<PAGE>
ANNUAL REPORT
December 31, 1998
AMERICAN ODYSSEY
------------------------------------------
Global High-Yield Bond Fund
International Equity Fund
Emerging Opportunities Fund
Core Equity Fund
Long-Term Bond Fund
Intermediate-Term Bond Fund
------------------------------------------
[LOGO OF AMERICAN ODYSSEY(R) FUNDS APPEARS HERE]
<PAGE>
Dear American Odyssey Funds Participant:
The year 1998 was one of many changes and uncertainties, both in the United
States and abroad. Internationally, the credit crisis in Russia and the stagnant
economies in Asia have created market volatility not seen for several years.
Despite these facts, the American Odyssey Funds continued to enjoy steady growth
as participants in tax deferred retirement savings programs continue to save for
the future. With more than $1.5 billion in assets at the end of 1998, the
American Odyssey Funds help serve the retirement needs of over 110,000
investors.
1998 was also a year of change for the American Odyssey Funds. First, our
Emerging Opportunities Fund saw the replacement of one of its subadvisers,
Wilke/Thompson Capital Management, with Chartwell Investment Partners. This
change was made after a detailed examination of Wilke/Thompson's performance
compared to other money managers that follow a similar investment strategy.
Another significant event for the American Odyssey Funds was the renaming and
changing of the investment objective for the Short-Term Bond Fund. It is now
called the Global High-Yield Bond Fund and invests in a portfolio of high-yield
debt securities from the United States and abroad. Credit Suisse Asset
Management (formerly BEA Associates) is the subadviser for this Fund. The change
was made to further diversify our fund offerings so that investors in the
American Odyssey Funds now have an even broader range of investment objectives
from which to choose.
Finally, as you will see in the information that follows, the American Odyssey
Funds are building a record of performance that is competitive over the long
term. In addition, American Odyssey Fund Management, Inc. remains focused on
delivering Funds that are managed to the highest standard with strict adherence
to the Fund objectives.
As always, we appreciate the opportunity to serve your retirement needs.
1
<PAGE>
AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
The American Odyssey Global High-Yield Bond Fund returned (5.55)% for
the period from May 1, 1998 to December 31, 1998. The blended benchmark (75% CS
First Boston High Yield Index/25% J.P. Morgan EMBI Plus Index) returned (5.55)%
for that same period. The Fund is managed by Credit Suisse Asset Management
(formerly BEA Associates).
For the period January 1, 1998 to April 30, 1998 the Fund was named the
Short-Term Bond Fund and had a substantially different investment objective and
investment program. During that period, the Fund was managed by Smith Graham &
Company Asset Managers L.P. and returned 1.90%. The Lehman
Government/Corporation 1-5 Year Bond Index returned 2.01% for that period.
1998 was a historic year for global fixed income markets. Driven by a
singularly volatile combination of concerns about interest rates, Japan, Russia,
Brazil, hedge funds and market liquidity, investors engaged in several classic
"flight to quality" rallies that favored only the safest securities at the
expense of all others. As a result, yield spreads relative to U.S. Treasury
bonds widened to unprecedented levels and the sovereign debt of major nations
significantly outperformed riskier sectors for much of the year.
Among riskier sectors, high yield and emerging market debt were hit
hardest. The CS First Boston High Yield Index gained just 0.6% for the entire
year, compared to 8.7% for the Lehman Brothers Aggregate Bond Index benchmark
for U.S. investment-grade issues. For the same period, emerging market debt, as
represented by the J.P. Morgan EMBI Plus, lost 14.4%, versus a 15.3% gain for
Morgan's developed-nation Global Government Bond Index. Returns for high yield
and emerging debt began to improve as 1998 drew to a close. The fourth quarter
saw a healthy rebound in "spread product"--debt securities whose market
valuation is driven by the difference, known as the "spread," between their
yields and those of U.S. Treasury debt--as investors' pronounced risk aversion
softened.
The key factors behind the market's improving sentiment were: the
cumulative effect of over 60 monetary easings by central banks, including three
in the U.S. by the Federal Reserve within a period of seven weeks, the
announcement of a long-awaited fiscal aid package for Brazil by the
International Monetary Fund, and the relatively orderly liquidation of large
positions held by Long-Term Capital Management and other ailing hedge funds.
Looking ahead, our outlook is cautiously optimistic for high yield and
emerging market debt. High yield should benefit from several factors: the strong
U.S. economy; minimal U.S. inflation; and the fact that yield spreads relative
to comparable-maturity U.S. Treasury bonds are fairly wide, leaving ample scope
to narrow (and, thus, push bond prices higher). We expect
2
<PAGE>
emerging market debt to trade higher with periods of high volatility. Spreads on
emerging market debt will continue to be driven by global factors, liquidity and
sentiment.
We are keeping the high yield portion of the portfolio most heavily
weighted in telecommunications, cable/media and gaming, whose positive industry
and company fundamentals are unchanged. We also are avoiding meaningful exposure
to cyclical industries and those most vulnerable to the severe economic problems
in Asia. Within the portfolio's emerging market allocation, we will emphasize
countries with positive economic fundamentals, relatively strong projected
economic growth rates and manageable financing needs.
During the fourth quarter, we remained underweight in emerging market
debt with a 21% allocation. In the first part of 1999, we expect to reallocate
assets back to neutral benchmark weights because with the recent Brazilian
devaluation, we believe that the "tail end of the storm" for emerging market
debt may have occurred.
Credit Suisse Asset Management
Investment Subadviser to the American Odyssey Global High-Yield Bond Fund
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND,
CS FIRST BOSTON HIGH YIELD INDEX,
AND LBGC 1-5 YEAR BOND INDEX
<TABLE>
<CAPTION>
LBGC 1-5 YEAR BOND
GLOBAL HIGH-YIELD BOND CSFB HIGH YIELD INDEX INDEX
---------------------- --------------------- ------------------
<S> <C> <C> <C>
5/31/93 10000 10000 10000
6/30/93 10070 10181 10111
9/30/93 10199 10433 10292
12/31/93 10275 10894 10340
3/31/94 10224 10778 10220
6/30/94 10194 10622 10190
9/30/94 10265 10792 10282
12/31/94 10261 10788 10264
3/31/95 10599 11295 10662
6/30/95 10986 11950 11089
9/30/95 11105 12309 11258
12/31/95 11378 12663 11587
3/31/96 11358 12937 11578
6/30/96 11450 13141 11679
9/30/96 11613 13634 11880
12/31/96 11807 14236 12131
3/31/97 11811 14446 12172
6/30/97 12086 15069 12478
9/30/97 12321 15778 12762
12/31/97 12533 16033 12996
3/31/98 12714 16515 13192
6/30/98 12783 16724 13412
9/30/98 11546 15696 13913
12/31/98 12063 16126 13988
Average Annual Total Return for the Fund for
the periods ended 12/31/98:
One Year: (3.76)%
Five Year: 3.26%
Since 5/17/93**: 3.42%
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* 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. In
accordance with SEC requirements, the above chart shows the performance
of two indices -- both short-term bond and high-yield bond -- during the
entire period that the Fund has been in operation. Performance of the
Fund from 5/93 through 4/98 should be compared to the Lehman Brothers
Government/Corporate 1-5 Bond Index. Performance of the Fund from 5/98
through 12/98 should be compared to the CS First Boston High-Yield
Index.
** Fund's inception date.
CS FIRST BOSTON HIGH YIELD INDEX
This is an unmanaged, trader priced index comprised of issues rated BB and
below, constructed to mirror the performance of the public high yield market.
All new and downgraded issues must have a minimum par value of $75 million.
4
<PAGE>
LEHMAN BROTHERS GOVERNMENT/CORPORATE 1-5 YEAR BOND INDEX
This Index is composed of all domestic bonds that are investment grade
(rated Baa or higher by Moody's or BBB or higher by Standard & Poor's) which are
between 1 and 5 years to maturity. Issues must have amounts outstanding in
excess of $25 million. Total return comprises price appreciation/depreciation
and income as a percentage of the original investment. Index is rebalanced
monthly by market capitalization.
5
<PAGE>
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
The American Odyssey International Equity Fund returned 14.91% for the
year ended December 31, 1998. The MSCI EAFE Index returned 20.33% for the same
period.
During 1998, Growth in Telecommunications has outperformed all other
themes. The growth in the mobile phone market and, to a lesser extent, the
privatization of Europe's telecommunications companies has influenced the
strength of this theme. The need to develop new technologies to keep pace with
this growth has driven a wave of new partnerships and joint ventures. Mannesmann
of Germany and Vodafone of the UK led the pack, outperforming all stocks in the
portfolio in 1998. Recently, Mannesmann and the Italian company, Olivetti,
teamed up to provide international phone service through a new international
network operator called Mannesmann euro.map. Vodafone announced cooperative
links with Lucent Technologies, to bring to market a new generation of wireless
technology, and with Cash Converters International, to provide "pay as you talk"
mobile phones.
The Healthcare Needs theme, another positive contributor, performed
very well. Glaxo Wellcome and Hoechst both made strong contributions. Since the
market turbulence in the third quarter, investors' interest in pharmaceutical
companies has rebounded as investors seek stocks with stable earnings, making
them less vulnerable to economic downturns. In addition, the merger and
acquisition activity that was prominent in the first half of 1998 has resumed.
The most recent wave of mergers is being fueled by the high cost of bringing new
drugs to the market - an average of $500 million on each new drug, only a few of
which become $1 billion blockbusters. During the fourth quarter, Zeneca and
Astra, a Swedish pharmaceuticals group, and Hoechst and Rhone-Poulenc have
announced mergers.
In the Leading Consumer Franchises theme, British American Tobacco and
Nestle received top marks for the past year. British American Tobacco shares
outperformed other shares in this theme, led by news of the successful spin-off
of Allied Zurich, its financial/insurance business, and favorable news in the US
over litigation. The tobacco settlement and industry-wide price rises are seen
as favorable for cigarette makers. Nestle's performance, while stronger in the
first half of this year, has made a come back since the third quarter.
Infrastructural Development, Technological Innovation and Expanding
Financial Services in Developing Markets were the poorest performing themes
during the year. Technological Innovation and Expanding Financial Services
themes had the highest concentrations in the Far East and thus were hardest hit
by that area's economic downturn.
6
<PAGE>
1999 Outlook
Global equity markets have rebounded strongly since the end of the
third quarter, prompted primarily by the reductions in interest rates which have
occurred in the US and Europe. The general consensus underpinning this recovery
appears to be that the lower interest rate environment will be sufficient to
ensure continued corporate earnings growth.
We do not subscribe to this theory, given the evidence that the
companies themselves are releasing. In recent weeks various global companies
from diverse sectors have all sounded the alarm bell about the trading
environment in which they are currently operating. However, it seems that
paradoxically every trading warning is accompanied by another index reaching an
all time high. Evidently these markets are being driven by increased levels of
liquidity chasing fewer and fewer stocks, driving them up to valuation levels
which we consider very risky. This momentum style of investing is currently
holding sway, but in the long term we believe it is unsustainable.
