AMERICAN ODYSSEY FUNDS INC /MD/, 485BPOS, 1998-04-24

AMERICAN ODYSSEY FUNDS INC /MD/
485BPOS, 1998-04-24

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998

REGISTRATION NOS. 33-57536
811-7450

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 9
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10

---------------------
AMERICAN ODYSSEY FUNDS, INC.
(EXACT NAME OF REGISTRANT)
TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
(732) 514-2000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
--------------------
PAUL S. FEINBERG, ESQ.
SENIOR VICE PRESIDENT AND SECRETARY
AMERICAN ODYSSEY FUNDS, INC.
TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
CHRISTOPHER E. PALMER
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
----------------------

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

[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485
[X] ON MAY 1, 1998 PURSUANT TO PARAGRAPH (b) OF RULE 485
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1) OF RULE 485
[ ] ON MAY 1, 1998 PURSUANT TO PARAGRAPH (a)(1) OF RULE 485
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
[ ] ON ________ PURSUANT TO PARAGRAPH (a)(2) OF RULE 485

IF APPROPRIATE CHECK THE FOLLOWING BOX:

[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE> 2
CROSS REFERENCE SHEET
(PURSUANT TO RULE 495 OF THE SECURITIES ACT OF 1933)

<TABLE>
<CAPTION>
ITEM NO. PART A: INFORMATION REQUIRED IN PROSPECTUS CAPTION IN PROSPECTUS
- -------- ------------------------------------------ ---------------------
<S> <C> <C>
ITEM 1. COVER PAGE COVER PAGE

ITEM 2. SYNOPSIS SUMMARY OF EXPENSES

ITEM 3. FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS;
PERFORMANCE INFORMATION

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT GENERAL INFORMATION; INVESTMENT
OBJECTIVES AND PROGRAMS;
ADDITIONAL INVESTMENT INFORMATION

ITEM 5. MANAGEMENT OF THE FUND MANAGEMENT OF THE FUNDS;
PORTFOLIO BROKERAGE; MONITORING
FOR POSSIBLE CONFLICT

ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND NOT APPLICABLE
PERFORMANCE

ITEM 6. CAPITAL STOCK AND OTHER GENERAL INFORMATION; VOTING
SECURITIES RIGHTS; PURCHASE AND REDEMPTION
OF SHARES; FEDERAL INCOME TAXES;
ADDITIONAL INFORMATION

ITEM 7. PURCHASE OF SECURITIES BEING PURCHASE AND REDEMPTION OF
OFFERED SHARES

ITEM 8. REDEMPTION OR REPURCHASE PURCHASE AND REDEMPTION OF
SHARES

ITEM 9. PENDING LEGAL PROCEEDINGS NOT APPLICABLE

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

ITEM 10. COVER PAGE COVER PAGE

ITEM 11. TABLE OF CONTENTS TABLE OF CONTENTS

ITEM 12. GENERAL INFORMATION AND HISTORY NOT APPLICABLE

ITEM 13. INVESTMENT OBJECTIVES AND INVESTMENT OBJECTIVES AND
POLICIES PROGRAMS; INVESTMENT
RESTRICTIONS

ITEM 14. MANAGEMENT OF THE FUND MANAGEMENT OF THE FUNDS
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM 15. CONTROL PERSONS AND PRINCIPAL MANAGEMENT OF THE FUNDS
HOLDERS OF SECURITIES

ITEM 16. INVESTMENT ADVISORY AND OTHER MANAGEMENT OF THE FUNDS
SERVICES

ITEM 17. BROKERAGE ALLOCATION AND OTHER PORTFOLIO TRANSACTIONS
PRACTICES

ITEM 18. CAPITAL STOCK AND OTHER OWNERSHIP OF SHARES
SECURITIES

ITEM 19. PURCHASE, REDEMPTION AND NET ASSET VALUE OF SHARES
PRICING OF SECURITIES BEING
OFFERED

ITEM 20. TAX STATUS FEDERAL INCOME TAXES

ITEM 21. UNDERWRITERS MANAGEMENT OF THE FUNDS

ITEM 22. CALCULATIONS OF PERFORMANCE DATA PERFORMANCE INFORMATION

ITEM 23. FINANCIAL STATEMENTS FINANCIAL STATEMENTS
</TABLE>

PART C: OTHER INFORMATION

INFORMATION REQUIRED TO BE INCLUDED IN PART C IS SET FORTH UNDER THE APPROPRIATE
ITEM, SO NUMBERED, IN PART C TO THIS REGISTRATION STATEMENT.
<PAGE> 4
PART A

INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
PROSPECTUS
May 1, 1998

AMERICAN

Global High-Yield Bond Fund

International Equity Fund

Emerging Opportunities Fund

Core Equity Fund

Long-Term Bond Fund

Intermediate-Term Bond Fund

[AMERICAN ODYSSEY FUNDS LOGO]
<PAGE> 6

PROSPECTUS AMERICAN ODYSSEY FUNDS, INC.
May 1, 1998
- --------------------------------------------------------------------------------

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

AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND -- seeks maximum long-term
total return (capital appreciation and income) by investing primarily in
high-yield debt securities (which are sometimes referred to as junk bonds and
which typically are rated below investment grade) from the United States and
abroad.

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

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

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

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

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

Shares of American Odyssey Funds, Inc. may be sold only to: (1) life
insurance company separate accounts to serve as the underlying investment
vehicle for variable annuity and variable life insurance contracts; (2)
qualified retirement plans, including sec.403(b) arrangements, as permitted by
Treasury regulations; and (3) life insurance companies and their affiliates.

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

This prospectus sets forth concisely the information that you, as a
purchaser or prospective purchaser of a variable contract or as a participant in
a qualified retirement plan, should know before directing that amounts credited
to you be invested in the Funds. You should retain this prospectus for future
reference.

American Odyssey Funds, Inc. has filed a Statement of Additional
Information with the Securities and Exchange Commission. This prospectus
incorporates the Statement of Additional Information by reference. You may
obtain the Statement of Additional Information, at no charge, by writing
American Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063, East Brunswick,
New Jersey 08816-1063, or by calling (732) 514-2000. The date of the Statement
of Additional Information is the same as the date of this prospectus.

- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 7

PROSPECTUS CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Expenses......................................... 3
Financial Highlights........................................ 4
General Information......................................... 10
Investment Objectives and Programs.......................... 11
American Odyssey Global High-Yield Bond Fund........... 11
American Odyssey International Equity Fund............. 14
American Odyssey Emerging Opportunities Fund........... 16
American Odyssey Core Equity Fund...................... 17
American Odyssey Long-Term Bond Fund................... 18
American Odyssey Intermediate-Term Bond Fund........... 20
Additional Investment Information........................... 21
Options................................................ 21
Futures Contracts...................................... 21
Preferred Stocks, Convertible Securities, and
Warrants............................................. 22
Short Sales Against the Box............................ 22
When-Issued and Delayed Delivery Securities............ 22
Lending of Portfolio Securities........................ 23
Investment Restrictions................................ 23
Management of the Funds..................................... 23
Directors and Officers................................. 23
Manager................................................ 24
Subadvisers............................................ 25
Custodian and Transfer Agent........................... 30
Purchase and Redemption of Shares........................... 30
Performance Information..................................... 31
Federal Income Taxes........................................ 32
Other Information........................................... 32
Voting Rights.......................................... 32
Portfolio Brokerage.................................... 33
Monitoring for Possible Conflict....................... 33
Conversion of Short-Term Bond Fund to Global High-Yield
Bond Fund............................................ 33
Previous Subadviser for Emerging Opportunities Fund.... 33
Year 2000 Preparedness................................. 34
Additional Information................................. 34
Appendix.................................................... 34
Additional Information Regarding Money Market
Instruments.......................................... 34
Ratings of Debt Securities............................. 35
Ratings of Commercial Paper............................ 38
</TABLE>

2
<PAGE> 8

SUMMARY OF EXPENSES

The following table shows Fund expenses, expressed as an annual percentage
of average net assets. Except where noted, expenses shown were the Funds' actual
expenses for 1997. If you have received this prospectus because you are
considering the purchase of a variable annuity contract, you should refer
instead to the corresponding table in the variable annuity contract prospectus.

<TABLE>
<CAPTION>
GLOBAL INT'L EMERGING CORE LONG- INTERMEDIATE-
HIGH-YIELD EQUITY OPPORTUNITIES EQUITY TERM TERM
BOND FUND FUND FUND FUND BOND FUND BOND FUND
---------- ------ ------------- ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases.............. None None None None None None
Sales Load on Reinvested Dividends... None None None None None None
Deferred Sales Load Imposed on
Redemption......................... None None None None None None
Exchange Fees........................ None None None None None None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net
assets)
Management Fees...................... 0.68%(1) 0.61% 0.76%(2) 0.56% 0.50% 0.50%
12b-1 Fees........................... None None None None None None
Other Expenses....................... 0.16%(1) 0.16% 0.21% 0.09% 0.12% 0.13%
TOTAL FUND OPERATING EXPENSES........ 0.84%(1) 0.77% 0.97%(2) 0.65% 0.62% 0.63%
</TABLE>

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

(1) The management fee and other expenses for the Global High-Yield Bond
Fund are estimates and are not based upon 1997 Fund expenses. 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. Information about the Short-Term Bond Fund is unlikely to be
helpful to investors and potential investors in the Global High-Yield Bond
Fund. See Conversion of Short-Term Bond Fund to Global High-Yield Bond Fund
on page 33.

(2) The management fee listed for the Emerging Opportunities Fund is an
estimate. Actual management fees will depend upon the Fund's average daily
net assets and how the Manager allocates those assets between the Fund's two
subadvisers, one of which is new as of May 1, 1998. The estimate that
appears above assumes (a) that the Fund has average daily net assets of
$258,886,428, which equals the Fund's net assets as of December 31, 1997,
and (b) that the Manager allocates the Fund's assets equally between the
Fund's two subadvisers.

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

<TABLE>
<CAPTION>
GLOBAL INT'L EMERGING CORE LONG- INTERMEDIATE-
HIGH-YIELD EQUITY OPPORTUNITIES EQUITY TERM TERM
BOND FUND FUND FUND FUND BOND FUND BOND FUND
---------- ------ ------------- ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
EXAMPLE
A shareholder would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and (2)
redemption at end of each time period:
1 year...... 8.56 7.89 9.94 6.66 6.36 6.46
3 years..... 26.76 24.69 31.04 20.87 19.91 20.23
5 years..... 46.49 42.93 53.86 36.33 34.67 35.22
10 years.... 103.45 95.69 119.40 81.24 77.60 78.82
</TABLE>

A shareholder would pay the same expenses on the same investment, assuming
no redemption.

3
<PAGE> 9

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period............... $ 15.08 $ 12.68 $ 10.76 $ 11.98 $ 10.00
------------ ------------ ----------- ----------- -----------
OPERATIONS
Net investment income (loss)(2)... 0.57 0.29 0.17 (0.05) 0.03
Net realized and unrealized gain
(loss) on investments........... 0.19 2.48 1.87 (0.78) 1.95
------------ ------------ ----------- ----------- -----------
Total from investment
operations...................... 0.76 2.77 2.04 (0.83) 1.98
------------ ------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment
income.......................... (0.24) (0.30) (0.12) (0.03) --
Distributions from net realized
gains on investments............ (0.06) (0.07) -- (0.26) --
Distributions in excess of net
investment income or realized
gains........................... (0.06) -- -- (0.10) --
------------ ------------ ----------- ----------- -----------
Total distributions............... (0.36) (0.37) (0.12) (0.39) --
------------ ------------ ----------- ----------- -----------
NET ASSET VALUE
End of period..................... $ 15.48 $ 15.08 $ 12.68 $ 10.76 $ 11.98
============ ============ =========== =========== ===========
TOTAL RETURN(3).................... 5.04% 21.93% 19.00% (6.98)% 19.80%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period....... $236,571,057 $187,109,248 $92,114,545 $51,712,327 $19,978,108
Ratios of expenses to average net
assets:
Before repayments/reimbursements
and directed brokerage
arrangements................... 0.79% 0.86% 1.00% 1.36% 1.76%(4)
After repayments/reimbursements
and directed brokerage
arrangements(5)................ 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................... 1.61% 1.51% 1.70% 0.83% 0.34%(4)
After repayments/reimbursements
and directed brokerage
arrangements................... 1.63% 1.54% 1.62% 0.94% 0.85%(4)
Portfolio turnover rate........... 23.08% 21.54% 31.40% 50.25% 9.20%
Average commission rate paid(6)... $ 0.0217 $ 0.0219 -- -- --
</TABLE>

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

(1) Commencement of operations.

(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.

(6) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.

Further information about the performance of the Funds appears in the Funds'
annual report to shareholders, which you may obtain without charge.

4
<PAGE> 10

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
EMERGING OPPORTUNITIES FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period............... $ 13.42 $ 15.02 $ 11.84 $ 10.94 $ 10.00
------------ ------------ ------------ ----------- -----------
OPERATIONS
Net investment loss (2)........... -- -- -- -- (0.01)
Net realized and unrealized gain
(loss) on investments........... 0.91 (0.47) 3.81 1.06 0.95
------------ ------------ ------------ ----------- -----------
Total from investment
operations...................... 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..................... $ 14.33 $ 13.42 $ 15.02 $ 11.84 $ 10.94
============ ============ ============ =========== ===========
TOTAL RETURN (3)................... 6.78% (3.03)% 32.23% 9.69% 9.40%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period....... $258,886,428 $171,278,216 $157,192,884 $88,676,329 $29,112,652
Ratios of expenses to average net
assets:
Before repayments/reimbursements
and directed brokerage
arrangements................... 0.86% 0.72% 0.77% 0.91% 1.23%(4)
After repayments/reimbursements
and directed brokerage
arrangements (5)............... 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................... (0.20)% (0.34)% (0.26) (0.31)% (0.60)%(4)
After repayments/reimbursements
and directed brokerage
arrangements................... (0.20)% (0.34)% (0.26) (0.32)% (0.88)%(4)
Portfolio turnover rate........... 80.36% 43.00% 36.02% 27.40% 8.70%
Average commission rate paid(6)... $ 0.0565 $ 0.0505 -- -- --
</TABLE>

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

(1) Commencement of operations.

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

(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.

Further information about the performance of the Funds appears in the Funds'
annual report to shareholders, which you may obtain without charge.

5
<PAGE> 11

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
CORE EQUITY FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period............... $ 15.49 $ 13.32 $ 10.06 $ 10.33 $ 10.00
------------ ------------ ------------ ------------ -----------
OPERATIONS
Net investment income(2).......... 0.24 0.26 0.25 0.16 0.06
Net realized and unrealized gain
(loss) on investments........... 4.65 2.83 3.63 (0.26) 0.33
------------ ------------ ------------ ------------ -----------
Total from investment
operations...................... 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................... (0.21) (0.65) (0.37) -- --
Distributions in excess of net
investment income or realized
gains.......................... -- -- (0.01) -- --
------------ ------------ ------------ ------------ -----------
Total distributions............... (0.45) (0.92) (0.62) (0.17) (0.06)
------------ ------------ ------------ ------------ -----------
NET ASSET VALUE
End of period..................... $ 19.93 $ 15.49 $ 13.32 $ 10.06 $ 10.33
============ ============ ============ ============ ===========
TOTAL RETURN(3).................... 31.67% 23.20% 38.56% (1.01)% 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period....... $414,698,095 $273,771,526 $183,734,809 $101,591,613 $37,365,875
Ratios of expenses to average net
assets:
Before repayments/reimbursements
and directed brokerage
arrangements................... 0.67% 0.68% 0.72% 0.84% 1.12%(4)
After repayments/reimbursements
and directed brokerage
arrangements (5)............... 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................... 1.36% 1.93% 2.32% 2.27% 1.84%(4)
After repayments/reimbursements
and directed brokerage
arrangements................... 1.38% 1.95% 2.83% 2.27% 1.96%(4)
Portfolio turnover rate........... 45.54% 45.73% 38.44% 48.16% 48.00%
Average commission rate paid (6).. $ 0.0596 $ 0.0594 -- -- --
</TABLE>

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

(1) Commencement of operations.

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

(4) Annualized.

Further information about the performance of the Funds appears in the Funds'
annual report to shareholders, which you may obtain without charge.

6
<PAGE> 12

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
LONG-TERM BOND FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period............... $ 10.15 $ 10.53 $ 9.37 $ 10.33 $ 10.00
------------ ------------ ------------ ----------- -----------
OPERATIONS
Net investment income (2)......... 0.61 0.50 0.53 0.37 0.62
Net realized and unrealized gain
(loss) on investments........... 0.61 (0.36) 1.57 (0.97) 0.45
------------ ------------ ------------ ----------- -----------
Total from investment
operations...................... 1.22 0.14 2.10 (0.60) 1.07
------------ ------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment
income.......................... (0.62) (0.52) (0.57) (0.34) (0.18)
Distributions from net realized
gains on investments............ (0.01) -- (0.27) (0.02) (0.56)
Distributions in excess of net
investment income or realized
gains........................... -- -- (0.10) -- --
------------ ------------ ------------ ----------- -----------
Total distributions............... (0.63) (0.52) (0.94) (0.36) (0.74)
------------ ------------ ------------ ----------- -----------
NET ASSET VALUE
End of period..................... $ 10.74 $ 10.15 $ 10.53 $ 9.37 $ 10.33
============ ============ ============ =========== ===========
TOTAL RETURN(3).................... 12.01% 1.34% 22.44% (5.79)% 10.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period....... $218,854,351 $160,694,516 $114,612,422 $70,359,236 $25,771,838
Ratios of expenses to average net
assets:
Before repayments/reimbursements
and directed brokerage
arrangements................... 0.62% 0.63% 0.66% 0.73% 1.30%(4)(5)
After repayments/reimbursements
and directed brokerage
arrangements (6)............... 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................... 6.22% 5.88% 6.67% 7.08% 15.19%(4)
After repayments/reimbursements
and directed brokerage
arrangements................... 6.22% 5.88% 6.63% 7.05% 15.73%(4)
Portfolio turnover rate........... 358.67% 369.32% 381.53% 152.91% 589.40%
</TABLE>

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

(1) Commencement of operations.

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

(4) Annualized.

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

Further information about the performance of the Funds appears in the Funds'
annual report to shareholders, which you may obtain without charge.

7
<PAGE> 13

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period............... $ 10.20 $ 10.88 $ 9.61 $ 10.28 $ 10.00
------------ ----------- ----------- ----------- -----------
OPERATIONS
Net investment income (2)......... 0.59 0.61 0.54 0.38 0.17
Net realized and unrealized gain
(loss) on investments........... 0.17 (0.20) 0.90 (0.67) 0.28
------------ ----------- ----------- ----------- -----------
Total from investment
operations...................... 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) -- (0.07) -- --
Distributions in excess of net
investment income or realized
gains........................... -- -- (0.05) -- --
------------ ----------- ----------- ----------- -----------
Total distributions............... (0.65) (0.59) (0.67) (0.38) (0.17)
------------ ----------- ----------- ----------- -----------
NET ASSET VALUE
End of period..................... $ 10.31 $ 10.20 $ 10.38 $ 9.61 $ 10.28
============ =========== =========== =========== ===========
TOTAL RETURN (3)................... 7.50% 3.95% 15.01% (2.85)% 4.50%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period....... $108,595,634 $86,385,074 $73,480,482 $48,570,907 $19,897,257
Ratios of expenses to average net
assets:
Before repayments/reimbursements
and directed brokerage
arrangements................... 0.63% 0.66% 0.68% 0.75% 1.37%(4)
After repayments/reimbursements
and directed brokerage
arrangements (5)............... 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................... 5.90% 5.77% 6.19% 5.35% 3.73%(4)
After repayments/reimbursements
and directed brokerage
arrangements................... 5.90% 5.77% 6.11% 5.35% 4.35%(4)
Portfolio turnover rate........... 215.97% 191.20% 137.14% 22.72% --
</TABLE>

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

(1) Commencement of operations.

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

(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.

Further information about the performance of the Funds appears in the Funds'
annual report to shareholders, which you may obtain without charge.

8
<PAGE> 14

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
SHORT-TERM BOND FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 17, 1993(1)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period............... $ 10.24 $ 10.22 $ 9.68 $ 10.07 $ 10.00
------------ ------------ ----------- ----------- -----------
OPERATIONS
Net investment income (2)......... 0.55 0.37 0.51 0.45 0.19
Net realized and unrealized gain
(loss) on investments........... 0.08 0.02 0.54 (0.46) 0.08
------------ ------------ ----------- ----------- -----------
Total from investment
operations...................... 0.63 0.39 1.05 (0.01) 0.27
------------ ------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment
income.......................... (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..................... $ 10.31 $ 10.24 $ 10.22 $ 9.68 $ 10.07
============ ============ =========== =========== ===========
TOTAL RETURN (3)................... 6.11% 3.80% 10.86% (0.14)% 2.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period....... $ 58,820,546 $ 48,672,916 $25,855,313 $17,628,991 $ 8,181,243
Ratios of expenses to average net
assets:
Before repayments/reimbursements
and directed brokerage
arrangements................... 0.66% 0.68% 0.76% 1.02% 1.72%(4)
After repayments/reimbursements
and directed brokerage
arrangements (5)............... 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................... 5.53% 5.54% 5.77% 4.99% 3.52%(4)
After repayments/reimbursements
and directed brokerage
arrangements................... 5.45% 5.47% 5.78% 5.25% 4.49%(4)
Portfolio turnover rate........... 200.78% 154.51% 93.37% 233.25% 144.30%
</TABLE>

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

(1) Commencement of operations.

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

(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.

On May 1, 1998, the Short-Term Bond Fund was renamed the Global High-Yield Bond
Fund and adopted a substantially different investment objective and investment
program. Information about the Short-Term Bond Fund is unlikely to be helpful to
investors and potential investors in the Global High-Yield Bond Fund. See
Conversion of Short-Term Bond Fund to Global High-Yield Bond Fund on page 33.

Further information about the performance of the Funds appears in the Funds'
annual report to shareholders, which you may obtain without charge.

9
<PAGE> 15

GENERAL INFORMATION

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

The Company utilizes a Manager/Subadviser structure for advisory services.
American Odyssey Funds Management, Inc. (the "Manager") serves as the overall
investment adviser to the Company. The subadvisers perform the actual day-to-day
management of the Funds. The Manager monitors the performance of the subadvisers
and will recommend changes if warranted. For those Funds with more than one
subadviser (currently, only the Emerging Opportunities Fund), the Manager
allocates the Fund's assets between or among the Fund's subadvisers. Pursuant to
an order issued by the Securities and Exchange Commission, the Company's Board
of Directors may change or add subadvisers, or amend existing subadvisory
agreements in certain respects, without shareholder approval. For more
information, see Subadvisers on page 25. The current subadvisers are set forth
below.

<TABLE>
<CAPTION>
FUND SUBADVISER(S)
---- -------------
<S> <C>
American Odyssey Global High-Yield BEA Associates
Bond Fund
American Odyssey International Equity Bank of Ireland Asset Management Fund
Fund (U.S.) Limited
American Odyssey Emerging Cowen Asset Management and Chartwell
Opportunities Fund Investment Partners
American Odyssey Core Equity Fund Equinox Capital Management, L.L.C.
American Odyssey Long-Term Bond Fund Western Asset Management Company
American Odyssey Intermediate-Term Travelers Asset Management
Bond Fund International Corporation
</TABLE>

For more information, see Management of the Funds on page 23.

10
<PAGE> 16

INVESTMENT OBJECTIVES AND PROGRAMS

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

AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND

Investment Objective. The investment objective of the Global High-Yield
Bond Fund is maximum long-term total return (capital appreciation and income) by
investing primarily in high-yield debt securities (which sometimes are referred
to as junk bonds and which typically are rated below investment grade) from the
United States and abroad.

Investment Program. To achieve its objective, the Fund generally invests
at least 85% of its assets in a diversified portfolio of (1) domestic high-yield
debt securities; (2) foreign high-yield debt securities, particularly from
emerging markets; (3) investment-grade debt securities; (4) equity securities
with high income potential or that are related to debt securities; (5)
mortgage-related securities; (6) asset-backed securities; (7) U.S. government
securities; and (8) money market instruments. Most securities in which the Fund
invests are characterized by high income potential, but in selecting securities
the Fund's subadviser also considers potential for growth of capital. The
Manager and the Fund's subadviser currently intend to weight the Fund's
portfolio more heavily toward domestic, rather than foreign, high-yield debt
securities.

Domestic High-Yield Debt. The portfolio ordinarily includes a substantial
number of bonds and other debt securities that, as a class, sell at discounts
from par value. These securities, sometimes referred to as junk bonds, are
generally rated below investment grade by nationally recognized statistical
rating organizations ("NRSROs") -- for example, ratings of Ba or lower by
Moody's Investors Service, Inc. ("Moody's") or of BB or lower by Standard &
Poor's Corporation ("S&P") -- and are typically considered high risk securities.
The Fund may also purchase unrated debt securities of comparable quality. The
Fund may invest in a debt security of any rating; i.e., there is no minimum
rating. For a description of Moody's and S&P's ratings, see the Appendix.

The Fund may purchase specialized types of high-yield securities such as,
but not limited to, zero coupon bonds, pay-in-kind ("PIK") bonds, reset bonds,
and increasing rate notes ("IRNs"), each of which is described in the Statement
of Additional Information.

Foreign High-Yield Debt. The portfolio ordinarily also includes a
substantial number of bonds or other debt instruments issued by foreign
companies or governmental agencies that, like domestic

11
<PAGE> 17

high-yield debt securities, sell at discounts from par value. Some or all of
these securities may issue from emerging markets, i.e., countries with limited
or developing capital markets. The portfolio's foreign securities may be
denominated in foreign or U.S. currencies. Like their domestic counterparts,
these securities are generally rated below investment grade by NRSROs or are
unrated, are typically considered high risk securities, and may be referred to
as junk bonds.

Investment-Grade Debt. The Fund may also invest in investment-grade debt,
i.e., corporate and other debt securities rated at least Baa by Moody's or at
least BBB by S&P at the time of purchase, or other debt securities judged to be
of comparable quality by another NRSRO or by the subadviser. For a description
of Moody's and S&P's ratings, see the Appendix. The Fund may invest in
investment-grade debt securities issued in the United States or issued in
foreign countries. Foreign debt securities may be denominated in either U.S. or
foreign currencies.

Equity Securities. The Fund may invest in equity securities, including
both preferred and common stock, that the subadviser believes has potential to
generate high dividend income. The Fund may also invest in convertible
securities, warrants, and units that combine debt and equity securities or that
share characteristics of each. The Fund may retain equity securities acquired if
the Fund exercises conversion options in securities it holds. Equity securities
held by the Fund be may issued by domestic or foreign corporations. The risks of
investing in domestic and foreign equity securities are discussed below in
connection with the International Equity Fund, the Emerging Opportunities Fund,
and the Core Equity Fund. In addition to the risks ordinarily associated with
equity securities, the equity securities in which the Fund may invest may be
subject to some or all of the risks associated with investment-grade and/or
high-yield debt securities.

Mortgage-Related Securities, Asset-Backed Securities, U.S. Government
Securities, and Money Market Instruments (including Repurchase Agreements and
Reverse Repurchase Agreements). The Fund may also invest in these securities,
which are described below in connection with the Long-Term Bond Fund. The Fund
generally will invest in money market instruments only for temporary, defensive,
or liquidity purposes.

Risks of Investing in Emerging Market and Other Foreign
Securities. General information about the risks of investing in foreign
securities is set forth below in connection with the International Equity Fund.
The risks of international investing may be intensified in the case of
investments in emerging markets. Security prices in emerging markets can be
significantly more volatile than in the more developed nations of the world,
reflecting the greater uncertainties of investing in less established markets
and economies. In particular, countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions of repatriation
of assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings difficult
or impossible at times. Securities of issuers located in countries with emerging
markets may have limited marketability and

12
<PAGE> 18

may be subject to more abrupt or erratic price movements. Foreign issuers,
particularly those in emerging markets, are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to U.S. issuers.

The following countries currently are not considered to have emerging
market economies: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Spain,
Sweden, Switzerland, the United Kingdom, and the United States. This list may
change from time to time.

Foreign Currency Forward Contracts. To facilitate the purchase and sale of
foreign securities and to manage foreign exchange risk, the Fund may enter into
forward contracts to purchase or sell foreign currencies. Although such
instruments may reduce the risk of loss due to a decline in the value of the
currency that is sold, they also limit any possible gain that might result
should the currency increase. Similarly, although such instruments are used
primarily to protect a Fund from adverse currency movements, they also involve
the risk that anticipated currency movements will not be accurately predicted,
thus adversely affecting the Fund's total return. More information is set forth
below in connection with the International Equity Fund and in the Statement of
Additional Information.

In addition, the Fund may enter into such forward contracts for investment
purposes as well as for hedging purposes. Successful investment in foreign
currency forward contracts depends upon the subadviser's ability accurately to
forecast changes in foreign currency exchange rates, and such investments may be
considered speculative. Making such forecasts involves techniques and
capabilities different from those required to analyze debt or equity securities.

