100 Bellwether Exploration Co.* .............................. 117,969
41,200 Devon Energy Corp. ....................................... 1,439,425
385,900 EEX Corporation* ......................................... 3,617,813
91,800 Forest Oil Corp.* ........................................ 1,313,888
100,800 HS Resources, Inc.* ...................................... 1,467,900
23,200 Nuevo Energy Co.* ........................................ 745,300
233,700 Oryx Energy Co.* ......................................... 5,170,613
118,300 Pioneer Natural Resources Co. ............................ 2,824,413
308,600 Santa Fe Energy Resources, Inc. .......................... 3,317,450
152,900 Seagull Energy Corp.* .................................... 2,532,406
38,600 Snyder Oil Corp. ......................................... 769,588
39,000 Titan Exploration, Inc.* ................................. 346,125
-------------
26,684,096
-------------
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Emerging Opportunities Fund/June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL & GAS FIELD SERVICES -- 7.2%
17,400 BJ Services Co. ........................................ $ 505,688
26,500 Cliffs Drilling Co.* ................................... 869,531
73,700 Global Marine, Inc.* ................................... 1,377,269
40,200 Hanover Compressor Co.* ................................ 1,087,913
14,600 Helmerich & Payne, Inc. ................................ 324,850
13,400 Marine Drilling Company, Inc.* ......................... 214,400
25,200 Nabors Industries, Inc* ................................ 499,275
200,660 Ocean Energy, Inc.* .................................... 3,925,411
186,700 Oceaneering International, Inc.* ....................... 3,313,925
62,500 Parker Drilling Co.* ................................... 441,406
52,400 Petroleum Geo-Services ADR ............................. 1,598,200
126,660 Precision Drilling Corp. ............................... 2,485,703
90,400 Pride International, Inc.* ............................. 1,531,150
52,292 R&B Falcon Corp.* ...................................... 1,183,107
14,400 UTI Energy Corp. ....................................... 185,400
44,300 Western Gas Resources, Inc. ............................ 647,888
-------------
20,191,116
-------------
PHARMACEUTICALS -- 4.4%
62,800 Alpharma, Inc. ......................................... 1,381,600
42,600 Carter-Wallace ......................................... 769,463
22,700 Fuisz Technologies, Ltd* ............................... 246,863
43,500 Kos Pharmaceuticals, Inc.* ............................. 440,438
55,200 Matrix Pharmaceuticals, Inc.* .......................... 241,500
99,600 Mylan Labs, Inc. ....................................... 2,994,225
314,357 PharMerica, Inc.* ...................................... 3,791,931
106,458 ViroPharma, Inc.* ...................................... 2,475,149
-------------
12,341,169
-------------
REAL ESTATE -- 0.5%
54,500 Atlantic Gulf Communities* ............................. 112,406
6,200 Clarion Commercial Holdings, Inc. - Class A ............ 95,325
19,300 Heartland Partners LP .................................. 342,575
6,800 Storage USA, Inc. REIT ................................. $ 238,000
13,400 Trizec Hahn Corp. ...................................... 287,263
14,900 Washington Real Estate Investment Trust ................ 258,888
-------------
1,334,457
-------------
RESTAURANTS -- 3.1%
91,500 Brinker International, Inc.* ........................... 1,761,375
30,300 CKE Restaurants, Inc. .................................. 1,249,875
15,900 Friendly Ice Cream Corp.* .............................. 268,313
85,604 Mortons Restaurant Group, Inc.* ........................ 2,059,846
82,304 Outback Steakhouse, Inc.* .............................. 3,209,856
71,900 Shoney's, Inc.* ........................................ 251,650
-------------
8,800,915
-------------
RETAILERS -- 5.7%
133,456 Central Garden & Pet Co.* .............................. 4,153,818
44,900 Homebase, Inc. ......................................... 356,394
102,578 Linens n Things, Inc. .................................. 3,135,040
44,900 Marker International* .................................. 84,188
57,000 Michaels Stores* ....................................... 2,011,028
25,400 Pier 1 Imports, Inc. ................................... 606,425
117,149 Renters Choice, Inc.* .................................. 3,324,103
56,127 Trans World Entertainment Corp. ........................ 2,420,477
-------------
16,091,473
-------------
TELEPHONE SYSTEMS -- 0.2%
30,700 Century Communications Corp.* .......................... 575,625
-------------
TEXTILES, CLOTHING & FABRICS-- 0.4%
25,800 Osh Kosh B Gosh Class A ................................ 1,148,100
-------------
TRANSPORTATION -- 1.8%
46,448 Coach USA, Inc.* ....................................... 2,119,190
34,700 Halter Marine Group, Inc. .............................. 522,669
23,700 Kirby Corp.* ........................................... 598,425
69,000 Offshore Logistics, Inc.* .............................. 1,224,750
30,300 Transport Corporation of America, Inc.* ................ 499,950
10,400 Willis Lease Finance Corp.* ............................ 237,900
-------------
5,202,884
-------------
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Emerging Opportunities Fund/June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Total Investments -- 95.5%
(Cost $278,672,414) $267,370,187
Other assets in excess of liabilities -- 4.5% 12,668,816
------------
Total Net Assets-- 100.0% $280,039,003
============
Notes to the Portfolio of Investments:
REIT - Real Estate Investment Trust
ADR - American Depository Receipt
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund / June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.3%
AIRLINES -- 3.5%
101,400 AMR Corp. ............................................... $ 8,441,550
62,800 Delta Air Lines, Inc. ................................... 8,116,900
-------------
16,558,450
-------------
AUTOMOTIVE -- 2.7%
210,700 Ford Motor Co. .......................................... 12,431,299
-------------
BANKING -- 12.7%
55,231 Associates First Capital................................. 4,245,883
Corp. ........................