Nevertheless, there are some positives on the international equity
horizon. The advent of the new single European currency, the Euro, should be
broadly positive for the large pan-European companies. There has been a
resurgence in recent weeks in mergers and acquisitions activity and this process
should accelerate in Europe over the coming months. Indeed, given where Europe
is in the current economic cycle, the opportunities for increasing synergies and
cutting costs there through consolidation are significantly greater than those
that exist in the U.S. at this time.
There continues to be evidence that reform is taking place in Japan,
albeit at the margins. The most recent example of this emerging change was the
recent privatization of NTT DoCoMo. This deal was the largest IPO of all time,
with a market capitalization of over $18 billion in U.S. dollars, and was
striking because a Western investment bank was the lead underwriter on the deal.
This scenario would probably not have occurred just a few years ago.
Nevertheless, the Japanese government has thus far failed to deliver the reform
package which the markets have deemed necessary to revive the country's moribund
domestic economy.
There are some signs of value emerging in the medium to large-cap
sectors in Europe and the UK, particularly in some economically sensitive areas.
Additionally, the reform-minded Japanese corporations have considerable
potential for long term investors. We will continue to concentrate on European
stocks that have the ability to prosper in the single-currency environment and
selected companies in Japan.
Bank of Ireland Asset Management (US) Limited
Investment Subadviser to the American Odyssey International Equity Fund
7
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
AND MSCI EAFE INDEX*
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND MSCI EAFE*
------------------------- ----------
<S> <C> <C>
5/31/93 10000 10000
6/30/93 9819 9900
9/30/93 10210 10512
12/31/93 11980 10570
3/31/94 11220 10946
6/30/94 11110 11514
9/30/94 11590 11532
12/31/94 11144 11423
3/31/95 11267 11644
6/30/95 12158 11737
9/30/95 13101 12236
12/31/95 13260 12741
3/31/96 14013 13118
6/30/96 14348 13335
9/30/96 14714 13255
12/31/96 16159 13551
3/31/97 16400 13392
6/30/97 17755 15140
9/30/97 17985 15043
12/31/97 17126 13875
3/31/98 19323 15926
6/30/98 19788 16106
9/30/98 16499 13827
12/31/98 19673 16696
Average Annual Total Return for the Fund for the periods
ended 12/31/98:
One Year: 14.91%
Five Year: 10.25%
Since 5/17/93**: 12.88%
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* South Africa-Free from 5/93 - 12/93
** Fund's inception date
MORGAN STANLEY CAPITAL INTERNATIONAL --
EUROPE, AUSTRALIA, FAR EAST INDEX
The arithmetic, market value-weighted average of the performance of over
900 securities listed on the stock exchanges of the following 20 countries:
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand, Norway, Singapore,
Spain, Sweden, Switzerland, and the United Kingdom. The Index is calculated on a
total return basis, which includes reinvestment of gross dividends before
deduction of withholding taxes.
8
<PAGE>
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
The American Odyssey Emerging Opportunities Fund returned (8.65)% for
the year ended December 31, 1998. The Russell 2500 Index returned 0.38% for the
same period.
The following commentary has been provided by Chartwell Investment
Partners, co-investment subadviser to the American Odyssey Emerging
Opportunities Fund. Chartwell Investment Partners has been co-investment adviser
for the period May 1, 1998 to December 31, 1998. Previously, Wilke/Thompson
Capital Management acted as co-investment adviser. Chartwell managed 49% of the
portfolio as of December 31, 1998.
Feast or Famine. No phrase better describes the divergence of returns
across securities, industries and asset classes in 1998. While GDP grew in the
3%+ range, inflation remained under 2% and the major market indices surged with
the average stock on the NYSE and NASDAQ ending the year 26% below its annual
high. So yet another year has passed with small capitalization stocks
underperforming their large-cap brethren--by 31% as measured by the S&P 500 and
Russell 2000. In fact, in only two years, 1929 and 1937, have small caps had a
worse relative performance. The past five year period has resulted in a
cumulative gap of 40.28% which falls into fifth place in history.
1998 can also be described as a roller-coaster year, especially for
small-caps. It started off strong in the first quarter to only approach a long,
painful descent starting in mid-April and continuing until October 8th, with two
brief head fakes in early July and late September. The small cap market
corrected over 38% during this period. Even more astonishing is the rebound of
50.4% from October 8th to December 31st for the Russell 2000 Growth.
During this wild ride, we remained steadfast to our small-cap growth
discipline. Our investment philosophy remains the following:
. We invest in companies which not only grow earnings but also
continually enhance all of their capabilities and demonstrate
internal growth through sound, high-return investments.
. We invest for an intermediate time horizon which derives from a
focus on long-term growth prospects and results in lower turnover.
. We choose investments which are more reasonably valued as measured
by P/E to long-term growth rate ratios.
We have historically maintained an overweighted position in the
Consumer, Healthcare, Technology and Business Services sectors and have been
underweighted in more cyclical sectors such as Financials and Energy. We ended
1998 with Technology as our largest weighted sector--a considerable
overweighting versus the Russell 2000 Growth. Most of 1998's positive
performance was led by technology in the strong first and fourth quarters. In
particular, the fourth quarter saw a 34.2% appreciation for the Russell 2000
Growth's technology sector, while the performance of our technology sector was
68.6%--a strong showing. Our technology investments focus on companies with
highly differentiated products addressing strong secular growth markets. We
believe that 1999 will continue to be a good year for product and service based
technology businesses due to the Inter/Intranet needs, mandatory Y2K investments
and discretionary productivity enhancements of businesses.
9
<PAGE>
We continue to believe in the power of the consumer, in particular
their propensity for home furnishings and technology driven products and
services. Despite their stratospheric price performance, we have shied away from
Internet focused retailers not believing in the attainability or sustainability
of profits and brands. In Healthcare, we attempt to avoid reimbursement risk and
invest in companies that provide justifiable efficacy and economic benefits.
Although 1998 continued to be a difficult year for small capitalization
stocks, we believe their relative valuation presents a compelling investment. By
nearly any metric, small-cap stocks are at significant valuation discounts
compared to large-caps.
The following commentary has been provided by SG Cowen Asset
Management, co-investment subadviser to the American Odyssey Emerging
Opportunities Fund. Cowen Asset Management managed 51% of the portfolio as of
December 31, 1998.
In 1998, the disparity in performance between the S&P 500 Index,
returning 28.58%, and the Russell 2000, returning (2.55)%, was among the largest
ever as investor confidence remained shaken by overseas economic events. The
Asian slowdown led to a surplus of some agriculture, energy and metals goods
which in turn led to a recession in countries representing half of the world's
population. Even though the Federal Reserve Board and other central banks acted
decisively to lower interest rates in the fall, money managers (due to liquidity
concerns) were not quite ready to abandon the largest stocks.
While we outperformed the benchmark initially, the last year has been
difficult. We are disappointed with small-cap performance in general and our
performance specifically. At times like these, we check and re-check our process
to make sure we are remaining true to the discipline in place since 1986. An
analysis of this shows that our stock selection process has remained sound but
our sector weightings have not helped recent performance.
1. Exemplary performing stocks and some of our largest holdings through
December include: Novell up 140%, Niagara Mohawk up 54% and Ann Taylor up
150%. We continue to have great confidence in the companies comprising the
portfolio due to their attractive valuations and good growth prospects.
2. Normally, our portfolios have ten to twelve takeovers per year. In 1998,
we have experienced a record twenty-three takeovers and mergers (or 18% of
the portfolio).
3. One of our key process inputs includes management ownership of stock. All
of the companies in the portfolio have this characteristic. In 1998, most of
the companies in the portfolio had additional insider buying and/or company
buy backs. Insider buying occurred in all sectors including energy.
In 1998 our overweighting in energy has been a drag on performance
while our overweighting (for most of 1998) in utilities, stock selection in
technology, and consumer goods helped.
10
<PAGE>
As always, we have numerous special situations where we have identified
catalysts that should lead to an improvement in their capital returns. These
improvements in return on capital should lead to higher stock market valuations,
in 1999, for these companies and/or attract other companies that will recognize
their basic business value and growth potential. Some of these special
situations include: Readers Digest, Oceaneering International, Mid Atlantic
Medical, Calgon Carbon, and Safety-Kleen.
Looking forward, sector weightings will include the following:
. Energy - The decline curve of existing gas wells, incentives for deep water
drilling, and years of underinvestment, along with a strong U.S. economy,
provide a positive backdrop for domestic exploration and production
companies with the ability to find and grow reserves. However, in response
to lower oil prices, the stocks of smaller companies have declined to
absolute and historically low relative valuations. Yet, supply chain
economics in response to lower prices is reducing production and will lead
ultimately to a balance in supply and demand.
. Our overweighting continues in exploration and production companies as well
as select service and drillers with Oceaneering International being one of
our largest positions. While we find valuations alone compelling, we
believe this sector is poised to exhibit dramatically higher stock prices.
It is now cheaper to buy oil and gas on the stock exchange than it is to
drill. We believe today's energy stock price valuations are where
technology was in the third quarter of 1988 and where financial services
were priced in 1990 before they become strong relative and absolute
performers.
. Health Care - Our build-up over the last year initially targeted generics
(Mylan Labs and Alpharma) and now selected regional HMOs, medical device,
biotech, and drug delivery companies (Coventry Health Care, Cor
Therapeutics, and Fuisz Technologies) have been added. Health care
valuations are now attractive and both drugs and commercial insurance
premiums are two of only a few areas that have pricing power.
. Utilities - With high relative yields, relative price-to-earnings ratios and
price-to-book values at all time lows, the industry presented exciting
investment potential with deregulation and restructuring as the catalysts.
Our largest utility holding was Niagara Mohawk, which benefited both from
restructuring and state regulators approving a program to recapture stranded
costs. We are currently reducing our utility exposure due to higher
valuations and attaining price targets.
. Technology - It has been only recently that valuations and stock specific
catalysts caused us to increase our technology sector weighting to be more
in-line with the Russell 2000. We are gradually moving up from an
underweighted position as we identify two types of situations: companies
with attractive valuations and improving fundamentals as well as product
companies building businesses (e.g., Sequent Computers and Brooks
Automation).
Conclusion
Once in place, small-cap outperformance comes in waves; nine
consecutive years of out-performance after 1974 and four consecutive years after
1990. Another wave of outperformance started in 1996 but was curtailed in
October 1997 by global economic concerns. Historically, small caps have bounced
back after tough periods. With such attractive valuations (and as Mr. Greenspan
calms current concerns as he did in 1990) confidence will reappear and small
caps will begin a new wave of outperformance.
11
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
AND RUSSELL 2500 INDEX
<TABLE>
<CAPTION>
EMERGING OPPORTUNITIES RUSSELL 2500
---------------------- ------------
<S> <C> <C>
5/31/93 10000 10000
6/30/93 9770 10104
9/30/93 10190 10819
12/31/93 10940 11012
3/31/94 10990 10767
6/30/94 10340 10387
9/30/94 11550 11131
12/31/94 12000 10895
3/31/95 12506 11700
6/30/95 14584 12744
9/30/95 16266 13968
12/31/95 15867 14349
3/31/96 16353 15191
6/30/96 16891 15823
9/30/96 17387 16179
12/31/96 15361 17080
3/31/97 13329 16510
6/30/97 15514 19004
9/30/97 17477 21732
12/31/97 16432 21243
3/31/98 18413 23421
6/30/98 17055 22445
9/30/98 13106 18164
12/31/98 15018 21324
Average Annual Total Return for the Fund for the periods
ended 12/31/98:
One Year: (8.65)%
Five Year: 6.50%
Since 5/17/93*: 7.56%
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
RUSSELL 2500(R) INDEX
The 2,500 smallest capitalization securities in the Russell 3000 Index,
representing approximately 7% of the Russell 3000 total market capitalization.