General Risk Considerations. There can be no assurance that the Fund will
achieve its investment objective. Because of its investment policy, the Fund may
or may not be suitable or appropriate for certain investors. The general risk
inherent in investing in the Fund is that the net asset value will fluctuate in
response to changes in economic conditions, interest rates, and the market's
perception of the underlying portfolio securities of the Fund. Income and yields
on high-yield securities, as on all securities, will fluctuate over time.

In addition, special considerations pertain to high-yield securities. The
Fund invests aggressively and seeks to maximize return over time from a
combination of many factors, including high current income and capital
appreciation. Such aggressive investing involves greater risk and additional
considerations than are present when investing in higher quality debt
securities. These risks and considerations relate, among other things, to: (1)
the speculative nature of high-yield securities, (2) their sensitivity to
interest rate and economic changes, (3) payment expectations, and (4) liquidity
and valuation issues. While these risks, which are described below, provide the
opportunity for maximizing return over time, they may result in greater
fluctuation of the net asset value of the Fund's shares.

Speculative Nature of High-Yield Securities. Bonds rated below investment
grade generally involve greater volatility of price and risk of principal and
income than bonds in the higher rating categories and are, on balance,
considered predominantly speculative. While such bonds will usually have some
quality and protective characteristics, these characteristics are outweighed by
uncertainties

13
<PAGE> 19

of major risk exposures to adverse conditions. The Fund's subadviser will
attempt to control risk through diversification, credit analysis, review of
sector and industry trends, interest rate forecasts, and economic analysis, as
well as fundamental analysis of individual securities. The Fund's subadviser
performs its own credit analyses of the Fund's investments, obtains research
from third-party sources, and does not rely solely on ratings assigned by rating
services; as a result, achievement of the Fund's investment objective may be
more dependent on the subadviser's credit analyses than is the case for Funds
that invest in higher quality bonds. The subadviser will monitor the issuers of
the Fund's securities to determine if they will have sufficient cash flow and
profits to meet required principal and interest payments. Credit ratings are
meant to evaluate the safety of bond principal and interest payments, and do not
necessarily serve as a proxy for the market value risk of a high-yield security.
The Fund may retain a security whose NRSRO credit rating has changed.

Sensitivity to Interest Rate and Economic Changes. As a general matter,
the yields of high-yield securities will fluctuate over time. The prices of
high-yield bonds tend to be less sensitive to interest rate changes than
higher-rated debt securities, but are more sensitive to adverse economic changes
or individual corporate developments. During an economic downturn or substantial
period of rising interest rates, highly leveraged issuers may experience
financial stress that can adversely affect their ability to service their
principal and interest payment obligations, to meet projected business goals,
and to obtain additional financing. Such events could severely disrupt the
market for high-yield bonds and adversely affect the value of outstanding bonds
and the ability of the issuers to repay principal and interest, leading to a
greater incidence of default. If the issuer of a bond defaulted, the Fund may
incur additional expenses to seek recovery. Periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices of
high-yield securities and therefore in the Fund's asset value.

Payment Expectations. High-yield bonds present certain risks based on
payment expectations. For example, high-yield bonds may contain redemption or
call provisions. If an issuer exercises such a provision in a declining interest
rate market, the Fund may have to replace the security with a lower yielding
security, resulting in a decreased return for investors.

Liquidity and Valuation. Some high-yield securities may lack an
established retail secondary market and therefore may be thinly traded. This may
make it more difficult to value such securities accurately or to sell them. To
the extent reliable data is unavailable from an outside source, the subadviser's
judgment will play a greater role in valuation. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
value and liquidity of high-yield bonds, especially in a thinly-traded market.
In addition, illiquid or restricted high-yield securities may involve special
registration responsibilities, liabilities, and costs.

AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND

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

14
<PAGE> 20

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

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

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

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

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

associated with investment in equity securities. But an investor bears
additional risks. Foreign investments involve sovereign risk, which includes the
risk of adverse local political or economic developments, expropriation or
nationalization of assets, imposition of withholding taxes on dividend or
interest payments, and currency blockage (which would prevent local currency
from being sold). Foreign investments may also be affected favorably or
unfavorably by changes in currency rates and exchange control regulations. And
there is a risk that the subadviser may not adequately hedge those risks. There
also may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing, and financial reporting standards and requirements comparable to those
applicable to U.S. companies. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, the financial markets
on which they are traded may be subject to less strict governmental supervision,
and foreign brokerage commissions and custodian fees are generally higher than
in the United States.

AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND

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

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

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

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

further diversification, such investments involve additional risks discussed
above in connection with the International Equity Fund and in the Statement of
Additional Information. Consistent with a long-term investment approach,
investors selecting the Fund should be prepared to withstand periods of adverse
market conditions and should not invest in the Fund with an objective of
short-term financial gain.

AMERICAN ODYSSEY CORE EQUITY FUND

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

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

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

General Risk Considerations. There can be no assurance that the Fund will
achieve its investment objective. Because of its investment policy, the Fund may
or may not be suitable or appropriate for certain investors. The Fund is
designed for long-term investors who can accept the risks entailed in seeking
long-term growth of capital and an increase in future income through investment
primarily in common stocks. By investing primarily in well-established growth
companies, the Fund seeks to avoid some of the volatility associated with
investment in less established companies. The Manager believes that, over the
long term, the earnings of well-established growth companies will not be as
adversely affected by unfavorable economic conditions as the earnings of more
cyclical companies. As with the Emerging Opportunities Fund, the value of the
securities held will fluctuate based on a variety of factors, and thus investors
selecting the Fund should be prepared to withstand periods of adverse market
conditions and should not invest with an objective of short-term financial gain.
Moreover, to the extent the Fund invests in foreign securities, although
investments in such securities and in foreign currency forward contracts are
intended to reduce overall risk by providing
17
<PAGE> 23

further diversification, these investments involve additional risks discussed
above in connection with the International Equity Fund and in the Statement of
Additional Information.

AMERICAN ODYSSEY LONG-TERM BOND FUND

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

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

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

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

Mortgage-Related Securities. The Fund may invest in mortgage-backed
securities issued by the Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association ("FNMA"), and the Federal Home Loan
Mortgage Corporation ("FHLMC"). These securities represent an interest in a pool
of mortgages, such as 30-year and 15-year fixed mortgages and adjustable rate
mortgages. For GNMA securities, the payment of principal and interest on the
underlying mortgages is guaranteed by the full faith and credit of the U.S.
government; for FNMA and FHLMC securities the payment of principal and interest
is guaranteed by the issuing agency, but not the U.S. government. The
guarantees, however, do not extend to the securities' value or yield, which like
other fixed income securities, are likely to fluctuate inversely with
fluctuations in interest rates.

18
<PAGE> 24

Mortgage-backed securities have an investment characteristic that is not
applicable to most other fixed-income securities. When interest rates fall
appreciably, mortgage borrowers tend to refinance and prepay their mortgages,
increasing the principal payments from the pool. The proceeds can then be
reinvested, but only at lower rates. Thus, although the value of mortgage-backed
securities will generally decrease in the same way as other bonds when interest
rates are rising, their value may not increase as much when interest rates are
falling.

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

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

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

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

High-Yield Debt. The Fund may invest up to 15% of its assets in debt
securities rated below investment grade by an NRSRO, e.g., securities with a
Moody's rating of Ba or lower, or with an S&P rating of BB or lower. The Fund
may also purchase unrated corporate debt securities that the subadviser
determines to be of comparable quality. While debt securities rated below
investment grade, sometimes referred to as junk bonds, generally offer a higher
yield than higher-rated securities, they involve additional risks. More
information about high-yield debt and its risks is set forth above in connection
with the Global High-Yield Bond Fund and in the Statement of Additional
Information.

Foreign Securities and Foreign Currency Transactions. The Fund may invest
up to 25% of its assets in fixed income securities of foreign companies or
governmental agencies denominated in foreign currencies. To facilitate the
purchase and sale of those securities and to manage foreign exchange risk, the
Fund may enter into forward contracts to purchase or sell foreign currencies.
More

19
<PAGE> 25

information concerning foreign securities and foreign currency transactions as
well as the risks of these investments is set forth above in connection with the
International Equity Fund and in the Statement of Additional Information.

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

AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND

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

Investment Program. To achieve its objective, the Fund generally invests
at least 85% of its assets in a diversified portfolio of five categories of
marketable (i.e., securities for which market quotations are readily available)
debt instruments: (1) corporate debt securities, (2) U.S. government securities,
(3) mortgage-related securities, (4) asset-backed securities, and (5) money
market instruments. The Fund may also engage in repurchase agreements and
reverse repurchase agreements. These securities are described in more detail
above in connection with the Long-Term Bond Fund and in the Appendix.

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

The Fund will invest primarily in debt securities that have been rated
investment grade by a nationally recognized statistical rating organization
("NRSRO"), e.g., corporate debt rated at least Baa by Moody's Investors Service,
Inc. ("Moody's") or at least BBB by Standard & Poor's Corporation ("S&P") at the
time of purchase, or unrated debt securities that the subadviser determines to
be of comparable quality. The Fund may invest up to 15% of its assets in
high-yield debt securities with lower ratings (or comparable unrated securities
as determined by the investment manager) as long as the subadviser determines
that the investment is consistent with the Fund's objective of preserving
capital. More information about high-yield debt and its risks is set forth above
in connection with the Global High-Yield Bond Fund and in the Statement of
Additional Information.

Foreign Securities and Foreign Currency Transactions. The Fund may invest
up to 25% of its assets in fixed income securities issued by foreign companies
or governments and their agencies

20
<PAGE> 26

denominated in foreign currencies. To facilitate the purchase and sale of those
securities and to manage foreign exchange risk, the Fund may enter into forward
contracts to purchase or sell foreign currencies. More information concerning
foreign securities and foreign currency transactions as well as the risks of
these investments is set forth above in connection with the International Equity
Fund and in the Statement of Additional Information.

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

ADDITIONAL INVESTMENT INFORMATION

Options. Each Fund may write (i.e., sell) options under certain
limitations set forth in the Statement of Additional Information. More
specifically, (1) the Global High-Yield Bond Fund, the International Equity
Fund, the Emerging Opportunities Fund, and the Core Equity Fund may purchase and
write (i.e., sell) put and call options on stocks or stock indices that are
traded on national securities exchanges or that are listed on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"); (2) any
Fund other than the Emerging Opportunities and the Core Equity Funds may
purchase and write (i.e., sell) put and call options on debt securities
(including U.S. government debt securities) that are traded on national
securities exchanges or that result from privately negotiated transactions with
primary U.S. government securities dealers recognized by the Federal Reserve
Bank of New York; and (3) any Fund may purchase and write (i.e., sell) put and
call options on foreign currencies traded on U.S. or foreign securities
exchanges or boards of trade. The Funds will only write covered options, as
explained in the Statement of Additional Information. An option gives the owner
the right to buy or sell securities at a predetermined exercise price for a
given period of time. Although options are primarily used to minimize principal
fluctuations, or to generate additional premium income for the Funds, they do
involve certain risks. Writing covered call options involves the risk of not
being able to effect closing transactions at a favorable price or participate in
the appreciation of the underlying securities or index above the exercise price.
Writing covered put options also involves the risk of not being able to effect
closing transactions at favorable prices or losing part or all of the securities
used for cover if the price of the underlying security falls below the exercise
price. Purchasing put or call options involves the risk of losing the entire
premium (purchase price of the option). The Statement of Additional Information
contains further details concerning the Funds' use of options and the risks
involved.

Futures Contracts. Each Fund may enter into futures contracts and options
thereon under certain limitations set forth in the Statement of Additional
Information. More specifically, (1) the

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<PAGE> 27

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

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

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

When-Issued and Delayed Delivery Securities. The Funds may purchase
securities on a when-issued or delayed delivery basis (i.e., delivery and
payment can take place a month or more after the date of the transaction). A
Fund will make commitments for when-issued transactions only with the
22
<PAGE> 28

intention of actually acquiring the securities and, to facilitate such
acquisitions, the Fund's custodian bank will maintain in a temporary holding
account cash, U.S. government securities or other high-grade debt obligations
having a value equal to or greater than such commitments. On delivery dates for
such transactions, the Fund will meet its obligations from maturities or sales
of the securities held in the temporary holding account and/or from then
available cash flow. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition it could, as with the disposition
of any other Fund security, incur a gain or loss due to market fluctuations. No
when-issued commitments will be made if, as a result, more than 15% of the
Fund's net assets would be so committed.

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

Investment Restrictions. Each Fund is also subject to certain investment
restrictions which are fundamental and may not be changed except with the
approval of a majority vote (as defined on page 11) of the persons having voting
rights with respect to the affected Fund. Investment limitations may also arise
under state insurance laws and regulations, and each Fund will comply with any
such applicable limitation. For a detailed discussion of the investment
restrictions applicable to the Funds, see INVESTMENT RESTRICTIONS in the
Statement of Additional Information.

MANAGEMENT OF THE FUNDS

DIRECTORS AND OFFICERS

The affairs of the Company are managed under the direction of its Board of
Directors. The Company utilizes a Manager/Subadviser structure for advisory
services. The Directors decide upon matters of general policy and review the
actions of the Company's investment manager and subadvisers. Pursuant to an
order issued by the Securities and Exchange Commission, the Company's Board of
Directors may change or add subadvisers, or amend existing shareholder
agreements in certain respects, without shareholder approval. For more
information, see Subadvisers on page 25.

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

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<PAGE> 29

MANAGER

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

The Manager was organized at the same time as the Funds and has managed
them since their inception. The Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended. It is a wholly-owned
indirect subsidiary of Travelers Group Inc. and a member of The Copeland
Companies, which includes another investment adviser upon whose expertise it is
able to draw. In addition, it retains consultants to provide assistance in
monitoring and evaluating the performance of the subadvisers and to provide
assistance in the administration of the Company. See OTHER SERVICE PROVIDERS in
the Statement of Additional Information.

Subject to the supervision and direction of the Directors, the Manager
manages the investment operations of the Funds and is responsible for monitoring
and overseeing the performance of the subadvisers to each of the Funds. The
Manager meets periodically with each of the subadvisers to review and agree upon
investment strategies and programs in the light of anticipated cash flows. The
Manager has responsibility for communicating performance expectations and
evaluations to subadvisers and recommending to the Directors whether
subadvisers' contracts should be renewed, modified, or terminated, and whether
new subadvisers should be hired. For those Funds with more than one subadviser,
the Manager allocates and, if appropriate, reallocates the Fund's assets between
or among the Fund's subadvisers. The Manager reports to the Directors regarding
the results of its evaluation and monitoring functions.

Each Fund pays the Manager a fee for its services that is computed daily
and paid monthly at an annual rate of 0.25% of the Fund's average net assets.
Each Fund pays its respective subadviser(s) directly, at the rates described
below. Prior to May 1, 1998, the Manager paid each of the subadvisers out of the
fees it received from the Funds. The Manager's fees (prior to any adjustment for
the expense limitation agreement) at that time were equal to an annual rate of
the amount the Manager paid each subadviser plus 0.25% of each Fund's average
daily net assets. Thus, during 1997, the Manager's net fee for each Fund, after
paying the subadviser(s) for that Fund, but prior to any adjustment for the
expense limitation agreement, was 0.25% of that Fund's average net assets.

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<PAGE> 30

SUBADVISERS

Each Fund pays its subadviser (or, for any Fund with more than one
subadviser, each of its subadvisers) a fee that is computed daily and paid
monthly at the annual rates specified below based on the value of the Fund's
average daily net assets allocated to that subadviser. Thus, for a Fund with one
subadviser, the subadviser's fee is based upon the average daily net assets of
the entire Fund; for a Fund with more than one subadviser, the subadviser's fee
is based upon the average daily net assets actually allocated to that
subadviser.

<TABLE>
<CAPTION>
FUND & SUBADVISER SUBADVISER'S FEE
----------------- ------------------------------------------
<S> <C>
Global High-Yield Bond Fund
- BEA Associates - 0.425% of assets
International Equity Fund
- Bank of Ireland Asset Management - 0.45% for first $50 million in assets,
(U.S.) plus
- 0.40% for next $50 million in assets,
Limited plus
- 0.30% for assets over $100 million
Emerging Opportunities Fund
- 0.70% for first $50 million in assets,
- Chartwell Investment Partners plus
- 0.50% for next $50 million in assets,
plus
- 0.45% for assets over $100 million
- 0.50% for first $50 million in assets,
- Cowen Asset Management plus
- 0.45% for next $50 million in assets,
plus
- 0.40% for assets over $100 million
Core Equity Fund
- 0.35% for first $100 million in assets,
- Equinox Capital Management, L.L.C. plus
- 0.30% for assets over $100 million
Long-Term Bond Fund
- 0.25% for first $250 million in assets,
- Western Asset Management Company plus
- 0.15% for assets over $250 million
Intermediate-Term Bond Fund
- Travelers Asset Management - 0.25% for first $100 million in assets,
International plus
- 0.20% for next $100 million in assets,
Corporation plus
- 0.15% for assets over $200 million
</TABLE>

The fees the subadvisers receive are generally lower than the fees the
subadvisers charge to institutional clients to which they provide investment
services or advice. The subadvisers are willing to do so in part because their
functions are limited to managing the securities held by the Funds by making
investment decisions and placing orders to buy and sell securities, with the
Manager responsible for administration and operations of the Funds.

The Company has obtained an order from the Securities and Exchange
Commission that permits the Board of Directors to change subadvisers, hire
additional subadvisers, or amend existing subadvisory agreements without
shareholder approval. The new or amended subadvisory agreements may have
different fee structures or rates than the current agreements, subject to the
following maximum annual rates expressed as a percentage of average daily net
assets: Global High-Yield Bond Fund, 0.525%; International Equity Fund, 0.55%;
Emerging Opportunities Fund, 0.80%; Core Equity Fund, 0.45%; Long-Term Bond
Fund, 0.35%; and Intermediate-Term Bond Fund, 0.35%. The

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<PAGE> 31

Board of Directors will approve a Fund's new or amended subadvisory agreement
only if the Board determines that doing so is in the best interests of the Fund
and its shareholders. In particular, the Board will not approve a new or amended
subadvisory agreement that pays a subadvisory fee within these maximums but
higher than the Fund currently pays unless the Board determines that the new or
amended subadvisory agreement, including the higher fee, is in the best interest
of the Fund and its shareholders. Any subadvisory agreement that would pay a
subadvisory fee higher than these maximum rates would require shareholder
approval in addition to the Board's approval.

In addition, no Fund will enter into a new subadvisory agreement with any
subadviser that is an "affiliated person" of the Fund, as defined in the
Investment Company Act of 1940 (the "1940 Act"), other than by reason of serving
as subadviser to one or more Funds, without that subadvisory agreement,
including the subadvisory fee rate, being approved by shareholders. This means,
in essence, that because the Manager is a wholly-owned indirect subsidiary of
Travelers Group Inc., any new subadvisory agreement with a subadviser that is
also a subsidiary of Travelers Group Inc. will require the approval of the
Fund's shareholders, regardless what fee is paid. Currently, for example, the
subadviser for the Intermediate-Term Bond Fund is Travelers Asset Management
International Corporation ("TAMIC"), which is a wholly-owned, indirect
subsidiary of Travelers Group Inc., and accordingly an "affiliated person" of
the Fund and of the Company. Any new subadvisory agreement with TAMIC would
require shareholder approval.

In the event the Board of Directors approves the hiring of a new subadviser
for a Fund without shareholder approval, the Company will, within ninety days of
the effective date of the subadvisory agreement, send all of that Fund's
shareholders an informational statement informing them of the changes. The
statement will include information about any changes caused by the addition of
the new subadviser, including any applicable changes in fees.

Pursuant to the order obtained from the Securities and Exchange Commission
granting the Board of Directors authority to enter into subadvisory agreements
without shareholder approval, the Company has agreed to comply with certain
conditions, some of which are discussed above, and all of which are set forth in
full in the Statement of Additional Information.

Set forth below is information about each of the current subadvisers:

BEA ASSOCIATES ("BEA") serves as subadviser for the Global High-Yield Bond
Fund. Its offices are at One Citicorp Center, 153 East 53rd Street, New York,
New York 10022. It is an indirect wholly-owned subsidiary of Credit Suisse
Group, a Swiss corporation. BEA serves as an investment adviser to a variety of
individual and institutional investors, including mutual funds. As of December
31, 1997, BEA managed more than $34 billion of assets, and Credit Suisse Asset
Management, a group of affiliated companies of which BEA is a member, together
managed more than $128 billion of assets in the United States and abroad. The
Fund currently pays BEA, on a monthly basis, an annual subadvisory fee at the
rate of 0.425% of the average daily net assets of the Fund. BEA first began
serving as subadviser for the Global High-Yield Bond Fund effective May 1, 1998,
and thus did not receive any subadvisory fees in 1997. The following individuals
are responsible for the day-to-day management of the Global High-Yield Bond
Fund:

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<PAGE> 32

Richard Lindquist serves as Executive Director and is a Portfolio Manager
at BEA and heads its high-yield portfolio team. Mr. Lindquist joined BEA in 1995
as a result of BEA's acquisition of CS First Boston Investment Management. Prior
to joining CS First Boston, Mr. Lindquist worked for Prudential Insurance
Company of America, where he managed high-yield portfolios totaling
approximately $1.3 billion, and T. Rowe Price Associates, where he managed a
high-yield bond mutual fund.

Gregg Diliberto serves as Managing Director and is a Portfolio Manager at
BEA, where he is responsible for the interest rate sensitivity of all BEA bond
assignments and the management of structured fixed income portfolios (domestic
and international) and insurance accounts. His work includes managing interest
rate futures, options, municipals, and convertibles, as well as more
conventional securities. Mr. Diliberto built BEA's proprietary computer models
for trading, option valuation, and asset liability modeling. Prior to joining
BEA in 1984, Mr. Diliberto spent seven years at Buck Consultants, where he
analyzed pension fund finances.

Diane Damskey serves as Senior Vice President and is a Portfolio Manager at
BEA. Ms. Damskey joined BEA in 1997 as a portfolio manager dedicated to emerging
markets fixed income. She has spent 16 years in investment or financial
capacities focused on emerging markets, and her experience spans the entire
universe of developing nations. Previously, she managed fixed income portfolios
at Global Emerging Markets Advisors; developed and marketed emerging market debt
strategies for The First National Bank of Chicago; advised and represented the
Republic of Venezuela regarding the restructuring of its commercial bank debt
into Brady bonds while at Shearson Lehman Hutton; and served as a credit officer
and risk analyst at Manufacturers Hanover Trust Company.

BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED ("BIAM") serves as
subadviser for the International Equity Fund. It is an indirect wholly-owned
subsidiary of Bank of Ireland, an Irish corporation. Its head offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. Its U.S. offices are at 20 Horseneck Lane,
Greenwich, Connecticut 06830. The Bank of Ireland provides investment management
services through a network of sister companies, including BIAM, which represents
U.S. clients. As of December 31, 1997, the Bank of Ireland managed more than
$109 million in global securities for U.S. clients. The Fund currently pays
BIAM, on a monthly basis, an annual subadvisory fee based on the average daily
net assets of the Fund at the rate of 0.45% for the first $50 million in assets,
0.40% for the next $50 million in assets, and 0.30% for assets over $100
million. During 1997, BIAM's fees (which were at that time paid by the Manager
rather than by the Fund) amounted to 0.36% of the Fund's average daily net
assets. BIAM's Strategy Group makes all the investment decisions for the
International Equity Fund, and no person is primarily responsible for making
recommendations to that Group.

CHARTWELL INVESTMENT PARTNERS ("CHARTWELL") serves as one of the two
subadvisers for the Emerging Opportunities Fund. Its offices are at 1235
Westlakes Drive, Suite 330, Berwyn, Pennsylvania 19312. Chartwell serves as an
investment adviser to a variety of individual and institutional investors,
including mutual funds. As of December 31, 1997, Chartwell managed approximately
$1.25 billion of assets. The Fund currently pays Chartwell, on a monthly basis,
an annual subadvisory fee based on the average daily net assets managed by
Chartwell at the rate of 0.70% for the first $50 million in assets, 0.50% for
the next $50 million in assets, and 0.45% for assets over

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<PAGE> 33

$100 million. Chartwell first began serving as a subadviser for the Emerging
Opportunities Fund effective May 1, 1998, and thus did not receive any
subadvisory fees in 1997. The following individuals are responsible for the
day-to-day management of the portion of the Emerging Opportunities Fund managed
by Chartwell:

Edward N. Antoian co-founded Chartwell in 1997 and is currently a partner
there. From 1984 to 1997, Mr. Antoian was a Senior Portfolio Manager at Delaware
Investment Advisers, managing institutional assets in small and mid-cap growth
styles as well as the Trend and DelCap Funds. Prior to joining Delaware, Mr.
Antoian was employed by E.F. Hutton in the institutional equity division. Mr.
Antoian has eighteen years' experience in equity investing.

David C. Dalrymple co-founded Chartwell in 1997 and is currently a partner
there. From 1991 to 1997, Mr. Dalrymple was a Portfolio Manager for Delaware
Investment Advisers, managing a small-cap value mutual fund, the Value Fund, and
previously assisting in managing mutual funds and institutional assets in small
and mid-cap styles. Prior to joining Delaware, he was an assistant portfolio
manager at Lord Abbett & Co. Mr. Dalrymple has 11 years' experience in equity
investing.

COWEN ASSET MANAGEMENT. Cowen & Co., through its investment management
division, Cowen Asset Management ("Cowen"), serves as one of the Emerging
Opportunities Fund's two subadvisers. Its principal offices are at Financial
Square, New York, New York 10005. Cowen serves as investment adviser to a
variety of individual and institutional investors, including mutual funds. As of
December 31, 1997, Cowen managed more than $5.8 billion of assets. As of the
date of this prospectus, Societe Generale Securities Corporation, a subsidiary
of Societe Generale, an international commercial bank based in France, had
agreed to acquire Cowen, but that transaction had not been completed. Cowen does
not anticipate this transaction to result in any change in the nature of the
services provided to American Odyssey Fund, Inc, or the personnel providing
those services. The Fund currently pays Cowen, on a monthly basis, an annual
subadvisory fee based on the average daily net assets managed by Cowen at the
rate of 0.50% for the first $50 million in assets, 0.45% for the next $50
million in assets, and 0.40% for assets over $100 million. During the period May
1, 1997, when Cowen became a subadviser to the Fund to December 31, 1997,
Cowen's fees (which were at that time paid by the Manager rather than by the
Fund) amounted to 0.48% of the average daily net assets allocated to Cowen. The
following individual is responsible for the day-to-day management of the portion
of the Fund managed by Cowen:

William Church, the portfolio manager, is a Class 1 Limited Partner of
Cowen & Co. and Chief Investment Officer of Cowen Asset Management. Mr. Church
has been with Cowen & Co. since 1982.

EQUINOX CAPITAL MANAGEMENT, L.L.C. serves as subadviser for the Core Equity
Fund. Its Corporate offices are at 590 Madison Avenue, New York, New York 10022.
Equinox serves as an investment adviser to a variety of individual and
institutional investors. As of December 31, 1997, Equinox managed more than $9.7
billion of assets. The Fund currently pays Equinox, on a monthly basis, an
annual subadvisory fee based on the average daily net assets of the Fund at the
rate of 0.35% for the first $100 million in assets plus 0.30% for assets over
$100 million. During 1997, Equinox's fees (which were at that time paid by the
Manager rather than by the Fund) amounted to 0.31% of

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<PAGE> 34

the Fund's average daily net assets. The following individuals are responsible
for the day-to-day management of the Core Equity Fund:

Ronald J. Ulrich founded Equinox in 1989 and has served as President and
Chief Investment Officer since the firm's inception. He oversees the firm's
portfolio construction and stock selection committees. Prior to Equinox, Mr.
Ulrich was with Morgan Stanley Asset Management, which he co-founded. He served
as Managing Director at Morgan Stanley, Inc. and was responsible for equity
management in their asset management division. Mr. Ulrich has over 26 years
experience in the investment management field.

Wendy D. Lee, C.F.A., joined Equinox in June 1992 as a Principal and Senior
Equity Analyst responsible for coverage of the consumer and basic materials
sectors. She was subsequently promoted in January 1994 to Managing Director and
Director of Research. Ms. Lee, together with Mr. Ulrich, oversees portfolio
construction and stock selection. From May 1985 through June 1992, she was a
Partner and Senior Equity Analyst at Brinson Partners. Ms. Lee has over 17 years
experience in the investment management field.