131,100 BankAmerica Corp. ....................................... 11,331,956
30,900 Bankers Trust New York Corp. ............................ 3,586,331
158,456 Chase Manhattan Corp. ................................... 11,963,427
112,200 Fleet Financial Group, Inc. ............................. 9,368,700
101,300 H.F. Ahmanson & Co. ..................................... 7,192,300
156,375 Nationsbank Corp. ....................................... 11,962,687
-------------
59,651,284
------------
BEVERAGES, FOOD & TOBACCO-- 4.4%
141,100 Anheuser-Busch Co., Inc. ................................ 6,658,156
214,400 Conagra, Inc. ........................................... 6,793,800
171,400 Pepsico, Inc. ........................................... 7,059,538
-------------
20,511,494
-------------
CHEMICALS -- 0.6%
41,600 Eastman Chemical Co. .................................... 2,589,600
-------------
COMMUNICATIONS -- 1.6%
181,700 SBC Communications, Inc. ................................ 7,268,000
-------------
COMPUTER SOFTWARE
& PROCESSING -- 1.9%
227,198 Electronic Data
Systems Corp. ........................................... 9,087,920
-------------
COMPUTERS & INFORMATION -- 4.2%
185,600 Compaq Computer ......................................... 5,266,400
64,000 Hewlett Packard Co. ..................................... 3,832,000
91,600 IBM Corp. ............................................... 10,516,825
-------------
19,615,225
-------------
ELECTRIC UTILITIES -- 6.2%
121,700 Consolidated Edison, Inc. ............................... 5,605,806
130,100 Edison International .................................... 3,846,081
71,500 FPL Group, Inc. ......................................... 4,504,500
261,400 PacifiCorp .............................................. 5,914,175
298,885 PG&E Corp. .............................................. 9,433,558
-------------
29,304,120
-------------
ELECTRICAL EQUIPMENT -- 1.6%
83,100 General Electric Co. .................................... 7,562,100
-------------
ELECTRONICS -- 2.1%
97,500 Xerox Corp. ............................................. 9,908,438
-------------
ENTERTAINMENT & LEISURE -- 4.1%
196,800 Carnival Corp. A ........................................ 7,798,200
94,570 Eastman Kodak Co. ....................................... 6,909,521
121,000 Hasbro, Inc. ............................................ 4,756,813
-------------
19,464,534
-------------
FINANCIAL SERVICES -- 5.5%
149,400 Federal National
Mortgage Association .................................... 9,076,050
180,524 Morgan Stanley, Dean Witter
and Co. ................................................. 16,495,380
-------------
25,571,430
-------------
FOREST PRODUCTS & PAPER -- 1.0%
114,400 International Paper Co. ................................. 4,919,200
-------------
HEALTH CARE PROVIDERS -- 1.4%
230,100 Columbia/HCA
Healthcare Corp. ........................................ 6,701,663
-------------
HEAVY CONSTRUCTION -- 0.6%
130,200 Foster Wheeler Corp. .................................... 2,791,163
-------------
HEAVY MACHINERY -- 0.5%
40,700 Caterpiller Tractor, Inc. ............................... 2,152,013
-------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES
-- 1.8%
124,300 Whirlpool Corp. ......................................... 8,545,625
-------------
INSURANCE -- 7.3%
109,300 Aetna, Inc. ............................................. 8,320,463
105,283 Allstate Corp. .......................................... 9,639,975
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund / June 30, 1998 (unaudited)
(continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
48,800 Hartford Financial Services
Group, Inc. .............................................. $ 5,581,500
38,600 TransAmerica Corp. ....................................... 4,443,825
102,868 Travelers Group, Inc.(a) ................................. 6,236,373
------------
34,222,136
------------
MEDIA - BROADCASTING
& PUBLISHING -- 5.9%
307,600 MediaOne Group, Inc.* .................................... 13,515,174
73,700 Time Warner, Inc. ........................................ 6,296,744
113,500 Tribune Co. .............................................. 7,810,219
------------
27,622,137
------------
MEDICAL SUPPLIES -- 1.2%
107,500 Baxter International, Inc. ............................... 5,784,844
------------
METALS -- 0.9%
75,900 Reynolds Metals Co. ...................................... 4,245,656
------------
OIL & GAS -- 8.2%
117,200 Amerada Hess Corp. ....................................... 6,365,425
58,400 Atlantic Richfield Co. ................................... 4,562,500
64,200 Coastal Corp. ............................................ 4,481,963
157,100 Exxon Corp. .............................................. 11,203,194
65,800 Mobil Corp. .............................................. 5,041,925
113,700 Texaco, Inc. ............................................. 6,786,469
------------
38,441,476
------------
PHARMACEUTICALS -- 3.2%
63,000 Bristol Myers Squibb Co. ................................. 7,241,063