The Index is reconstituted annually in June, based upon the May 31 market
capitalization rankings. The Index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
12
<PAGE>
AMERICAN ODYSSEY CORE EQUITY FUND
The American Odyssey Core Equity Fund returned 15.54% for the year
ended December 31, 1998. The S&P 500 Index returned 28.58% for the same period.
The equity markets endured substantial shocks during 1998, yet the
underlying "bullishness" of most investors prevailed as the dominant theme
resulting in yet another year of strong performance by the S&P 500 Index.
Returns of nearly 29% were achieved despite: 1) the collapse of many Asian
economies including Japan, the second largest global economy; 2) Russian debt
defaults and a plummeting ruble; 3) a domestic (and, by extension, worldwide)
financial crisis precipitated by the debacle of the Long-Term Capital Management
hedge fund, which required a "rush to rescue" effort by some of the world's most
prominent financial institutions; and 4) turmoil plaguing Latin America as
Brazil struggled with a very tenuous economic environment.
In contrast, our own economy maintained good growth while exhibiting
very little upward pressure on prices. In response to the global shocks (whose
magnitude was most severe during the third quarter) interest rates fell by 25
basis points on three occasions in the fall. And, the Federal Reserve Board
flooded the market with liquidity, as did many other Central Banks around the
globe. Ongoing optimism and a flush of cash to invest are what propelled the
markets forward in 1998.
Not all aspects of the market, however, participated in the fun. In
fact, the strong results were very narrowly realized. While the S&P returned
28.58%, a few, very large capitalization growth stocks dominated this result as
the average stock in the index rose only 3.7% (on an equally weighted basis).
Further, growth indices topped the returns of the value indices by 20%; while
large stock composites significantly outperformed the medium and smaller stock
composites which, on average, were up less than 10%.
Our approach proved effective for our style over the last year with
results that outperformed the vast majority of the managers that use a value
style and are within 10 basis points of our benchmark, the Russell 1000 Value
Index, which returned 15.63%. Our relatively favorable performance was driven by
positive contributions from both sector weighting decisions and strong stocks
selections in the automotive, financial services, telephone systems, and medical
categories. In particular, performance benefited from our holdings in
MCI/WorldCom, IBM, Ford, SBC Communications, MediaOne, TimeWarner, and Schering
Plough. Stocks that detracted from returns in 1998 included J.C. Penney,
Conseco, Foster Wheeler, Delta Airlines, Lockheed Martin, and Columbia/HCA
HealthCare.
In 1999 we expect equity market results to remain volatile despite a
rather benign outlook for the economic picture during the first half, which
calls for continued growth and very modest levels of inflation. High current
valuations and the prospect of a further weakening dollar could place selling
pressures on equities as investors look for alternative asset classes. Also,
Y2K-related spending is expected to impact productivity leading to potential
profit shortfalls. The risk of a severe market decline is not high, but further
gains similar to those realized over the past several years are unlikely as
well.
Equinox Capital Management, L.L.C.
Investment Subadviser to the American Odyssey Core Equity Fund
13
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
AMERICAN ODYSSEY CORE EQUITY FUND AND S&P 500 INDEX
<TABLE>
<CAPTION>
CORE EQUITY S&P 500
----------- -------
<S> <C> <C>
5/31/93 10000 10000
6/30/93 10140 10029
9/30/93 10380 10288
12/31/93 10392 10527
3/31/94 10151 10124
6/30/94 10181 10167
9/30/94 10503 10663
12/31/94 10287 10666
3/31/95 11166 11704
6/30/95 12301 12821
9/30/95 13405 13840
12/31/95 14253 14674
3/31/96 15131 15461
6/30/96 15484 16153
9/30/96 15922 16652
12/31/96 17555 18043
3/31/97 17606 18532
6/30/97 20301 21768
9/30/97 22669 23378
12/31/97 22916 24070
3/31/98 26055 27427
6/30/98 26516 28333
9/30/98 23165 25514
12/31/98 26478 30948
Average Annual Total Return for the Fund for the periods
ended 12/31/98:
One Year: 15.54%
Five Year: 20.76%
Since 5/17/93*: 19.05%
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
S&P 500(R) INDEX
Capitalization weighted index of 500 large stocks, representing
approximately 70% of the broad U.S. equity market. Membership is decided upon by
the Standard & Poor's 500 committee. The Index is calculated on a total return
basis, which includes reinvestment of gross dividends before deduction of
withholding taxes.
14
<PAGE>
AMERICAN ODYSSEY LONG-TERM BOND FUND
The American Odyssey Long-Term Bond Fund returned 9.04% for the year
ended December 31, 1998. The Salomon Core+5 Index returned 9.08% for the same
period.
The portfolio's long duration posture throughout the period was a
substantial positive since interest rates declined significantly. Yield curve
exposure was also a positive, as we captured the flattening of the curve in the
first half of the year and the net steepening of the curve in the second half of
the year. These gains, however, were reduced by the exposure to spread product
and inflation-indexed bonds. Corporate and mortgage spreads widened
significantly in the third quarter in the wake of the Russian crisis, and only
partially recovered by the end of the year. Real interest rates rallied briefly
in the third quarter, only to end the year substantially wider as it became
apparent that the Fed was not going to ease monetary policy further, contrary to
our expectations.
The major story of 1998 was the collapse of the Russian economy. Events
in Russia, and its impact on emerging markets generally, left no sector
unscathed as corporates, mortgages and even government agency issues
under-performed Treasuries. The speed and magnitude of the spread widening in
the month of August was unprecedented. Anxiety levels were extreme by the end of
the month, as emerging market spreads reached near-default levels.
Going forward, we believe the economy is likely to slow since monetary
policy remains tight. The Fed is likely to resume a policy of easing as the
economy weakens, resulting in a steeper yield curve as short-term interest rates
fall more than long-term interest rates. Spread product is likely to outperform,
but caution is advised until monetary ease becomes effective.
We continue to remain long on duration with a bulleted yield curve
exposure to benefit from an anticipated decline in short-term rates. Our outlook
for slower economic growth ahead mandates a cautious approach to credit risk,
leaving us with a conservatively overweight exposure in the corporate sector
until further monetary ease. Mortgage exposure is clearly overweight, in light
of our expectation that volatility in the long end of the yield curve will tend
to decline as rates decline and the curve steepens. We retain a substantial
exposure to the inflation-indexed bonds, believing that they continue to
represent excellent value and should perform well as nominal yields decline
further and the curve steepens. In addition, we will target an aggressive
exposure to emerging market debt, emphasizing shorter maturities and sovereign
issuers to minimize systemic risk exposure, as we believe the current level of
spreads are very attractive.
Western Asset Management Company
Investment Subadviser to the American Odyssey Long-Term Bond Fund
15
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY LONG-TERM BOND FUND
AND SALOMON CORE +5 BOND INDEX
<TABLE>
<CAPTION>
LONG-TERM BOND SALOMON CORE +5
-------------- ---------------
<S> <C> <C>
5/31/93 10000 10000
6/30/93 10370 10221
9/30/93 10960 10524
12/31/93 11072 10513
3/31/94 10655 10152
6/30/94 10365 10024
9/30/94 10375 10065
12/31/94 10433 10130
3/31/95 11055 10700
6/30/95 11868 11463
9/30/95 12124 11703
12/31/95 12773 12283
3/31/96 12179 11982
6/30/96 12203 12023
9/30/96 12434 12256
12/31/96 12947 12677
3/31/97 12711 12564
6/30/97 13289 13079
9/30/97 13851 13571
12/31/97 14445 14027
3/31/98 14676 14259
6/30/98 15075 14623
9/30/98 15529 15246
12/31/98 15750 15300
Average Annual Total Return for the Fund for the periods
ended 12/31/98:
One Year: 9.04%
Five Year: 7.37%
Since 5/17/93*: 8.48%
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
SALOMON BROTHERS CORE +5 BOND INDEX
This Index is composed of all domestic bonds that are investment grade
(rated Baa or higher by Moody's or BBB or higher by Standard & Poor's) with the
exception of government issues with less than 5 years to maturity. Total return
comprises price appreciation/depreciation and income as a percentage of the
original investment. Index is rebalanced monthly by market capitalization.
16
<PAGE>
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
The American Odyssey Intermediate-Term Bond Fund returned 8.48% for the
year ended December 31, 1998. The Lehman Government/Corporate Intermediate Bond
Index returned 8.42% for the same period.
1998 began with strong economic momentum gathered in the year before.
It seemed that the Federal Reserve was poised for an interest rate increase in
the event that the economy became overheated. It seemed the next move by the Fed
was to tighten. Asian turmoil had not yet infected our economy and interest
rates within spread sectors were among the tightest ever. Finally, the stock
market was poised for another terrific year.
While this was the backdrop through July, in early August the world
changed- Russia defaulted! This triggered a massive deleveraging and sell off by
fixed income hedge funds, most notably Long-Term Capital Management and D.E.
Shaw. Long-Term Capital needed an additional $3.6 billion from a group of twelve
major Wall Street investment and commercial banks to shore up its balance sheet.
D.E. Shaw was absorbed by BankAmerica but not before they had to write down well
over $1 billion of its investment. Most Wall Street firms also took significant
trading losses in their trading accounts.
Responding to this disarray in the marketplace, the Fed cut interest
rates 25 basis points on September 29, 1998. Sensing this was not enough to calm
market fears, the Fed again lowered the base rate 25 basis points on October 15,
1998. This was the first time in five years that an interest rate change was
announced outside of regularly scheduled Federal Reserve Board meetings,
indicating the seriousness on the Fed's concern about global financial meltdown.
One last rate cut occurred November 2, 1998 to get the Fed Funds rate down to
4.75% at year end. Additionally, the stock market declined almost 2000 points
from July record highs to the mid-October lows. Corporate bond spreads almost
doubled during this period. New issuance came to a complete halt during this
period.
By the end of October, a nervous calm came into the market place.
Corporate bond issuance began again, but at sharply discounted spreads.
Interestingly, the month of November set a record pace for new issues with over
$40 billion coming to market. Confidence that the worst was over and that the
Fed would provide liquidity set the stage for a partial rebound of spread
tightening.
The fourth quarter performance for the American Odyssey Intermediate
Bond Fund was 1.04% versus a 0.29% return for the Lehman Intermediate
Government/Corporate Index. The fund outperformed the index by 75 basis points.
Our duration was modestly long for most of the quarter. We also traded
securities more actively than normal as high volumes of new corporate issuance
provided many attractive purchase opportunities.