WESTERN ASSET MANAGEMENT COMPANY serves as subadviser for the Long-Term
Bond Fund. Its Corporate offices are at 117 East Colorado Boulevard, Pasadena,
California 91105. Western Asset Management serves as an investment adviser to a
variety of individual and institutional investors, including mutual funds. As of
December 31, 1997, Western Asset Management managed more than $35 billion of
assets. The Fund currently pays Western Asset Management, on a monthly basis, an
annual subadvisory fee based on the average daily net assets of the Fund at the
rate of 0.25% for the first $250 million of assets and 0.15% for assets over
$250 million. During 1997, Western Asset Management's fees (which were at that
time paid by the Manager rather than by the Fund) amounted to 0.25% of the
Fund's average daily net assets. The following individuals are responsible for
the day-to-day management of the Long-Term Bond Fund:

Kent S. Engel has been with Western Asset since its inception in 1971 and
currently serves as Chief Investment Officer. He is responsible for overseeing
the decisions of the Investment Strategy Committee. Mr. Engel has 26 years
experience with fixed income investing.

S. Kenneth Leech joined Western Asset in May 1990 and currently serves as
Director of Portfolio Management. He is responsible for overseeing the
implementation of the firm's investment strategy. Mr. Leech has 20 years
experience with fixed income investing.

TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION ("TAMIC") serves as
subadviser for the Intermediate-Term Bond Fund. TAMIC is a wholly-owned indirect
subsidiary of Travelers Group Inc., of which the Manager is also a wholly-owned
indirect subsidiary. TAMIC's corporate offices are at One Tower Square,
Hartford, Connecticut 06183. It serves as an investment adviser to a variety of
individual and institutional investors, including mutual funds and variable
annuity portfolios. As of December 31, 1997, TAMIC managed more than $5.5
billion of assets. The Fund currently pays TAMIC, on a monthly basis, an annual
subadvisory fee based on the average daily net assets of the Fund at the rate of
0.25% for the first $100 million in assets, 0.20% for the next $100 million in
assets, and 0.15% for assets over $200 million. During 1997, TAMIC's fees (which
were at that time

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<PAGE> 35

paid by the Manager rather than by the Fund) amounted to 0.25% of the Fund's
average daily net assets. The following individuals are responsible for the
day-to-day management of the Intermediate-Term Bond Fund:

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

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

CUSTODIAN AND TRANSFER AGENT

Investors Bank and Trust Company, 200 Clarendon Street, Boston,
Massachusetts 02116, is custodian of the assets of the Funds of the Company and
maintains certain records and books in connection therewith.

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

PURCHASE AND REDEMPTION OF SHARES

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

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

Redemption. The Company is required to redeem its shares for cash, within
7 days of receipt of proper notice of redemption or sooner if required by law.
The redemption price is the net asset value next determined after the initial
receipt of a proper request for redemption. There is no redemption charge. The
right to redeem shares or to receive payment with respect to any redemption may
be suspended only for any period during which trading on the New York Stock
Exchange is restricted as

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<PAGE> 36

determined by the Securities and Exchange Commission ("SEC") or when such
exchange is closed (other than customary weekend and holiday closings), for any
period during which an emergency exists as defined by the SEC as a result of
which disposal of a Fund's securities or determination of the net asset value of
each Fund is not reasonably practicable, and for such other periods as the SEC
may by order permit for the protection of shareholders of each Fund.

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

PERFORMANCE INFORMATION

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

A Fund's total return for any given period measures the Fund's overall
change in value over that period, including share price movements, and assumes
all dividends and capital gains have been reinvested. Average annual total
return is that rate of return which, if earned uniformly over standard one-,
five- or ten-year periods (or shorter periods depending on the length of time
during which the Fund has operated), would have resulted in the Fund's actual
total return for that period. Other reported total return figures may differ in
that they may report non-standard periods or represent aggregate or cumulative
returns over stated lengths of time.

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

Comparative performance information may be used from time to time in
advertising the Funds' shares, including data from independent fund reporting
services, such as Lipper Analytical Services,

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<PAGE> 37

Inc., from unmanaged market indices, such as the Morgan Stanley Capital
International EAFE Index, the Russell 2500 Index, the Standard & Poor's 500
Stock Index, the Salomon Core + Five Index, the Lehman Brothers
Government/Corporate Intermediate Bond Index, the Lehman Brothers
Government/Corporate 1-5 Year Bond Index, the First Boston High-Yield Bond
Index, and industry or financial publications of general interest such as
Business Week, Forbes and Money.

If you have purchased a variable contract that offers the American Odyssey
Funds as an investment option, you should not compare the Funds' performance
information with funds that offer their shares directly to the public because
the performance figures provided by the American Odyssey Funds do not reflect
charges of the insurance company issuing the variable contract. You should
therefore consult your contract prospectus to learn more about those charges.

FEDERAL INCOME TAXES

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

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

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

OTHER INFORMATION

Voting Rights. The shares of the Funds have equal voting rights, except
that certain issues will be voted on separately by the shareholders of each
Fund. Pursuant to current SEC requirements and staff interpretations, insurance
companies will vote Fund shares held in registered separate accounts in
accordance with voting instructions received from variable contract owners or
payees having the right to give such instructions. Fund shares for which
contract owners or payees are entitled to give voting instructions, but as to
which no voting instructions are received, and shares owned by an insurance

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<PAGE> 38

company in its general and unregistered separate accounts, will be voted in
proportion to the shares for which voting instructions have been received by
that company. Under state insurance law and federal regulations, there are
certain circumstances under which the insurance companies may disregard such
voting instructions. If voting instructions are ever ignored, the insurance
companies will so advise contract owners in the next semiannual report. The
Company currently does not intend to hold annual meetings of shareholders unless
required to do so under applicable law.

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

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

Conversion of Short-Term Bond Fund to Global High-Yield Bond Fund. Prior
to May 1, 1998, the American Odyssey Global High-Yield Bond Fund was named the
American Odyssey Short-Term Bond Fund and had a substantially different
investment objective and investment program. At a special meeting on April 24,
1998, persons having voting rights with respect to the Short-Term Bond Fund
approved a proposal recommended by the Board of Directors (1) to change the
Fund's investment objective to its current one of seeking maximum long-term
total return (capital appreciation and income) by investing primarily in
high-yield debt securities (which are sometimes referred to as junk bonds and
which typically are rated below investment grade) from the United States and
abroad; (2) to approve a new investment subadvisory agreement with a new
subadviser entailing a new fee structure; and (3) to make other changes
necessary to convert the Short-Term Bond Fund to the Global High-Yield Bond
Fund. Because the converted Fund has a different investment objective,
investment program, subadviser, investment portfolio, and asset base,
information about the Short-Term Bond Fund's performance, expenses, fees, asset
base, net asset value, operations, distributions, investment portfolio, and
other data is unlikely to be helpful to investors and potential investors in the
Global High-Yield Bond Fund. Smith Graham & Co. Asset Managers, L.P., served as
subadviser for the Short-Term Bond Fund prior to its conversion to the Global
High-Yield Bond Fund. Smith Graham's corporate offices are at 6900 Texas
Commerce Tower, 600 Travis Street, Houston, TX 77002-3007. During 1997, Smith
Graham's fees (which were paid by the Manager, not the Fund) amounted to 0.25%
of the Short-Term Bond Fund's average daily net assets.

Previous Subadviser for Emerging Opportunities Fund. Prior to May 1, 1998,
Wilke/Thompson Capital Management, Inc. ("Wilke/Thompson") served as one of the
Emerging Opportunities Fund's two subadvisers. Its corporate offices are at 3800
Norwest Center, 90 South 7th Street, Minneapolis, Minnesota 55402-3934. During
1997, its fees (which were paid by the Manager,
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<PAGE> 39

not by the Fund) amounted to 0.36% of the average daily net assets allocated to
Wilke/Thompson. On May 1, 1998, Chartwell Investment Partners replaced
Wilke/Thompson as a subadviser for the Fund.

Year 2000 Preparedness. The services provided to the Funds and their
shareholders by the Manager, the subadvisers, the principal underwriter, and the
custodian depend on the smooth functioning of their respective computer systems
and their outside service providers' computer systems. Some computer software
currently in use cannot distinguish the year 2000 from the year 1900 because of
the way that dates are encoded and calculated. Failure to correct or replace
this type of software could adversely affect, among other things, the handling
of securities trades, the payment of interest and dividends, the pricing of the
Funds' securities and of the Funds' shares, and account services. Although there
is a possibility of the Funds suffering some adverse impact because of this
"Year 2000" issue, the Manager, subadvisers, principal underwriter, and
custodian have advised the Funds that they are taking steps to prepare for the
year 2000, and that they expect that they will have put in place the necessary
changes to their computer systems in time to prevent adverse impact to the
Funds.

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

APPENDIX

ADDITIONAL INFORMATION REGARDING MONEY MARKET INSTRUMENTS

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

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

Repurchase Agreements. When a Fund purchases money market securities, it
may on occasion enter into a repurchase agreement with the seller wherein the
seller and the buyer agree at the time of sale to a repurchase of the security
at a mutually agreed upon time and price. The period of maturity is usually
quite short, possibly overnight or a few days, although it may extend over a
number of months. The resale price is in excess of the purchase price,
reflecting an agreed upon market rate effective for the period of time the
Fund's money is invested in the security, and is not related to the coupon rate
of

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<PAGE> 40

the purchase security. Repurchase agreements may be considered loans of money to
the seller of the underlying security, which are collateralized by the
securities underlying the repurchase agreement. A Fund will not enter into
repurchase agreements unless the agreement is fully collateralized (i.e., the
value of the securities is, and during the entire term of the agreement remains,
at least equal to the amount of the loan including interest). The Fund will take
possession of the securities underlying the agreement and will value them daily
to assure that this condition is met. In the event that a seller defaults on a
repurchase agreement, the Fund may incur loss in the market value of the
collateral, as well as disposition costs; and, if a party with whom the Fund has
entered into a repurchase agreement becomes involved in a bankruptcy proceeding,
the Fund's ability to realize on the collateral may be limited or delayed and a
loss may be incurred if the collateral securing the repurchase agreement
declines in value during the bankruptcy proceeding.

Reverse Repurchase Agreements. The Funds may enter into reverse repurchase
agreements with banks, which agreements have the characteristics of borrowing
and involve the sale of securities held by a Fund with an agreement to
repurchase the securities at an agreed-upon price and date, which reflect a rate
of interest paid for the use of funds for the period. Generally, the effect of
such a transaction is that the Fund can recover all or most of the cash invested
in the securities involved during the term of the reverse repurchase agreement,
while in many cases it will be able to keep some of the interest income
associated with those securities. Such transactions are only advantageous if the
Fund has an opportunity to earn a greater rate of interest on the cash derived
from the transaction than the interest cost of obtaining that cash. The Fund may
be unable to realize a return from the use of the proceeds equal to or greater
than the interest required to be paid. Opportunities to achieve this advantage
may not always be available, and the Funds intend only to use the reverse
repurchase technique when it appears to be to their advantage to do so. The use
of reverse repurchase agreements may magnify any increase or decrease in the
value of a Fund's securities. The Fund's custodian bank will maintain in a
separate account securities of the Fund that have a value equal to or greater
than the Fund's commitments under reverse repurchase agreements. The value of
the securities subject to reverse purchase agreements will not exceed 10% of the
value of the Fund's total assets.

RATINGS OF DEBT SECURITIES

Moody's Investors Service, Inc.

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

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

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

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

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<PAGE> 41

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

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

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

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

C -- Bonds which are rated as C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

Standard & Poor's Corporation

A Standard & Poor's Corporation (S&P) corporate bond rating is a current
assessment of the creditworthiness of an obligor, including obligors outside the
U.S., with respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers, or lessees. Ratings of
foreign obligors do not take into account currency exchange and related
uncertainties. The ratings are based on current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
are based, in varying degrees, on the following considerations:

- Likelihood of default -- capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;

- Nature of and provisions of the obligation; and

- Protection afforded by and relative position of the obligation in
the event of bankruptcy, reorganization or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.

To provide more detailed indications of credit quality, ratings from "AA" to "A"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.

Bond ratings are as follows:

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

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

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

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

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

BB -- Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.

B -- Bonds rated B have a greater vulnerability to default but currently have
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

CCC -- Bonds rated CCC have a currently identifiable vulnerability to default,
and are dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.

CC -- The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

C -- The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

C1 -- The rating C1 is reserved for income bonds on which no interest is being
paid.

D -- Bonds rated D are in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

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RATINGS OF COMMERCIAL PAPER

Moody's Investors Service, Inc.

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

Standard & Poor's Corporation

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

38
<PAGE> 44

[AMERICAN ODYSSEY FUNDS LOGO]

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 1993-1998 American Odyssey Funds Management, Inc.

<PAGE> 45
PART B

INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 46
A M E R I C A N O D Y S S E Y F U N D S , I N C .
STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1998

Shares of American Odyssey Funds, Inc. may be sold only to: (1) life
insurance company separate accounts to serve as the underlying investment
vehicle for variable annuity and variable life insurance contracts; (2)
qualified retirement plans, including Section 403(b) arrangements, as permitted
by Treasury Regulations; and (3) life insurance companies and their affiliates.

This statement of additional information is not a prospectus. You
should read it in conjunction with the American Odyssey Funds, Inc. prospectus
dated May 1, 1998. You may obtain the prospectus without charge by writing to
American Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063, East Brunswick,
New Jersey 08816-1063, or by calling (732) 514-2000.

American Odyssey Funds, Inc.
Two Tower Center, P.O. Box 1063
East Brunswick, New Jersey 08816-1063
Telephone: (732) 514-2000
<PAGE> 47
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTMENT OBJECTIVES AND PROGRAMS.................................................................3
Options on Equity Securities.............................................................3
Options on Stock Indices.................................................................6
Options on Debt Securities...............................................................9
Options on Foreign Currencies...........................................................11
Stock Index Futures Contracts...........................................................12
Interest Rate Futures Contracts.........................................................13
Foreign Currency Futures Contracts......................................................14
Options on Futures Contracts............................................................15
Forward Foreign Currency Exchange Contracts.............................................15
Additional Types of High-Yield Securities...............................................18
INVESTMENT RESTRICTIONS...........................................................................20

CONDITIONS FOR CHANGING SUBADVISERS WITHOUT
SHAREHOLDER APPROVAL..............................................................................24
MANAGEMENT OF THE FUNDS...........................................................................26
Directors and Officers..................................................................26
Investment Advisers.....................................................................29
Other Service Providers.................................................................30
PORTFOLIO TRANSACTIONS............................................................................31
NET ASSET VALUE OF SHARES.........................................................................36
PERFORMANCE INFORMATION...........................................................................38
TAXES ........................................................................................39
OWNERSHIP OF SHARES...............................................................................40
FINANCIAL STATEMENTS..............................................................................41
</TABLE>

<PAGE> 48
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

INVESTMENT OBJECTIVES AND PROGRAMS

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

OPTIONS ON EQUITY SECURITIES

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

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

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

3
<PAGE> 49
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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

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

4
<PAGE> 50
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

5
<PAGE> 51
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

OPTIONS ON STOCK INDICES

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

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

6
<PAGE> 52
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

The purchase and sale of options on stock indices will be subject to the same
risks as options on equity securities, described above. In addition, the
distinctive characteristics of options on

7
<PAGE> 53
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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

8
<PAGE> 54
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

OPTIONS ON DEBT SECURITIES

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

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

9
<PAGE> 55
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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

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

As explained in INVESTMENT RESTRICTIONS on page 20, no Fund other than the
Global High-Yield Bond Fund may invest more than 10% of its total assets
(determined at the time of

10
<PAGE> 56
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

investment) in illiquid securities, including debt securities for which there is
not an established market. The Global High-Yield Bond Fund may invest up to 15%
of its net assets (determined at the time of investment) in such securities. The
staff of the Securities and Exchange Commission has taken the position that
purchased OTC options and the assets used as "cover" for written OTC options are
illiquid securities. However, pursuant to the terms of certain no-action letters
issued by the staff, the securities used as cover for written OTC options may be
considered liquid provided that the Fund sells OTC options only to qualified
dealers who agree that the Fund may repurchase any OTC option it writes for a
maximum price to be calculated by a predetermined formula. In such cases, the
OTC option would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.

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

OPTIONS ON FOREIGN CURRENCIES

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

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

If, on the other hand, a subadviser anticipates purchasing a foreign security
and also anticipates a rise in such foreign currency (thereby increasing the
cost of such security), a Fund may purchase call options on the foreign
currency. The purchase of such options could offset, at least partially, the
effects of the adverse movements of the exchange rates.

11
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

Alternatively, a Fund could write a put option on the currency and, if the
exchange rates move as anticipated, the option would expire unexercised.

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

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

STOCK INDEX FUTURES CONTRACTS

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

A Fund may sell stock index futures to hedge against a decline in the value of
equity securities it holds. A Fund may also buy stock index futures to hedge
against a rise in the

12
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

INTEREST RATE FUTURES CONTRACTS

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

A Fund may sell an interest rate futures contract to hedge against a decline in
the market value of debt securities it owns. A Fund may purchase an interest
rate futures contract to hedge against an anticipated increase in the value of
debt securities it intends to acquire. To the extent permitted by applicable
federal regulations, a Fund may also engage in other types of transactions in
interest rate futures contracts that are economically appropriate for the
reduction of risks inherent in the ongoing management of its futures.

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

FOREIGN CURRENCY FUTURES CONTRACTS

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

The use of these futures contracts is subject to risks similar to those
involved in the use of options on foreign currencies and the use of any futures
contract. A Fund's successful use of foreign currency futures contracts depends
upon the subadviser's ability to predict the direction of currency exchange
markets and political conditions. In addition, the correlation between movements
in the price of futures contracts and the price of currencies being hedged is
imperfect, and there is no assurance that liquid markets will exist for any
particular futures contract at any particular time. Those risks are discussed
more fully under OPTIONS ON FOREIGN CURRENCIES on page 11 and STOCK INDEX
FUTURES CONTRACTS on page 12.

14
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

OPTIONS ON FUTURES CONTRACTS

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

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

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Funds may enter into forward foreign currency exchange contracts in several
circumstances. When a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when a Fund anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Fund may desire to "lock-in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment, as
the case may be. By entering into a forward contract for a fixed amount of
dollars, for the purchase or sale of the amount of foreign currency involved in
the

15
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

underlying transactions, the Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
As discussed in the prospectus, the Global High-Yield Bond fund may also enter
into forward foreign currency exchange contracts for investment purposes. The
other Funds will use forward foreign currency exchange contracts strictly for
hedging purposes.

Additionally, when a subadviser believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, the
Fund may enter into a forward contract for a fixed amount of dollars, to sell
the amount of foreign currency approximating the value of some or all of the
portfolio securities denominated in such foreign currency. The precise matching
of the forward contract amounts and the value of the securities involved will
not generally be possible since the future value of securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date on which the forward contract is entered into
and the date it matures. The projection of short-term currency market movement
is extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. No Fund other than the Global High-Yield Bond Fund
will enter into such forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate a Fund to
deliver an amount of foreign currency in excess of the value of the securities
or other assets denominated in that currency held by the Fund. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the long-term investment decisions made with regard to overall
diversification strategies. However, the Manager believes that it is important
that the subadvisers have the flexibility to enter into such forward contracts
when it is determined that the best interests of the Funds will thereby be
served. A Fund's custodian will place cash or liquid, high-grade equity or debt
securities into a segregated account of the portfolio in an amount equal to the
value of the Fund's total assets committed to the consummation of forward
foreign currency exchange contracts. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of the Fund's commitments with respect to such contracts.

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

16
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.

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

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

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

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

17
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

ADDITIONAL TYPES OF HIGH-YIELD SECURITIES

In furtherance of their respective investment objectives, the Global High-Yield
Bond Fund, Long-Term Bond Fund, and Intermediate-Term Bond Fund may invest in
the following specialized types of high-yield instruments. The latter two Funds
may invest up to 15% of their assets in high-yield debt securities, which may
include those described below. The Global High-Yield Bond Fund may invest up to
100% of its assets in high-yield debt securities, but the Manager does not
anticipate that the Fund ordinarily will invest more than 5% of its assets in
each of the specialized instruments described below.

Zero Coupon Bonds. Zero coupon bonds do not pay interest for several years, and
then pay full coupon interest until maturity. These bonds are sold at a
substantial original issue discount equal to the missing interest payment
compounded at the coupon rate. Zero coupon bonds give the issuer the flexibility
of reduced cash interest expense for several years, while giving the purchaser
the potential advantage of compounding the coupons at a higher rate than might
otherwise be available.

Zero coupon bonds bear special risks beyond those ordinarily associated with
high-yield securities. Because the bonds' cash flows are deferred and because
the bonds often represent very subordinated debt, their prices are subject to
more volatility than most other bonds and may be more greatly affected by
interest rate changes.

For federal income tax purposes, a purchaser of zero coupon bonds (either
initially or in the secondary market) is treated as if the buyer had purchased a
corporate obligation issued on the purchase date with an original issue
discount. The purchaser is required to treat as ordinary income an allocable
portion of such discounts determined on a "constant yield" method. Any such
income increases the holder's tax basis for the zero coupon bond, and any gain
or loss on a sale of the zero coupon bonds relative to the holder's basis, as so
adjusted, is a capital gain or loss. Although certain federal tax law income and
capital gain distribution requirements may have an adverse effect on some
investment companies to the extent they invest in zero coupon bonds, because
each Fund's shares may be sold only to life insurance companies, life insurance
company separate accounts, and qualified retirement plans, none of the Funds is
likely to suffer such effects.

Step-up Bonds. Step-up bonds are a variant of zero coupon bonds. Step-up bonds
pay a low initial interest rate for several years and then pay a higher rate
until maturity. They are

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

also issued at an original issue discount, and bear similar risks to those
associated with zero coupon bonds, although generally to a lesser degree.

Pay-in-kind Bonds. Pay-in-kind ("PIK") bonds pay interest either in cash or in
additional securities at the issuer's option for a specified period. Like zero
coupon bonds, PIK bonds are designed to give the issuer flexibility in managing
cash flow. Unlike zero coupon bonds, however, PIK bonds offer the investor the
opportunity to sell the additional securities issued in lieu of interest and
thus obtain current income on the original investment. Interest rate changes
tend to affect the market prices of PIK bonds to a greater extent than
securities that pay interest in cash. Although certain federal tax law income
and capital gain distribution requirements may have an adverse effect on some
investment companies to the extent they invest in PIK bonds, because each Fund's
shares may be sold only to life insurance companies, life insurance company
separate accounts, and qualified retirement plans, none of the Funds is likely
to suffer such effects.

Reset Bonds. The interest rate on reset bonds is adjusted periodically to a
level which should allow the bonds to trade at a specified dollar level,
generally par or $101. The rate can usually be raised, but the bonds have a low
call premium, limiting the opportunity for capital gains by the Fund. Some
resets have a maximum rate, generally 2.5% or 3% above the initial rate.

Increasing Rate Notes. Increasing rate notes ("IRNs") have interest rates that
increase periodically (by 1/4% per quarter, for example). IRNs are generally
used as a temporary financing instrument, because the increasing rate provides
an incentive for the issuer to refinance with longer-term debt. Thus, principal
is likely to be repaid more quickly than with other types of high-yield
securities, and it may not be possible for a Fund to reinvest the proceeds at
the same rates.

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

INVESTMENT RESTRICTIONS

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

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

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

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

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

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

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

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

9. Lend money, except that loans of up to 10% of the value of each Fund
except for the Global High-Yield Bond Fund, and loans of up to 100% of
the value of the Global High-Yield Bond Fund, may be made through the
purchase of privately placed bonds, debentures, notes, and other
evidences of indebtedness of a character customarily acquired by
institutional investors that may or may not be convertible into stock
or accompanied by warrants or rights to acquire stock. Repurchase
agreements and the purchase of publicly traded debt obligations are not
considered to be "loans" for this purpose and may be entered into or
purchased by a Fund in accordance with its investment objectives and
policies.

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

In addition, the Board of Directors has adopted the following restriction for
the Global High-Yield Bond Fund as a nonfundamental investment policy, which
means that the Board of Directors may change it without shareholder approval:

The Global High-Yield Bond Fund may not invest more than 15% of its
net assets in illiquid securities, i.e., securities subject to legal
or contractual restrictions on resale or for which no readily
available market exists. Restricted securities that have not been
registered but may be sold and resold to institutional investors are
not considered illiquid for purposes of this restriction, provided
that there is dealer or institutional trading market in such
securities.

23
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

CONDITIONS FOR CHANGING SUBADVISERS WITHOUT SHAREHOLDER APPROVAL

As described in the prospectus, the Securities and Exchange Commission
has granted an order permitting the Board of Directors (the "Board") to enter
into new or amended subadvisory agreements without shareholder approval. In
their application to the Securities and Exchange Commission requesting that
order, American Odyssey Funds, Inc. (the "Company") and the Manager consented to
the following conditions:

1. Before any Fund may rely on the order requested in the application,
the operation of the Fund in the manner described in the application will be
approved by a majority vote of persons having voting rights with respect to the
Fund or, in the case of a new Fund whose prospectus contains the disclosure
contemplated by condition 2 below, by the sole initial shareholder(s) before
offering shares of such Fund to the public.

2. Any Fund relying on the requested relief will disclose in its
prospectus the existence, substance, and effect of any order granted pursuant to
the application. In addition, any such Fund will hold itself out to the public
as employing the "manager/subadviser" structure described in the application.
The prospectus will prominently disclose that the Manager has ultimate
responsibility to oversee the subadvisers and recommend their hiring,
termination, and replacement.

3. The Manager will provide management and administrative services to
the Company and, subject to the review and approval by the Board, will: (i) set
each Fund's overall investment strategies; (ii) evaluate, select, and recommend
subadvisers to manage all or part of a Fund's assets; (iii) allocate and, when
appropriate, reallocate each Fund's assets among subadvisers; (iv) monitor and
evaluate subadviser performance; and (v) oversee subadviser compliance with the
applicable Fund's investment objective, policies and restrictions.

4. A majority of the Board will be persons who are not "interested
persons" (as defined in section 2(a)(19) of the Investment Company Act of 1940,
as amended) of the Company ("Independent Directors"), and the nomination of new
or additional Independent Directors will be placed within the discretion of the
then existing Independent Directors.

24
<PAGE> 70
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

5. The Company will not enter into a subadvisory agreement with any
subadviser that is an "affiliated person" of the Fund (as defined in section
2(a)(3) of the Investment Company Act of 1940, as amended) ("Affiliated
Subadviser") other than by reason of serving as subadviser to one or more Funds
without such subadvisory agreement, including the compensation to be paid
thereunder, being approved by the persons having voting rights with respect to
the applicable Fund.

6. When a subadviser change is proposed for a Fund with an Affiliated
Subadviser, the Board, including a majority of the Independent Directors, will
make a separate finding, reflected in the Board minutes, that such change is in
the best interests of the applicable Fund and persons having voting rights with
respect to that Fund and that such change does not involve a conflict of
interest from which the Manager or the Affiliated Subadviser derives an
inappropriate advantage.

7. No director, trustee, or officer of the Company or the Manager will
own directly or indirectly (other than through a pooled investment vehicle that
is not controlled by any such director, trustee or officer) any interest in a
subadviser except for ownership of (i) interests in the Manager or any entity
that controls, is controlled by, or is under common control with the Manager, or
(ii) less than 1% of the outstanding securities of any class of equity or debt
of a publicly-traded company that is either a subadviser or an entity that
controls, is controlled by, or is under common control with a subadviser.

8. Within 90 days of the hiring of any new subadviser, the Manager will
furnish persons having voting rights with respect to the appropriate Fund with
all information about the new subadviser or subadvisory agreement that would be
included in a proxy statement. Such information will include any changes caused
by the addition of the new subadviser. To meet this condition, the Manager will
provide persons having voting rights with an information statement meeting the
requirements of Regulation 14C, Schedule 14C, and Item 22 of Schedule 14A under
the Securities Exchange Act of 1934.

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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

MANAGEMENT OF THE FUNDS

DIRECTORS AND OFFICERS

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

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

Kent A. Kelley* Director Senior Vice President, Salomon Smith
One Tower Square Barney Asset Management; prior to
Hartford, CT January 1998, Chief Executive Officer of
06183 Travelers Inv. Management Company
("TIMCO"); prior to January 1995,
President and Chief Inv. Officer of TIMCO

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

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

26
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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

William A. Arnold Senior Vice President Senior Vice President, Chief Financial
Two Tower Center and Treasurer Officer, and Treasurer, The Copeland
East Brunswick, NJ Companies. Also: Senior Vice President,
08816 Chief Financial Officer and Treasurer of
CFS and the Manager. Prior to January
1998, Vice President and Asst. Financial
Officer, The Travelers Insurance Company
</TABLE>

27
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

<TABLE>
<CAPTION>
Compensation Table
- -----------------------------------------------------------------------------------------------------------------
Total compensation from AOF and
Name of Director Aggregate compensation from AOF Fund Complex paid to Directors
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert C. Dughi $0 $0
- -----------------------------------------------------------------------------------------------------------------
Kent A. Kelley $0 $0
- -----------------------------------------------------------------------------------------------------------------
Linda Walker Bynoe $18,000 $18,000
- -----------------------------------------------------------------------------------------------------------------
Steven I. Weinstein $18,000 $18,000
- -----------------------------------------------------------------------------------------------------------------
Jane DiRenzo Pigott $18,000 $18,000
- -----------------------------------------------------------------------------------------------------------------
Mark M. Skinner $0 $0
- -----------------------------------------------------------------------------------------------------------------
John G. Beam, Jr. $18,000 $18,000
- -----------------------------------------------------------------------------------------------------------------
Nicholas D. Yatrakis $18,000 $18,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

Directors do not receive any form of deferred or retirement benefits. None of
the compensated directors are members of a board of any other mutual fund other
than AOF.