86,100 Schering Plough Corp. .................................... 7,888,913
------------
15,129,976
------------
RETAILERS -- 4.5%
128,384 Federated Department
Stores, Inc.* ............................................ 6,908,664
119,400 J.C. Penney Co., Inc. .................................... 8,634,113
93,100 Sears Roebuck & Co. ...................................... 5,684,919
------------
21,227,696
------------
TELEPHONE SYSTEMS -- 9.1%
208,900 AT&T Corp. ............................................... 11,933,412
253,356 Bell Atlantic Corp. ...................................... 11,559,367
121,359 GTE Corporation .......................................... 6,750,594
253,500 WorldCom, Inc.* ..........................................$ 12,278,905
------------
42,522,278
------------
TRANSPORTATION -- 1.6%
50,800 FMC Corp.* ............................................... 3,463,925
125,200 Ryder System ............................................. 3,951,625
------------
7,415,550
------------
Total Investments -- 98.3%
(Cost $330,876,595)............................................... 461,245,307
Other assets in excess of liabilities............................... 7,847,095
-- 1.7%
============
Total Net Assets-- 100.0%...........................................$469,092,402
=============
Notes to the Portfolio of Investments:
(a) An affiliate of American Odyssey Funds
Management Inc. Received in exchange
for Salomon Brothers stock upon
acquisition by Travelers Group Inc.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
FOREIGN OBLIGATIONS -- 10.4%
Corporate Debt
$ 600,000 Comtel Brasileira
Ltd., 144A, (Yankee)
10.750%, 09/26/04 ........ $ 555,000
3,500,000 Petroleos Mexicanos,
(Yankee)
8.850%, 09/15/07 ......... 3,478,895
1,000,000 Sears Overseas Finance,
Step Up
0.000%, 07/12/98 ......... 999,110
2,300,000 Sumitomo Bank Treasury
144A, Variable Rate
9.400%, 12/29/49 ......... 2,285,832
2,021,730 YPF Sociedad Anonima,
(Yankee)
7.000%, 10/26/02 ......... 2,031,758
-------------
9,350,595
-------------
Government Obligations
910,000 Ministry of Finance
Russia, 144A
12.750%, 06/24/28 ........ 792,337
2,000,000 Quebec Province
(Yankee)
5.670%, 02/27/26 ......... 2,125,920
3,220,500 Republic of Argentina,
Variable Rate
6.625%, 03/31/05 ......... 2,849,659
703,000 Republic of Argentina
Series FRB, Variable Rate
6.313%, 03/31/05 ......... 621,033
4,223,164 Republic of Brazil - C
Bond, Variable Rate
8.000%, 04/15/14 ......... 3,103,853
2,856,000 Republic of Brazil -
Industrial, Variable rate
6.875%, 01/01/01 ......... 2,766,893
3,780,000 Republic of Korea
8.875%, 04/15/08 ......... 3,436,844
-------------
15,696,539
-------------
Total Foreign Obligations
(Cost $25,411,965) ...................$ 25,047,134
-------------
MUNICIPAL OBLIGATIONS -- 0.2%
Municipal Obligations
$ 600,000 Long Island Power
Authority Revenue Bond
5.125%, 12/01/22 ......... 593,376
------------
Total Municipal Obligations
(Cost $585,705) ...................... 593,376
-------------
U.S. CORPORATE OBLIGATIONS -- 19.3%
Asset Backed and Mortgage Backed
1,020,000 Nomura Assets Securities
Corp., REMIC
7.120%, 04/13/36 ......... 1,081,470
------------
Corporate Bonds & Notes
2,000,000 Associates Corporation of
North America
8.150%, 08/01/09 ......... 2,295,660
1,000,000 Cit Group Holdings
8.375%, 11/01/01 ......... 1,067,380
1,500,000 Citicorp Capital I
7.933%, 02/15/27 ......... 1,631,805
1,350,000 Commonwealth Edison Co.
8.375%, 02/15/23 ......... 1,458,513
500,000 Commonwealth Edison Co.
8.625%, 02/01/22 ......... 542,650
400,000 Dean Witter
Discover & Co.
6.250%, 03/15/00 ......... 401,676
2,500,000 Ford Motor Co.
7.700%, 05/15/69 ......... 2,853,650
2,000,000 Ford Motor Credit Corp.
5.750%, 01/25/01 ......... 1,986,960
350,000 General Motors
Acceptance Corp.
9.625%, 12/15/01 ......... 387,335
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / June 30, 1998 (unaudited)
(continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
$ 4,700,000 General Motors
Acceptance Corp. - Units
0.000%, 06/15/15 ......... $ 1,530,414
359,345 GG1B Funding Corp.
7.430%, 01/15/11 ......... 361,055
550,000 IBJ Preferred Cap L.L.C.,
144A, Variable Rate
8.790%, 12/29/49 ......... 502,233
2,000,000 International Paper Co.
7.000%, 06/01/01 ......... 2,039,340
2,000,000 JP Morgan Co.,
Variable Rate
6.000%, 02/15/12 ......... 1,852,600
1,500,000 JPM Capital Trust I
7.540%, 01/15/27 ......... 1,557,135
2,000,000 Lockheed Martin
6.850%, 05/15/01 ......... 2,042,380
600,000 Loews Corp.
7.625%, 06/01/23 ......... 609,978
700,000 NBD Bank N.A.
8.250%, 11/01/24 ......... 840,721
600,000 News America Holdings
8.250%, 10/17/46 ......... 682,314
400,000 News America Inc.
6.750%, 01/09/38 ......... 417,640
1,400,000 News America, Inc., 144A
7.125%, 04/08/28 ......... 1,394,680
900,000 Niagara Mohawk Power
Series G
7.750%, 10/01/08 ......... 918,900
900,000 Niagara Mohawk Power
Series H, Step Up
0.000%, 07/01/10 ......... 612,540
2,000,000 Niagara Mohawk
Power Corp.
7.750%, 05/15/06 ......... 2,139,760
740,000 Philip Morris Co., Inc.