Travelers Asset Management International Corporation
Investment Subadvisor to the American Odyssey Intermediate-Term Bond Fund
17
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
AND LBGC INTERMEDIATE BOND INDEX
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND LBGC INTERMEDIATE
---------------------- -----------------
<S> <C> <C>
5/31/93 10000 10000
6/30/93 10170 10157
9/30/93 10440 10386
12/31/93 10455 10403
3/31/94 10232 10192
6/30/94 10120 10131
9/30/94 10170 10214
12/31/94 10157 10203
3/31/95 10559 10649
6/30/95 11098 11181
9/30/95 11257 11365
12/31/95 11682 11763
3/31/96 11604 11665
6/30/96 11649 11759
9/30/96 11840 11968
12/31/96 12143 12241
3/31/97 12191 12227
6/30/97 12528 12587
9/30/97 12796 12927
12/31/97 13066 13204
3/31/98 13288 13409
6/30/98 13528 13661
9/30/98 14022 14274
12/31/98 14168 14315
Average Annual Total Return for the Fund for the periods
ended 12/31/98:
One Year: 8.48%
Five Year: 6.25%
Since 5/17/93*: 6.44%
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
LEHMAN BROTHERS GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX
This Index is composed of all domestic bonds that are investment grade
(rated Baa or higher by Moody's or BBB or higher by Standard & Poor's) which are
between 1 and 10 years to maturity. Issues must have amounts outstanding in
excess of $25 million. Total return comprises price appreciation/depreciation
and income as a percentage of the original investment. Index is rebalanced
monthly by market capitalization.
18
<PAGE>
This Page Intentionally Left Blank
19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities
American Odyssey Funds, Inc. / December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments in securities, at
cost ........................ $ 82,763,579 $ 224,993,418 $ 268,309,911 $ 364,025,648 $ 245,410,524 $ 126,757,234
====================================================================================================================================
Investments in securities, at
value (see accompanying
Portfolio of Investments)
(Note 2) ...................... $ 78,679,305 $ 291,724,439 $ 256,392,094 $ 468,287,513 $ 249,947,519 $ 126,735,577
Cash ............................ 1,735,113 10,661,540 21,926,889 17,634,347 5,309,088 41,340
Cash, denominated in foreign currency
(cost, $4,055,907) ............ -- 4,024,267 -- -- -- --
Receivables for:
Investment securities sold .... 474,328 -- 1,300,771 -- -- --
Capital stock subscriptions ... 59,368 63,402 153,807 138,120 121,960 27,041
Unrealized appreciation on
forward foreign currency
contracts (Note 8) .......... 2,400 219,939 -- -- -- --
Interest ...................... 1,600,687 44,640 65,846 38,347 2,879,462 1,188,435
Dividends ..................... -- 180,153 99,133 916,362 -- --
Foreign tax reclaims .......... -- 215,430 -- -- -- --
------------ ------------- ------------- ------------- ------------- -------------
Total assets .................. 82,551,201 307,133,810 279,938,540 487,014,689 258,258,029 127,992,393
------------ ------------- ------------- ------------- ------------- -------------
Liabilities
Payables for:
Investment securities
purchased ................... 452,554 -- 5,764,292 -- 12,382 --
Delayed delivery transactions
(Note 9) .................... -- -- -- -- 2,473,438 --
Capital stock redemptions ..... -- 5,651,059 5,620,833 13,776,103 1,125,959 1,546,010
Unrealized depreciation on
forward foreign currency
contracts (Note 8) .......... 3,376 1,192,520 -- -- -- --
Variation margin on open
futures contracts (Note 6) .. -- -- -- -- 19,703 --
Options written (premiums
received $126,951) (Note 7) . -- -- -- -- 100,406 --
Payable to Adviser .............. 46,641 148,186 165,648 227,576 107,664 53,092
Accrued expenses ................ 40,558 70,304 57,962 57,748 53,661 34,768
------------ ------------- ------------- ------------- ------------- -------------
Total liabilities ............. 543,129 7,062,069 11,608,735 14,061,427 3,893,213 1,633,870
------------ ------------- ------------- ------------- ------------- -------------
NET ASSETS ...................... $ 82,008,072 $ 300,071,741 $ 268,329,805 $ 472,953,262 $ 254,364,816 $ 126,358,523
============ ============= ============= ============= ============= =============
Capital shares outstanding ...... 8,265,528 17,809,092 20,493,456 22,953,325 22,145,289 11,356,645
============ ============= ============= ============= ============= =============
Net asset value per share ....... $9.92 $16.85 $13.09 $20.61 $11.49 $11.13
============ ============= ============= ============= ============= =============
==================================================================================================================================
COMPOSITION OF NET ASSETS
Capital shares at par ........... $ 82,655 $ 178,091 $ 204,935 $ 229,533 $ 221,453 $ 113,566
Additional paid-in-capital ...... 85,685,231 239,610,216 256,456,780 297,670,207 228,177,172 115,941,202
Undistributed net investment
income ........................ 5,442,468 797,921 -- 6,077,406 14,565,934 6,579,802
Accumulated net realized gain
(loss) on investments, futures
contracts, option contracts
and foreign currency
transactions .................. (5,117,260) (6,253,851) 23,585,907 64,714,251 7,256,299 3,745,610
Net unrealized appreciation
(depreciation) on investments,
translation of assets and
liabilities in foreign
currencies, futures contracts
and option contracts .......... (4,085,022) 65,739,364 (11,917,817) 104,261,865 4,143,958 (21,657)
------------ ------------- ------------- ------------- ------------- -------------
$ 82,008,072 $ 300,071,741 $ 268,329,805 $ 472,953,262 $ 254,364,816 $ 126,358,523
============ ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Operations
American Odyssey Funds, Inc. / For the year ended December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends .......................... $ - $ 4,790,889(1) $ 898,120(2) $ 8,429,033(3) $ - $ -
Interest ........................... 6,012,433 588,701 761,627 443,868 15,728,848 7,314,817
------------ ------------- ------------ ------------- ------------ -------------
Total income ..................... 6,012,433 5,379,590 1,659,747 8,872,901 15,728,848 7,314,817
------------ ------------- ------------ ------------- ------------ -------------
Expenses
Management fees (Note 3) ........... 451,932 1,634,996 1,891,669 2,553,003 1,197,713 589,370
Audit fees ......................... 27,050 22,334 22,334 23,334 21,334 19,334
Director's fees & expenses ......... 6,548 25,519 26,777 43,114 23,141 11,549
Custodian fees ..................... 62,466 287,674 181,747 250,796 153,353 76,817
Legal fees ......................... 3,559 12,136 12,347 20,740 10,738 6,539
Printing expense ................... 7,128 21,290 114,300 36,063 19,882 9,594
Amortization of organization
expense .......................... 1,856 1,898 1,826 1,827 1,834 1,856
Miscellaneous expense .............. 2,497 9,506 9,596 14,861 8,428 4,500
------------ ------------- ------------ ------------- ------------ -------------
Total expenses before directed
brokerage arrangements ......... 563,036 2,015,353 2,260,596 2,943,738 1, 436,423 719,559
------------ ------------- ------------ ------------- ------------ -------------
Less:
Expenses paid under directed
brokerage arrangements (Note 4). - (34,171) (41,721) (148,247) - -
------------ ------------- ------------ ------------- ------------ -------------
Total expense reductions ......... - (34,171) (41,721) (148,247) - -
------------ ------------- ------------ ------------- ------------ -------------
Net expenses ..................... 563,036 1,981,182 2,218,875 2,795,491 1,436,423 719,559
------------ ------------- ------------ ------------- ------------ -------------
Net investment income (loss)..... 5,449,397 3,398,408 (559,128) 6,077,410 14,292,425 6,595,258
------------ ------------- ------------ ------------- ------------ -------------
REALIZED and UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
security transactions .......... (4,429,264) (5,948,335) 24,973,514 64,714,251 4,056,236 3,745,609
Net realized gain on futures
contracts ...................... - - - - 2,549,315 -
Net realized gain on option
contracts ...................... - - - - 793,306 -
------------ ------------- ------------ ------------- ------------ -------------
Net realized gain (loss) on
security transactions,
futures contracts and
option contracts ............. (4,429,264) (5,948,335) 24,973,514 64,714,251 7,398,857 3,745,609
Net realized loss on foreign
currency transactions .......... (1,325) (2,350,236) - - - -
Net increase (decrease) in
unrealized appreciation of
investments, futures
contracts and option
contracts ...................... (4,468,181) 43,721,152 (45,105,846) (4,421,205) (853,133) (608,893)
Net change in unrealized
depreciation of translation
of assets and liabilities in
foreign currencies ............. (748) (1,855,478) - - - -
------------ ------------- ------------ ------------- ------------ -------------
Net realized and unrealized
gain (loss) on investments. (8,899,518) 33,567,103 (20,132,332) 60,293,046 6,545,724 3,136,716
------------ ------------- ------------ ------------- ------------ -------------
Net increase (decrease) in net
assets from operations ......... $ (3,450,121) $ 36,965,511 $(20,691,460) $ 66,370,456 $ 20,838,149 $ 9,731,974
============ ============= ============ ============= ============ =============
</TABLE>
(1) Net of withholding taxes of $524,522.
(2) Net of withholding taxes of $919.
(3) Net of withholding taxes of $5,910.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
American Odyssey Funds, Inc.