As of May 1, 1998, the directors and officers owned in the aggregate less than
1% of the outstanding shares of each Fund.

28
<PAGE> 74
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

INVESTMENT ADVISERS

For the years 1995, 1996, and 1997, the International Equity Fund paid the
Manager fees of $488,474, $823,891, and $1,320,135 respectively, and the Manager
paid the subadviser $310,189, $506,087, and $776,892 respectively. In 1995, the
Fund also paid the Manager $69,257 as a repayment of expenses previously
reimbursed under an expense limitation agreement.

For the years 1995 and 1996, the Emerging Opportunities Fund paid the Manager
fees of $811,641 and $1,169,885 respectively, and the Manager paid the
subadviser $487,651 and $683,573 respectively. In 1997, the Fund paid the
Manager $1,405,303, and the Manager paid Wilke/Thompson Capital Management,
Inc., one of the Fund's subadvisers during 1997, $571,429, and paid Cowen & Co.,
the Fund's other subadviser in 1997, $290,218.

For the years 1995, 1996, and 1997, the Core Equity Fund paid the Manager fees
of $855,725, $1,362,267, and $2,022,000 respectively, and the Manager paid the
subadviser $489,333, $765,782, and $1,125,636 respectively.

For the years 1995, 1996, and 1997, the Long-Term Bond Fund paid the Manager
fees of $486,896, $718,488, and $945,274 respectively, and the Manager paid the
subadviser $243,334, $359,244, and $472,637 respectively. In 1995, the Fund also
paid the Manager $40,770 as a repayment of expenses previously reimbursed under
an expense limitation agreement.

For the years 1995, 1996, and 1997, the Intermediate-Term Bond Fund paid the
Manager fees of $317,000, $442,594, and $493,298 respectively, and the Manager
paid the subadviser $158,441, $221,298, and $246,921 respectively. In 1995, the
Fund also paid the Manager $46,612 as a repayment of expenses previously
reimbursed under an expense limitation agreement.

For the years 1995, 1996, and 1997, the Short-Term Bond Fund paid the Manager
fees of $113,867, $161,395, and $271,414 respectively, and the Manager paid the
subadviser $56,916, $80,698, and $135,707 respectively. In 1995, 1996, and 1997,
the Fund also paid the Manager $1,531, $21,289, and $42,792 respectively, as a
repayment of expenses previously reimbursed under an expense limitation
agreement.

The expense limitation agreement is no longer in effect for any of the Funds.
Each Fund has repaid the Manager for all expenses previously reimbursed.

29
<PAGE> 75
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

OTHER SERVICE PROVIDERS

Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116 is the
custodian of the assets and is also the accounting services agent for the Funds
of the Company. In that capacity Investors Bank & Trust Company provides
custodial and accounting services to, and keeps the accounts and records of, the
Company. The Company pays a monthly fee based upon the total assets of the Funds
at the end of the month at an annual rate of between 0.04% and 0.08% plus
reimbursement of out-of-pocket expenses for obtaining information from pricing
services and securities transaction charges. For both U.S. and non-U.S. assets,
the annual rate is 0.08% for assets up to $250 million, 0.06% for assets over
$250 million and up to $500 million, and 0.04% for assets over $500 million. For
non-U.S. assets, the Company paid additional custodial expenses at annual rates
of 0.04% and 0.13%, based upon the country. For the years 1995, 1996, and 1997,
the Company paid $213,928, $671,232, and $864,106 respectively to Investors Bank
& Trust Company as custodian and accounting services agent.

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

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

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

30
<PAGE> 76
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

Coopers & Lybrand, L.L.P., One Post Office Square, Boston, MA 02109 serves as
the Company's independent accountants, providing audit services.

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

RogersCasey Sponsor Services ("RogersCasey"), 1 Parklands Drive, Darien, CT
06820, assists the Manager in monitoring the performance of the subadvisers and
comparing that performance to that of other investment managers. For this
assistance, the Manager (not the Company) paid RogersCasey a fee of
approximately $50,000 in 1995, $135,000 in 1996, and $140,000 in 1997.

Investors Bank and Trust Company assists the Manager in providing certain
administrative services for the Company. For this assistance, the Manager (not
the Company) paid Investors Bank & Trust Company a fee of $116,550 in 1996 and
$236,026 in 1997. Investors Bank & Trust Company did not serve in this capacity
before 1996.

PORTFOLIO TRANSACTIONS

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

31
<PAGE> 77
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

In allocating brokerage for the Funds, the subadvisers may annually assess the
contribution of the brokerage and research services provided by broker-dealers,
and allocate a portion of the brokerage business of its clients on the basis of
these assessments. In addition, broker-dealers sometimes suggest a level of
business they would like to receive in return for the various brokerage and
research services they provide. Actual brokerage received by any firm may be
less than the suggested allocations, but can exceed the suggestions because
total brokerage is allocated on the basis of all the considerations described
above. In no instance is a broker-

32
<PAGE> 78
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

dealer excluded from receiving business because it has not been identified as
providing research services.

The subadvisers cannot readily determine the extent to which net prices or
commission rates charged by broker-dealers reflect the value of their research
services. However, net prices and commissions are periodically reviewed to
determine whether they are reasonable in relation to the services provided. In
some instances, the subadvisers receive research services they might otherwise
have had to perform for themselves. The research services provided by
broker-dealers can be useful to the subadvisers, in serving the Funds, as well
as to their other clients.

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

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

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

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

33
<PAGE> 79
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

INTERNATIONAL EQUITY FUND

<TABLE>
<CAPTION>
% Paid to Brokers % of Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1995 $161,675 0% 0%
1996 $249,106 0% 0%
1997 $214,573 0% 0%
</TABLE>

EMERGING OPPORTUNITIES FUND

<TABLE>
<CAPTION>
% Paid to Brokers % of Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1995 $65,993 100% 100%
1996 $90,013 60% 60%
1997 $585,591 94% 94%
</TABLE>

Commissions in the amount of $273 in 1996 were paid to The Robinson-Humphrey
Company, Inc., an affiliate of the Manager.

CORE EQUITY FUND

<TABLE>
<CAPTION>
% Paid to Brokers % of Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1995 $207,159 78% 78%
1996 $333,930 63% 63%
1997 $414,992 50% 50%
</TABLE>

Commissions in the amount of $186 in 1996 were paid to Smith Barney Inc., an
affiliate of the Manager.

34
<PAGE> 80
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

LONG-TERM BOND FUND

<TABLE>
<CAPTION>
% Paid to Brokers % of Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1995 $30,903 0% 0%
1996 $66,218 0% 0%
1997 $94,185 0% 0%
</TABLE>

INTERMEDIATE-TERM BOND FUND

<TABLE>
<CAPTION>
% Paid to Brokers % of Transactions through
Year Total Commission Providing Research Brokers Providing Research
---- ---------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1995 $0 0% 0%
1996 $0 0% 0%
1997 $0 0% 0%
</TABLE>

SHORT-TERM BOND FUND

<TABLE>
<CAPTION>
% Paid to Brokers % of Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1995 $1,447 100% 100%
1996 $0 0% 0%
1997 $0 0% 0%
</TABLE>

On May 1, 1998, the Short-Term Bond Fund was renamed the Global High-Yield Bond
Fund and adopted a substantially different investment objective and investment
program. Information about commissions paid by the Short-Term Bond Fund is
unlikely to be helpful to investors and potential investors in the Global
High-Yield Bond Fund. For more information, see CONVERSION OF SHORT-TERM BOND
FUND TO GLOBAL HIGH-YIELD BOND FUND in the prospectus.

The annual portfolio turnover rate for the International Equity, Emerging
Opportunities, and Core Equity Funds are expected to be less than 100%. For 1998
only, the portfolio turnover rate for the Global High-Yield Bond Fund is
expected to exceed 100% because of the conversion of the Fund. For more
information, see CONVERSION OF SHORT-TERM BOND

35
<PAGE> 81
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

FUND TO GLOBAL HIGH-YIELD BOND FUND in the prospectus. After 1998, the annual
portfolio turnover rate for the Global High-Yield Bond Fund is expected to be
less than 100%. The annual portfolio turnover rate for the Long-Term Bond and
Intermediate-Term Bond Funds are expected to be more than 100%. See INVESTMENT
OBJECTIVES AND PROGRAMS of those Funds in the prospectus for more information.
For a listing of last year's portfolio turnover rates for all of the Funds other
than the Global High-Yield Bond Fund, see FINANCIAL HIGHLIGHTS in the
prospectus.

NET ASSET VALUE OF SHARES

The net asset value of the shares of each Fund is determined once daily, as of
4:15 p.m. New York City time, on each day during which the New York Stock
Exchange ("NYSE") is open for business. The NYSE is open for business Monday
through Friday except for the days on which the following holidays are observed:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. The net asset value per share of
each Fund is computed by adding the sum of the value of the securities held by
that Fund plus any cash or other assets it holds, subtracting all its
liabilities, and dividing the result by the total number of shares outstanding
of that Fund at such time. Expenses, including the investment management fee,
are accrued daily.

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

Debt obligations (other than those with remaining maturities of less than 60
days when purchased) are valued utilizing an independent pricing service to
determine valuations for normal institutional size trading units of securities.
The pricing service considers such factors as security prices, yields,
maturities, call features, ratings, and developments relating to specific
securities. Debt obligations with remaining maturities of less than 60 days will
be

36
<PAGE> 82
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

valued at amortized cost, which approximates market value. This means that
each obligation will be valued initially at its purchase price (or its market
value as of the 60th day prior to maturity) and thereafter by amortizing any
discount or premium uniformly to maturity, unless this method does not represent
fair market value. In such cases, the security will be valued at its fair value
as determined by the Manager and/or the subadvisers under the direction of the
Board of Directors of the Company.

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

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

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

37
<PAGE> 83
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

PERFORMANCE INFORMATION

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

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

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

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

Total returns quoted in advertising reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions,
and any change in the Fund's net asset value per share (NAV) over the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in the Fund over a stated
period, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a total return of 100% over ten years
would require an average

38
<PAGE> 84
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

annual return of 7.18%, which is the steady annual rate that would equal 100%
growth on a compounded basis in ten years. While average annual total returns
are a convenient means of comparing investment alternatives, investors should
realize that a Fund's performance is not constant over time, but changes from
year to year, and that average annual total returns represent averaged figures
as opposed to the actual year-to-year performance.

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

TAXES

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

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

39
<PAGE> 85
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

OWNERSHIP OF SHARES

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

40
<PAGE> 86
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
American Odyssey Funds, Inc. / December 31, 1997
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Emerging Intermediate
International Opportunities Core Equity Long-Term Term Short-Term
Equity Fund Fund Fund Bond Fund Bond Fund Bond Fund
------------- ------------- ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at cost.. $201,197,983 $212,586,767 $297,388,264 $198,965,142 $106,685,504 $57,188,291
- ----------------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value
(see accompanying Portfolio of
Investments) (Note 2) ............... $224,207,852 $245,774,796 $406,071,334 $204,140,597 $107,272,740 $57,572,198
Cash .................................. 8,051,307 21,290,263 7,728,339 17,665,389 2,215 609,105
Cash, denominated in foreign currency
(cost, $4,364,940) .................. 4,196,182 -- -- -- -- --
Receivables for:
Capital stock subscriptions ........ 281,888 243,045 502,408 305,656 64,193 50,435
Investment securities sold ......... -- 2,274,122 1,442,922 -- -- --
Delayed delivery transactions
(Note 9) ......................... -- -- -- 49,948,278 -- --
Unrealized appreciation on forward
foreign currency contracts
(Note 8) ......................... 1,089,879 -- -- -- -- --
Interest ........................... 39,956 80,895 47,091 2,340,810 1,326,244 631,196
Dividends .......................... 228,645 91,226 745,224 -- -- --
Foreign tax reclaims ............... 78,093 -- 2,851 -- -- --
Prepaid organization expense .......... 1,898 1,826 1,827 1,834 1,856 1,856
------------ ------------ ------------ ------------ ------------ -----------
Total assets ....................... 238,175,700 269,756,173 416,541,996 274,402,564 108,667,248 58,864,790
------------ ------------ ------------ ------------ ------------ -----------
LIABILITIES
Payables for:
Investment securities purchased .... 1,361,614 10,679,678 1,587,134 3,988,223 -- --
Delayed delivery transactions
(Note 9) ......................... -- -- -- 51,337,598 -- --
Unrealized depreciation on forward
foreign currency contracts
(Note 8) ......................... 69,093 -- -- -- -- --
Variation margin on open futures
contracts (Note 6) ............... -- -- -- 106,687 -- --
Payable to Adviser .................... 125,896 150,578 207,580 83,066 47,980 26,335
Accrued expenses ...................... 48,040 39,489 49,187 32,639 23,634 17,909
------------ ------------ ------------ ------------ ------------ -----------
Total liabilities .................. 1,604,643 10,869,745 1,843,901 55,548,213 71,614 44,244
------------ ------------ ------------ ------------ ------------ -----------
NET ASSETS ............................ $236,571,057 $258,886,428 $414,698,095 $218,854,351 $108,595,634 $58,820,546
============ ============ ============ ============ ============ ===========
Capital shares outstanding ............ 15,277,557 18,071,430 20,812,710 20,383,564 10,531,347 5,704,494
============ ============ ============ ============ ============ ===========
Net asset value per share ............. $15.48 $14.33 $19.93 $10.74 $10.31 $10.31
============ ============ ============ ============ ============ ===========
- ------------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Capital shares at par ................. $ 152,776 $ 180,714 $ 208,127 $ 203,836 $ 105,313 $ 57,045
Additional paid-in-capital ............ 198,816,813 226,916,667 256,865,764 208,966,285 107,349,249 58,608,562
Undistributed net investment income.... 4,133,869 -- 40,198 114,595 37,666 21,955
Accumulated net realized gain (loss)
on investments, futures contracts,
option contracts and foreign
currency transactions ............... 9,593,909 (1,398,982) 48,900,936 4,572,544 516,170 (250,923)
Net unrealized appreciation on
investments, translation of assets
and liabilities in foreign
currencies, futures contracts and
option contracts .................... 23,873,690 33,188,029 108,683,070 4,997,091 587,236 383,907
============ ============ ============ ============ ============ ===========
$236,571,057 $258,886,428 $414,698,095 $218,854,351 $108,595,634 $58,820,546
============ ============ ============ ============ ============ ===========
</TABLE>

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

20
<PAGE> 87

- --------------------------------------------------------------------------------
Statements of Operations
American Odyssey Funds, Inc. / For the year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Intermediate
International Opportunities Core Equity Long-Term Term Short-Term
Equity Fund Fund Fund Bond Fund Bond Fund Bond Fund
------------ ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ................................... $ 4,740,999(1) $ 578,112(2) $ 6,913,314(3) $ -- $ -- $ --
Interest .................................... 480,037 851,831 363,698 12,939,002 6,452,343 3,361,008
----------- ------------ ----------- ----------- ----------- ----------
Total income ............................. 5,221,036 1,429,943 7,277,012 12,939,002 6,452,343 3,361,008
----------- ------------ ----------- ----------- ----------- ----------
EXPENSES
Management fees (Note 3) .................... 1,320,135 1,405,303 2,022,000 945,274 493,298 271,414
Audit fees .................................. 13,890 11,472 15,727 12,475 9,114 6,685
Director's fees & expenses .................. 21,928 21,137 33,544 16,571 8,795 4,887
Custodian fees .............................. 268,332 162,886 212,360 122,051 57,924 40,553
Legal fees .................................. 13,786 17,398 22,187 15,937 9,136 3,965
Printing expense ............................ 58,407 245,265 71,011 50,912 36,720 24,559
Amortization of organization expense ........ 4,975 4,913 4,847 4,895 4,920 4,997
Miscellaneous expense ....................... 5,497 8,095 9,644 5,499 3,447 1,316
----------- ------------ ----------- ----------- ----------- ----------
Total expenses before reimbursement ...... 1,706,950 1,876,469 2,391,320 1,173,614 623,354 358,376
----------- ------------ ----------- ----------- ----------- ----------
Reimbursement repaid to Management Company
(Note 3) ............................... -- -- -- -- -- 42,792
Less:
Expenses paid under directed brokerage
arrangements (Note 4) .................. (35,639) -- (58,525) -- -- --
----------- ------------ ----------- ----------- ----------- ----------
Net expenses ............................. 1,671,311 1,876,469 2,332,795 1,173,614 623,354 401,168
----------- ------------ ----------- ----------- ----------- ----------
Net investment income (loss) ........... 3,549,725 (446,526) 4,944,217 11,765,388 5,828,989 2,959,840
----------- ------------ ----------- ----------- ----------- ----------
REALIZED and UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on security
transactions ........................... 9,593,909 4,178,737 48,900,932 4,903,936 632,431 (148,187)
Net realized loss on futures contracts ... -- -- -- (1,166,089) -- --
Net realized gain on option contracts .... -- -- -- 798,211 -- --
----------- ------------ ----------- ----------- ----------- ----------
Net realized gain (loss) on security
transactions, futures contracts and
option contracts ..................... 9,593,909 4,178,737 48,900,932 4,536,058 632,431 (148,187)
Net realized gain on foreign currency
transactions ........................... 5,039,668 -- -- -- -- --
Net increase (decrease) in unrealized
appreciation of investments, futures
contracts and option contracts ......... (7,928,382) 13,026,859 42,788,687 5,890,460 785,322 473,223
Net unrealized depreciation from
translation of assets and liabilities
in foreign currencies .................. (43,044) -- -- -- -- --
----------- ------------ ----------- ----------- ----------- ----------
Net realized and unrealized gain on
investments .......................... 6,662,151 17,205,596 91,689,619 10,426,518 1,417,753 325,036
----------- ------------ ----------- ----------- ----------- ----------
Net increase in net assets from
operations ............................. $10,211,876 $ 16,759,070 $96,633,836 $22,191,906 $ 7,246,742 $3,284,876
=========== ============ =========== =========== =========== ==========
</TABLE>
(1) Net of withholding taxes of $597,297.
(2) Net of withholding taxes of $678.
(3) Net of withholding taxes of $17,229

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

<PAGE> 88

- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
American Odyssey Funds, Inc.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

International Equity Fund Emerging Opportunities Fund
-------------------------------- --------------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) ................................... $ 3,549,725 $ 1,951,989 $ (446,526) $ (661,610)
Net realized gain (loss) on security transactions, futures
contracts and option contracts ............................... 9,593,909 1,855,312 4,178,737 9,311,902
Net realized gain (loss) on foreign currency transactions ...... 5,039,668 1,968,421 -- --
Net increase (decrease) in unrealized appreciation
(depreciation) of investments, translation of assets and
liabilities in foreign currencies, futures contracts and
option contracts ............................................. (7,971,426) 22,072,465 13,026,859 (16,078,616)
------------- ------------- -------------- -------------
Net increase (decrease) in net assets resulting from
operations ................................................ 10,211,876 27,848,187 16,759,070 (7,428,324)
------------- ------------- -------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ..................................... (3,549,725) (3,751,066) -- --
From net realized gains on investment transactions ............. (862,014) (903,958) -- (14,364,919)
In excess of net investment income or realized gains ........... (886,397) -- -- --
------------- ------------- -------------- -------------
Total distributions to shareholders ......................... (5,298,136) (4,655,024) -- (14,364,919)
------------- ------------- -------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares .................................. 43,198,871 89,218,342 66,649,338 103,366,353
Distributions reinvested ....................................... 9,953,160 896,810 14,364,919 6,627,286
Cost of shares repurchased ..................................... (8,603,962) (18,313,612) (10,165,115) (74,115,064)
------------- ------------- -------------- -------------
Net increase from capital share transactions ................ 44,548,069 71,801,540 70,849,142 35,878,575
------------- ------------- -------------- -------------
Net increase in net assets ..................................... 49,461,809 94,994,703 87,608,212 14,085,332

NET ASSETS
Beginning of year .............................................. 187,109,248 92,114,545 171,278,216 157,192,884
------------- ------------- -------------- -------------
End of year .................................................... $236,571,057 $187,109,248 $ 258,886,428 $171,278,216
============= ============= ============== =============
Undistributed (excess distribution) net investment income ...... $ 4,133,869 $ (19,402) -- --
============= ============= ============== =============

CAPITAL SHARES
Capital shares outstanding, beginning of year .................. 12,410,280 7,264,073 12,764,369 10,462,738
Capital shares issued .......................................... 2,764,223 6,422,181 4,984,206 6,669,075
Capital shares from distributions reinvested ................... 652,615 70,283 1,087,428 443,000
Capital shares redeemed ........................................ (549,561) (1,346,257) (764,573) (4,810,444)
------------- ------------- -------------- -------------
Capital shares outstanding, end of year ........................ 15,277,557 12,410,280 18,071,430 12,764,369
============= ============= ============== =============
</TABLE>

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

22
<PAGE> 89

- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Core Equity Fund Long-Term Bond Fund
----------------------------- ------------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) ................................... $ 4,944,217 $ 4,660,486 $ 11,765,388 $ 8,450,174
Net realized gain (loss) on security transactions, futures
contracts and option contracts ............................... 48,900,932 15,834,337 4,536,058 (650,445)
Net realized gain (loss) on foreign currency transactions ...... -- -- -- --
Net increase (decrease) in unrealized appreciation
(depreciation) of investments, translation of assets and
liabilities in foreign currencies, futures contracts and
option contracts ............................................. 42,788,687 30,480,771 5,890,460 (4,201,977)
------------ ------------- ------------- ------------
Net increase (decrease) in net assets resulting from
operations ................................................ 96,633,836 50,975,594 22,191,906 3,597,752
------------ ------------- ------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ..................................... (4,951,911) (4,697,100) (11,872,559) (8,175,364)
From net realized gains on investment transactions ............. (4,293,241) (11,536,265) (188,073) --
In excess of net investment income or realized gains ........... -- -- -- --
------------ ------------- ------------- ------------
Total distributions to shareholders ......................... (9,245,152) (16,233,365) (12,060,632) (8,175,364)
------------ ------------- ------------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares .................................. 63,233,692 89,834,796 31,371,836 64,001,096
Distributions reinvested ....................................... 25,394,006 8,600,854 20,235,996 10,236,499
Cost of shares repurchased ..................................... (35,089,813) (43,141,162) (3,579,271) (23,577,889)
------------ ------------- ------------- ------------
Net increase from capital share transactions ................ 53,537,885 55,294,488 48,028,561 50,659,706
------------ ------------- ------------- ------------
Net increase in net assets ..................................... 140,926,569 90,036,717 58,159,835 46,082,094

NET ASSETS
Beginning of year .............................................. 273,771,526 183,734,809 160,694,516 114,612,422
------------ ------------- ------------- ------------
End of year .................................................... $414,698,095 $ 273,771,526 $ 218,854,351 $160,694,516
============ ============= ============= ============
Undistributed (excess distribution) net investment income ...... $ 40,198 $ 47,896 $ 114,595 $ 242,735
============ ============= ============= ============
CAPITAL SHARES
Capital shares outstanding, beginning of year .................. 17,673,755 13,795,844 15,828,492 10,887,947
Capital shares issued .......................................... 3,512,120 6,205,107 2,958,292 6,272,737
Capital shares from distributions reinvested ................... 1,520,884 639,225 1,934,930 973,051
Capital shares redeemed ........................................ (1,894,049) (2,966,421) (338,150) (2,305,243)
------------ ------------- ------------- ------------
Capital shares outstanding, end of year ........................ 20,812,710 17,673,755 20,383,564 15,828,492
============ ============= ============= ============
<CAPTION>
Intermediate-Term Bond Fund Short-Term Bond Fund
----------------------------- ----------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) ................................... $ 5,828,989 $ 5,111,303 $ 2,959,840 $ 1,767,705
Net realized gain (loss) on security transactions, futures
contracts and option contracts ............................... 632,431 488,591 (148,187) 75,014
Net realized gain (loss) on foreign currency transactions ...... -- -- -- --
Net increase (decrease) in unrealized appreciation
(depreciation) of investments, translation of assets and
liabilities in foreign currencies, futures contracts and
option contracts ............................................. 785,322 (1,945,622) 473,223 (585,095)
------------- ------------ ------------ -----------
Net increase (decrease) in net assets resulting from
operations ................................................ 7,246,742 3,654,272 3,284,876 1,257,624
------------- ------------ ------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ..................................... (5,989,855) (4,980,334) (3,005,205) (1,745,696)
From net realized gains on investment transactions ............. (475,876) -- -- --
In excess of net investment income or realized gains ........... -- -- -- --
------------- ------------ ------------ -----------
Total distributions to shareholders ......................... (6,465,731) (4,980,334) (3,005,205) (1,745,696)
------------- ------------ ------------ -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares .................................. 13,449,251 34,374,279 10,266,744 29,548,991
Distributions reinvested ....................................... 11,446,064 4,749,913 4,750,901 1,291,083
Cost of shares repurchased ..................................... (3,465,766) (24,893,538) (5,149,686) (7,534,399)
------------- ------------ ------------ -----------
Net increase from capital share transactions ................ 21,429,549 14,230,654 9,867,959 23,305,675
------------- ------------ ------------ -----------
Net increase in net assets ..................................... 22,210,560 12,904,592 10,147,630 22,817,603

NET ASSETS
Beginning of year .............................................. 86,385,074 73,480,482 48,672,916 25,855,313
------------- ------------ ------------ -----------
End of year .................................................... $ 108,595,634 $ 86,385,074 $ 58,820,546 $48,672,916
============= ============ ============ ===========
Undistributed (excess distribution) net investment income ...... $ 37,666 $ 165,695 $ 21,955 $ 45,487
============= ============ ============ ===========
CAPITAL SHARES
Capital shares outstanding, beginning of year .................. 8,470,117 7,081,020 4,754,313 2,530,211
Capital shares issued .......................................... 1,276,376 3,298,559 975,165 2,826,896
Capital shares from distributions reinvested ................... 1,114,771 457,603 462,176 126,329
Capital shares redeemed ........................................ (329,917) (2,367,065) (487,160) (729,123)
------------- ------------ ------------ -----------
Capital shares outstanding, end of year ........................ 10,531,347 8,470,117 5,704,494 4,754,313
============= ============ ============ ===========
</TABLE>

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

23
<PAGE> 90

- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund
-----------------------------------------------------------------------------
May 17,
1993 (1)
Year ended Year ended Year ended Year ended to
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ...................... $ 15.08 $ 12.68 $ 10.76 $ 11.98 $ 10.00
------------- ------------ ------------ ------------ -------------
OPERATIONS
Net investment income (loss) (2).......... 0.57 0.29 0.17 (0.05) 0.03
Net realized and unrealized gain (loss)
on investments ......................... 0.19 2.48 1.87 (0.78) 1.95
------------- ------------ ------------ ------------ -------------
Total from investment operations ......... 0.76 2.77 2.04 (0.83) 1.98
------------- ------------ ------------ ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ..... (0.24) (0.30) (0.12) (0.03) --
Distributions from net realized gains on
investments ........................... (0.06) (0.07) -- (0.26) --
Distributions in excess of net investment
income or realized gains ............... (0.06) -- -- (0.10) --
------------- ------------ ------------ ------------ -------------
Total distributions ...................... (0.36) (0.37) (0.12) (0.39) --
------------- ------------ ------------ ------------ -------------
NET ASSET VALUE
End of period ............................ $ 15.48 $ 15.08 $ 12.68 $ 10.76 $ 11.98
============= ============ ============ ============ =============
TOTAL RETURN (3)............................. 5.04% 21.93% 19.00% (6.98)% 19.80%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period .............. $236,571,057 $187,109,248 $ 92,114,545 $ 51,712,327 $ 19,978,108
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements ...... 0.79% 0.86% 1.00% 1.36% 1.76%(4)
After repayments/reimbursements and
directed brokerage arrangements (5)... 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 ...... 1.61% 1.51% 1.70% 0.83% 0.34%(4)
After repayments/reimbursements and
directed brokerage arrangements ...... 1.63% 1.54% 1.62% 0.94% 0.85%(4)
Portfolio turnover rate .................. 23.08% 21.54% 31.40% 50.25% 9.20%
Average commission rate paid (6).......... $ 0.0217 $ 0.0219 -- -- --
</TABLE>
================================================================================
(1) Commencement of operations.
(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.
(6) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.