7.000%, 07/15/05 ......... 757,057
$ 1,600,000 Republic of New York Corp.
7.200%, 07/15/47 ......... $ 1,720,768
2,000,000 RJR Nabisco, Inc.
6.850%, 06/15/05 ......... 2,005,980
200,000 RJR Nabisco, Inc.
8.500%, 07/01/07 ......... 207,662
380,000 RJR Nabisco, Inc.
8.750%, 08/15/05 ......... 396,291
2,000,000 Southern California Edison
6.500%, 06/01/01 ......... 2,029,260
400,000 Southern Union Co.
7.600%, 02/01/24 ......... 424,692
950,000 TCI Communications, Inc.
8.750%, 08/01/15 ......... 1,143,724
1,860,000 TCI Communications, Inc.
9.650%, 03/31/27 ......... 2,278,444
800,000 Telecommunications, Inc.
7.875%, 08/01/13 ......... 892,824
2,000,000 Time Warner Entertainment
8.375%, 03/15/23 ......... 2,342,620
1,000,000 Time Warner Entertainment
8.375%, 07/15/33 ......... 1,182,210
-------------
45,508,851
-------------
Total U.S. Corporate Obligations
(Cost $43,236,816) ................... 46,590,321
-------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS --67.0%
U.S. Governmnt Agency Mortgage Backed
Obligations
8,314,048 Federal Home Loan
Mortgage Corp.
7.000%, 01/01/26 ......... 8,449,084
20,604,508 Federal National
Mortgage Association
6.500%, 09/01/27 ......... 20,523,739
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / June 30, 1998 (unaudited)
(continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
$11,054,308 Federal National
Mortgage Association
6.500%, 03/01/28 ......... $11,019,675
14,276,221 Federal National
Mortgage Association
7.000%, 01/01/28 ......... 14,480,085
9,932,411 Federal National
Mortgage Association
7.000%, 03/01/28 ......... 10,074,246
910,071 Federal National
Mortgage Association
7.000%, 04/01/28 ......... 923,067
745,964 Federal National
Mortgage Association
8.500%, 12/01/26 ......... 778,600
1,877,143 Federal National
Mortgage Association
8.500%, 07/01/27 ......... 1,959,268
955,288 Federal National
Mortgage Association
6.000%, 02/01/26 ......... 932,371
965,150 Federal National
Mortgage Association
6.000%, 11/01/27 ......... 941,996
195,193 Government National
Mortgage Association
9.500%, 09/15/30 ......... 207,088
-------------
70,289,219
-------------
U.S. Government Agency Obligations
3,000,000 Federal Home Loan Bank
5.920%, 06/29/00 ......... 3,016,410
3,000,000 Federal Home Loan Bank
6.285%, 07/28/00 ......... 3,037,020
3,000,000 Federal Home Loan
Mortgage Corp.
6.783%, 08/18/05 ......... 3,167,820
3,000,000 Federal National
Mortgage Association
6.140%, 11/25/05 ......... 3,084,510
$20,000,000 Resolution Funding Corp.,
TIGR Coupon Strip
0.000%, 01/15/11 ......... $ 9,723,600
15,000,000 Resolution Funding Corp.,
TIGR Principal Strip
0.000%, 01/15/30 ......... 2,346,150
-------------
24,375,510
-------------
U.S. Treasury Bonds
502,320 3.625%, 04/15/28 II....... 496,197
7,670,000 6.375%, 08/15/27 ......... 8,422,580
-------------
8,918,777
-------------
U.S. Treasury Notes
10,461,018 3.461%, 01/15/07 II ...... 10,130,868
12,092,356 3.646%, 01/15/08 II ...... 11,960,090
1,207,350 3.678%, 07/15/02 II....... 1,194,142
1,410,000 5.500%, 02/28/03 ......... 1,408,900
16,500,000 5.625%, 12/31/02 ......... 16,572,104
100,000 5.625%, 11/30/00 ......... 100,219
3,670,000 5.750%, 10/31/02 ......... 3,699,800
700,000 5.750%, 11/30/02 ......... 705,796
390,000 5.750%, 04/30/03 ......... 393,838
1,300,000 6.625%, 07/31/01 ......... 1,339,403
-------------
47,505,160
-------------
U.S. Treasury Principal Strip
5,000,000 0.000%, 02/15/19 ......... 1,545,350
34,000,000 0.000%, 11/15/21 ......... 8,945,740
-------------
10,491,090
-------------
Total U.S. Government and Agency
Obligations
(Cost $159,004,016) ................ 161,579,756
-------------
PURCHASED OPTIONS -- 0.0%*
162,500 Euro $ Future Call,
Expires September 98,
Strike Price 94.5......... 3,250
141,000 U.S. 5-Year Note Call
Sept. 98.................. 26,438
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / June 30, 1998 (unaudited)
(continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------
Total Purchased Options
(Cost $59,639) ..................... $ 29,688
-------------
SHORT-TERM INVESTMENTS -- 0.9%
U.S. Treasury Bills
$ 2,200,000 U.S. Treasury Bill
5.120%, 09/03/98 ....... 2,179,975
-------------
Total Short-Term Investments
(Cost $2,179,975) .................. 2,179,975
-------------
Total Investments -- 97.8%
(Cost $230,478,116) 236,020,250
Other assets in excess of liabilities
-- 2.2% 5,277,882
=============
Total Net Assets-- 100.0% $241,298,132
=============
Notes to the Portfolio of Investments:
REMIC -- Real Estate Mortgage Investment Conduit
Yankee -- U.S. Dollar denominated bonds issued by non-U.S.
companies in the U.S.