- -----------------------------------------------------------------------------------------------------------------
Global High-Yield Bond Fund International Equity Fund
--------------------------- --------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) .......................... $ 5,449,397 $ 2,959,840 $ 3,398,408 $ 3,549,725
Net realized gain (loss) on security transactions,
futures contracts and option contracts .............. (4,429,264) (148,187) (5,948,335) 9,593,909
Net realized gain (loss) on foreign currency
transactions ........................................ (1,325) -- (2,350,236) 5,039,668
Net increase (decrease) in unrealized appreciation
(depreciation) of investments, translation of assets
and liabilities in foreign currencies, futures
contracts and option contracts ...................... (4,468,929) 473,223 41,865,674 (7,971,426)
------------- ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations ........................................ (3,450,121) 3,284,876 36,965,511 10,211,876
------------- ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................ (20,259) (3,005,205) (5,154,657) (3,549,725)
From net realized gains on investment transactions .... -- -- (10,221,21) (862,014)
In excess of net investment income or realized gains .. -- -- -- (886,397)
------------- ------------ ------------ ------------
Total distributions to shareholders ................. (20,259) (3,005,205) (15,375,86) (5,298,136)
------------- ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares ......................... 30,761,703 10,266,744 44,196,631 43,198,871
Distributions reinvested .............................. 20,259 4,750,901 15,375,867 9,953,160
Cost of shares repurchased ............................ (4,124,056) (5,149,686) (17,661,458) (8,603,962)
------------- ------------ ------------ ------------
Net increase from capital share transactions ........ 26,657,906 9,867,959 41,911,040 44,548,069
------------- ------------ ------------ ------------
Net increase in net assets ............................ 23,187,526 10,147,630 63,500,684 49,461,809
NET ASSETS
Beginning of year ..................................... 58,820,546 48,672,916 236,571,057 187,109,248
------------- ------------ ------------ ------------
End of year ........................................... $ 82,008,072 $ 58,820,546 $300,071,741 $236,571,057
============= ============ ============ ============
Undistributed net investment income ................... $ 5,442,468 $ 21,955 $ 797,921 $ 4,133,869
============= ============ ============ ============
CAPITAL SHARES
Capital shares outstanding, beginning of year ......... 5,704,494 4,754,313 15,277,557 12,410,280
Capital shares issued ................................. 2,964,963 975,165 2,695,337 2,764,223
Capital shares from distributions reinvested .......... 1,925 462,176 918,510 652,615
Capital shares redeemed ............................... (405,854) (487,160) (1,082,312) (549,561)
============= ============ ============ ============
Capital shares outstanding, end of year ............... 8,265,528 5,704,494 17,809,092 15,277,557
============= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Emerging Opportunities
Fund Core Equity Fund
-------------------------- -------------------------
Year ended Year ended Year ended Year ended
December December December December
31, 31, 31, 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) .......................... $ (559,128) $ (446,526) $ 6,077,410 $4,944,217
Net realized gain (loss) on security transactions,
futures contracts and option contracts .............. 24,973,514 4,178,737 64,714,251 48,900,932
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 ...................... (45,105,846) 13,026,859 (4,421,205) 42,788,687
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations ........................................ (20,691,460) 16,759,070 66,370,456 96,633,836
------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................ -- -- (40,202) (4,951,911)
From net realized gains on investment transactions .... -- -- (48,900,936) (4,293,241)
In excess of net investment income or realized gains .. -- -- -- --
------------ ------------ ------------ ------------
Total distributions to shareholders ................. -- -- (48,941,138) (9,245,152)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares ......................... 49,422,449 66,649,338 58,159,646 63,233,692
Distributions reinvested .............................. -- 14,364,919 48,941,138 25,394,006
Cost of shares repurchased ............................ (19,287,612) (10,165,115) (66,274,935) (35,089,813)
------------ ------------ ------------ ------------
Net increase from capital share transactions ........ 30,134,837 70,849,142 40,825,849 53,537,885
------------ ------------ ----------- -----------
Net increase in net assets ............................ 9,443,377 87,608,212 58,255,167 140,926,569
NET ASSETS
Beginning of year ..................................... 258,886,428 171,278,216 414,698,095 273,771,526
------------ ------------ ----------- ------------
End of year ........................................... $268,329,805 $258,886,428 $472,953,262 $414,698,095
============ ============ ============ ============
Undistributed net investment income ................... $ -- $ -- $ 6,077,406 $ 40,198
============ ============ ============ ============
CAPITAL SHARES
Capital shares outstanding, beginning of year ......... 18,071,430 12,764,369 20,812,710 17,673,755
Capital shares issued ................................. 3,809,758 4,984,206 2,836,416 3,512,120
Capital shares from distributions reinvested .......... -- 1,087,428 2,387,373 1,520,884
Capital shares redeemed ............................... (1,387,732) (764,573) (3,083,174) (1,894,049)
============ ============ =========== ===========
Capital shares outstanding, end of year ............... 20,493,456 18,071,430 22,953,325 20,812,710
============ ============ =========== ===========
<CAPTION>
Intermediate-Term Bond
Long-Term Bond Fund Fund
----------------------- -------------------------
Year ended Year ended Year ended Year ended
December December December December
31, 31, 31, 31,
1998 1997 1998 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) .......................... $14,292,425 $11,765,388 $6,595,258 $5,828,989
Net realized gain (loss) on security transactions,
futures contracts and option contracts .............. 7,398,857 4,536,058 3,745,609 632,431
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 ...................... (853,133) 5,890,460 (608,893) 785,322
----------- ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations ........................................ 20,838,149 22,191,906 9,731,974 7,246,742
----------- ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ............................ (114,595) (11,872,559) (37,668) (5,989,855)
From net realized gains on investment transactions .... (4,441,593) (188,073) (542,497) (475,876)
In excess of net investment income or realized gains .. -- -- -- --
------------ ------------- ------------ ------------
Total distributions to shareholders ................. (4,556,188) (12,060,632) (580,165) (6,465,731)
------------ ------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares ......................... 31,060,308 31,371,836 17,626,605 13,449,251
Distributions reinvested .............................. 4,556,188 20,235,996 580,165 11,446,064
Cost of shares repurchased ............................ (16,387,992) (3,579,271) (9,595,690) (3,465,766)
------------ ------------- ------------ ------------
Net increase from capital share transactions ........ 19,228,504 48,028,561 8,611,080 21,429,549
------------ ------------- ------------ ------------
Net increase in net assets ............................ 35,510,465 58,159,835 17,762,889 22,210,560
NET ASSETS
Beginning of year ..................................... 218,854,351 160,694,516 108,595,634 86,385,074
------------ ------------ ------------ ------------
End of year ........................................... $254,364,816 $218,854,351 $126,358,523 $108,595,634
============ ============ ============ ============
Undistributed net investment income ................... $ 14,565,934 $ 114,595 $ 6,579,802 $ 37,666
============ ============ =========== ============
CAPITAL SHARES
Capital shares outstanding, beginning of year ......... 20,383,564 15,828,492 10,531,347 8,470,117
Capital shares issued ................................. 2,806,155 2,958,292 1,650,973 1,276,376
Capital shares from distributions reinvested .......... 414,953 1,934,930 54,629 1,114,771
Capital shares redeemed ............................... (1,459,383) (338,150) (880,304) (329,917)
=========== ============ =========== ===========
Capital shares outstanding, end of year ............... 22,145,289 20,383,564 11,356,645 10,531,347
=========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Global High-Yield Bond Fund
----------------------------------------------------------------
Year ended December 31,
----------------------------------------------------------------
1998 (1) 1997 1996 1995 1994
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ......................................... $ 10.31 $ 10.24 $ 10.22 $ 9.68 $ 10.07
-------- -------- --------- --------- ---------
OPERATIONS
Net investment income (2).................................. 0.66 0.55 0.37 0.51 0.45
Net realized and unrealized gain (loss) on investments .... (1.05) 0.08 0.02 0.54 (0.46)
-------- -------- --------- --------- ---------
Total from investment operations .......................... (0.39) 0.63 0.39 1.05 (0.01)
-------- -------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ...................... (0.00) (0.56) (0.37) (0.51) (0.38)
-------- -------- --------- --------- ---------
Total distributions ....................................... (0.00) (0.56) (0.37) (0.51) (0.38)
-------- -------- --------- --------- ---------
NET ASSET VALUE
End of year ............................................... $ 9.92 $ 10.31 $ 10.24 $ 10.22 $ 9.68
======== ======== ========= ========= =========
TOTAL RETURN (3).............................................. (3.76)% 6.11% 3.80% 10.86% (0.14)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted) ................. $ 82,008 $ 58,821 $ 48,673 $ 25,855 $ 17,629
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements ......................................... 0.78% 0.66% 0.68% 0.76% 1.02%
After repayments/reimbursements and directed brokerage
arrangements (4)...................................... 0.78% 0.74% 0.75% 0.75% 0.75%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements ......................................... 7.56% 5.53% 5.54% 5.77% 4.99%
After repayments/reimbursements and directed brokerage
arrangements ......................................... 7.56% 5.45% 5.47% 5.78% 5.25%
Portfolio turnover rate ................................... 193.04% 200.78% 154.51% 93.37% 233.25%
====================================================================================================================================
</TABLE>
(1) 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.
(2) Net of expense reimbursements and repayments.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) 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.
24
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund
-----------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year .................................. $ 15.48 $ 15.08 $ 12.68 $ 10.76 $ 11.98
--------- --------- --------- -------- --------
OPERATIONS
Net investment income (loss) (1).................... 0.09 0.57 0.29 0.17 (0.05)
Net realized and unrealized gain (loss) on
investments ...................................... 2.21 0.19 2.48 1.87 (0.78)
--------- --------- --------- -------- --------
Total from investment operations ................... 2.30 0.76 2.77 2.04 (0.83)
--------- --------- --------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............... (0.31) (0.24) (0.30) (0.12) (0.03)
Distributions from net realized gains on
investments ..................................... (0.62) (0.06) (0.07) -- (0.26)
Distributions in excess of net investment income or
realized gains ................................... -- (0.06) -- -- (0.10)
--------- --------- --------- -------- --------
Total distributions ................................ (0.93) (0.36) (0.37) (0.12) (0.39)
--------- --------- --------- -------- --------
NET ASSET VALUE
End of year ........................................ $ 16.85 $ 15.48 $ 15.08 $ 12.68 $ 10.76
========= ========= ========= ======== ========
TOTAL RETURN (2)....................................... 14.91% 5.04% 21.93% 19.00% (6.98)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted) .......... $ 300,072 $ 236,571 $ 187,109 $92,115 $ 51,712
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements ......................... 0.73% 0.79% 0.86% 1.00% 1.36%
After repayments/reimbursements and directed
brokerage arrangements (3)...................... 0.72% 0.77% 0.83% 1.08% 1.25%
Ratios of net investment income to average net
assets:
Before repayments/reimbursements and directed
brokerage arrangements ......................... 1.22% 1.61% 1.51% 1.70% 0.83%
After repayments/reimbursements and directed
brokerage arrangements ......................... 1.23% 1.63% 1.54% 1.62% 0.94%
Portfolio turnover rate ............................ 20.65% 23.08% 21.54% 31.40% 50.25%
</TABLE>
- --------------------------------------------------------------------------------
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) 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.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Opportunities Fund
-------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ........................................ $ 14.33 $ 13.42 $ 15.02 $ 11.84 $ 10.94
----------- ----------- ----------- ----------- ----------
OPERATIONS
Net investment loss (1)................................... -- -- -- -- --
Net realized and unrealized gain (loss) on investments ... (1.24) 0.91 (0.47) 3.81 1.06
----------- ----------- ----------- ----------- ----------
Total from investment operations ......................... (1.24) 0.91 (0.47) 3.81 1.06
----------- ----------- ----------- ----------- ----------
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 year .............................................. $ 13.09 $ 14.33 $ 13.42 $ 15.02 $ 11.84
=========== =========== =========== =========== ==========
TOTAL RETURN (2)............................................. (8.65)% 6.78% (3.03)% 32.23% 9.69%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted) ................ $ 268,330 $ 258,886 $ 171,278 $ 157,193 $ 88,676
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements ........................................ 0.87% 0.86% 0.72% 0.77% 0.91%
After repayments/reimbursements and directed brokerage
arrangements (3)..................................... 0.86% 0.86% 0.72% 0.77% 0.92%