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

<PAGE> 91

<TABLE>
<CAPTION>
Emerging Opportunities Fund
-----------------------------------------------------------------------------
May 17,
1993 (1)
Year ended Year ended Year ended Year ended to
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ..................... $ 13.42 $ 15.02 $ 11.84 $ 10.94 $ 10.00
------------- ------------ ------------ ------------ -----------
OPERATIONS
Net investment loss (2).................. -- -- -- -- (0.01)
Net realized and unrealized gain (loss)
on investments ........................ 0.91 (0.47) 3.81 1.06 0.95
------------- ------------ ------------ ------------ -----------
Total from investment operations ........ 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 ........................... $ 14.33 $ 13.42 $ 15.02 $ 11.84 $ 10.94
============= ============ ============ ============ ===========
TOTAL RETURN (3)............................ 6.78% (3.03)% 32.23% 9.69% 9.40%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period ............. $ 258,886,428 $171,278,216 $157,192,884 $ 88,676,329 $29,112,652
Ratios of expenses to average net
assets:
Before repayments/reimbursements and
directed brokerage arrangements ..... 0.86% 0.72% 0.77% 0.91% 1.23%(4)
After repayments/reimbursements and
directed brokerage arrangements (5).. 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 ..... (0.20)% (0.34)% (0.26)% (0.31)% (0.60)%(4)
After repayments/reimbursements and
directed brokerage arrangements ..... (0.20)% (0.34)% (0.26)% (0.32)% (0.38)%(4)
Portfolio turnover rate ................. 80.36% 43.00% 36.02% 27.40% 8.70%
Average commission rate paid (6)......... $ 0.0565 $ 0.0505 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations.
(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.
(6) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.

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

25
<PAGE> 92

- -------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Core Equity Fund
-------------------------------------------------------------------------------
May 17,
1993 (1)
Year ended Year ended Year ended Year ended to
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period .................... $ 15.49 $ 13.32 $ 10.06 $ 10.33 $ 10.00
-------------- ------------- ------------- -------------- ------------
OPERATIONS
Net investment income (2)............... 0.24 0.26 0.25 0.16 0.06
Net realized and unrealized gain (loss)
on investments ....................... 4.65 2.83 3.63 (0.26) 0.33
-------------- ------------- ------------- -------------- ------------
Total from investment operations ....... 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 ....................... (0.21) (0.65) (0.37) -- --
Distributions in excess of net
investment income or realized gains .. -- -- (0.01) -- --
-------------- ------------- ------------- -------------- ------------
Total distributions .................... (0.45) (0.92) (0.62) (0.17) (0.06)
-------------- ------------- ------------- -------------- ------------
NET ASSET VALUE
End of period .......................... $ 19.93 $ 15.49 $ 13.32 $ 10.06 $ 10.33
============== ============= ============= ============== ============
TOTAL RETURN (3)........................... 31.67% 23.20% 38.56% (1.01)% 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period ............ $ 414,698,095 $273,771,526 $183,734,809 $ 101,591,613 $37,355,875
Ratios of expenses to average net
assets:
Before repayments/reimbursements and
directed brokerage arrangements .... 0.67% 0.68% 0.72% 0.84% 1.12%(4)
After repayments/reimbursements and
directed brokerage arrangements (5). 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 .... 1.36% 1.93% 2.32% 2.27% 1.84%(4)
After repayments/reimbursements and
directed brokerage arrangements .... 1.38% 1.95% 2.33% 2.27% 1.96%(4)
Portfolio turnover rate ................ 45.54% 45.73% 38.44% 48.16% 48.00%
Average commission rate paid (6)........ $ 0.0596 $ 0.0594 -- -- --
===================================================================================================================================
</TABLE>

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

26
<PAGE> 93

- -------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long-Term Bond Fund
--------------------------------------------------------------------------------
May 17,
1993 (1)
Year ended Year ended Year ended Year ended to
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
-------------- ------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ..................... $ 10.15 $ 10.53 $ 9.37 $ 10.33 $ 10.00
-------------- ------------- ------------- ------------- ------------
OPERATIONS
Net investment income (2)................ 0.61 0.50 0.53 0.37 0.62
Net realized and unrealized gain (loss)
on investments ........................ 0.61 (0.36) 1.57 (0.97) 0.45
-------------- ------------- ------------- ------------- ------------
Total from investment operations ........ 1.22 0.14 2.10 (0.60) 1.07
-------------- ------------- ------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .... (0.62) (0.52) (0.57) (0.34) (0.18)
Distributions from net realized gains on
investments ........................... (0.01) -- (0.27) (0.02) (0.56)
Distributions in excess of net
investment income or realized gains ... -- -- (0.10) -- --
-------------- ------------- ------------- ------------- ------------
Total distributions ..................... (0.63) (0.52) (0.94) (0.36) (0.74)
-------------- ------------- ------------- ------------- ------------
NET ASSET VALUE
End of period ........................... $ 10.74 $ 10.15 $ 10.53 $ 9.37 $ 10.33
============== ============= ============= ============= ============
TOTAL RETURN (3)............................ 12.01% 1.34% 22.44% (5.79)% 10.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period ............. $ 218,854,351 $160,694,516 $114,612,422 $ 70,359,236 $25,771,838
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements ..... 0.62% 0.63% 0.66% 0.73% 1.30%(4)(5)
After repayments/reimbursements and
directed brokerage arrangements (6).. 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 ..... 6.22% 5.88% 6.67% 7.08% 15.19%(4)
After repayments/reimbursements and
directed brokerage arrangements ..... 6.22% 5.88% 6.63% 7.05% 15.73%(4)
Portfolio turnover rate ................. 358.67% 369.32% 381.53% 152.91% 589.40%
====================================================================================================================================
</TABLE>

(1) Commencement of operations.
(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.

27
<PAGE> 94

<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
----------------------------------------------------------------------------
May 17,
1993 (1)
Year ended Year ended Year ended Year ended to
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ........................ $ 10.20 $ 10.38 $ 9.61 $ 10.28 $ 10.00
------------ ----------- ---------- ----------- -----------
OPERATIONS
Net investment income (2)................... 0.59 0.61 0.54 0.38 0.17
Net realized and unrealized gain (loss) on
investments .............................. 0.17 (0.20) 0.90 (0.67) 0.28
------------ ----------- ---------- ----------- -----------
Total from investment operations ........... 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) -- (0.07) -- --
Distributions in excess of net investment
income or realized gains ................. -- -- (0.05) -- --
------------ ----------- ---------- ----------- -----------
Total distributions ........................ (0.65) (0.59) (0.67) (0.38) (0.17)
------------ ----------- ---------- ----------- -----------

NET ASSET VALUE
End of period .............................. $ 10.31 $ 10.20 $ 10.38 $ 9.61 $ 10.28
============ =========== ========== =========== ===========
TOTAL RETURN (3)............................... 7.50% 3.95% 15.01% (2.85)% 4.50%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period ................ $108,595,634 $86,385,074 $73,480,482 $ 48,570,907 $19,897,257
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements ........ 0.63% 0.66% 0.68% 0.75% 1.37%(4)
After repayments/reimbursements and
directed brokerage arrangements (5)..... 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 ........ 5.90% 5.77% 6.19% 5.35% 3.73%(4)
After repayments/reimbursements and
directed brokerage arrangements ........ 5.90% 5.77% 6.11% 5.35% 4.35%(4)
Portfolio turnover rate .................... 215.97% 191.20% 137.14% 22.72% --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations.
(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.

28
<PAGE> 95

Short-Term Bond Fund
---------------------------------------------------------------------------
May 17,
1993 (1)
Year ended Year ended Year ended Year ended to
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period .......................... $ 10.24 $ 10.22 $ 9.68 $ 10.07 $ 10.00
------------ ------------ ------------- ------------ -----------
OPERATIONS
Net investment income (2)..................... 0.55 0.37 0.51 0.45 0.19
Net realized and unrealized gain (loss) on
investments ................................ 0.08 0.02 0.54 (0.46) 0.08
------------ ------------ ------------- ------------ -----------
Total from investment operations ............. 0.63 0.39 1.05 (0.01) 0.27
------------ ------------ ------------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ......... (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 ................................ $ 10.31 $ 10.24 $ 10.22 $ 9.68 $ 10.07
============ ============ ============= ============ ===========
TOTAL RETURN (3)................................. 6.11% 3.80% 10.86% (0.14)% 2.70%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period .................. $58,820,546 $48,672,916 $ 25,855,313 $17,628,991 $8,181,243
Ratios of expenses to average net assets:
Before repayments/reimbursements and
directed brokerage arrangements .......... 0.66% 0.68% 0.76% 1.02% 1.72%(4)
After repayments/reimbursements and
directed brokerage arrangements (5)....... 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 .......... 5.53% 5.54% 5.77% 4.99% 3.52%(4)
After repayments/reimbursements and
directed brokerage arrangements .......... 5.45% 5.47% 5.78% 5.25% 4.49%(4)
Portfolio turnover rate ...................... 200.78% 154.51% 93.37% 233.25% 144.30%
====================================================================================================================================
</TABLE>
(1) Commencement of operations.
(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> 96

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./International Equity Fund/December 31, 1997
- --------------------------------------------------------------------------------

Shares Value
- ----------------------------------------------------------------------------

COMMON STOCKS -- 94.6%

AUTOMOTIVE -- 3.5%
166,000 Honda Motor Co. Ltd. .............................. $ 6,115,456
41,975 Michelin B ........................................ 2,114,146
-------------
8,229,602
-------------
BANKING -- 10.8%
139,726 ABN Amro Holdings ................................. 2,722,519
78,635 Banco De Santander ................................ 2,626,055
213,100 Barclay's Plc ..................................... 5,662,748
375,250 Development Bank of Singapore ..................... 3,206,962
400,324 Lloyds TSB Group Plc .............................. 5,177,310
429,550 National Australia Bank Ltd. ...................... 5,997,806
453,000 RHB Capital Berhad ................................ 218,754
-------------
25,612,154
-------------
BEVERAGES, FOOD & TOBACCO -- 9.4%
765,360 B.A.T. Industries ................................. 6,982,914
208,130 Cadbury Schweppes Plc ............................. 2,071,851
313,792 Diageo Plc ........................................ 2,883,592
260,800 Fraser & Neave Ltd. ............................... 1,129,890
601,000 Gudang Garam ...................................... 916,019
719,000 HM Sampoerna ...................................... 542,989
3,492 Nestle ............................................ 5,240,809
58,830 Nutricia Verenigde Bedrijven NV* .................. 1,766,818
520,650 San Miguel Corp. B ................................ 645,918
-------------
22,180,800
-------------
BUILDING MATERIALS -- 0.9%
419,000 City Developments ................................. 1,939,635
278,000 Hume Industries ................................... 291,400
-------------
2,231,035
-------------
COMMERCIAL SERVICES -- 1.1%
140,000 Dai Nippon Printing Co., Ltd....................... 2,638,020
-------------
COMMUNICATIONS -- 6.3%
292,100 Cable & Wireless .................................. 2,571,298
71,850 Royal PTT Nederland NV ............................ 2,998,430
540,736 Telecom Italia SpA ................................ 3,456,060
1,126,000 Telekomunikasi .................................... 599,370
601,050 Telstra Corporation Ltd.* ......................... 1,268,817
534,250 Vodafone Group Plc ................................ 3,898,583
-------------
14,792,558
-------------
CONGLOMERATES -- 2.7%
3,209 Alusuisse Lonza Holdings .......................... 3,086,780
811,611 BTR Ltd. .......................................... 2,490,510
757,000 Sime-Darby Berhad ................................. 727,326
203,000 United Engineers .................................. 168,977
-------------
6,473,593
-------------
ELECTRIC UTILITIES -- 2.9%
18,575 EDP - Electricidade de Portugal SA* ............... 352,111
162,515 Scottish Power Plc ................................ 1,434,601
52,660 Veba AG ........................................... 3,587,705
2,716 Viag AG ........................................... 1,463,705
-------------
6,838,122
-------------
ELECTRICAL EQUIPMENT -- 4.7%
362,330 General Electric Co. Plc .......................... 2,378,733
10,300 Keyence Corp. ..................................... 1,528,905
224,770 Siebe Plc ......................................... 4,419,278
44,430 Siemens ........................................... 2,681,053
-------------
11,007,969
-------------
ELECTRONICS -- 5.0%
227,150 Farnell Electronic ................................ 1,637,025
63,000 Murata Manufacturing Co, Ltd. ..................... 1,589,276
24,000 Rohm Co. Ltd. ..................................... 2,454,984
69,900 Sony Corp. ........................................ 6,236,211
-------------
11,917,496
-------------
ENTERTAINMENT & LEISURE -- 3.2%
133,150 EMI Group Plc ..................................... 1,148,552
304,950 Granada Group Plc ................................. 4,666,406
394,450 Ladbroke Group .................................... 1,713,412
-------------
7,528,370
-------------

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

30
<PAGE> 97

- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./International Equity Fund/December 31, 1997
(continued)
- -------------------------------------------------------------------------------

Shares Value
- ----------------------------------------------------------------------------

FINANCIAL SERVICES -- 2.3%
595,510 Grupo Financiero Banamex* ......................... $ 1,780,218
149,000 HSBC Holdings Plc ................................. 3,672,939
------------
5,453,157
------------
FOOD RETAILERS -- 1.1%
327,150 TI Group Plc ...................................... 2,497,659
------------
FOREST PRODUCTS & PAPER -- 0.8%
694,600 Jefferson Smurfit Group Plc ....................... 1,960,231
------------
HEAVY MACHINERY -- 2.4%
11,134 Mannesmann AG ..................................... 5,591,635
------------
INSURANCE -- 7.2%
120,075 International Nederlanden Groep ................... 5,058,340
372,180 Prudential Corp. .................................. 4,348,481
4,088 Schw Ruckversicher ................................ 7,657,198
------------
17,064,019
------------
MEDIA - BROADCASTING
& PUBLISHING -- 4.1%
171,600 Elsevier NV ....................................... 2,776,437
791,900 News Corp. Ltd. ................................... 4,370,259
213,800 Singapore Press Holdings Ltd. ..................... 2,677,353
------------
9,824,049
------------
MEDICAL SUPPLIES -- 2.4%
197,000 Takeda Chemical Industries Ltd. ................... 5,636,308
------------
METALS -- 0.6%
59,300 Broken Hill Proprietary Co......................... 550,589
253,950 Western Mining Corp. Ltd. ......................... 885,219
------------
1,435,808
------------
OFFICE EQUIPMENT -- 2.9%
290,000 Canon ............................................. 6,780,431
------------
OIL & GAS -- 4.7%
100,327 Ente Nazionale Idrocarburi SpA .................... 569,155
51,850 Royal Dutch Petroleum Co. ......................... 2,846,695
571,450 Shell Transport & Trading ......................... 4,137,127
33,560 Total SA - Series B ............................... 3,653,973
------------
11,206,950
------------
PHARMACEUTICALS -- 11.6%
194,680 Glaxo Wellcome Plc ................................ 4,612,690
75,205 Hoechst AG ........................................ 2,605,755
6,836 Novartis .......................................... 11,107,817
433 Roche Holding AG .................................. 4,306,099
133,650 Zeneca Group ...................................... 4,706,017
------------
27,338,378
------------
RETAILERS -- 4.0%
169,000 KAO Corp. ......................................... 2,443,588
180,200 Kingfisher ........................................ 2,514,313
413,400 Safeway Plc ....................................... 2,346,706
157,000 Shiseido Co., Ltd. ................................ 2,149,330
------------
9,453,937
------------

Total Common Stocks
(Cost $200,800,179) ......................................... 223,692,281
------------

PREFERRED STOCKS -- 0.2%
MEDIA - BROADCASTING
& PUBLISHING -- 0.2%
104,200 News Corp. Ltd. (Cost $397,804).................... 515,571
------------
Total Investments -- 94.8%
(Cost $201,197,983) 224,207,852
Other assets in excess of liabilities -- 5.2% 12,363,205
------------
Total Net Assets -- 100.0% $236,571,057
============
Notes to the Portfolio of Investments:
* Non-income producing security.

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

31
<PAGE> 98

- --------------------------------------------------------------------------------
Investments by Country
American Odyssey Funds, Inc./International Equity Fund/December 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------

Percentage of
COUNTRY Net Assets
-------------------------------------------------------------------------
Great Britain 31.4%
Japan 15.9
Switzerland 13.3
Netherlands 7.7
Germany 6.7
Australia 5.7
Singapore 3.8
France 2.4
Italy 1.7
Hong Kong 1.6
Spain 1.1
Indonesia 0.9
Ireland 0.8
Mexico 0.8
Malaysia 0.6
Philippines 0.3
Portugal 0.1
========
Total 94.8%
========

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

32
<PAGE> 99

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund /December 31, 1997
- --------------------------------------------------------------------------------

Shares Value
- -------------------------------------------------------------------------------

COMMON STOCKS -- 94.9%

ADVERTISING -- 1.2%
65,800 Catalina Marketing Corp.* ........................... $ 3,043,250
------------
APPAREL RETAILERS -- 1.4%
29,000 AnnTaylor Stores Corp.* ............................. 387,875
7,600 Brylane, Inc.* ...................................... 374,300
198,600 The Sports Authority, Inc.* ......................... 2,929,350
------------
3,691,525
------------
AUTOMOTIVE -- 0.4%
12,200 Keystone Automotive
Industries, Inc.* ................................... 289,750
20,200 Wabash National Corp. ............................... 574,438
15,100 Walbro Corp. ........................................ 202,906
------------
1,067,094
------------
BANKING -- 1.7%
28,200 Alliance Bancorp, Inc. .............................. 747,300
4,000 Bank Plus Corporation* .............................. 50,500
5,000 Carver Bancorp, Inc. ................................ 81,250
7,800 Community Capital Corp.* ............................ 117,000
32,600 Compass Bancshares, Inc. ............................ 1,426,250
45,000 IBS Financial Corp. ................................. 795,938
25,000 Roslyn Bancorp, Inc. ................................ 581,250
29,700 Sovereign Bancorp, Inc. ............................. 616,275
------------
4,415,763
------------
BEVERAGES, FOOD & TOBACCO -- 2.4%
6,600 Boston Beer Co., Inc. Class A* ...................... 51,563
176,800 Dreyers Grand Ice Cream, Inc. ....................... 4,265,299
36,850 Flowers Industries, Inc. ............................ 757,728
10,100 Morrison Health Care, Inc. .......................... 202,000
20,400 Petes Brewing Co.* .................................. 82,875
10,500 Redhook Ale Brewery, Inc.* .......................... 55,125
44,700 Scheid Vineyards, Inc. Class A* ..................... 407,888
25,750 Tasty Baking ........................................ 497,297
------------
6,319,775
------------

BUILDING MATERIALS -- 0.7%
125,500 Dravo Corp.* ........................................ 1,380,500
10,900 USG Corp.* .......................................... 534,100
------------
1,914,600
------------
CHEMICALS -- 0.1%
35,700 Calgon Carbon Corp. ................................. 383,775
------------
COMMERCIAL SERVICES -- 9.1%
53,500 American Banknote Corp.* ............................ 267,500
20,100 COR Therapeutics, Inc.* ............................. 452,250
105,100 Fair Issac & Co., Inc. .............................. 3,501,143
81,900 Forrester Research, Inc.* ........................... 1,863,225
14,200 Healthworld Corp.* .................................. 171,288
163,100 ICF International, Inc. Class A* .................... 377,169
103,100 Lo-Jack Corp.* ...................................... 1,520,725
91,400 Meta Group, Inc.* ................................... 2,010,800
116,200 On Assignment, Inc.* ................................ 3,079,300
96,100 Quick Response Services, Inc.* ...................... 3,555,699
104,700 Romac International, Inc.* .......................... 2,558,606
340,100 Sitel Corp.* ........................................ 3,103,413
64,300 Sotheby's, Inc. ..................................... 1,189,550
------------
23,650,668
------------
COMMUNICATIONS -- 0.0%
10,800 Positron Fiber Systems Corp.* ....................... 70,875
------------
COMPUTER HARDWARE -- 0.1%
25,200 Impact Systems, Inc.* ............................... 68,511
70,500 Visioneer, Inc.* .................................... 114,563
------------
183,074
------------
COMPUTER SERVICES -- 4.3%
75,100 BISYS Group, Inc.* .................................. 2,497,075
48,600 CSG Systems International, Inc.* .................... 1,944,000
124,800 Fiserv, Inc.* ....................................... 6,130,799
21,000 Gerber Scientific, Inc. ............................. 417,375
7,700 Red Brick Systems, Inc.* ............................ 53,900
13,000 TCSI Corporation* ................................... 104,000
------------
11,147,149
------------

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

33
<PAGE> 100

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund /December 31, 1997
(continued)
- --------------------------------------------------------------------------------

Shares Value
- -------------------------------------------------------------------------------

COMPUTER SOFTWARE -- 15.9%
118,900 Acxiom Corp.* ....................................... $ 2,288,825
12,750 Barra, Inc.* ........................................ 307,594
75,520 BGS Systems, Inc. ................................... 2,643,200
125,450 Boole & Babbage, Inc.* .............................. 3,747,818
14,100 Business Objects S.A. ADR* .......................... 146,288
117,000 Data Processing Resources Corp.* .................... 2,983,500
7,500 DataWorks Corporation* .............................. 149,063
39,500 Electronic Arts* .................................... 1,493,594
9,400 Evans & Sutherland Computer Co.* .................... 272,600
21,800 HNC Software, Inc.* ................................. 937,400
16,800 Information Advantage, Inc.* ........................ 109,200
30,300 Information Resources, Inc.* ........................ 405,263
92,600 Manugistics Group, Inc.* ............................ 4,132,274
155,000 MetaCreations Corp.* ................................ 1,724,375
293,100 Novell, Inc.* ....................................... 2,198,250
12,400 Objective Systems Integrator, Inc.* ................. 103,850
129,900 Pinnacle Systems, Inc.* ............................. 3,166,312
13,000 Platinum Software Corp.* ............................ 152,750
6,300 Project Software & Development, Inc.* ............... 148,050
55,200 Saville Systems Ireland ADR* ........................ 2,290,800
188,800 Sungard Data Systems, Inc.* ......................... 5,852,799
86,100 Sykes Enterprises, Inc.* ............................ 1,678,950
5,400 Symix Systems, Inc.* ................................ 83,700
103,400 Transaction Systems* ................................ 3,929,199
23,600 Versant Object Technology Corp.* .................... 325,975
------------
41,271,629
------------
CONGLOMERATES -- 0.3%
30,900 York Group, Inc. .................................... 753,188
------------
ELECTRIC UTILITIES -- 5.0%
18,500 Central Louisiana Electric, Inc. .................... 598,938
19,200 DPL, Inc. ........................................... 552,000
17,000 Eastern Utilities Associates ........................ 446,250
26,800 Empire District Electric Co. ........................ 525,950
16,400 Madison Gas & Electric Co. .......................... 377,200
13,600 New Century Energies, Inc. .......................... 651,950
260,400 Niagara Mohawk Power Corp.* ......................... 2,734,200
9,000 NIPSCO Industries, Inc. ............................. 444,938
23,200 Northeast Utilities ................................. 274,050
9,100 Orange & Rockland Utilities ......................... 423,719
14,000 Otter Tail Power Co. ................................ 530,250
11,900 Puget Sound Energy, Inc. ............................ 359,231
13,200 SCANA Corp. ......................................... 395,175
30,900 Sierra Pacific Resources ............................ 1,158,750
21,100 St. Joseph Light & Power ............................ 375,844
36,600 TNP Enterprises, Inc. ............................... 1,216,950
36,600 Union Electric Co. .................................. 1,582,950
12,200 Wisconsin Power & Light Holding, Inc. ............... 404,125
------------
13,052,470
------------
ELECTRICAL EQUIPMENT -- 1.0%
14,700 General Signal Corp. ................................ 620,156
74,200 Littelfuse, Inc.* ................................... 1,845,725
------------
2,465,881
------------
ELECTRONICS -- 1.3%
70,200 Anicom, Inc.* ....................................... 1,114,425
104,900 Unitrode Corp.* ..................................... 2,255,350
------------
3,369,775
------------
ENVIRONMENTAL CONTROLS -- 0.5%
18,400 AIM Safety Co.* ..................................... 230,156
97,600 Laidlaw Environmental Services* ..................... 475,800
27,000 OHM Corp.* .......................................... 212,738
16,600 U.S. Filter Corp.* .................................. 496,963
------------
1,415,657
------------
FOOD RETAILERS -- 1.9%
73,600 Quality Food Centers, Inc.* ......................... 4,931,199
------------
FOREST PRODUCTS & PAPER -- 0.1%
3,900 Bowater, Inc. ....................................... 173,306
18,700 Stone Container Corp.* .............................. 195,181
------------
368,487
------------

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

34
<PAGE> 101

- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund /December 31, 1997
(continued)
- -------------------------------------------------------------------------------

Shares Value
- -------------------------------------------------------------------------------

HEALTH CARE PROVIDERS -- 2.4%
91,800 Healthplan Services Corp. ........................... $ 1,927,800
230,900 Mid Atlantic Medical Services* ...................... 2,943,975
91,700 Physician Reliance Network, Inc.* ................... 957,119
12,600 Sierra Health Services, Inc.* ....................... 423,675
------------
6,252,569
------------
HEAVY MACHINERY -- 3.4%
110,300 Fastenal Co. ........................................ 4,218,974
105,800 JLK Direct Distribution, Inc.* ...................... 2,962,400
29,500 Stewart & Stevenson Services, Inc.................... 752,250
36,900 Tokheim Corp.* ...................................... 763,369
4,600 Varco International, Inc.* .......................... 98,612
------------
8,795,605
------------
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES -- 0.2%
18,800 American Woodmark Corp. ............................. 413,600
------------
HOUSEHOLD PRODUCTS -- 0.3%
34,500 American Safety Razor Co.* .......................... 690,000
------------
MEDIA - BROADCASTING & PUBLISHING -- 0.6%
10,100 Cablevision Systems Corp.* .......................... 967,075
15,200 Central European Media Enterprises Ltd.* ............ 383,800
2,600 TCA Cable TV, Inc. .................................. 119,600
------------
1,470,475
------------
MEDICAL & BIO-TECHNOLOGY -- 1.7%
22,000 Biogen, Inc.* ....................................... 800,250
63,700 CN Biosciences, Inc.* ............................... 1,592,500
53,700 Genzyme Corp.-General Division*...................... 1,490,175
36,100 NeoPath, Inc.* ...................................... 469,300
------------
4,352,225
------------
MEDICAL SUPPLIES -- 5.3%
43,700 Healthdyne Technologies* ............................ 890,388
13,600 Heartstream, Inc.* .................................. 145,350
72,400 Henry Schein, Inc.* ................................. 2,534,000
9,000 Hologic, Inc.* ...................................... 186,188
48,100 Patterson Dental Co.* ............................... 2,176,525
129,000 Physician Sales & Service, Inc.* .................... 2,773,500
95,300 Steris Corp.* ....................................... 4,598,224
5,100 Thoratec Laboratories Corp.* ........................ 33,788
21,700 Universal Hospital Services* ........................ 330,925
------------
13,668,888
------------
METALS -- 2.0%
76,500 Armco, Inc.* ........................................ 377,719
139,500 Battle Mountain Gold Co. ............................ 819,562
31,000 Birmingham Steel Corp. .............................. 488,250
45,900 Cyprus Amax Minerals Co. ............................ 705,713
12,100 Getchell Gold Corp.* ................................ 290,400
62,600 Hecla Mining* ....................................... 309,088
45,400 Kaiser Aluminum Corp.* .............................. 400,088
12,800 Newmont Mining Corp. ................................ 376,000
11,300 Placer Dome, Inc. ................................... 143,369
157,600 Royal Oak Mines, Inc.* .............................. 246,250
125,300 TVX Gold, Inc.* ..................................... 422,888
28,600 Worthington Industries, Inc. ........................ 471,900
------------
5,051,227
------------
MISCELLANEOUS -- 0.1%
37,300 Marker International* ............................... 149,200
------------
OIL & GAS EXPLORATION -- 8.5%
61,200 Barrett Resources Corp.* ............................ 1,851,300
14,800 Benton Oil & Gas Co.* ............................... 191,475
34,500 Devon Energy Corp. .................................. 1,328,250
204,300 EEX Corporation* .................................... 1,851,469
45,000 Forest Oil Corp.* ................................... 742,500
87,900 HS Resources, Inc.* ................................. 1,214,119
3,500 Murphy Oil Corp. .................................... 189,656
32,100 Nuevo Energy Co.* ................................... 1,308,075
181,100 Oryx Energy Co.* .................................... 4,618,049
42,900 Pioneer Natural Resources Co. ....................... 1,241,419
14,300 Pogo Producing Co. .................................. 421,850

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

35
<PAGE> 102

- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Emerging Opportunities Fund/December 31, 1997
(continued)
- -------------------------------------------------------------------------------

Shares Value
- -------------------------------------------------------------------------------

197,700 Santa Fe Energy Resources, Inc.* .................... $ 2,224,125
60,100 Seagull Energy Corp.* ............................... 1,239,563
32,000 Titan Exploration, Inc.* ............................ 304,000
10,300 Union Texas Petroleum Holdings, Inc. ................ 214,369
105,100 United Meridian Corp.* .............................. 2,955,938
------------
21,896,157
------------
OIL & GAS FIELD SERVICES -- 6.8%
6,100 BJ Services Co.* .................................... 438,819
88,900 Global Marine, Inc.* ................................ 2,178,050
33,200 Hanover Compressor Co.* ............................. 678,525
15,200 KeySpan Energy Corp. ................................ 559,550
49,900 Nabors Industries, Inc.* ............................ 1,568,731
131,000 Oceaneering International, Inc.* .................... 2,587,250
61,900 Parker Drilling Co.* ................................ 754,406
24,100 Petroleum Geo-Services ADR* ......................... 1,560,475
84,800 Pride International, Inc.* .......................... 2,141,200
59,400 Reading & Bates Corp.* .............................. 2,487,375
6,700 Rowan Co., Inc.* .................................... 204,350
54,300 Weatherford Enterra, Inc.* .......................... 2,375,625
------------
17,534,356
------------
PHARMACEUTICALS -- 3.6%
54,500 Alpharma, Inc. ...................................... 1,185,375
31,300 Ascent Pediatrics, Inc.* ............................ 183,888
35,800 Carter-Wallace ...................................... 604,125
40,500 Columbia Laboratories, Inc.* ........................ 642,938
35,700 Kos Pharmaceuticals* ................................ 551,119
27,900 Matrix Pharmaceuticals, Inc.* ....................... 95,906
180,000 Mylan Labs, Inc. .................................... 3,768,749
4,900 Nastech Pharmaceutical Co., Inc.* ................... 63,700
17,000 Onyx Pharmaceuticals, Inc.* ......................... 131,750
35,400 R. P. Scherer Corp.* ................................ 2,159,400
------------
9,386,950
------------
REAL ESTATE -- 0.6%
59,200 Atlantic Gulf Communities* .......................... 266,400
20,300 Heartland Partners LP ............................... 324,800
5,800 Storage USA, Inc. REIT .............................. 231,638
23,900 Trizec Hahn Corp. ................................... 554,181
6,200 Washington Real Estate Investment Trust ............. 103,850
------------
1,480,869
------------
RESTAURANTS -- 2.5%
44,700 Brinker International, Inc.* ........................ 715,200
171,300 Landry's Seafood Restaurants* ....................... 4,111,199
99,300 O' Charleys, Inc.* .................................. 1,737,750
------------
6,564,149
------------
RETAILERS -- 6.9%
172,150 Arbor Drugs, Inc. ................................... 3,184,774
64,400 Best Buy Co., Inc.* ................................. 2,374,750
23,940 CDW Computer Centers, Inc.* ......................... 1,247,873
130,300 Eagle Hardware & Garden, Inc.* ...................... 2,524,563
10,400 Homebase, Inc.* ..................................... 81,900
46,800 Michaels Stores* .................................... 1,368,900
85,800 MSC Industrial Direct Co., Inc.* .................... 3,635,774
71,500 Tech Data Corp.* .................................... 2,779,563
15,300 Williams-Sonoma, Inc.* .............................. 640,688
------------
17,838,785
------------
TELEPHONE SYSTEMS -- 0.7%
107,200 Brightpoint, Inc.* .................................. 1,487,400
11,800 Century Communications Corp.* ....................... 115,050
17,600 Vanguard Cellular Systems, Inc. Class A* ............ 224,400
------------
1,826,850
------------
TEXTILES, CLOTHING & FABRICS -- 0.4%
27,500 Osh Kosh B Gosh Class A ............................. 907,500
------------
TRANSPORTATION -- 1.5%
16,900 Covenant Transport, Inc.* ........................... 257,725
23,700 Halter Marine Group, Inc.* .......................... 684,338
19,500 Kirby Corp.* ........................................ 376,594

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

36
<PAGE> 103

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Emerging Opportunities Fund/December 31, 1997
(continued)
- --------------------------------------------------------------------------------

Shares Value
- -------------------------------------------------------------------------------

68,600 Offshore Logistics, Inc.* ........................... $ 1,466,325
22,800 Simon Transportation Services* ...................... 547,200
30,300 Transport Corporation of America, Inc.* ............. 477,225
8,300 Werner Enterprises, Inc. ............................ 170,150
------------
3,979,557
------------

Total Investments -- 94.9%
(Cost $212,586,767) 245,774,796
Other assets in excess of liabilities -- 5.1% 13,111,632
------------
Total Net Assets -- 100.0% $258,886,428
============

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.