144A - Securities restricted for resale to Qualified
Institutional Buyers
II - Inflation Indexed
Variable rate -- The rates shown on variable rate securities reflect the current
interest rate at June 30, 1998, which are subject to change based upon the
terms of the security, including varying reset dates.
* Less than 0.0%.
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / June 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
FOREIGN OBLIGATIONS -- 17.4%
Corporate Debt
$ 5,000,000 Telecom Corporation of
New Zealand, Ltd. - 144A
6.250%, 02/10/03 .................................... $ 5,001,595
5,700,000 United Utilities Plc,
(Yankee)
6.450%, 04/01/08 .................................... 5,793,970
-------------
10,795,565
-------------
Government Obligations
5,000,000 Manitoba Province,
(Yankee)
6.750%, 03/01/03 .................................... 5,152,850
5,000,000 Republic of Panama (Euro)
7.875%, 02/13/02 .................................... 4,918,965
-------------
10,071,815
-------------
Total Foreign Obligations
(Cost $20,811,015) .............................................. 20,867,380
-------------
U.S. CORPORATE OBLIGATIONS -- 31.1%
Corporate Bonds & Notes
3,000,000 Columbia/HCA
Healthcare Corp.
6.870%, 09/15/03 .................................... 2,919,000
1,500,000 Columbia/HCA
Healthcare Corp.
8.700%, 02/10/10 .................................... 1,612,155
5,500,000 CSX Corp.
7.250%, 05/01/04 .................................... 5,729,845
3,000,000 Nationwide Health
Properties
6.900%, 10/01/37 .................................... 3,087,561
5,000,000 Niagara Mohawk Power
Series F
7.625%, 10/01/05 .................................... 5,028,500
4,200,000 Philip Morris Co., Inc.
6.950%, 06/01/06 .................................... 4,341,721
4,000,000 Praxair, Inc.
6.150%, 04/15/03 .................................... 4,001,640
5,000,000 RJR Nabisco, Inc.
6.700%, 06/15/02 .................................... 5,037,750
5,500,000 Tommy Hilfiger Corp.
6.500%, 06/01/03 .................................... 5,495,160
-------------
37,253,332
-------------
Total U.S. Corporate Obligations
(Cost $37,065,128) .............................................. 37,253,332
-------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 43.4%
U.S. Treasury Notes
16,000,000 5.625%, 11/30/99 .................................... 16,020,000
5,000,000 5.750%, 11/15/00 .................................... 5,026,560
10,000,000 6.250%, 08/31/02 .................................... 10,262,500
20,000,000 6.625%, 06/30/01 .................................... 20,584,400
-------------
51,893,460
-------------
Total U.S. Government and Agency
Obligations
(Cost $51,889,667) .............................................. 51,893,460
-------------
SHORT-TERM INVESTMENTS -- 7.2%
Commercial Paper
2,550,000 Eaton Corp.
6.250%, 07/01/98 .................................... 2,549,557
5,010,000 Prudential Funding Corp.
6.000%, 07/01/98 .................................... 5,009,165
1,000,000 Southern New England
Telecom Corp.
5.550%, 07/20/98 .................................... 995,221
-------------
8,553,943
-------------
Total Short-Term Investments
(Cost $8,553,943) ............................................... 8,553,943
-------------
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / June 30, 1998
(unaudited) (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Total Investments -- 99.1%
(Cost $118,319,753) $118,568,115
Other assets in excess of liabilities -- 0.9% 1,071,647
-------------
Total Net Assets-- 100.0% $119,639,762
=============
Notes to the Portfolio of Investments:
144A -- Securities restricted for resale to Qualified
Institutional Buyers
Yankee -- U.S. Dollar denominated bonds issued by
non-U.S. companies in the U.S.
Euro -- Bonds issued offshore that pay interest and
principal in U.S. Dollars.
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
American Odyssey Funds, Inc. / June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
NOTE 1. Organization
American Odyssey Funds, Inc., (the "Company"), was organized as a Maryland
corporation in December 1992. It is registered under the Investment Company Act
of 1940 as an open-end diversified management investment company. It consists of
six separate funds (the "Fund(s)"): Global High-Yield Bond Fund, International
Equity Fund, Emerging Opportunities Fund, Core Equity Fund, Long-Term Bond Fund
and Intermediate-Term Bond Fund. Prior to May 1, 1998, the Global High-Yield
Bond Fund was named the Short-Term Bond Fund and had a substantially different
investment objective and investment program. Shares of the Funds are offered
only to life insurance company separate accounts to serve as the underlying
investment vehicle for variable annuity and variable life insurance contracts;
qualified retirement plans, as permitted by Treasury regulations; and insurance
companies and their affiliates.
NOTE 2. Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
a) Securities Valuation
Securities traded on a national exchange and those traded on over-the-counter
markets are valued at the last sales price; if there was no sale on such day,
the securities are valued at the mean between the most recently quoted bid and
asked prices. Securities for which market quotations are not readily available
are valued in good faith at fair value using methods determined by the Board of
Directors. Short-term securities which mature in 60 days or less are valued at
amortized cost, which approximates market value, unless this method does not
represent fair market value, at which time the security will be valued at its
fair value as determined in good faith by the Board of Directors. Futures
contracts and options are valued based upon their quoted daily settlement
prices.
b) Off Balance Sheet Risk
The Funds may utilize futures contracts, options, and forward foreign currency
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. The primary risks associated
with the use of these financial instruments for hedging purposes are (a) an
imperfect correlation between the change in market value of the other securities
held by the Funds and the change in market value of these financial instruments,
(b) the possibility of an illiquid market, and (c) the non-performance of the
counterparties under the terms of the contract. As a result, the use of these
financial instruments may involve, to a varying degree, risk of loss in excess
of the amount recognized in the Statement of Assets and Liabilities.