Ratios of net investment loss to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements ........................................ (0.23)% (0.20)% (0.34)% (0.26)% (0.31)%
After repayments/reimbursements and directed brokerage
arrangements ........................................ (0.22)% (0.20)% (0.34)% (0.26)% (0.32)%
Portfolio turnover rate .................................. 138.02% 80.36% 43.00% 36.02% 27.40%
====================================================================================================================================
</TABLE>
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) 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.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Core Equity Fund
--------------------------------------------------------------------
Year ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ........................................ $ 19.93 $ 15.49 $ 13.32 $ 10.06 $ 10.33
----------- ----------- ----------- ----------- -----------
OPERATIONS
Net investment income (1)................................. 0.26 0.24 0.26 0.25 0.16
Net realized and unrealized gain (loss) on investments ... 2.82 4.65 2.83 3.63 (0.26)
----------- ----------- ----------- ----------- -----------
Total from investment operations ......................... 3.08 4.89 3.09 3.88 (0.10)
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ..................... (0.00) (0.24) (0.27) (0.24) (0.17)
Distributions from net realized gains on investments ..... (2.40) (0.21) (0.65) (0.37) --
Distributions in excess of net investment income or
realized gains ......................................... -- -- -- (0.01) --
----------- ----------- ----------- ----------- -----------
Total distributions ...................................... (2.40) (0.45) (0.92) (0.62) (0.17)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
End of year .............................................. $ 20.61 $ 19.93 $ 15.49 $ 13.32 $ 10.06
=========== =========== =========== =========== ===========
TOTAL RETURN (2)............................................. 15.54% 31.67% 23.20% 38.56% (1.01)
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted) ................ $ 472,953 $ 414,698 $ 273,772 $ 183,735 $ 101,592
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements ........................................ 0.65% 0.67% 0.68% 0.72% 0.84%
After repayments/reimbursements and directed brokerage
arrangements (3)..................................... 0.61% 0.65% 0.66% 0.70% 0.85%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements ........................................ 1.30% 1.36% 1.93% 2.32% 2.27%
After repayments/reimbursements and directed brokerage
arrangements ........................................ 1.34% 1.38% 1.95% 2.33% 2.27%
Portfolio turnover rate .................................. 51.52% 45.54% 45.73% 38.44% 48.16%
====================================================================================================================================
</TABLE>
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) 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.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long-Term Bond Fund
-------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ................................ $ 10.74 $ 10.15 $ 10.53 $ 9.37 $ 10.33
-------- --------- -------- -------- ---------
OPERATIONS
Net investment income (1)......................... 0.66 0.61 0.50 0.53 0.37
Net realized and unrealized gain (loss) on
investments .................................... 0.31 0.61 (0.36) 1.57 (0.97)
-------- --------- -------- -------- ----------
Total from investment operations ................. 0.97 1.22 0.14 2.10 (0.60)
-------- --------- -------- -------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ............. (0.01) (0.62) (0.52) (0.57) (0.34)
Distributions from net realized gains on
investments .................................... (0.21) (0.01) -- (0.27) (0.02)
Distributions in excess of net investment income
or realized gains .............................. -- -- -- (0.10) --
-------- --------- -------- -------- ---------
Total distributions .............................. (0.22) (0.63) (0.52) (0.94) (0.36)
--------- ---------- --------- --------- ----------
NET ASSET VALUE
End of year ...................................... $ 11.49 $ 10.74 $ 10.15 $ 10.53 $ 9.37
======== ========= ======== ======== =========
TOTAL RETURN (2)..................................... 9.04% 12.01% 1.34% 22.44% (5.79)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted) ........ $254,365 $ 218,854 $160,695 $114,612 $ 70,359
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements ....................... 0.60% 0.62% 0.63% 0.66% 0.73%
After repayments/reimbursements and directed
brokerage arrangements (3).................... 0.60% 0.62% 0.63% 0.70% 0.75%
Ratios of net investment income to average net
assets:
Before repayments/reimbursements and directed
brokerage arrangements ....................... 5.96% 6.22% 5.88% 6.67% 7.08%
After repayments/reimbursements and directed
brokerage arrangements ....................... 5.96% 6.22% 5.88% 6.63% 7.05%
Portfolio turnover rate .......................... 224.48% 358.67% 369.32% 381.53% 152.91%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) 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.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
American Odyssey Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
-----------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ................................... $ 10.31 $ 10.20 $ 10.38 $ 9.61 $ 10.28
--------- --------- --------- -------- --------
OPERATIONS
Net investment income (1)............................ 0.58 0.59 0.61 0.54 0.38
Net realized and unrealized gain (loss) on
investments ....................................... 0.29 0.17 (0.20) 0.90 (0.67)
--------- --------- --------- -------- --------
Total from investment operations .................... 0.87 0.76 0.41 1.44 (0.29)
--------- --------- --------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................ (0.00) (0.60) (0.59) (0.55) (0.38)
Distributions from net realized gains on investments. (0.05) (0.05) -- (0.07) --
Distributions in excess of net investment income or
realized gains .................................... -- -- -- (0.05) --
--------- --------- --------- -------- --------
Total distributions ................................. (0.05) (0.65) (0.59) (0.67) (0.38)
--------- --------- --------- -------- --------
NET ASSET VALUE
End of year ......................................... $ 11.13 $ 10.31 $ 10.20 $ 10.38 $ 9.61
========= ========= ========= ======== ========
TOTAL RETURN (2)........................................ 8.48% 7.50% 3.95% 15.01% (2.85)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted) ........... $126,359 $108,596 $ 86,385 $73,480 $48,571
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements .......................... 0.60% 0.63% 0.66% 0.68% 0.75%
After repayments/reimbursements and directed
brokerage arrangements (3)....................... 0.60% 0.63% 0.66% 0.75% 0.75%
Ratios of net investment income to average net
assets:
Before repayments/reimbursements and directed
brokerage arrangements .......................... 5.50% 5.90% 5.77% 6.19% 5.35%
After repayments/reimbursements and directed
brokerage arrangements .......................... 5.50% 5.90% 5.77% 6.11% 5.35%
Portfolio turnover rate ............................. 407.24% 215.97% 191.20% 137.14% 22.72%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) 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.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and
directed brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the expense limitation.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount (a) Value
- --------------------------------------------------------------------------------
FOREIGN OBLIGATIONS -- 29.1%
Corporate Debt -- 9.7%
$ 350,000 Ainsworth Lumber Co.,
Yankee-Dollar (PIK)
12.500%, 07/15/07 ............................... $ 346,500
250,000 Algoma Steel, Inc.,
Yankee-Dollar
12.375%, 07/15/05 ............................... 187,500
350,000 Call-Net Enterprises, Inc.,
Yankee-Dollar
8.000%, 08/15/08 ................................ 332,500
250,000 Call-Net Enterprises, Inc.,
Yankee-Dollar, Step Up
8.000%, 08/15/08 ................................ 143,750
200,000 Canadian Airlines Corp.,
Yankee-Dollar
10.000%, 05/01/05 ............................... 175,000
200,000 Canadian Airlines Corp.,
Yankee-Dollar
12.250%, 08/01/06 ............................... 137,000
400,000 Cenargo International Plc, 144A
9.750%, 06/15/08 ................................ 385,500
400,000 Clearnet Communications, Inc.,
Yankee-Dollar, Step Up
14.750%, 12/15/05 ............................... 340,500
450,000 Companhia Brasileira de
Petroleo Ipiranga,
Euro-Dollar, Variable Rate,
Step Up
10.625%, 02/25/02 ............................... 375,750
500,000 Diamond Cable Communications
Plc, Yankee-Dollar, Step Up
10.750%, 02/15/07 ............................... 355,000
500,000 Dolphin Telecom Plc, 144A,
Step Up
11.625%, 06/01/08 ............................... 145,000
350,000 Hermes Euro Rail, Yankee-Dollar
11.500%, 08/15/07 ............................... 367,500
100,000 Hidroelectricia Piedra del
Aguila SA, 144A
10.625%, 10/09/01 ............................... 81,250
400,000 HMV Media Group Plc Series B,
Yankee-Dollar
10.250%, 05/15/08 ............................... 384,000
300,000 Imax Corp., Yankee-Dollar
7.875%, 12/01/05 ................................ 300,000
400,000 International Utility
Structures, Yankee-Dollar
10.750%, 02/01/08 ............................... 378,000
250,000 Intrawest Corp. 144A
9.750%, 08/15/08 ................................ 257,500
400,000 Lodestar Holdings, Inc., 144A
11.500%, 05/15/05 ............................... 322,000
500,000 MetroNet Communications Corp.,
Yankee-Dollar, Step Up
9.950%, 06/15/08 ................................ 300,000
500,000 Microcell Telecommunication,
Inc., Series B, Yankee-Dollar,
Step Up
14.000%, 06/01/06 ............................... 377,500
400,000 Millar Western Forest,
Yankee-Dollar
9.875%, 05/15/08 ................................ 302,000
500,000 Rabobank Nederland Series
EMTN, Euro-Dollar
7.500%, 08/18/00 ................................ 450,000
400,000 Regional Independent Media,
144A
10.500%, 07/01/08 ............................... 406,000
400,000 Stena Line AB, Yankee-Dollar
10.625%, 06/01/08 ............................... 362,000
250,000 Supercanal Holdings SA, 144A
11.500%, 05/15/05 ............................... 151,250
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount (a) Value
- --------------------------------------------------------------------------------
$ 250,000 TeleWest Communications Plc,
Yankee-Dollar
9.625%, 10/01/06 ................................ $ 255,000
400,000 TeleWest Communications Plc,
Yankee-Dollar, Step Up
11.000%, 10/01/07 ............................... 333,000
---------------
7,951,000
---------------
Government Obligations -- 19.4%
1,295,000 Bulgaria Government Discount
Note Series A, Variable Rate
6.688%, 07/28/24 ................................ 906,500
285,000 Ecuador-Par, Step Up
3.500%, 02/28/25 ................................ 121,125
50,000,000 Hungarian Government Bond
(HUF) 15.000%, 07/24/01 ............................... 227,509
5,332,500 Ivory Coast - Past Due
(FRF) Interest (Brady)
1.900%, 03/29/18 ................................ 257,747
1,500,000 Ministry of Finance Russia,
144A
12.750%, 06/24/28 ............................... 450,000
550,000 Peru-FLIRB - Series US,
Variable Rate
3.250%, 03/07/17 ................................ 311,438
600,000 Peru-PDI - Series US, Variable
Rate
4.000%, 03/07/17 ................................ 376,500
170,000 Poland - Bearer - PDI, Step Up
5.000%, 10/27/14 ................................ 158,738
410,000 Poland - Global Regulation D
3.000%, 10/27/24 ................................ 271,625
600,000 Republic of Argentina Global
Bond
9.750%, 09/19/27 ................................ 532,500
250,000 Republic of Argentina Global
Bond Series BGL
11.000%, 10/09/06 ............................... 245,000
900,000 Republic of Argentina Global
Bond, Variable Rate
6.062%, 03/31/23 ................................ 658,125
1,034,000 Republic of Argentina Series
BB, Variable Rate
6.188%, 03/31/05 ................................ 878,900
1,725,000 Republic of Argentina Series
L-GP, Step Up
5.750%, 03/31/23 ................................ 1,241,999
395,346 Republic of Argentina Series
(ARS) PRO1, Variable Rate
3.011%, 04/01/07 ................................ 290,809
472,373 Republic of Argentina-Bocon -
PRE2, Variable Rate
5.010%, 04/01/01 ................................ 329,244
900,000 Republic of Brazil
10.125%, 05/15/27 ............................... 598,500
1,901,856 Republic of Brazil - C Bond,
Variable Rate (PIK)
8.000%, 04/15/14 ................................ 1,138,865
670,000 Republic of Brazil Discount
Bond Series ZL, Variable Rate
6.125%, 04/15/24 ................................ 391,950
1,718,400 Republic of Brazil Series
EI-L, Variable Rate
6.125%, 04/15/06 ................................ 1,104,071
1,113,600 Republic of Brazil Series
EI-RG, Variable Rate
6.125%, 04/15/06 ................................ 715,488
405,000 Republic of Colombia
8.625%, 04/01/08 ................................ 344,250
195,000 Republic of Colombia, Variable
Rate, Yankee-Dollar
12.243%, 08/13/05 ............................... 178,425
470,000 Republic of Panama
8.875%, 09/30/27 ................................ 439,450
200,000 Republic of Panama - IRB,
Variable Rate
4.000%, 07/17/14 ................................ 149,000
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount (a) Value
- --------------------------------------------------------------------------------
$ 700,000 Republic of Venezuela
9.250%, 09/15/27 ................................ $ 427,000
1,071,425 Republic of Venezuela Series
DL, Variable Rate
5.938%, 12/18/07 ................................ 679,016
404,760 Republic of Venezuela-FLIRB
Series A, Variable Rate
6.125%, 03/31/07 ................................ 251,710
600,000 United Mexican States Global
Bond
11.500%, 05/15/26 ............................... 636,000
250,000 United Mexican States Series
W-A (d)
6.250%, 12/31/19 ................................ 194,688
1,060,000 United Mexican States
Series B (d)
6.250%, 12/31/19 ................................ 825,475
750,000 United Mexican States
Series D, Variable Rate(d)
6.098%, 12/31/19 ................................ 609,375
------------
15,941,022
------------
Total Foreign Obligations
(Cost $24,995,495) ........................................... 23,892,022
------------
U.S. Corporate Obligations -- 66.2%
300,000 Ackerley Group, Inc., 144A
9.000%, 01/15/09 ................................ 306,000
400,000 Adelphia Communications
Corp. Series B
8.375%, 02/01/08 ................................ 410,000
300,000 Aetna Industries, Inc.