37
<PAGE> 104

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund / December 31, 1997
- --------------------------------------------------------------------------------

Shares Value
- --------------------------------------------------------------

COMMON STOCKS -- 97.9%

AIRLINES -- 4.5%
62,800 AMR Corp.* ....................... $ 8,069,800
56,800 Delta Air Lines, Inc. ............ 6,759,200
59,600 Federal Express Corp.* ........... 3,639,325
---------------
18,468,325
---------------
AUTOMOTIVE -- 2.9%
249,700 Ford Motor Co. .................. 12,157,268
---------------
BANKING -- 13.5%
74,810 Banc One Corp. ................... 4,063,118
134,300 BankAmerica Corp. ................ 9,803,899
31,700 Bankers Trust New York Corp. ..... 3,564,269
50,000 Barnett Banks, Inc. .............. 3,593,750
64,028 Chase Manhattan Corp. ............ 7,011,066
60,403 First Chicago NBD Corp. .......... 5,043,651
115,500 Fleet Financial Group, Inc. ...... 8,655,281
132,300 H.F. Ahmanson & Co. .............. 8,855,831
88,300 Nationsbank Corp. ................ 5,369,744
---------------
55,960,609
---------------
BEVERAGES, FOOD & TOBACCO -- 4.6%
145,900 Anheuser-Busch Co., Inc. ......... 6,419,600
175,600 Pepsico, Inc. .................... 6,398,425
111,800 Sara Lee Corp. ................... 6,295,738
---------------
19,113,763
---------------
COMMUNICATIONS -- 2.7%
152,100 SBC Communications, Inc. ........ 11,141,324
---------------
COMPUTER SOFTWARE
& PROCESSING -- 1.6%
149,998 Electronic Data Systems Corp. ... 6,590,537
---------------
COMPUTERS & INFORMATION -- 3.4%
64,400 Hewlett Packard Co. .............. 4,025,000
94,900 IBM Corp. ........................ 9,922,980
---------------
13,947,980
---------------
ELECTRIC UTILITIES -- 5.7%
105,400 Consolidated Edison of
N.Y., Inc. ....................... 4,321,400
208,200 Edison International ............. 5,660,438
174,900 Entergy Corp. .................... 5,236,069
275,485 PG&E Corp. ....................... 8,385,075
---------------
23,602,982
---------------
ELECTRICAL EQUIPMENT -- 2.2%
124,400 General Electric Co. ............ 9,127,850
---------------
ELECTRONICS -- 1.2%
87,900 Motorola, Inc. .................. 5,015,794
---------------
ENTERTAINMENT & LEISURE -- 1.6%
118,600 Carnival Corp. A ................ 6,567,475
---------------
FINANCIAL SERVICES -- 5.4%
193,200 Federal National Mortgage
Association ...................... 11,024,474
194,024 Morgan Stanley, Dean Witter,
Discover and Co. ................. 11,471,668
---------------
22,496,142
---------------
FOREST PRODUCTS & PAPER -- 3.6%
176,200 Fort James Corp. ................. 6,739,650
112,100 International Paper Co. .......... 4,834,313
114,400 Mead Corp. ....................... 3,203,200
---------------
14,777,163
---------------
HEAVY CONSTRUCTION -- 0.9%
145,000 Foster Wheeler Corp. ............ 3,924,063
---------------
HEAVY MACHINERY -- 1.0%
82,800 Caterpiller Tractor, Inc. ....... 4,020,975
---------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES-- 1.7%
127,400 Whirlpool Corp. ................. 7,007,000
---------------
INSURANCE -- 8.5%
102,400 Aetna, Inc. ...................... 7,225,600
107,883 Allstate Corp. ................... 9,803,867
80,500 Chubb Corp. ...................... 6,087,813
39,600 TransAmerica Corp. ............... 4,217,400
149,668 Travelers Group Inc.(a) .......... 8,063,364
---------------
35,398,044
---------------
MEDIA - BROADCASTING
& PUBLISHING -- 3.0%
71,500 Time Warner, Inc. ................ 4,433,000

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

38
<PAGE> 105

- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund / December 31, 1997 (continued)
- -------------------------------------------------------------------------------

Shares Value
- ------------------------------------------------------------------------------

128,900 Tribune Co. ...................................... $ 8,024,025
---------------
12,457,025
---------------
MEDICAL SUPPLIES -- 1.3%
110,200 Baxter International, Inc. ....................... 5,558,213
---------------
METALS -- 1.9%
77,800 Reynolds Metals Co. .............................. 4,668,000
109,400 USX-US Steel Group, Inc. ......................... 3,418,750
---------------
8,086,750
---------------
OIL & GAS -- 10.0%
120,100 Amerada Hess Corp. ............................... 6,590,488
92,900 Ashland, Inc. .................................... 4,987,569
91,600 Atlantic Richfield Co. ........................... 7,339,450
55,012 British Petroleum ADR ............................ 4,383,769
115,800 Exxon Corp. ...................................... 7,085,513
67,400 Mobil Corp. ...................................... 4,865,438
116,500 Texaco, Inc. ..................................... 6,334,688
---------------
41,586,915
---------------
PHARMACEUTICALS -- 3.5%
87,100 Bristol Myers Squibb Co. ......................... 8,241,838
100,700 Schering Plough Corp. ............................ 6,255,988
---------------
14,497,826
---------------
RETAILERS -- 3.4%
99,200 J.C. Penney Co., Inc. ............................ 5,983,000
72,000 Sears Roebuck & Co. .............................. 3,258,000
125,600 Wal-Mart Stores, Inc. ............................ 4,953,350
---------------
14,194,350
---------------
TELEPHONE SYSTEMS -- 8.0%
156,600 AT&T Corp. ....................................... 9,591,750
123,378 Bell Atlantic Corp. .............................. 11,227,397
115,859 GTE Corporation .................................. 6,053,633
205,800 Worldcom, Inc.* .................................. 6,225,450
---------------
33,098,230
---------------
TRANSPORTATION -- 1.8%
45,700 FMC Corp.* ....................................... 3,076,181
128,200 Ryder System ..................................... 4,198,550
---------------
7,274,731
---------------
Total Investments -- 97.9%
(Cost $297,388,264) 406,071,334
Other assets in excess of liabilities-- 2.1% 8,626,761
===============
Total Net Assets-- 100.0% $ 414,698,095
===============

Notes to the Portfolio of Investments: ADR -- American Depository Receipt
* Non-income producing security.
(a) An affiliate of American Odyssey Funds Management Inc. Received in exchange
for Salomon Brothers stock upon acquisition by Travelers Group Inc.

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

39
<PAGE> 106

- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31, 1997
- -------------------------------------------------------------------------------

Principal
Amount Value
- -------------------------------------------------------------------------------

FOREIGN OBLIGATIONS -- 6.0%

Corporate Debt
$ 600,000 Comtel Brasileira Ltd. 144A, Yankee Dollar
10.750%, 09/26/04 ............................. $ 589,500
320,000 Korea Development Bank 7.125%, 09/17/01 ....... 272,636
870,000 Korea Electric Power 6.375%, 12/01/03 ......... 667,653
2,000,000 Petroleos Mexicanos, Yankee Dollar 8.850%,
09/15/07 ...................................... 1,980,000
1,000,000 Sears Overseas Finance, Euro-Dollar 0.000%,
07/12/98 ...................................... 973,580
2,218,059 YPF Sociedad Anonima, Yankee-Dollar 7.000%,
10/26/02 ...................................... 2,230,569
-------------
6,713,938
-------------
Government Obligations
2,000,000 Quebec Province, Yankee-Dollar 5.670%,
02/27/26 ...................................... 2,108,060
1,390,000 Republic of Argentina Global Bond 9.750%,
09/19/27 ...................................... 1,333,009
2,182,300 Republic of Brazil 6.813%, 01/01/01 ........... 2,074,560
980,000 Venezuela 9.250%, 09/15/27 .................... 880,529
-------------
6,396,158
-------------

Total Foreign Obligations
(Cost $13,024,098) ......................................... 13,110,096
-------------

U.S. CORPORATE OBLIGATIONS -- 21.2%

Asset Backed and Mortgage Backed
1,020,000 Nomura Assets Securities Corp., REMIC 7.120%,
04/13/36 ...................................... 1,064,146
------------
Corporate Bonds & Notes
2,000,000 Associates Corporation of North America
8.150%, 08/01/09 .............................. 2,235,280
1,000,000 Cit Group Holdings 8.375%, 11/01/01 ........... 1,070,630
1,500,000 Citicorp Capital I 7.933%, 02/15/27 ........... 1,599,315
1,350,000 Commonwealth Edison Co. 8.375%, 02/15/23 ...... 1,478,277
500,000 Commonwealth Edison Co. 8.625%, 02/01/22 ...... 551,675
400,000 Dean Witter Discover & Co. 6.250%, 03/15/00 ... 400,676
2,500,000 Ford Motor Co. 7.700%, 05/15/97 ............... 2,747,025
2,000,000 Ford Motor Credit Corp. 5.750%, 01/25/01 ...... 1,972,340
350,000 General Motors Acceptance Corp. 9.625%,
12/15/01 ...................................... 389,102
4,700,000 General Motors Acceptance Corp. - Units
0.000%, 06/15/15 .............................. 1,493,425
370,351 GG1B Funding Corp 7.430%, 01/15/11 ............ 373,307
2,000,000 International Paper Co. 7.000%, 06/01/01 ...... 2,042,660
2,000,000 JP Morgan Co. 6.000%, 02/15/12 ................ 1,916,480
1,500,000 JPM Capital Trust I 7.540%, 01/15/27 .......... 1,523,790

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

40
<PAGE> 107

- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc./Long-Term Bond Fund/December 31, 1997
(continued)
- -------------------------------------------------------------------------------

Principal
Amount Value
- --------------------------------------------------------------

$ 2,000,000 Lockheed Martin
6.850%, 05/15/01 ............. $ 2,036,020
600,000 Loews Corp.
7.625%, 06/01/23 ............. 616,968
700,000 NBD Bank N.A.
8.250%, 11/01/24 ............. 829,612
2,000,000 News America Holdings
8.250%, 10/17/96 ............. 2,173,380
400,000 News America Holdings
8.450%, 08/01/34 ............. 451,628
2,000,000 Niagara Mohawk
Power Corp.
7.750%, 05/15/06 ............. 2,111,080
740,000 Philip Morris Co., Inc.
7.000%, 07/15/05 ............. 754,326
1,600,000 Republic of New York Corp.
7.200%, 07/15/97 ............. 1,693,360
2,000,000 RJR Nabisco, Inc.
6.850%, 06/15/05 ............. 2,041,440
200,000 RJR Nabisco, Inc.
8.500%, 07/01/07 ............. 213,210
380,000 RJR Nabisco, Inc.
8.750%, 08/15/05 ............. 409,993
2,000,000 Southern California Edison
6.500%, 06/01/01 ............. 2,017,220
400,000 Southern Union Co.
7.600%, 02/01/24 ............. 417,412
950,000 TCI Communications
8.750%, 08/01/15 ............. 1,101,041
1,860,000 TCI Communications
9.650%, 03/31/27 ............. 2,177,353
800,000 Telecommunications, Inc.
7.875%, 08/01/13 ............. 860,456
2,000,000 Time Warner Entertainment
8.375%, 03/15/23 ............. 2,282,360
1,000,000 Time Warner Entertainment
8.375%, 07/15/33 ............. 1,144,760

2,000,000 US West Capital
Funding, Inc.
7.950%, 02/01/97 ............. 2,203,060
---------------
45,328,661
---------------

Total U.S. Corporate Obligations
(Cost $43,098,794) ....................... 46,392,807
---------------

U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 65.1%

U.S. Government Agency Mortgage Backed Obligations
9,040,130 Federal Home Loan Mortgage
Corp.,
7.000%, 01/01/26 ............. 9,130,531
978,520 Federal National
Mortgage Association
6.000%, 02/01/26 ............. 945,935
992,957 Federal National
Mortgage Association
6.000%, 10/01/27 ............. 957,419
14,100,000 Federal National
Mortgage Association, TBA
7.000%, 01/01/27 ............. 14,201,379
3,000,000 Federal National
Mortgage Association, TBA
8.500%, 01/01/26 ............. 3,132,180
195,637 Government National Mortgage
Association
9.500%, 09/15/30 ............. 207,987
4,570,000 Government National Mortgage
Association, TBA
7.000%, 01/01/28 ............. 4,607,154
8,890,000 Government National Mortgage
Association, TBA
7.500%, 01/01/28 ............. 9,106,738
---------------
42,289,323
---------------

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

41
<PAGE> 108

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31, 1997
(continued)
- --------------------------------------------------------------------------------

Principal
Amount Value
- --------------------------------------------------------------------------------

U.S. Government Agency Obligations
$ 3,000,000 Federal Home Loan Bank 5.920%, 06/29/00 ........ $ 3,007,980
3,000,000 Federal Home Loan Bank 6.285%, 07/28/00 ........ 3,033,270
3,000,000 Federal Home Loan Mortgage Corp. 6.783%,
08/18/05 ....................................... 3,133,590
3,000,000 Federal National Mortgage Association 6.140%,
11/25/05 ....................................... 2,979,870
20,000,000 Resolution Funding Corp., TIGR Coupon Strip
0.000%, 01/15/11(a) ............................ 9,097,800
15,000,000 Resolution Funding Corp., TIGR Principal Strip
0.000%, 01/15/30 ............................... 2,222,550
-------------
23,475,060
-------------
U.S. Treasury Bonds
4,380,000 6.000%, 02/15/26(a) ............................ 4,374,525
1,100,000 6.125%, 11/15/27 ............................... 1,130,426
15,660,000 6.625%, 02/15/27(a) ............................ 17,000,809
2,560,000 6.375%, 08/15/27 ............................... 2,700,006
-------------
25,205,766
-------------
U.S. Treasury Notes
10,402,878 3.375%, 01/15/07 II ............................ 10,129,802
24,000,000 5.625%, 12/31/02 ............................... 23,910,000
100,000 5.625%, 11/30/00 ............................... 99,812
3,670,000 5.750%, 10/31/02(a) ............................ 3,673,450
700,000 5.750%, 11/30/02 ............................... 700,546
2,100,000 5.875%, 09/30/02 ............................... 2,111,487
1,300,000 6.625%, 07/31/01 ............................... 1,336,556
-------------
41,961,653
-------------
U.S. Treasury Principal Strip
5,000,000 0.000%, 02/15/19 ............................... 1,402,650
34,000,000 0.000%, 11/15/21(a) ............................ 8,084,180
-------------
9,486,830
-------------

Total U.S. Government and Agency Obligations
(Cost $140,633,163) ......................................... $ 142,418,632
-------------

PURCHASED OPTIONS -- 0.0%
257,500 90 Day Eurodollar Future Call Option, expires
6/15/98, Strike price $94.25 (Cost $29,223) .... 38,625
-------------

SHORT-TERM INVESTMENTS -- 1.0%
U.S. TREASURY BILLS -- 1.0%
2,200,000 U.S. Treasury Bill 5.230%(b), 03/05/98(c)
(Cost $2,179,864) .............................. 2,180,437
-------------

Total Investments -- 93.3%
(Cost $198,965,142) 204,140,597
Other assets in excess of liabilities -- 6.7% 14,713,754
=============
Total Net Assets -- 100.0% $ 218,854,351
=============

Notes to the Portfolio of Investments:
Euro-Dollar -- Bonds issued offshore that pay interest and
principal in U. S. Dollars.
REMIC -- Real Estate Mortgage Investment Conduit
TBA -- Delayed delivery transaction (Note 9)
TIGR -- Treasury Income Growth Receipts (a stripped U.S. Bond)
Yankee-Dollar -- 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
(a) All or a portion of these securities have been segregated to cover delayed
delivery transactions.
(b) Rate noted reflects yield to maturity at issue.
(c) Security has been pledged to cover collateral requirements for open futures.

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

42
<PAGE> 109

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / December 31, 1997
- --------------------------------------------------------------------------------

Principal
Amount Value
- -------------------------------------------------------------------------------
FOREIGN OBLIGATIONS -- 4.6%

Corporate Debt
$ 5,000,000 Avon Energy Partners
Holdings 144A
6.730%, 12/11/02 ................................ $ 5,049,705
------------

Total Foreign Obligations
(Cost $5,000,000) ............................................ 5,049,705
------------

U.S. CORPORATE OBLIGATIONS -- 56.3%

Asset Backed and Mortgage Backed
1,452,000 DQU II Funding
7.230%, 12/01/99 ................................ 1,479,820
1,500,000 Household Private Label Credit Card Master
Trust II 8.000%, 09/20/03 ....................... 1,532,340
1,000,000 Signet Credit Card Master Trust
7.350%, 09/15/02 ................................ 1,015,620
------------
4,027,780
------------
Corporate Bonds & Notes
50,000 Banponce Financial Corp.
6.750%, 08/09/01 ................................ 50,484
4,500,000 CalEnergy Company, Inc.
9.500%, 09/15/06 ................................ 4,917,240
1,750,000 CIT Group Holdings, Inc.
6.200%, 10/20/00 ................................ 1,751,803
3,000,000 Columbia/HCA Healthcare Corp.
6.870%, 09/15/03 ................................ 2,941,470
1,500,000 Columbia/HCA Healthcare Corp.
8.700%, 02/10/10 ................................ 1,617,195
2,800,000 Comdisco Inc.
6.500%, 04/30/99 ................................ 2,817,752
2,500,000 Continental Cablevision, Inc.
11.000%, 06/01/07 ............................... 2,775,900
2,100,000 Cox Communications, Inc.
6.690%, 09/20/04 ................................ 2,114,490
2,000,000 Crane Co.
7.250%, 06/15/99 ................................ 2,027,900
1,100,000 GTE Corporation
9.100%, 06/01/03 ................................ 1,237,669
3,000,000 Hewlett-Packard Finance Corp.
6.500%, 12/30/99 ................................ 3,020,625
1,850,000 Illinois Power
6.500%, 09/01/99 ................................ 1,856,790
3,000,000 Nationwide Health Properties
6.900%, 10/01/37 ................................ 3,092,166
4,200,000 Philip Morris Co., Inc.
6.950%, 06/01/06 ................................ 4,329,935
5,000,000 Six Flags Entertainment
0.000%, 12/15/99 ................................ 4,422,650
4,050,000 Tele Communications, Inc.
9.650%, 10/01/03 ................................ 4,340,588
3,500,000 Texaco Capital
8.500%, 02/15/03 ................................ 3,841,390
1,500,000 United Illuminating
7.375%, 01/15/98 ................................ 1,500,555
4,400,000 US West Capital Funding, Inc.
6.950%, 01/15/37 ................................ 4,532,308
3,750,000 USL Capital Corp.
8.125%, 02/15/00 ................................ 3,891,825
------------
57,080,735
------------
Total U.S. Corporate Obligations
(Cost $60,665,854) ........................................... 61,108,515
------------

U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 30.9%

U.S. Treasury Notes
5,000,000 5.750%, 11/15/00 ................................ 5,010,935
23,350,000 5.750%, 10/31/02 ................................ 23,371,948
5,000,000 6.125%, 08/15/07 ................................ 5,138,300
------------
33,521,183
------------

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

43
<PAGE> 110

- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / December 31, 1997
(continued)
- -------------------------------------------------------------------------------

Principal
Amount Value
- -------------------------------------------------------------------------------

Total U.S. Government and Agency Obligations
(Cost $33,426,313) ........................................... 33,521,183
------------

SHORT-TERM INVESTMENTS -- 7.0%
COMMERCIAL PAPER
$ 2,000,000 Goldman Sachs Group LP
5.950%(a), 01/05/98 ............................. 1,998,678
2,000,000 Transamerica Financial Corp.
6.000%(a), 01/06/98 ............................. 1,998,333
3,597,000 UBS Finance (Delaware) Inc.
6.750%(a), 01/02/98............................. 3,596,326

Total Short-Term Investments ------------
(Cost $7,593,337)............................................. 7,593,337
------------

Total Investments -- 98.8%
(Cost $106,685,504) 107,272,740
Other assets in excess of liabilities -- 1.2% 1,322,894
============
Total Net Assets -- 100.0% $108,595,634
============
Notes to the Portfolio of Investments:
REIT -- Real Estate Investment Trust
144A -- Securities restriced for resale to
Qualified Institutional Buyers
Yankee-Dollar -- U.S. Dollar denominated bonds issued by
non-U.S. companies in the U.S.
(a) Rate noted reflects yield to maturity at issue.

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

44
<PAGE> 111

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Short-Term Bond Fund / December 31, 1997
- --------------------------------------------------------------------------------

Principal
Amount Value
- -------------------------------------------------------------------------------

U.S. CORPORATE OBLIGATIONS -- 34.8%
Asset Backed and Mortgage Backed
$ 1,500,000 Contimortgage Home Equity Trust 6.770%, 01/15/12 ... $ 1,510,781
530,000 Contimortgage Home Equity Trust 7.340%, 07/15/11 ... 535,464
1,625,000 Equicredit Home Equity Trust, REMIC 6.840%,
09/15/11 ........................................... 1,653,226
925,000 Premier Auto 1997-2 A4 6.250%, 06/06/01 ............ 926,734
1,020,000 Student Loan Marketing Association 7.500%,
03/08/00 ........................................... 1,054,741
1,250,000 The Money Store Home Equity Trust 6.520%, 07/15/12 . 1,250,388
------------
6,931,334
------------
Corporate Bonds & Notes
800,000 American General 8.500%, 06/15/99 .................. 825,256
500,000 Associates Corp. N. A. 6.375%, 08/15/00 ............ 502,815
215,000 BankAmerica Corp. 6.625%, 05/30/01 ................. 217,346
1,625,000 BankAmerica Corp. 8.125%, 02/01/02 ................. 1,730,706
775,000 Ford Holdings, Inc. 9.250%, 03/01/00 ............... 822,205
475,000 Ford Motor Credit Corp. 8.200%, 02/15/02 ........... 507,310
1,575,000 General Motors 9.625%, 12/01/00 .................... 1,714,167
895,000 Lehman Brothers Holdings, Inc. 6.500%, 10/01/02 .... 895,179
317,000 Nationsbank Corp. 6.500%, 08/15/03 ................. 320,050
1,785,000 Norwest Corp. 8.150%, 11/01/01 ..................... 1,901,525
1,500,000 Salomon, Inc. 7.250%, 05/01/01 ..................... 1,539,480
750,000 Sears Roebuck Acceptance Corp. 6.600%, 09/22/04 .... 758,360
1,780,000 Union Acceptance Corp. 6.260%, 02/08/02 ............ 1,780,556
-----------
13,514,955
-----------

Total U.S. Corporate Obligations (Cost $20,313,763) ............... 20,446,289
-----------

U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 63.1%

U.S. Government Agency Mortgage Backed Obligations
2,957,945 Federal Home Loan Mortgage Corp., REMIC 5.500%,
04/15/05 ........................................... 2,913,576
779,177 Federal Home Loan Mortgage Corp., REMIC 6.000%,
08/15/20 ........................................... 777,229
2,036,000 Federal Home Loan Mortgage Corp., REMIC 7.000%,
06/15/21 ........................................... 2,056,279
4,469,827 Federal National Mortgage Association 6.470%,
12/01/01 ........................................... 4,502,009
2,441,134 Federal National Mortgage Association 6.925%,
03/01/01 ........................................... 2,485,074
1,396,876 Federal National Mortgage Association 8.500%,
03/01/25 ........................................... 1,461,677
2,740,000 Federal National Mortgage Association, REMIC 5.700%,
06/25/17 ........................................... 2,715,148
-----------
16,910,992
-----------

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

45
<PAGE> 112

- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Short-Term Bond Fund / December 31, 1997
(continued)
- --------------------------------------------------------------------------------

Principal
Amount Value
- --------------------------------------------------------------------------------

U.S. Government Agency Obligations
$ 425,000 Federal Home Loan Bank 5.870%, 11/21/00 ............ $ 425,531
2,500,000 Federal Home Loan Bank 5.970%, 10/06/00 ............ 2,508,975
1,000,000 Federal Home Loan Bank 6.100%, 10/27/99 ............ 997,970
2,400,865 Federal Home Loan Mortgage Corp. 5.500%, 12/01/99 .. 2,390,133
3,105,000 Federal Home Loan Mortgage Corp. 7.125%, 07/21/99 .. 3,165,641
580,000 Federal National Mortgage Association 6.270%,
10/26/00 ........................................... 579,095
-----------
10,067,345
-----------

U.S. Treasury Bonds 5,580,000 6.500%, 05/31/02 .................. 5,743,047
-----------
5,743,047
-----------
U.S. Treasury Notes
1,100,000 4.750%, 10/31/98 ................................... 1,092,091
2,545,000 6.125%, 07/31/00 ................................... 2,571,239
724,000 7.125%, 09/30/99 ................................... 741,195
-----------
4,404,525
-----------

Total U.S. Government and Agency Obligations
(Cost $36,874,528) .............................................. 37,125,909
-----------

Total Investments -- 97.9%
(Cost $57,188,291) 57,572,198
Other assets in excess of liabilities -- 2.1% 1,248,348
===========
Total Net Assets -- 100.0% $58,820,546
===========
Notes to the Portfolio of Investments:
REMIC -- Real Estate Mortgage Investment Conduit

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

46
<PAGE> 113

- -------------------------------------------------------------------------------
Notes to Financial Statements
American Odyssey Funds, Inc./December 31, 1997
- -------------------------------------------------------------------------------

NOTE 1. Organization

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

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

47
<PAGE> 114

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 a unrealized gain or loss. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
currency values and interest rates.

f) Repurchase Agreements

The Funds may enter into repurchase agreements (on an individual Fund
basis or in conjunction with the other Funds) with the seller wherein the seller
and the buyer agree at the time of sale to a repurchase of the security at a
mutually agreed upon time and price. The Funds will not enter into repurchase
agreements unless the agreement is fully collateralized. Securities purchased
subject to the repurchase agreement are deposited with a custodian and, pursuant
to the terms of the

48
<PAGE> 115

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

i) Taxes

It is the Company's policy to comply with the provisions of the Internal
Revenue Code applicable to a regulated investment company. Under such
provisions, the Company will not be subject to federal income tax as the Company
intends to distribute as dividends substantially all of the net investment
income, if any, of each Fund. The Company also intends to distribute annually
all of its net realized capital gains. Such dividends and distributions are
automatically reinvested in additional shares of the Funds.