52
<PAGE>
c) Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets due from the broker. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the value of the
contract at the end of each day's trading. Variation margin payments are made or
received and recognized as assets due from or liabilities to the broker
depending upon whether unrealized gains or losses are incurred. Gains and losses
are realized upon the expiration or closing of the futures contract.
d) Options
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's Statement of Assets and Liabilities as an investment and
subsequently "marked to market" to reflect the current market value of the
option purchased. The current market value of a purchased option is the last
reported sale price on the principal exchange on which such option is traded. If
an option which the Fund has purchased expires on its stipulated expiration
date, the Fund realizes a loss in the amount of the cost of the option. If the
Fund enters into a closing transaction, it realizes a gain or loss, depending on
whether the proceeds from the sale are greater or less than the cost of the
option. If the Fund exercises a put option, it realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. If the Fund exercises a call option,
the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
The premium received for a written option is recorded as an asset with an
equivalent liability. The liability is marked-to-market based on the option's
quoted daily settlement price. When an option expires or the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss if the cost of
the closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is eliminated. When a written
call option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the Fund
purchased.
e) Forward Foreign Currency Contracts
The International Equity Fund may enter into forward foreign currency contracts
to manage its exposure to fluctuations in certain foreign currency values. A
forward currency contract is a commitment to purchase or sell a foreign currency
at a future date at a set price. The forward currency contracts are valued at
the forward rate and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. Risks arise from the possible inability of counterparties to meet the
terms of their contracts and from movements in currency values and interest
rates.
53
<PAGE>
f) Repurchase Agreements
The Funds may enter into repurchase agreements (on an individual Fund basis or
in conjunction with the other Funds) with the seller wherein the seller and the
buyer agree at the time of sale to a repurchase of the security at a mutually
agreed upon time and price. The Funds will not enter into repurchase agreements
unless the agreement is fully collateralized. Securities purchased subject to
the repurchase agreement are deposited with a custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value at least
equal to the repurchase price plus accrued interest. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
interest, the seller is required to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, the Funds maintain the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller. Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
g) Currency Translation
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the rate of exchange at the end of the period. Purchases and
sales of securities are translated at the rates of exchange prevailing when such
securities were acquired or sold. Income is translated at rates of exchange
prevailing when accrued.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
h) Organization Expenses
Organization expenses totaling $147,450 were deferred and amortized on a
straight-line basis through May 29, 1998.
i) Taxes
It is the Company's policy to comply with the provisions of the Internal Revenue
Code applicable to a regulated investment company. Under such provisions, the
Company will not be subject to federal income tax as the Company intends to
distribute as dividends substantially all of the net investment income, if any,
of each Fund. The Company also intends to distribute annually all of its net
realized capital gains. Such dividends and distributions are automatically
reinvested in additional shares of the Funds.
54
<PAGE>
j) Distributions
Dividends from net investment income and capital gains distributions are
determined in accordance with U.S. federal income tax regulations which may
differ from generally accepted accounting principles. As a result, dividends and
distributions differ from net investment income and net realized capital gains
due to timing differences, primarily the deferral of losses due to wash sales
and the deferral of net realized capital losses recognized subsequent to October
31, 1997. Distributions which were the result of permanent differences between
book and tax rules, primarily due to the differing treatment of foreign currency
transactions and the inability to carry net operating losses forward to future
years, have been reclassified to additional paid-in capital, undistributed net
investment income and accumulated net realized gain on investments, futures
contracts, option contracts and foreign currency transactions.
k) Securities Transactions
Securities transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are determined on the identified
cost basis. Dividend income is recorded on the ex-dividend date. Interest income
is accrued daily as earned.
NOTE 3. Management, Subadvisory, and Transfer Agency Agreements and Transactions
with Affiliates
The Company has entered into a management agreement with American Odyssey Funds
Management, Inc. (AOFM), pursuant to which AOFM manages the investment
operations of the Company and administers the Company's affairs. AOFM has
entered into subadvisory agreements for investment advisory services in
connection with the management of each of the Funds. AOFM supervises the
subadvisors' performance of advisory services and will make recommendations to
the Company's Board of Directors with respect to the retention or renewal of the
subadvisory agreements. AOFM pays for the cost of compensating officers of the
Company, occupancy, and certain clerical and accounting costs of the Company.
The Company bears all other costs and expenses. Each Fund pays the Manager a fee
for its services that is computed daily and paid monthly at an annual rate of
0.25% of the Fund's average net assets. Each Fund pays its respective
subadvisor(s) directly. Prior to May 1, 1998, the Manager paid each of the
subadvisors out of the fees it received from the Funds. The Manager's fees at
that time were equal to an annual rate of the amount the Manager paid each
subadvisor plus 0.25% of each Fund's average net assets.
AOFM's management fees for the period January 1, 1998 to April 30, 1998 were
$2,595,046, of which $1,455,406 was paid to the subadvisors. AOFM's management
fees for the period May 1, 1998 to June 30, 1998 were $610,933.