11.875%, 10/01/06 ............................... 306,000
500,000 ALARIS Medical, Inc. 144A,
Step Up
11.125%, 08/01/08 ............................... 275,000
400,000 Allied Holdings, Inc. Series B
8.625%, 10/01/07 ................................ 408,000
350,000 Allied Waste North America,
144A
7.875%, 01/01/09 ................................ 356,125
400,000 American Cellular Corp., 144A
10.500%, 05/15/08 ............................... 388,000
400,000 American Communication
Lines L.L.C./ACL, 144A
10.250%, 06/30/08 ............................... 408,000
400,000 American Eco Corp. Series B
9.625%, 05/15/08 ................................ 212,000
400,000 American Lawyer Media, Inc.
Series B
9.750%, 12/15/07 ................................ 413,000
400,000 Ameristar Casinos, Inc.
Series B
10.500%, 08/01/04 ............................... 368,000
200,000 Ampex Corp. 144A
12.000%, 03/15/03 ............................... 209,000
300,000 Anthony Crane Rentals 144A
10.375%, 08/01/08 ............................... 289,500
300,000 Applied Extrusion
Technologies, Inc. Series B
11.500%, 04/01/02 ............................... 310,500
400,000 Archibald Candy Corp.
10.250%, 07/01/04 ............................... 408,000
400,000 Aurora Foods, Inc. Series B
8.750%, 07/01/08 ................................ 418,000
400,000 Avalon Cable Holdings LLC,
144A, Step Up
11.875%, 12/01/08 ............................... 224,500
400,000 Axia, Inc.
10.750%, 07/15/08 ............................... 408,000
250,000 Ball Corp. 144A
8.250%, 08/01/08 ................................ 261,875
400,000 Bayou Steel Corp.
9.500%, 05/15/08 ................................ 378,000
200,000 Brand Scaffold Services, Inc.
10.250%, 02/15/08 ............................... 191,000
400,000 Building Materials Corp.
Series B
7.750%, 07/15/05 ................................ 396,000
400,000 CapStar Broadcasting, Step Up
12.750%, 02/01/09 ............................... 328,000
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount (a) Value
- --------------------------------------------------------------------------------
$ 250,000 Carrols Corp. 144A
9.500%, 12/01/08 ................................ $ 255,625
300,000 Casino America, Inc.
12.500%, 08/01/03 ............................... 331,500
400,000 Casino Magic Corp.
(Louisiana) Series B
13.000%, 08/15/03 ............................... 452,000
500,000 Century Communications
Corp. Series B
0.000%(b), 01/15/08 ............................. 256,250
400,000 Classic Communications, Inc.,
Step Up
13.250%, 08/01/09 ............................... 246,000
400,000 Coaxial Communications,
144A
10.000%, 08/15/06 ............................... 415,000
250,000 Coinstar, Inc., Step Up
13.000%, 10/01/06 ............................... 206,250
400,000 Comcast Cellular Holdings
Series B
9.500%, 05/01/07 ................................ 425,000
300,000 Continental Resources, Inc.
10.250%, 08/01/08 ............................... 250,500
400,000 Cumulus Media, Inc.
10.375%, 07/01/08 ............................... 426,000
400,000 Diamond Brands, Inc.
10.125%, 04/15/08 ............................... 362,000
300,000 Diamond Triumph Autoglass
144A
9.250%, 04/01/08 ................................ 300,000
500,000 Diva Systems, 144A, Step Up(d)
12.625%, 03/01/08 ............................... 188,750
400,000 Dobson Communications
Corp.
11.750%, 04/15/07 ............................... 398,000
400,000 Dobson Wireline Co.
12.250%, 06/15/08 ............................... 372,000
250,000 Dobson/Sygnet Communications
Corp. 144A
12.250%, 12/15/08 ............................... 255,625
250,000 DVI, Inc.
9.875%, 02/01/04 ................................ 239,170
400,000 e. spire Communications,
Inc.,
Step Up
10.625%, 07/01/08 ............................... 160,000
500,000 e. spire Communications,
Inc.,
Step Up
13.000%, 11/01/05 ............................... 320,000
400,000 Eagle Family Foods Series
B
8.750%, 01/15/08 ................................ 380,000
400,000 Eagle Geophysical, Inc. Series B
10.750%, 07/15/08 ............................... 334,000
400,000 EchoStar Satellite
Broadcasting, Step Up
13.125%, 03/15/04 ............................... 399,000
400,000 Empress Entertainment, Inc.
8.125%, 07/01/06 ................................ 402,000
400,000 Exodus Communications, Inc.
11.250%, 07/01/08 ............................... 402,000
300,000 Fisher Scientific Group, Inc.,
144A
9.000%, 02/01/08 ................................ 301,500
300,000 Fitzgerald Gaming Corp. Series
B
12.250%, 12/15/04 ............................... 166,500
400,000 Fleming Companies, Inc. Series
B
10.500%, 12/01/04 ............................... 376,000
500,000 Focal Communications Corp.
Series B, Step Up
12.125%, 02/15/08 ............................... 265,000
300,000 Fountain View, Inc. Series B
11.250%, 04/15/08 ............................... 262,500
250,000 Four M Corp. Series B
12.000%, 06/01/06 ............................... 187,500
400,000 Fresh Foods, Inc.
10.750%, 06/01/06 ............................... 378,000
400,000 Friendly Ice Cream Corp.
10.500%, 12/01/07 ............................... 407,000
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount (a) Value
- --------------------------------------------------------------------------------
$ 250,000 FrontierVision Operating
Partners L.P., 144A
11.875%, 09/15/07 ............................... $ 210,313
400,000 Galey & Lord, Inc. 144A
9.125%, 03/01/08 ................................ 348,000
350,000 Gaylord Container Corp. Series B
9.750%, 06/15/07 ................................ 301,000
400,000 General Binding Corp.
9.375%, 06/01/08 ................................ 400,000
300,000 Geo Specialty Chemicals 144A
10.125%, 08/01/08 ............................... 289,500
400,000 Globalstar L.P.
11.500%, 06/01/05 ............................... 300,000
300,000 Globe Manufacturing, Inc. 144A
10.000%, 08/01/08 ............................... 273,000
250,000 Globix Corp. (d)
13.000%, 05/01/05 ............................... 206,250
400,000 Granite Broadcasting Corp.
8.875%, 05/15/08 ................................ 383,000
400,000 Great Lakes Carbon Corp.
Series B (PIK)
10.250%, 05/15/08 ............................... 405,000
400,000 GST USA, Inc., Step Up
13.875%, 12/15/05 ............................... 286,000
200,000 Gulf States Steel-Alabama
13.500%, 04/15/03 ............................... 60,000
400,000 Hard Rock Hotel, Inc. Series B
9.250%, 04/01/05 ................................ 402,000
350,000 Hayes Lemmerz International,
Inc. 144A
8.250%, 12/15/08 ................................ 350,000
350,000 Helicon Group Ltd. Series B
11.000%, 11/01/03 ............................... 367,500
400,000 HMH Properties Series B
7.875%, 08/01/08 ................................ 388,000
450,000 Hollinger International
Publishing, Inc.
9.250%, 02/01/06 ................................ 472,500
400,000 Hollywood Casino Corp.
12.750%, 11/01/03 ............................... 424,000
400,000 Hollywood Park, Inc. Series B
9.500%, 08/01/07 ................................ 396,000
400,000 Home Products International,
Inc.
9.625%, 05/15/08 ................................ 394,000
350,000 Horseshoe Gaming L.L.C. Series B
9.375%, 06/15/07 ................................ 361,375
350,000 Huntsman Corp.
9.500%, 07/01/07 ................................ 350,000
400,000 Hyperion Telecommunications,
Inc. Series B, Step Up
13.000%, 04/15/03 ............................... 288,000
400,000 ICN Pharmaceuticals, Inc.
Series B
9.250%, 08/15/05 ................................ 410,000
400,000 IMPAC Group, Inc. Series B
10.125%, 03/15/08 ............................... 404,000
400,000 InSight Health Services Corp.
9.625%, 06/15/08 ................................ 388,000
400,000 Interep National Radio Sales,
144A
10.000%, 07/01/08 ............................... 414,000
500,000 Intermedia Communication, Inc.
Series B
8.600%, 06/01/08 ................................ 477,500
400,000 International Home Foods, Inc.
10.375%, 11/01/06 ............................... 433,000
400,000 Iridium L.L.C.
10.875%, 07/15/05 ............................... 342,000
400,000 ITC/\DeltaCom, Inc.
8.875%, 03/01/08 ................................ 392,000
400,000 IXC Communications, Inc.
9.000%, 04/15/08 ................................ 403,000
335,000 Jackson Products, Inc.
9.500%, 04/15/05 ................................ 329,975
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount (a) Value
- --------------------------------------------------------------------------------
$ 400,000 James Cable Partners L.P.
Series B
10.750%, 08/15/04 ............................... $ 418,000
400,000 Jones Intercable, Inc.
8.875%, 04/01/07 ................................ 426,000
400,000 Jordan Telecommunications
Products Series B
9.875%, 08/01/07 ................................ 398,000
250,000 Key Energy Services, Inc.
11.500%, 09/15/99 ............................... 240,000
400,000 Keystone Consolidated
Industries, Inc.
9.625%, 08/01/07 ................................ 384,000
50,000 Krystal Co.
10.250%, 10/01/07 ............................... 51,250
400,000 L-3 Communications Corp.