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

49
<PAGE> 116

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 (loss) 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, Transfer Agency and Subadvisory Agreements and
Transactions with Affiliates

The Company has entered into a management agreement with American
Odyssey Funds Management, Inc. (AOFM), pursuant to which AOFM manages the
investment operations of the Company and administers the Company's affairs. AOFM
has entered into subadvisory agreements for investment advisory services in
connection with the management of each of the Funds. AOFM supervises the
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 costs pursuant to the subadvisory
agreements, the cost of compensating officers of the Company, occupancy, and
certain clerical and accounting costs of the Company.The Company bears all
other costs and expenses.

Under the terms of the management agreement, the Funds pay AOFM a
manage-ment fee based on average daily net assets as follows: International
Equity Fund, .70% for the first $50 million in assets, .65% for the next $50
million in assets, and .55% for the assets over $100 million; Emerging
Opportunities Fund, .75% for the first $50 million in assets allocated to Cowen
Asset Management ("Cowen"), .70% for the next $50 million in assets allocated to
Cowen, and .65% for assets over $100 million allocated to Cowen, .65% for the
first $100 million in assets allocated to Wilke/Thompson Capital Management,
Inc. ("Wilke/Thompson") and .55% for the assets over $100 million allocated to
Wilke/Thompson; Core Equity Fund, .60% for the first $100 million in assets and
.55% for the assets over $100 million; Long-Term Bond Fund, .50% for the first
$250 million in assets, and .40% for assets over $250 million; Intermediate-Term
Bond Fund, .50% for the first $100 million in assets, .45% for the next $100
million in assets, and .40% for assets over $200 million; Short-Term Bond Fund,
.50% for the first $100 million in assets and .40% for assets over $100 million.
Prior to May 1, 1997, Wilke/Thompson was the sole subadvisor for the Emerging
Opportunities Fund. The management fee paid to AOFM prior to that date was .65%
for the first $100 million in assets and .55% for assets over $100 million.
AOFM's management fees for the year ended December 31, 1997 were $6,457,424.

AOFM previously agreed to waive fees or reimburse expenses for the
Short-Term Bond Fund to the extent the Fund's total expense ratio (excluding
interest, taxes, brokerage, other expenses which are capitalized in accordance
with generally accepted accounting principles, and extraordinary expenses, but
including the Manager's investment advisory

50
<PAGE> 117

fees), exceeded 0.75%. During the fiscal year ended December 31, 1997, the
Short-Term Bond Fund completed repaying the Manager for any fees the Manager
previously waived or expenses the Manager previously reimbursed pursuant to the
above expense limitation. For the year ended December 31, 1997, the Short-Term
Bond Fund paid to AOFM $42,792 for reimbursement of previous fees waived and
expenses reimbursed..

The Company has entered into a transfer agency agreement with AOFM
pursuant to which AOFM is responsible for shareholders' record keeping and
communications. AOFM does not currently charge any additional fees for these
services.

Under the subadvisory agreements, AOFM pays each subadvisor a fee that is
computed daily and paid monthly at the annual rates based on the value of the
Fund's average daily net assets as follows: International Equity Fund, .45% for
the first $50 million in assets, .40% for the next $50 million in assets, and
.30% for assets over $100 million; Emerging Opportunities Fund, .50% for the
first $50 million in assets allocated to Cowen, .45% for the next $50 million in
assets allocated to Cowen, and .40% for assets over $100 million allocated to
Cowen, .40% for the first $100 million in assets allocated to Wilke/Thompson and
.30% for assets over $100 million allocated to Wilke/Thompson; Core Equity Fund,
.35% for the first $100 million in assets and .30% for assets over $100 million;
Long-Term Bond Fund, .25% for the first $250 million in assets and .15% for
assets over $250 million; Intermediate-Term Bond Fund, .25% for the first $100
million in assets, .20% for the next $100 million in assets, and .15% for assets
over $200 million; and Short-Term Bond Fund, .25% for the first $100 million in
assets and .15% for assets over $100 million. Prior to May 1, 1997,
Wilke/Thompson was the sole subadvisor for the Emerging Opportunities Fund.

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 and Core Equity Fund have entered into
brokerage service arrangements with certain broker-dealers. The broker-dealers
have agreed to pay certain Fund expenses in exchange for the Fund directing a
portion of the fund brokerage to these broker dealers. In no event would the
Fund pay additional brokerage or receive inferior execution of transactions for
fund brokerage so allocated.

Under these arrangements for the year ended December 31, 1997,
broker-dealers paid custodian expenses for the International Equity Fund and the
Core Equity Fund of $35,639 and $58,525, respectfully.

51
<PAGE> 118

NOTE 5. Securities Transactions

The cost of purchases and proceeds from sales of investment securities
(excluding short-term investments and repurchase agreements), for the year ended
December 31, 1997 were:

Emerging Intermediate-
Internationa Opportunities Core Equity Long-Term Term Short-Term
Equity Fund Fund Fund Bond Fund Bond Fund Bond Fund
-------------- --------------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Purchases:
Government...................... $ -- $ -- $ -- $625,127,560 $103,812,247 $ 92,163,012
Non-Government.................. 91,963,944 211,342,351 190,344,034 44,229,130 99,747,105 24,161,769
----------- ------------ ------------ ------------ ------------ ------------
Total........................... $91,963,944 $211,342,351 $190,344,034 $669,356,690 $203,559,352 $116,324,781
=========== ============ ============ ============ ============ ============

Sales:
Government...................... $ -- $ -- $ -- $621,325,933 $ 90,856,875 $ 93,366,643
Non-Government.................. 46,941,480 161,481,564 158,647,206 19,170,339 104,069,897 10,852,802
=========== ============ ============ ============ ============ ============
Total........................... $46,941,480 $161,481,564 $158,647,206 $640,496,272 $194,926,772 $104,219,445
=========== ============ ============ ============ ============ ============

</TABLE>

At December 31, 1997, 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:

Emerging Intermediate-
Internationa Opportunities Core Equity Long-Term Term Short-Term
Equity Fund Fund Fund Bond Fund Bond Fund Bond Fund
-------------- --------------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Federal Income Tax Cost........... $201,197,983 $212,866,154 $297,388,264 $199,003,151 $106,685,504 $57,204,658
============ ============ ============ ============ ============ ===========
Gross Unrealized
Appreciation.................... 44,039,532 42,142,217 116,449,047 5,472,822 673,017 398,086
Gross Unrealized
(Depreciation).................. (21,029,663) (9,233,575) (7,765,977) (335,376) (85,781) (30,546)
------------ ------------ ------------ ------------ ------------ -----------
Net Unrealized Appreciation....... $ 23,009,869 $ 32,908,642 $108,683,070 $ 5,137,446 $ 587,236 $ 367,540
============ ============ ============ ============ ============ ===========

</TABLE>

NOTE 6. Futures Contracts

At December 31, 1997, the Long-Term Bond Fund had entered into the
following futures contracts:

Unrealized
Number Underlying Expiration Nominal Nominal Appreciation/
of Contracts Face Value Securities Date Cost Value (Depreciation)
- -------------- ------------ ----------------------------- ------------ --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Short Position
- --------------
231 $23,100,000 U.S. Long-Term Treasury Bonds 3/20/98 $27,650,892 $27,828,281 $ (177,389)
Long Position
- -------------
130 13,000,000 5 Year U.S. Treasury Note 3/20/98 14,122,225 14,121,250 (975)
------------
Total: $ (178,364)
============

</TABLE>

At December 31, 1997, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open future contracts.

52
<PAGE> 119

NOTE 7. Written Options

The Long Term Bond Fund's activity in written options during year ended
December 31, 1997 was as follows:

Number of
Options Premiums
---------- -----------
<S> <C> <C>
Options Outstanding at December 31, 1996.............................................. 213 $ 197,715
Options Written................................................................... 6,187 1,407,266
Options Canceled in Closing Transactions.......................................... (1,951) (1,260,110)
Options Expired................................................................... (4,275) (242,551)
Options Exercised................................................................. (174) (102,320)
---------- ----------
Options Outstanding at December 31, 1997.............................................. 0 $ 0
========== ==========

Cost of closing transactions......................................................... $ 806,770
==========

</TABLE>

NOTE 8. Forward Foreign Currency Contracts

The International Equity Fund had forward foreign currency contracts which
contractually obligates the Fund to deliver or receive currencies at specified
future dates. The following contracts were open at December 31, 1997:

Foreign
Contract Unrealized
U.S. $ Settlement Current Appreciation/
Sales Value Date U.S. $ Value (Depreciation)
- ------------------------------------------------------------ ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C>
British Pound............................................. $ 6,579,630 01/26/98 $ 6,648,723 $ (69,093)
British Pound............................................. 5,748,174 02/24/98 5,593,964 154,210
German Deutsche Mark...................................... 3,430,531 01/14/98 3,322,628 107,903
Japanese Yen.............................................. 3,241,430 02/27/98 3,122,467 118,963
Japanese Yen.............................................. 8,798,760 03/09/98 8,531,746 267,014
Japanese Yen.............................................. 3,164,738 03/16/98 3,129,812 34,926
Swiss Franc............................................... 5,198,064 01/07/98 5,154,366 43,698
Swiss Franc............................................... 4,202,149 01/30/98 4,027,273 174,876
Swiss Franc............................................... 3,309,557 02/13/98 3,121,268 188,289
----------- ----------- ----------
Total Sales........................................... $43,673,033 $42,652,247 $1,020,786
=========== =========== ===========

</TABLE>

53
<PAGE> 120

NOTE 9. Delayed Delivery Transactions:

The Long-Term Bond Fund 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 December 31, 1997, the Fund has entered into the following delayed
delivery transactions.

Settlement
Type Security Date Amount
---- --------------------------------------------------------------------- -------------- -----------
<S> <C> <C> <C>
Buy Federal National Mortgage Association, 7%........................... 01/14/98 $10,186,362
Buy Federal National Mortgage Association, 7%........................... 01/14/98 2,944,594
Buy Federal National Mortgage Association, 7%........................... 01/14/98 18,193,327
Buy Federal National Mortgage Association, TBA, 8.5%.................... 01/14/98 3,135,938
Buy Government National Mortgage Association, TBA, 7%................... 01/22/98 4,609,988
Buy Government National Mortgage Association, TBA, 7.5%................. 01/22/98 9,113,639
Buy Government National Mortgage Association, TBA, 8.5%................. 01/22/98 3,153,750
-----------
Total............................................................... $51,337,598
===========

Sell Federal National Mortgage Association, 7%........................... 01/14/98 $ 2,962,739
Sell Federal National Mortgage Association, 7%........................... 01/14/98 10,254,759
Sell Federal National Mortgage Association, 7%........................... 01/14/98 4,020,625
Sell Federal National Mortgage Association, 6%........................... 01/14/98 12,630,118
Sell Government National Mortgage Association, TBA, 7% .................. 01/22/98 2,561,981
Sell Government National Mortgage Association, TBA, 8.5%................. 01/22/98 1,035,847
Sell Government National Mortgage Association, TBA, 7%................... 01/22/98 11,244,142
Sell Government National Mortgage Association, TBA, 8.5%................. 01/22/98 5,238,067
-----------
Total............................................................... $49,948,278
===========

</TABLE>

NOTE 10. Federal Income Taxes:

For federal income tax purposes, the Funds indicated below have a
capital loss carryforward as of December 31, 1997 which is available to offset
future capital gains, if any.

Capital
Loss Expiration
Carryforward Date
------------ -----------
Emerging Opportunities $1,119,594 12/31/2005
==========

Short-Term Bond $ 85,972 12/31/2002
148,584 12/31/2005
----------
$ 234,556
==========

The International Equity elected to defer to its fiscal year ending December 31,
1998, $627,301 of losses recognized during the period November 1, 1997 to
December 31, 1997.

54
<PAGE> 121

Supplementary Data (Unaudited): Proxy Voting Results

A special meeting of the fund's shareholders was held on April 23, 1997. The
results of votes taken among shareholders on proposals are listed below.

Proposal 1

For the Emerging Opportunities Fund Only: To approve or disapprove certain
advisory and subadvisory agreements to add Cowen Asset Management as a second
subadvisor for the Emerging Opportunities Fund.

# of
Shares Voted % of Shares

Affirmative.......................... 11,951,639 86.23%
Against.............................. 1,125,862 8.12%
Abstain.............................. 782,684 5.65%
TOTAL.............................. 13,860,185 100.00%

Proposal 2

For all Funds: To approve or disapprove an arrangement, a new investment
advisory agreement, and revised subadvisory agreements that would permit AOF to
enter into new subadvisory agreements or to amend the terms of existing
subadvisory agreements without the approval of persons having voting rights.

International Equity Fund Shareholders:

# of
Shares Voted % of Shares

Affirmative.......................... 10,242,491 79.54%
Against.............................. 2,024,726 15.72%
Abstain.............................. 610,263 4.74%
TOTAL.............................. 12,877,480 100.00%

Emerging Opportunities Fund Shareholders:

# of
Shares Voted % of Shares

Affirmative.......................... 10,950,517 79.01%
Against.............................. 2,259,349 16.30%
Abstain.............................. 650,319 4.69%
TOTAL.............................. 13,860,185 100.00%

Core Equity Fund Shareholders:

# of
Shares Voted % of Shares

Affirmative.......................... 15,121,900 80.86%
Against.............................. 2,685,083 14.36%
Abstain.............................. 895,277 4.78%
TOTAL.............................. 18,702,260 100.00%

Long-Term Bond Fund Shareholders:

# of
Shares Voted % of Shares

Affirmative.......................... 13,700,793 80.72%
Against.............................. 2,476,163 14.59%
Abstain.............................. 795,855 4.69%
TOTAL.............................. 16,972,811 100.00%

Intermediate-Term Bond Fund Shareholders:

# of
Shares Voted % of Shares

Affirmative.......................... 7,284,262 80.30%
Against.............................. 1,409,444 15.54%
Abstain.............................. 377,829 4.16%
TOTAL.............................. 9,071,535 100.00%

Short-Term Bond Fund Shareholders:

# of
Shares Voted % of Shares

Affirmative.......................... 4,174,795 83.95%
Against.............................. 569,127 11.45%
Abstain.............................. 228,794 4.60%
TOTAL.............................. 4,972,716 100.00%

55
<PAGE> 122

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the statements of assets and liabilities, including the
portfolios of investments, of the American Odyssey Funds, Inc., comprising,
respectively, the International Equity Fund, Emerging Opportunities Fund, Core
Equity Fund, Long-Term Bond Fund, Intermediate Term Bond Fund, and Short-Term
Bond Fund, (the "Funds"), as of December 31, 1997, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the four years in the period then ended and for the period from May 17,
1993 (commencement of operations) to December 31, 1993. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective Funds constituting the American Odyssey Funds, Inc. as of
December 31, 1997, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for the periods referred to above, in conformity
with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
February 6, 1998

56
<PAGE> 123
PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a). FINANCIAL STATEMENTS

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

Financial Highlights

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

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

(b). EXHIBITS

1. (a) Articles of Incorporation (1)

(b) Amendment to Articles of Incorporation (3)

2. By-Laws (8)

3. Not Applicable

4. Not Applicable

5. (a) Investment Management Agreement between
Registrant and American Odyssey Funds Management,
Inc. (11)

(b) Subadvisory Agreement among Registrant, American
Odyssey Funds Management, Inc. and Equinox Capital
Management, L.L.C. (11)

(c) Subadvisory Agreement among Registrant, American
Odyssey Funds Management, Inc. and Chartwell
Investment Partners (11)

1
<PAGE> 124

(d) Subadvisory Agreement among Registrant, American
Odyssey Funds Management, Inc. and Bank of Ireland
Asset Management Ltd. (11)

(e) Subadvisory Agreement among Registrant, American
Odyssey Funds Management, Inc. and Western Asset
Management Company (11)

(f) Subadvisory Agreement among Registrant, American
Odyssey Funds Management, Inc. and Travelers Asset
Management International Corporation (11)

(g) Subadvisory Agreement among Registrant, American
Odyssey Funds Management, Inc. and BEA Associates
(11)

(h) Subadvisory Agreement among Registrant, American
Odyssey Funds Management, Inc. and Cowen & Co. (11)

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

(b) Distribution Agreement between Registrant and
Copeland Equities, Inc. (8)

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

7. Not Applicable

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

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

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

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

10. Opinion of Counsel (5)

11. Consent of Independent Accountants (11)

2
<PAGE> 125
12. Not Applicable

13. Not Applicable

14. Not Applicable

15. Not Applicable

16. Not Applicable

17. Financial Data Schedules (11)

18. Not Applicable

19. Powers of Attorney:

Robert C. Dughi (1)
Kent A. Kelley (1)
Steven I. Weinstein (1)
William A. Arnold (10)
Linda Walker Bynoe (2)
John G. Beam, Jr. (2)
Nicholas D. Yatrakis (2)
Jane DiRenzo Pigott (3)
Mark M. Skinner (3)
- -----------------------------

(1) Incorporated by reference to the initial registration statement filed
January 27, 1993.

(2) Incorporated by reference to Pre-Effective Amendment No. 1 filed April

22, 1993.
(3) Incorporated by reference to Post-Effective Amendment No. 1 filed
November 24, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 2 filed March
1, 1994.

(5) Incorporated by reference to Post-Effective Amendment No. 1 filed

November 24, 1993.
(6) Incorporated by reference to Post-Effective Amendment No. 4 filed April
28, 1995.
(7) Incorporated by reference to Post-Effective Amendment No. 5 filed April
29, 1996.
(8) Incorporated by reference to Post-Effective Amendment No. 6 filed
February 28, 1997.

(9) Incorporated by reference to Post-Effective Amendment No. 7 filed April
30, 1997.
(10) Incorporated by reference to Post-Effective Amendment No. 8 filed March
2, 1998.
(11) Filed herewith.

3
<PAGE> 126
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not Applicable

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
American Odyssey Global High-Yield Bond Fund 4

American Odyssey International Equity Fund 5

American Odyssey Emerging Opportunities Fund 6

American Odyssey Core Equity Fund 5

American Odyssey Long-Term Bond Fund 5

American Odyssey Intermediate-Term Bond Fund 5
</TABLE>

ITEM 27. INDEMNIFICATION.

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

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

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

4
<PAGE> 127
obligations and duties under this Agreement. The Series Fund shall
indemnify the Manager and hold it harmless from all cost, damage and
expenses, including reasonable expenses for legal counsel, incurred by
the Manager resulting from actions for which for which it is relieved
of responsibility by this paragraph. The Manager shall indemnify the
Series Fund and hold it harmless from all cost, damage and expense,
including reasonable expenses for legal counsel, incurred by the Series
Fund resulting from actions for which the Manager is not relieved of
responsibility by this paragraph."

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

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

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

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

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

5
<PAGE> 128
See "Management of the Funds" both in the Prospectus constituting Part
A of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.

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

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

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

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

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

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

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

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

William A. Arnold Senior Vice President, Chief Senior Vice President, Chief Financial
Financial Officer, and Treasurer Officer, and Treasurer, The Copeland

Companies and various affiliates
</TABLE>

6
<PAGE> 129
<TABLE>
<CAPTION>
Name and Address Position with AOFM Principal Occupation
- ---------------- ------------------ --------------------
<S> <C> <C>

Michael R. Zarelli Senior Vice President, Finance, and Senior Vice President, Finance, The Copeland
Director Companies and various affiliates

</TABLE>

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

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

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

Information as to Chartwell Investment Partners' directors and
executive officers is included in its Form ADV filed with the Securities and
Exchange Commission (File No. 801-54124), as most recently amended, the text of
which is incorporated herein by reference.

(D) EQUINOX CAPITAL MANAGEMENT, L.L.C.

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

(E) WESTERN ASSET MANAGEMENT COMPANY

7
<PAGE> 130
Information as to Western Asset Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-08162), as most recently amended, the text of which is
incorporated herein by reference.

(F) TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION

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

(G) BEA ASSOCIATES

Information as to BEA Associates' directors and executive officers is
included in its Form ADV filed with the Securities and Exchange Commission (File
No. 801-37170), as most recently amended, the text of which is incorporated
herein by reference.

(H). COWEN & CO.

Information as to Cowen & Co.'s, and its investment management
division, Cowen Asset Management, directors and executive officers is included
in its Form ADV filed with the Securities and Exchange Commission (File No.
801-7380), as most recently amended, the text of which is incorporated herein by
reference.

ITEM 29. PRINCIPAL UNDERWRITERS

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

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

8
<PAGE> 131

<TABLE>
<CAPTION>
Name Positions and Offices with Positions and Offices with
Underwriter Registrant
----------- ----------
<S> <C> <C>
Robert C. Dughi Chairman of the Board of Chairman of the Board of Directors
Directors
Mark M. Skinner Director and President Director and Executive Vice
President

Craig S. Cheyne Regional Vice President None

Paul S. Chong Senior Vice President, Corporate None
Markets

Hazel E. Durand Regional Vice President None

James R. Famularo Vice President, Financial None
Operations

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

Mark E. Freemyer Vice President Vice President

Gary E. Ganakas Senior Vice President None

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

William M. Gardner Senior Vice President None

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

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

Robert C. Kniceley Senior Vice President, None
Government Markets

Stephen E. Maschino Regional Vice President None
</TABLE>

9
<PAGE> 132

<TABLE>
<CAPTION>
<S> <C> <C>
Brendan F. Morrison Vice President, Government None
Markets

Mary F. Nolan Vice President, Marketing None

Elizabeth A. O'Brien Regional Vice President None

Lori M. Renzulli Assistant Secretary None

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

William B. Schwartz Regional Vice President None

William P. Schwarzkopf Senior Vice President None

J. Dennis Smith Regional Vice President None

Michael L. St. Clair Senior Vice President None

Donna S. Webber Vice President, Counsel, and None
Assistant Secretary

Michael R. Zarelli Senior Vice President, Chief None
Financial Officer and Treasurer,
and Director

Joseph Zavoda Vice President, 401(k)
Compliance Services
</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the Rules thereunder are
maintained at the offices of (1) the Registrant and American Odyssey Funds
Management, Inc., Two Tower Center, P.O. Box 1063, East Brunswick, NJ
08816-1063; (2) Bank of Ireland Asset Management (U.S.) Limited, 26 Fitzwilliam
Place, Dublin 2, Ireland and 20 Horseneck Lane, Greenwich, CT 06830; (3)
Chartwell Investment Partners, 1235 Westlakes Drive, Suite 330, Berwyn, PA
19312; (4) Equinox Capital Management, L.L.C., 590 Madison Avenue, New York, NY
10022; (5) Western Asset Management, 117 East Colorado Boulevard, Pasadena, CA
91105; (6) Travelers Asset Management International Corporation, One Tower
Square, Hartford, CT

10
<PAGE> 133

06183; (7) BEA Associates, One Citicorp Center, 153 East 53rd Street, New York,
NY 10022; (8) Cowen & Co., Financial Square, New York, NY 10005; and (9)
Investors Bank and Trust Company, 200 Clarendon Street, Boston, MA 02116.

ITEM 31. MANAGEMENT SERVICES

Not Applicable

ITEM 32. UNDERTAKINGS

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940, the Registrant certifies that this
amendment is filed solely for one or more of the purposes specified in Rule
485(b)(1) under the 1933 Act and that no material event requiring disclosure in
the prospectus, other than one listed in Rule 485(b)(1), has occurred since the
filing date of a Post-Effective Amendment under Rule 485(a), and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of East Brunswick, and the State of New
Jersey on the 24th day of April, 1998.

AMERICAN ODYSSEY FUNDS, INC.

/s/ Robert C. Dughi By: /s/ Paul S. Feinberg
- ------------------- -------------------------------
Robert C. Dughi Paul S. Feinberg
Chairman of the Board and President Attorney-in-fact

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on April 24, 1998.

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

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

11
<PAGE> 134
<TABLE>
<CAPTION>
<S> <C>
/s/ Linda Walker Bynoe By: /s/ Paul S. Feinberg
- ----------------------------- --------------------
Linda Walker Bynoe Paul S. Feinberg
Director (Attorney-in-Fact)

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

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

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

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

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

/s/ William A. Arnold By: /s/ Paul S. Feinberg
- ----------------------------- --------------------
William A. Arnold Paul S. Feinberg
Senior Vice President and Treasurer; (Attorney-in-Fact)
Principal Financial Officer;
Principal Accounting Officer
</TABLE>

12
<PAGE> 135
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NUMBERS
-------------- ----------- ------------
<S> <C> <C> <C>
5(a) Investment Management Agreement C-14
between Registrant and Manager

5(b) Subadvisory Agreement among C-22
Registrant, the Manager, and
Equinox

5(c) Subadvisory Agreement among C-28
Registrant, the Manager and
Chartwell Investment Partners

5(d) Subadvisory Agreement among C-34
Registrant, the Manager and Bank
of Ireland Asset Management

5(e) Subadvisory Agreement among C-40
Registrant, the Manager and
Western Asset

5(f) Subadvisory Agreement among C-46
Registrant, the Manager and TAMIC

5(g) Subadvisory Agreement among C-52
Registrant, the Manager and BEA

5(h) Subadvisory Agreement among C-57
Registrant, the Manager and Cowen

11 Consent of Independent C-63
Accountants

17 Financial Data Schedules C-64
</TABLE>

<PAGE> 1
EXHIBIT 5(a)
INVESTMENT MANAGEMENT AGREEMENT

Agreement, made this 1st day of May, 1998, between American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), and American Odyssey
Funds Management, Inc., a New Jersey corporation (the "Manager").

WHEREAS, the Series Fund is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

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

WHEREAS, the Series Fund desires to retain the Manager to render, or
contract to obtain as hereinafter provided, investment advisory services to the
Series Fund and also to avail itself of the facilities available to the Manager
with respect to the administration of the Series Fund's day to day business
affairs; and

WHEREAS, the Manager is willing to render such investment advisory and
administrative services;

NOW, THEREFORE, the parties agree as follows:

1. The Series Fund hereby appoints the Manager to act as manager of the
Series Fund and administrator of its business affairs for the period and on the
terms set forth in this Agreement. The Manager accepts such appointment and
agrees to render the services described below for the compensation provided in
paragraph 9. The Manager is authorized to enter into Subadvisory agreements for
investment advisory services in connection with the management of each of the
Funds of the Series Fund (the "Subadvisory agreements"), provided that no such
contract shall be made until it has been approved by the Board of Directors of
the Series Fund. The Series Fund shall be a party to each such agreement. Any
such agreement may be entered into by the Manager on such terms and in such
manner as may be permitted by paragraph 9(b) and by the 1940 Act and the rules
thereunder (subject to any applicable exemptions). The Manager will continue to
have supervisory responsibility for all investment advisory services furnished
pursuant to any such Subadvisory agreements. The Manager will review the
performance of all Subadvisers, determine the allocation of assets among the
Subadvisers, and make recommendations to the Board of Directors with respect to
the retention and renewal of such Subadvisory agreements.

2. Subject to the supervision of the Board of Directors and, subject to
paragraph 1 hereof, the Manager shall manage the operations of the Series Fund
and each Fund thereof. More particularly:

(a) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws, Prospectus, and Statement
<PAGE> 2
- 2 -

of Additional Information of the Series Fund and with the instructions
and directions of the Board of Directors of the Series Fund and will
conform to and comply with the requirements of the 1940 Act and all other
applicable federal and state laws and regulations.

(b) The Manager will monitor the performance of each of the
Subadvisers and will be generally responsible for their activities. The
Manager shall meet periodically with each Subadviser to review and agree
upon its current investment strategies and programs in the light of
anticipated cash flows. The Manager shall periodically provide the Board
of Directors with evaluations of the performance of the Subadvisers and
shall make recommendations concerning the renewal or termination of the
Subadvisory contracts.