Each Fund pays its subadvisor (or, for any Fund with more than one subadvisor,
each of its subadvisers) a fee that is computed daily and paid monthly at the
annual rates specified below based upon the value of the Fund's average daily
net assets allocated to that subadvisor. On May 1, 1998 Chartwell Investment
Partners replaced Wilke/Thompson Capital Management, Inc. ("Wilke/Thompson") as
one of the two subadvisers for the Emerging Opportunities Fund. BEA Associates
began serving as subadvisor for the Global High-Yield Bond Fund, formerly the
Short-Term Bond Fund, effective May 1, 1998.
55
<PAGE>
<TABLE>
<CAPTION>
Fund & Subadvisor Subadvisor's Fee
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
Global High-Yield Bond Fund
- - BEA Associates . 0.425% of assets
International Equity Fund
- - Bank of Ireland Asset Management (U.S.) Limited . 0.45% for first $50 million in assets, plus
. 0.40% for next $50 million in assets, plus
. 0.30% for assets over $100 million
Emerging Opportunities Fund
- - Chartwell Investment Partners . 0.70% for the first $50 million in assets, plus
. 0.50% for the next $50 million in assets, plus
. 0.45% for assets over $100 million
- - Cowen Asset Management . 0.50% for the first $50 million in assets, plus
. 0.45% for the next $50 million in assets, plus
. 0.40% for assets over $100 million
Core Equity Fund
- - Equinox Capital Management, LLC . 0.35% for first $100 million in assets, plus
. 0.30% for assets over $100 million
Long-Term Bond Fund
- - Western Asset Management Company . 0.25% for the first $250 million in assets, plus
. 0.15% for assets over $250 million
Intermediate-Term Bond Fund
- - Travelers Asset Management
International Corporation . 0.25% for the first $100 million in assets, plus
. 0.20% for the first $100 million in assets, plus
. 0.15% for assets over $200 million
</TABLE>
On May 1, 1998 Chartwell Investment Partners replaced Wilke/Thompson as a
subadvisor of the Emerging Opportunities Fund. Prior to this day Wilke/Thompson
was paid .40% for the first $100 million in assets allocated to Wilke/Thompson
and .30% for assets over $100 million allocated to Wilke/Thompson. For the
period January 1, 1998 to April 30, 1998, Smith Graham was subadvisor of the
Short-Term Bond Fund. Smith Graham was paid .25% for the first $100 million in
assets and .15% for assets over $100 million.
The Company has entered into a transfer agency agreement with AOFM pursuant to
which AOFM is responsible for shareholders' record keeping and communications.
AOFM does not currently charge any additional fees for these services.
56
<PAGE>
Travelers Asset Management International Corporation, an affiliate of AOFM,
serves as subadvisor for the Intermediate-Term Bond Fund.
NOTE 4. Directed Brokerage Arrangements
The International Equity Fund, Emerging Opportunities Fund and Core Equity Fund
have entered into brokerage service arrangements with certain broker-dealers.
The broker-dealers have agreed to pay certain Fund expenses in exchange for the
Fund directing a portion of the fund brokerage to these broker dealers. In no
event would the Fund pay additional brokerage or receive inferior execution of
transactions for fund brokerage so allocated.
Under these arrangements for the six months ended June 30, 1998, broker-dealers
paid custodian expenses for the International Equity Fund and the Core Equity
Fund of $17,868 and $94,511, respectively.
NOTE 5. Securities Transactions
The cost of purchases and proceeds from sales of investment securities
(excluding short-term investments and repurchase agreements), for the six months
ended June 30, 1998, were:
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
<S> ------------ ------------ -------------- -------------- ------------ ------------
Purchases: <C> <C> <C> <C> <C> <C>
Government ................. $ 31,940,879 $ - $ - $ - $300,412,241 $ 93,064,097
Non-Government ............. 73,442,240 52,332,910 252,088,365 117,354,643 24,432,656 100,456,216
------------ ------------ -------------- ------------ ------------ ------------
Total ...................... $105,383,119 $ 52,332,910 $ 252,088,365 $117,354,643 $324,844,897 $193,520,313
============ ============ ============== ============ ============ ===========
Sales:
Government ................. $ 63,633,523 $ - $ - $ - $281,459,818 $ 70,882,227
Non-Government ............. 23,959,773 30,022,542 232,224,219 125,274,428 9,726,637 102,486,071
------------ ------------ -------------- -------------- ------------ -----------
Total ...................... $ 87,593,296 $ 30,022,542 $ 232,224,219 $ 125,274,428 $291,186,455 $173,368,298
============ ============ ============== ============== ============ ============
</TABLE>
At June 30, 1998, the cost of securities for federal income tax purposes and the
unrealized appreciation (depreciation) of investments for federal income tax
purposes for each Fund was as follows:
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Federal Income Tax Cost $ 74,253,902 $ 219,628,897 $ 278,672,414 $ 330,876,595 $ 228,298,141 $ 109,765,80
============= ============= ============= ============= ============= ============
Gross Unrealized
Appreciation ......... 364,717 78,844,577 14,976,463 137,841,206 6,448,891 438,759
Gross Unrealized
(Depreciation) ....... (1,013,482) (16,778,180) (26,278,690) (7,472,494) (906,757) (190,397)
------------- ------------- ------------- ------------- ------------- ------------
Net Unrealized
Appreciation ......... $ (648,765) $ 62,066,397 $ (11,302,227) $ 130,368,712 $ 5,542,134 $ 248,362
============= ============= ============= ============= ============= ============
</TABLE>
57
<PAGE>
NOTE 6. Futures Contracts
At June 30, 1998, the Long-Term Bond Fund had entered into the following futures
contracts:
<TABLE>
<CAPTION>
Unrealized
Number Underlying Expiration Nominal Nominal Appreciation/
of Contracts Face Value Securities Date Cost Value (Depreciation)
- --------------- ----------- ------------------------------- ----------- ---------- ---------- ---------------
Short Position
- ---------------
<S> <C> <C> <C> <C> <C> <C>
30 $ 300,000 5 Year U.S. Treasury Note 9/30/98 $ 3,301,884 $ 3,290,625 $ 11,259
105 10,500,000 U.S. Long-Term Treasury Bond 9/30/98 12,918,588 12,977,344 (58,756)
-----------
Total: $ (47,497)
===========
</TABLE>
At June 30, 1998, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open future contracts.