(c) For any Fund with more than one Subadviser, the Manager is
authorized to determine the allocation of Fund assets among the
Subadvisers.

(d) The Manager shall provide the Board of Directors of the Series
Fund such periodic and special reports as the Board may reasonably
request.

(e) The Manager shall be responsible for the financial and
accounting records maintained by the Series Fund, other than those being
maintained by the Series Fund's custodian or accounting services agent.

(f) The Manager shall provide, or cause to be provided, to the
Series Fund's custodian on each business day all information relating to
the transactions in the securities owned, purchased, or sold by each
Fund.

(g) The Manager shall provide such staff assistance as the Board of
Directors of the Series Fund shall reasonably request in connection with
the conduct of meetings of the Board and otherwise.

(h) The investment management services of the Manager to the Series
Fund under this Agreement are not to be deemed exclusive, and the Manager
shall be free to render investment advisory services to others.

3. The Series Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:

(a) The Articles of Incorporation of the Series Fund, as filed with
the Secretary of State of Maryland;

(b) The By-Laws of the Series Fund;

(c) Certified resolutions of the Board of Directors of the Series
Fund authorizing the appointment of the Manager and approving the form of
this Agreement;
<PAGE> 3
- 3 -

(d) The Notification of Registration of the Series Fund under the
1940 Act on Form N-8A as filed with the Securities and Exchange
Commission (the "Commission");

(e) The Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-1A (the "Registration
Statement"), as filed with the Commission relating to the Series Fund and
shares of the Series Fund and all amendments thereto; and

(f) The Prospectus and Statement of Additional Information of the
Series Fund as currently in effect and as amended or supplemented from
time to time.

4. The Manager shall authorize and permit any of its directors, officers,
and employees who may be elected as members of the Board of Directors or
officers of the Series Fund to serve in the capacities in which they are
elected. All services to be furnished by the Manager under this Agreement may be
furnished through the medium of any such directors, officers, or employees of
the Manager.

5. The Manager shall keep the Series Fund's books and records required to
be maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Series Fund are the property of the Series
Fund and it will surrender promptly to the Series Fund any such records upon the
Series Fund's request, provided however that the Manager may retain a copy of
such records. The Manager further agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act (or any successor provision) any such records
as are required to be maintained by the Manager pursuant to paragraph 2 hereof.

6. During the term of this Agreement, the Manager shall pay the following
expenses:

(i) the salaries and expenses of all personnel of the Series Fund
and the Manager except the fees and expenses of members of the Board of
Directors who are not interested persons of the Series Fund, as that term
is defined in the 1940 Act;

(ii) all expenses incurred by the Manager or by the Series Fund in
connection with managing the ordinary course of the Series Fund's
business, other than those stated below that will be paid by the Series
Fund; and

(iii) expenses incurred in connection with meetings of the Board of
Directors of the Series Fund, including such staff assistance as the
Board shall reasonably request, but not including the fees and expenses
of directors of the Series Fund who are not interested persons of the
Series Fund, as that term is defined in the 1940 Act.

7. The Series Fund will pay the expenses described below:
<PAGE> 4
- 4 -

(a) the fees and expenses incurred by the Series Fund in connection
with the management of the investment and reinvestment of each Fund's
assets, including the fees described in paragraph 9;

(b) brokers' commissions and any issue or transfer taxes chargeable
to the Series Fund in connection with its securities, options, and
futures transactions;

(c) the fees and expenses of directors of the Series Fund who are
not interested persons of the Series Fund, as that term is defined in the
1940 Act;

(d) the fees and expenses of the Series Fund's custodian(s) or
accounting services agent(s) that relate to (i) the custodial function
and the recordkeeping connected therewith, (ii) preparing and maintaining
the general accounting records of the Series Fund (other than those
relating to the shares and shareholder accounts of the Series Fund) and
the providing of any such records to the Manager useful to the Manager in
connection with the Manager's responsibility for the accounting records
of the Series Fund pursuant to Section 31 of the 1940 Act and the rules
promulgated thereunder, and (iii) the pricing of the shares of the Series
Fund, including the cost of any pricing service or services which may be
retained pursuant to the authorization of the directors of the Series
Fund;

(e) the charges and expenses of legal counsel and independent
accountants for the Series Fund;

(f) all taxes and corporate fees payable by the Series Fund to
federal, state, and other governmental agencies;

(g) the fees of any trade associations of which the Series Fund may
be a member;

(h) the cost of fidelity, directors and officers, and errors and
omissions insurance;

(i) the fees and expenses involved in registering and maintaining
registration of the Series Fund and of its shares with the Commission,
and qualifying its shares, to the extent required, under state securities
laws, including the preparation and printing of the Series Fund's
registration statements, prospectuses and statements of additional
information for filing under federal and state securities laws;

(j) communications expenses with respect to investor services and
expenses of preparing, printing, and mailing reports to shareholders in
the amount necessary for distribution to the shareholders;

(k) all expenses incurred in connection with the holding of
shareholder meetings; and
<PAGE> 5
- 5 -

(l) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Series Fund's
business.

8. In the event the expenses of the Series Fund for any fiscal year
(including the fees payable to the Manager but excluding interest, taxes,
brokerage commissions and litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Series Fund's
business) exceed the lowest applicable annual expense limitation established and
enforced pursuant to the statute or regulations of any jurisdictions in which
shares of the Series Fund are then qualified for offer and sale, the
compensation due the Manager will be reduced by the amount of such excess, and,
if such reduction exceeds the compensation payable to the Manager, the Manager
will pay to the Series Fund the amount of such reduction which exceeds the
amount of such compensation.

9. (a) For the services provided and the expenses assumed pursuant to
this Agreement, the Series Fund shall pay to the Manager as full compensation
therefor a fee at an annual rate of 0.25% of each Fund's average daily net
assets. The fee shall be computed daily and shall be paid to the Manager monthly
as of the first business day of the next succeeding calendar month. Any
reduction in the fee payable and any payment by the Manager to the Fund pursuant
to paragraph 8 shall be made monthly. Any such reductions or payments are
subject to readjustment during the year. The Series Fund shall pay the fee
described in this subparagraph (a) in addition to the subadvisory fees the
Series Fund pays pursuant to subparagraph (b).

(b) The Series Fund shall pay to each subadviser the fee set forth
in the respective subadvisory agreement, which shall specify a fee rate or rates
based upon the average daily net assets allocated to that subadviser; provided,
however, that the annual fee rate for a subadviser shall not exceed the maximum
annual fee rates specified below:

<TABLE>
<CAPTION>
Fund Maximum annual subadviser fee rate
---- as a percentage of average daily
net assets allocated to the
subadviser
------------------------------------
<S> <C>
American Odyssey Core Equity Fund 0.45%

American Odyssey Emerging Opportunities Fund 0.80%

American Odyssey International Equity Fund 0.55%

American Odyssey Global High-Yield Bond Fund 0.525%

American Odyssey Long-Term Bond Fund 0.35%

American Odyssey Intermediate-Term Bond Fund 0.35%
</TABLE>
<PAGE> 6
- 6 -

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

11. The words "American Odyssey" and the design set forth in Appendix A
hereto (the "Design") are service marks of the Manager. The Manager hereby
grants to the Series Fund a license to use the words "American Odyssey" in the
Series Fund's corporate name, "American Odyssey Funds, Inc.," and a license to
use the words "American Odyssey" and the Design in connection with the Series
Fund's operations as an investment company. This license is granted on a
royalty-free basis. The Manager retains the right to use, or license the use of,
the words "American Odyssey" and any derivative thereof, as well as the Design,
in connection with any other business enterprise. If the holders of the
outstanding voting securities of any Fund fail to approve this Agreement, or if
at any time after such approval the Manager ceases to be investment manager of
any Fund, the Manager shall have the absolute right to terminate the license
herein granted forthwith upon written notice to the Series Fund. Upon
termination of the license herein granted, the Series Fund shall immediately
change its corporate name to one which does not include the words "American
Odyssey" or any derivative thereof, and will discontinue all use by it of the
words "American Odyssey," the Design or anything resembling the Design, in
connection with its business. The terms of the license herein granted shall
inure to the benefit of and be binding upon any successors or assigns of the
Series Fund or the Manager.

12. 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 Series Fund
without the payment of any penalty, by the Board of Directors of the Series Fund
or by vote of a majority of the Series Fund's outstanding voting securities (as
defined in the 1940 Act), or by the Manager 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).

13. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of the Manager who may also be a director,
officer, or employee of the Series Fund to engage in any other business or to
devote his or her time and attention in part to the management or
<PAGE> 7
- 7 -

other aspects of any business, whether of a similar or dissimilar nature, nor
limit or restrict the right of the Manager to engage in any other business or to
render services of any kind to any other corporation, firm, individual, or
association.

14. Except as otherwise provided herein or authorized by the Board of
Directors of the Series Fund from time to time, the Manager shall for all
purposes herein be deemed to be an independent contractor and shall have no
authority to act for or represent the Series Fund in any way or otherwise be
deemed an agent of the Series Fund.

15. During the term of this Agreement, the Series Fund agrees to furnish
the Manager at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature, or other material prepared for distribution
to shareholders of the Series Fund or the public, which refer in any way to the
Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt thereof. In the event of termination of
this Agreement, the Series Fund will continue to furnish to the Manager copies
of any of the above mentioned materials which refer in any way to the Manager.
Sales literature may be furnished to the Manager hereunder by first class mail,
overnight delivery service, facsimile transmission equipment, or hand delivery.
The Series Fund shall furnish or otherwise make available to the Manager such
other information relating to the business affairs of the Series Fund as the
Manager at any time, or from time to time, reasonably requests in order to
discharge its obligations hereunder.

16. 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.

17. 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 American
Odyssey Funds Management, Inc. at Two Tower Center, East Brunswick, New Jersey
08816, Attention: Secretary; or (2) to American Odyssey Funds, Inc. at Two Tower
Center, East Brunswick, New Jersey 08816, Attention: President.

18. This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.

19. This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
<PAGE> 8
- 8 -

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

AMERICAN ODYSSEY FUNDS, INC.

__________________________ By: _____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

__________________________ By: _____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

<PAGE> 1
EXHIBIT 5(b)
INVESTMENT SUBADVISORY AGREEMENT

Agreement made as of this 1st day of May, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and Equinox Capital
Management, L.L.C., a Delaware limited liability company (the "Subadviser").
This Agreement supersedes the Investment Subadvisory Agreement among the parties
dated February 23, 1993.

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 Core Equity 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
<PAGE> 2
-3-

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 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.

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.

(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; provided, however, that
the Subadviser agrees that it shall not serve or accept retention
as investment adviser, investment manager, or similar service
provider during the term of this Agreement and, if this Agreement
is terminated by the Subadviser, for the period of one year after
the termination of this Agreement, with or for the benefit of any
investment company registered under the 1940 Act that seeks as a
primary purchaser of its shares, directly or indirectly through
sales of variable contracts, persons who are eligible to
participate in an investment advisory asset allocation program
similar in nature to that offered by the Manager's affiliated
company, Copeland Financial Services, Inc., it being understood and
agreed that the foregoing restriction shall not apply to any
services provided to the Financial Services Department, or any
other unit, of The Travelers Insurance Company, it being further
understood and agreed that an investment company with asset
allocation as its own investment objective (commonly called a
balanced fund) shall not be subject to the foregoing restriction.

(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
<PAGE> 4
-4-

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 0.35% of the average daily Net Allocated Assets up to and
including $100 million, plus a fee at an annual rate of 30% 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 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.

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 Equinox
Capital Management, L.L.C. at 590 Madison Avenue, New York, New York 10022,
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.

<PAGE> 6
-6-

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

AMERICAN ODYSSEY FUNDS, INC.

___________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

____________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

EQUINOX CAPITAL MANAGEMENT, L.L.C.

____________________________ By: ____________________________
Witness:

<PAGE> 1
EXHIBIT 5(c)
INVESTMENT SUBADVISORY AGREEMENT

Agreement made as of this 1st day of May, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and Chartwell
Investment Partners, a partnership organized under the laws of the state of
Pennsylvania (the "Subadviser").

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
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:

(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.

<PAGE> 2
-2-

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
<PAGE> 3
-3-

a fair and nondiscriminatory basis, in a manner consistent with
the Subadviser's fiduciary obligations to the Fund and to such
other clients.

(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; provided, however, that
the Subadviser agrees that it shall not serve or accept retention
as investment adviser, investment manager, or similar service
provider during the term of this Agreement and, if this Agreement
is terminated by the Subadviser, for the period of one year after
the termination of this Agreement, with or for the benefit of any
investment company registered under the 1940 Act that meets the
following conditions: (1) at least 25% of the shares of the
investment company (or in the case of a series investment company,
at least 25% of the shares of the series of that investment company
to which the Subadviser would provide services) are owned by one or
more separate accounts that fund individual or group variable
annuity contracts, and (2) the owners of (or, for a group variable
annuity contract, the participants in) one or more of the variable
annuity contracts funded by the investment company (or series
thereof) are eligible to participate in a fee-based investment
advisory asset allocation program associated with that variable
annuity contract; provided, however, that the foregoing restriction
shall not apply to any services provided to the Financial Services
Department, or any other unit, of The Travelers Insurance Company.

(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.

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.

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 0.70% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.50% 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 0.45% 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.

<PAGE> 5
-5-

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.

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 Chartwell
Investment Partners, 1235 Westlakes Drive, Suite 330, Berwyn, Pennsylvania
19312, Attention: Chief Operating Officer.

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.

<PAGE> 6
-6-

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

AMERICAN ODYSSEY FUNDS, INC.

___________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

____________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

CHARTWELL INVESTMENT PARTNERS

____________________________ By: ____________________________
Witness:

<PAGE> 1
EXHIBIT 5(d)
INVESTMENT SUBADVISORY AGREEMENT

Agreement made as of this 1st day of May, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and Bank of Ireland
Asset Management Limited, an Irish corporation (the "Subadviser"). This
Agreement supersedes the Investment Subadvisory Agreement among the parties
dated February 23, 1993.

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 International Equity 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:

(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.

<PAGE> 2
-2-

by the Fund, and what portion of the Allocated Assets will be
invested or held uninvested as cash.

<PAGE> 3
-3-

(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.

<PAGE> 4
-4-

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.

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 0.45% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.40% 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 0.30% 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.

<PAGE> 5
-5-

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 Bank of
Ireland Asset Management Limited at 2 Greenwich Plaza, Greenwich, Connecticut
06830, 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.

<PAGE> 6
-6-

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

AMERICAN ODYSSEY FUNDS, INC.

___________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

____________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

BANK OF IRELAND ASSET
MANAGEMENT LIMITED

____________________________ By: ____________________________
Witness:

<PAGE> 1
EXHIBIT 5(e)
INVESTMENT SUBADVISORY AGREEMENT

Agreement made as of this 1st day of May, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and Western Asset
Management Company, a California corporation (the "Subadviser"). This Agreement
supersedes the Investment Subadvisory Agreement among the parties amended
effective May 1, 1997.

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 Long-Term Bond 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:

(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.

by the Fund, and what portion of the Allocated Assets will be
invested or held uninvested as cash.

(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.

(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
<PAGE> 4
- 4 -

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.

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 0.25% of the average daily Net Allocated Assets up to and
including $250 million, plus a fee at an annual rate of 15% of the average daily
Net Allocated Assets over $250 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.

services of any kind to any other corporation, firm, individual, or association,
except as described in Paragraph 1(a)(vii) above.

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 Western Asset
Management Company at 117 East Colorado Boulevard, Pasadena, California 91105,
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.
<PAGE> 6
- 6 -

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

AMERICAN ODYSSEY FUNDS, INC.

___________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

____________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

WESTERN ASSET MANAGEMENT
COMPANY

____________________________ By: ____________________________
Witness:

<PAGE> 1
EXHIBIT 5(f)
INVESTMENT SUBADVISORY AGREEMENT

Agreement made as of this 1st day of May, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and Travelers Asset
Management International Corporation, a New York corporation (the "Subadviser").
This Agreement supersedes the Investment Subadvisory Agreement among the parties
dated February 23, 1993.

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 Intermediate-Term Bond 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:

(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.

by the Fund, and what portion of the Allocated Assets will be
invested or held uninvested as cash.

(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.

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.

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 0.25% of the average daily Net Allocated Assets up to and
including $100 million, plus a fee at an annual rate of 0.20% of the average
daily Net Allocated Assets over $100 million and up to and including $200
million, plus a fee at an annual rate of 0.15% of the average daily Net
Allocated Assets over $200 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.

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 Travelers
Asset Management International Corporation at One Tower Square, Hartford,
Connecticut 06183, 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.
<PAGE> 6
- 6 -

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

AMERICAN ODYSSEY FUNDS, INC.

___________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

____________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

TRAVELERS ASSET MANAGEMENT
INTERNATIONAL CORPORATION

____________________________ By: ____________________________
Witness:

<PAGE> 1
EXHIBIT 5(g)
INVESTMENT SUBADVISORY AGREEMENT

Agreement made as of this 1st day of May, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and BEA Associates,
a partnership organized under the laws of the state of New York (the
"Subadviser").

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
Global High-Yield Bond Fund (the "Fund"), the Series Fund 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:

(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.

a fair and nondiscriminatory basis, in a manner consistent with the
Subadviser's fiduciary obligations to the Fund and to such other
clients.

(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; provided, however, that
the Subadviser agrees that, unless the Subadviser obtains the prior
express written approval of the Manager, the Subadviser shall not
serve or accept retention as investment adviser, investment
manager, or similar service provider during the term of this
Agreement with or for the benefit of any investment company
registered under the 1940 Act that meets the following conditions:
(1) at least 25% of the shares of the investment company (or in the
case of a series investment company, at least 25% of the shares of
the series of that investment company to which the Subadviser would
provide services) are owned by one or more separate accounts that
fund individual or group variable annuity contracts, and (2) the
owners of (or, for a group variable annuity contract, the
participants in) one or more of the variable annuity contracts
funded by the investment company (or series thereof) are eligible
to participate in a fee-based investment advisory asset allocation
program associated with that variable annuity contract; provided,
however, that the foregoing restriction shall not apply to any
services provided to the Financial Services Department, or any
other unit, of The Travelers Insurance Company.

(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.

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.

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 0.425% of the average daily Net Allocated Assets. 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.

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.

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 BEA
Associates, One Citicorp Center, 153 East 53rd Street, New York, New York 10022,
Attention: General Counsel.

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.
<PAGE> 6
- 6 -

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

AMERICAN ODYSSEY FUNDS, INC.

___________________________ By: ____________________________
Witness Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

____________________________ By: ____________________________
Witness Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

BEA ASSOCIATES

____________________________ By: ____________________________
Witness

<PAGE> 1
EXHIBIT 5(h)
INVESTMENT SUBADVISORY AGREEMENT

Agreement made as of this 1st day of May, 1998, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and Cowen & Co., a
partnership, doing business as Cowen Asset Management (the "Subadviser"). This
Agreement supersedes the Investment Subadvisory Agreement among the parties
dated May 1, 1997.

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:

(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.

by the Fund, and what portion of the Allocated Assets will be
invested or held uninvested as cash.

(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.

(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
<PAGE> 4
-4-

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.

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.

services of any kind to any other corporation, firm, individual, or association,
except as described in Paragraph 1(a)(vii) above.

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 Cowen & Co. 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.

<PAGE> 6
-6-

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

AMERICAN ODYSSEY FUNDS, INC.

___________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.

____________________________ By: ____________________________
Witness: Lori M. Renzulli Mark E. Freemyer
Assistant Secretary Vice President

COWEN & CO.

____________________________ By: ____________________________
Witness:

<PAGE> 1
COOPERS & LYBRAND, L.L.P.

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
American Odyssey Funds, Inc.

We consent to the inclusion in Post-Effective Amendment No. 9 to the
Registration Statement of American Odyssey Funds, Inc., comprising,
respectively, the International Equity Fund, Emerging Opportunities Fund, Core
Equity Fund, Long-Term Bond Fund, Intermediate-Term Bond Fund, and Short-Term
Bond Fund, (the "Funds"), on Form N-1A (File No. 33-57536) of our report dated
February 6, 1998, on our audits of the financial statements and financial
highlights of the Funds, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1997 which is included in the
Post-Effective Amendment to the Registration Statement.

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

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
April 21, 1998

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from American
Odyssey Funds, Inc. form N-SAR for the period ended December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 201,197,893
<INVESTMENTS-AT-VALUE> 224,207,852
<RECEIVABLES> 13,965,950
<ASSETS-OTHER> 1,898
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 238,175,700
<PAYABLE-FOR-SECURITIES> 1,361,614
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 243,029
<TOTAL-LIABILITIES> 1,604,643
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 198,969,589
<SHARES-COMMON-STOCK> 15,277,557
<SHARES-COMMON-PRIOR> 12,410,280
<ACCUMULATED-NII-CURRENT> 4,133,869
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,593,909
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,873,690
<NET-ASSETS> 236,571,057
<DIVIDEND-INCOME> 4,740,999
<INTEREST-INCOME> 480,037
<OTHER-INCOME> 0
<EXPENSES-NET> 1,671,311
<NET-INVESTMENT-INCOME> 3,549,725
<REALIZED-GAINS-CURRENT> 14,633,577
<APPREC-INCREASE-CURRENT> (7,971,426)
<NET-CHANGE-FROM-OPS> 10,211,876
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,436,122)
<DISTRIBUTIONS-OF-GAINS> (862,014)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,764,223
<NUMBER-OF-SHARES-REDEEMED> 549,561
<SHARES-REINVESTED> 652,615
<NET-CHANGE-IN-ASSETS> 45,461,809
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 862,014
<OVERDISTRIB-NII-PRIOR> 19,402
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,320,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,706,950
<AVERAGE-NET-ASSETS> 217,297,430
<PER-SHARE-NAV-BEGIN> 15.08
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.19
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.06
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.48
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from American
Odyssey Funds, Inc. form N-SAR for the period ended December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 212,586,767
<INVESTMENTS-AT-VALUE> 245,774,796
<RECEIVABLES> 23,979,551
<ASSETS-OTHER> 1,826
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 269,756,173
<PAYABLE-FOR-SECURITIES> 10,679,678
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 190,067
<TOTAL-LIABILITIES> 10,869,745
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 227,097,381
<SHARES-COMMON-STOCK> 18,071,430
<SHARES-COMMON-PRIOR> 12,764,369
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,398,982
<ACCUM-APPREC-OR-DEPREC> 33,188,029
<NET-ASSETS> 258,886,428
<DIVIDEND-INCOME> 578,112
<INTEREST-INCOME> 851,831
<OTHER-INCOME> 0
<EXPENSES-NET> 1,876,469
<NET-INVESTMENT-INCOME> (446,526)
<REALIZED-GAINS-CURRENT> 4,178,737
<APPREC-INCREASE-CURRENT> 13,026,859
<NET-CHANGE-FROM-OPS> 16,759,070
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,984,206
<NUMBER-OF-SHARES-REDEEMED> 764,573
<SHARES-REINVESTED> 1,087,428
<NET-CHANGE-IN-ASSETS> 87,608,212
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 5,577,719
<GROSS-ADVISORY-FEES> 1,405,303
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,876,469
<AVERAGE-NET-ASSETS> 217,160,042
<PER-SHARE-NAV-BEGIN> 13.42
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.33
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 297,388,264
<INVESTMENTS-AT-VALUE> 406,071,334
<RECEIVABLES> 10,468,835
<ASSETS-OTHER> 1,827
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 416,541,996
<PAYABLE-FOR-SECURITIES> 1,587,134
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 256,767
<TOTAL-LIABILITIES> 1,843,901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 257,073,891
<SHARES-COMMON-STOCK> 20,812,710
<SHARES-COMMON-PRIOR> 17,673,755
<ACCUMULATED-NII-CURRENT> 40,198
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 48,900,936
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 108,683,070
<NET-ASSETS> 414,698,095
<DIVIDEND-INCOME> 6,913,314
<INTEREST-INCOME> 363,698
<OTHER-INCOME> 0
<EXPENSES-NET> 2,332,795
<NET-INVESTMENT-INCOME> 4,944,217
<REALIZED-GAINS-CURRENT> 48,900,932
<APPREC-INCREASE-CURRENT> 42,788,687
<NET-CHANGE-FROM-OPS> 96,633,836
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,951,911
<DISTRIBUTIONS-OF-GAINS> 4,293,241
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,512,120
<NUMBER-OF-SHARES-REDEEMED> 1,894,049
<SHARES-REINVESTED> 1,520,884
<NET-CHANGE-IN-ASSETS> 140,926,569
<ACCUMULATED-NII-PRIOR> 47,896
<ACCUMULATED-GAINS-PRIOR> 4,298,072
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,022,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,391,320
<AVERAGE-NET-ASSETS> 358,545,356
<PER-SHARE-NAV-BEGIN> 15.49
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 4.65
<PER-SHARE-DIVIDEND> 0.24
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.93
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 198,965,142
<INVESTMENTS-AT-VALUE> 204,140,597
<RECEIVABLES> 70,260,133
<ASSETS-OTHER> 1,834
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 274,402,564
<PAYABLE-FOR-SECURITIES> 55,325,821
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 222,392
<TOTAL-LIABILITIES> 55,548,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 209,170,121
<SHARES-COMMON-STOCK> 20,383,564
<SHARES-COMMON-PRIOR> 15,828,492
<ACCUMULATED-NII-CURRENT> 114,595
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,572,544
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,997,091
<NET-ASSETS> 218,854,351
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,939,002
<OTHER-INCOME> 0
<EXPENSES-NET> 1,173,614
<NET-INVESTMENT-INCOME> 11,765,388
<REALIZED-GAINS-CURRENT> 4,536,058
<APPREC-INCREASE-CURRENT> 5,890,460
<NET-CHANGE-FROM-OPS> 22,191,906
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,872,559
<DISTRIBUTIONS-OF-GAINS> 188,073
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,958,292
<NUMBER-OF-SHARES-REDEEMED> 338,150
<SHARES-REINVESTED> 1,934,930
<NET-CHANGE-IN-ASSETS> 58,159,835
<ACCUMULATED-NII-PRIOR> 242,735
<ACCUMULATED-GAINS-PRIOR> 207,536
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 945,274
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,173,614
<AVERAGE-NET-ASSETS> 189,054,868
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.61
<PER-SHARE-DIVIDEND> 0.62
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.74
<EXPENSE-RATIO> 0.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from American
Odyssey Funds, Inc. form N-SAR for the period ended December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 106,685,504
<INVESTMENTS-AT-VALUE> 107,272,740
<RECEIVABLES> 1,392,652
<ASSETS-OTHER> 1,856
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 108,667,248
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71,614
<TOTAL-LIABILITIES> 71,614
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107,454,562
<SHARES-COMMON-STOCK> 10,531,347
<SHARES-COMMON-PRIOR> 8,470,117
<ACCUMULATED-NII-CURRENT> 37,666
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 516,170
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 587,236
<NET-ASSETS> 108,595,634
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,452,343
<OTHER-INCOME> 0
<EXPENSES-NET> 623,354
<NET-INVESTMENT-INCOME> 5,828,989
<REALIZED-GAINS-CURRENT> 632,431
<APPREC-INCREASE-CURRENT> 785,322
<NET-CHANGE-FROM-OPS> 7,246,742
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,989,855
<DISTRIBUTIONS-OF-GAINS> 475,876
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,276,376
<NUMBER-OF-SHARES-REDEEMED> 329,917
<SHARES-REINVESTED> 1,114,771
<NET-CHANGE-IN-ASSETS> 22,210,560
<ACCUMULATED-NII-PRIOR> 165,695
<ACCUMULATED-GAINS-PRIOR> 475,876
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 493,298
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 623,354
<AVERAGE-NET-ASSETS> 98,768,429
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.17
<PER-SHARE-DIVIDEND> 0.60
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 0.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 57,188,291
<INVESTMENTS-AT-VALUE> 57,572,198
<RECEIVABLES> 1,290,736
<ASSETS-OTHER> 1,856
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,864,790
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,244
<TOTAL-LIABILITIES> 44,244
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,665,607
<SHARES-COMMON-STOCK> 5,704,494
<SHARES-COMMON-PRIOR> 4,754,313
<ACCUMULATED-NII-CURRENT> 21,955
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 250,923
<ACCUM-APPREC-OR-DEPREC> 383,907
<NET-ASSETS> 58,820,546
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,361,008
<OTHER-INCOME> 0
<EXPENSES-NET> 401,168
<NET-INVESTMENT-INCOME> 2,959,840
<REALIZED-GAINS-CURRENT> (148,187)
<APPREC-INCREASE-CURRENT> 473,223
<NET-CHANGE-FROM-OPS> 3,284,876
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,005,205
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 975,165
<NUMBER-OF-SHARES-REDEEMED> 487,160
<SHARES-REINVESTED> 462,176
<NET-CHANGE-IN-ASSETS> 10,147,630
<ACCUMULATED-NII-PRIOR> 45,487
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 103,597
<GROSS-ADVISORY-FEES> 271,414
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 401,168
<AVERAGE-NET-ASSETS> 54,282,883
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.08
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>