NOTE 7. Written Options
The Long Term Bond Fund's activity in written options during the six months
ended June 30, 1998 was as follows:
<TABLE>
<CAPTION>
Number of
Options Premiums
---------- -------------
<S> <C> <C>
Options Outstanding at December 31, 1997........................................ - $ -
Options Written............................................................. 1,786 805,158
Options Canceled in Closing Transactions.................................... (1,030) (449,280)
Options Expired............................................................. (191) (83,833)
Options Exercised........................................................... - -
========= ===========
Options Outstanding at June 30, 1998............................................ 565 $ 272,045
========= ===========
Cost of closing transactions.................................................... $ 551,550
===========
</TABLE>
58
<PAGE>
NOTE 8. Forward Foreign Currency Contracts
The International Equity Fund had forward foreign currency contracts which
contractually obligate the Fund to deliver or receive currencies at specified
future dates. The following contracts were open at June 30, 1998:
<TABLE>
<CAPTION>
Foreign
Contract Unrealized
U.S. $ Settlement Current Appreciation/
Sales Value Date U.S.$ Value (Depreciation)
- -------------------------------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
British Pound $ 3,598,629 07/27/98 $ 3,615,271 $ (16,642)
German Deutsche Mark 3,668,843 07/17/98 3,645,003 23,840
German Deutsche Mark 2,634,503 09/25/98 2,615,249 19,254
Japanese Yen 3,288,281 07/13/98 3,049,268 239,013
Japanese Yen 3,086,765 08/18/98 2,971,850 114,915
Japanese Yen 2,869,114 08/28/98 2,835,719 33,395
Japanese Yen 2,620,060 09/09/98 2,624,138 (4,078)
Japanese Yen 2,822,877 09/16/98 2,933,335 (110,458)
Swiss Franc 8,083,934 07/07/98 8,082,716 1,218
Swiss Franc 3,109,318 07/31/98 3,032,514 76,804
Swiss Franc 3,008,559 08/13/98 2,910,024 98,535
------------ ------------ -----------
Total Sales $ 38,790,883 $ 38,315,087 $ 475,796
============ ============ ===========
Purchases
- --------------------------------------------------------------
Japanese Yen $ 350,230 07/01/98 $ 357,516 $ 7,286
===========
</TABLE>
NOTE 9. Delayed Delivery Transactions:
The American Odyssey Bond Funds may purchase and sell securities on a
when-issued or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transactions. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. The Fund instructs its
custodian to segregate securities having a value at least equal to the net
amount of the purchase commitments. At June 30, 1998, the Funds had not entered
into any delayed delivery transactions.
59
<PAGE>
Supplementary Data: Proxy Voting Results
A special meeting of the fund's shareholders was held on April 24, 1998. The
results of votes taken among shareholders on proposals are listed below.
Proposal 1
For the Short-Term Bond Fund Only: To consider three interrelated proposals that
together would convert the American Odyssey Short-Term Bond Fund into the
American Odyssey Global High-Yield Bond Fund, which would invest primarily in
high-yield debt securities (sometimes called "junk bonds") from the U.S. and
abroad.
a. To approve or disapprove changes to the fund's investment objective and
policies.
# of
Shares Voted % of Shares
Affirmative 4,511,684 77.78%
Against 878,833 15.15%
Abstain 409,979 7.07%
TOTAL 5,800,496 100.00%
b. To approve or disapprove a new investment subadvisory agreement with BEA
Associates.
# of
Shares Voted % of Shares
Affirmative 4,441,208 76.57%
Against 949,135 16.36%
Abstain 410,153 7.07%
TOTAL 5,800,496 100.00%
c. To approve or disapprove amendments to the investment management agreement
with American Odyssey Funds Management, Inc.
# of
Shares Voted % of Shares
Affirmative 4,468,644 77.04%
Against 933,416 16.09%
Abstain 398,436 6.87%
TOTAL 5,800,496 100.00%
60
<PAGE>
Proposal 2
For the Emerging Opportunities Fund Only: To approve or disapprove a new
subadvisory agreement and amendments to the investment management agreement to
add Chartwell Investment Partners as a new subadviser for the Emerging
Opportunities Fund and to increase the maximum fee rate that may be paid to the
subadvisers of the Emerging Opportunities Fund.
# of
Shares Voted % of Shares
Affirmative 11,471,688 62.54%
Against 5,273,175 28.74%
Abstain 1,600,445 8.72%
TOTAL 18,345,308 100.00%
61
<PAGE>
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American Odyssey Funds Management, Inc.
Two Tower Center
East Brunswick, NJ 08816
1-800-242-7884
AMERICAN ODYSSEY and the Sailing Ship Logo are
registered trademarks of American Odyssey Funds Management, Inc.
(c) Copyright 1998 American Odyssey Funds Management, Inc.