8.500%, 05/15/08 ................................ 414,000
300,000 Lady Luck Gaming Corp.
11.875%, 03/01/01 ............................... 303,000
400,000 Laroche Industries, Inc.
Series B
9.500%, 09/15/07 ................................ 322,000
400,000 Level 3 Communications, Inc.
9.125%, 05/01/08 ................................ 396,500
400,000 Magellan Health Services, Inc.
9.000%, 02/15/08 ................................ 354,000
300,000 Majestic Star Casino L.L.C.
12.750%, 05/15/03 ............................... 315,000
500,000 Marcus Cable Company L.P.,
Step Up
14.250%, 12/15/05 ............................... 477,500
400,000 Maxim Group, Inc. Series B
9.250%, 10/15/07 ................................ 392,000
250,000 MCII Holdings, Step Up
12.000%(c), 11/15/02 ............................ 203,125
500,000 McLeodUSA, Inc., Step Up
10.500%, 03/01/07 ............................... 382,500
300,000 Motors and Gears, Inc. Series D
10.750%, 11/15/06 ............................... 306,750
200,000 Mrs. Fields Holding Co. -
Unit, Step Up
14.000%, 12/01/05 ............................... 115,000
400,000 Mrs. Fields Original Cookies
Series D
10.125%, 12/01/04 ............................... 388,000
400,000 NE Restaurant Company, Inc.
10.750%, 07/15/08 ............................... 404,000
500,000 Nextel Communications, Inc.,
Step Up
9.950%, 02/15/08 ................................ 300,000
300,000 NEXTLINK Communications, Inc.
9.625%, 10/01/07 ................................ 289,500
400,000 Nortek, Inc. 144A
8.875%, 08/01/08 ................................ 410,000
400,000 Northland Cable Television
10.250%, 11/15/07 ............................... 423,000
500,000 NTL, Inc., 144A, Step Up
9.500%, 04/01/08 ................................ 312,500
500,000 NTL, Inc., 144A, Step Up
11.500%, 10/01/08 ............................... 310,000
250,000 Orion Network, Inc.
11.250%, 01/15/07 ............................... 246,250
400,000 Outboard Marine Corp., 144A
10.750%, 06/01/08 ............................... 392,000
250,000 Oxford Automotive, Inc.
10.125%, 06/15/07 ............................... 261,250
400,000 Oxford Health Plans, Inc., 144A
11.000%, 05/15/05 ............................... 378,000
400,000 P & L Coal Holdings Corp.
Series B
9.625%, 05/15/08 ................................ 406,000
300,000 Packaged Ice, Inc. Series B
9.750%, 02/01/05 ................................ 301,500
400,000 Pathmark Stores, Inc.
9.625%, 05/01/03 ................................ 388,000
400,000 Philipp Brothers Chemical,
Inc., 144A
9.875%, 06/01/08 ................................ 394,000
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount (a) Value
- --------------------------------------------------------------------------------
$ 300,000 Pioneer Americas Acquisition
Corp. Series B
9.250%, 06/15/07 ................................ $ 241,500
200,000 Players International, Inc.
10.875%, 04/15/05 ............................... 214,000
300,000 Price Communications Cellular
Holdings (PIK)
11.250%, 08/15/08 ............................... 285,000
400,000 Price Communications Wireless,
Inc., 144A
9.125%, 12/15/06 ................................ 406,000
400,000 Primus Telecomm Group, Inc.
Series B
9.875%, 05/15/08 ................................ 382,000
250,000 PSINet Inc., Euro-Dollar
11.500%, 11/01/08 ............................... 261,250
500,000 Qwest Communications
International, Inc., Step Up
9.470%, 10/15/07 ................................ 388,750
300,000 Randall's Food Markets, Inc.
Series B
9.375%, 07/01/07 ................................ 322,500
700,000 Regal Cinemas, Inc.
9.500%, 06/01/08 ................................ 731,500
400,000 Republic Engineered Steels,
Inc.
9.875%, 12/15/01 ................................ 404,000
250,000 RSL Communications Plc, 144A
10.500%, 11/15/08 ............................... 244,375
200,000 Rural Cellular Corp. Series B
9.625%, 05/15/08 ................................ 201,500
350,000 S.D. Warren Co. Series B
12.000%, 12/15/04 ............................... 379,750
400,000 Sabreliner Corp., 144A
11.000%, 06/15/08 ............................... 354,000
400,000 Salem Communications Corp.
Series B
9.500%, 10/01/07 ................................ 415,000
400,000 Samsonite Corp.
10.750%, 06/15/08 ............................... 338,000
400,000 Santa Fe Hotel, Inc.
11.000%, 12/15/00 ............................... 380,000
300,000 Sinclair Broadcast Group, Inc.
10.000%, 09/30/05 ............................... 318,000
250,000 SITEL Corp.
9.250%, 03/15/06 ................................ 205,000
300,000 Splitrock Services Series B(d)
11.750%, 07/15/08 ............................... 261,000
400,000 Sprint Spectrum L.P.
11.000%, 08/15/06 ............................... 464,000
300,000 Stanadyne Automotive Corp.
Series B
10.250%, 12/15/07 ............................... 301,500
400,000 Startec Global Communications
Corp. (d)
12.000%, 05/15/08 ............................... 346,000
300,000 Station Casinos, Inc.
9.750%, 04/15/07 ................................ 310,500
300,000 Tenet Healthcare Corp., 144A
8.125%, 12/01/08 ................................ 307,500
400,000 Thermadyne Holdings Corp.
9.875%, 06/01/08 ................................ 378,000
300,000 Time Warner Telecom L.L.C.
9.750%, 07/15/08 ................................ 313,500
400,000 Trans World Airlines, Inc.
11.375%, 03/01/06 ............................... 254,000
400,000 Tri-state Outdoor Media
11.000%, 05/15/08 ............................... 400,000
400,000 Tropical Sportswear
International Corp. Series B
144A
11.000%, 06/15/08 ............................... 423,000
350,000 United Artists Theater Series B
9.750%, 04/15/08 ................................ 336,000
500,000 United International Holdings,
Inc., Series B, Step Up
10.750%, 02/15/08 ............................... 265,000
250,000 United Rentals (North America), Inc. 144A
9.250%, 01/15/09 ................................ 252,500
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount (a)/
Shares Value
- --------------------------------------------------------------------------------
$ 400,000 US Office Products Co. 144A
9.750%, 06/15/08 ................................ $ 252,000
300,000 Vencor Operating, Inc.
9.875%, 05/01/05 ................................ 258,000
400,000 Waste Systems International,
Inc., Convertible 144A
7.000%, 05/13/05 ................................ 386,000
400,000 WCI Steel, Inc. Series B
10.000%, 12/01/04 ............................... 396,000
500,000 Winstar Communications, Inc., Step Up
14.000%, 10/15/05 ............................... 361,875
300,000 Wiser Oil Co.
9.500%, 05/15/07 ................................ 186,000
400,000 Young Broadcasting, Inc.
Series B
8.750%, 06/15/07 ................................ 402,000
---------------
54,271,208
---------------
Total U.S. Corporate Obligations
(Cost $57,217,709) ........................................... 54,271,208
---------------
Preferred Stocks -- 0.6%
200 Benedek Communications (PIK),
11.5% *.......................................... 166,500
210 Rural Cellular Corp. Series B
(PIK) *.......................................... 195,825
3,000 S.D. Warren Company
Series B, 14% *.................................. 153,750
-------------
Total Preferred Stocks
(Cost $550,375) ............................................ 516,075
---------------
Total Investments -- 95.9%
(Cost $82,763,579) $ 78,679,305
Other assets in excess of liabilities -- 4.1% 3,328,767
===============
Total Net Assets-- 100.0% $ 82,008,072
===============
Notes to the Portfolio of Investments:
Euro-Dollar -- Securities issued offshore that pay interest and principal in
U.S. Dollars.
FLIRB -- Front Loaded Interest Reduction Bond
IRB -- Industrial Revenue Bond
PDI -- Past Due Interest
PIK -- Payment in Kind
Step Up -- Security is a "step up" bond where the coupon increases or steps up
on predetermined date(s).
Variable Rate -- The rates shown on variable rate securities reflect the current
interest rate at December 31, 1998, which are subject to change based upon the
terms of the security, including varying reset dates.
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
ARS -- Argentina Peso
FRF -- French Franc
HUF -- Hungarian Forint
(a) The Principal Amount shown is expressed in United States Dollars unless
stated otherwise.
(b) Security is a zero coupon bond.
(c) Rate shown is effective through 11/99. Thereafter, the rate will be 15%.
(d) Issued with detachable warrants or value recovery rights. The current
market value of each warrant or right is zero.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
- --------------------------------------------------------------------------------
Investments by Country
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31, 1998
- --------------------------------------------------------------------------------
Percentage of
COUNTRY Net Assets
----------------------------------------------------------------------
United States 66.7%
Argentina 5.4
Brazil 5.3
Canada 4.7
Mexico 2.8
Great Britain 2.8
Venezuela 1.7
Bulgaria 1.1
Netherlands 1.0
Peru 0.8
Panama 0.7
Columbia 0.6
Russia 0.6
Poland 0.5
Sweden 0.4
Ivory Coast 0.3
Hungary 0.3
Ecuador 0.2
-----
Total 95.9%
=====
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1998
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Common Stocks -- 97.2%
Automotive -- 2.6%
3,809 Bayerische Motoren Werke AG
(BMW)............................................ $ 2,957,048
505 Bayerische Motoren Werke AG -
New Shares....................................... 374,462
82,000 Honda Motor Co., Ltd............................. 2,697,070
44,345 Michelin - B..................................... 1,774,274
---------------
7,802,854
---------------
Banking -- 13.3%
110,976 ABN Amro Holdings................................ 2,335,812
176,091 Banco De Santader................................ 3,504,634
611,000 Bangkok Bank Co., Ltd*........................... 1,261,226
292,025 Barclay's Plc.................................... 6,296,877
39,660 Bayerische Vereinsbank AG........................ 3,107,508
392,825 Development Bank of Singapore.................... 3,547,406
460,289 Lloyds TSB Group Plc............................. 6,547,841
346,200 National Australia Bank Ltd...................... 5,223,708
120,685 National Westminster Bank Plc.................... 2,327,217
11,975 Royal Bank of Canada............................. 596,823
16,761 UBS AG - Registered.............................. 5,149,787
---------------
39,898,839
---------------
Beverages, Food & Tobacco -- 7.3%
421,755 British American Tobacco......................... 3,708,576
219,130 Cadbury Schweppes Plc............................ 3,737,021
442,056 Diageo Plc....................................... 5,030,774
4,175 Nestle........................................... 9,088,759
218,650 San Miguel Corp. - B............................. 421,579
---------------
21,986,709
---------------
Building Materials -- 0.1%
278,000 Hume Industries.................................. 168,968
---------------
Chemicals -- 0.8%
65,000 Fuji Photo Film.................................. 2,420,288
---------------
Commercial Services -- 3.1%
93,000 Dai Nippon Printing Co., Ltd..................... 1,485,740
30,145 Vivendi.......................................... $ 7,824,952
---------------
9,310,692
---------------
Communications -- 8.7%
28,035 Alcatel Alsthom.................................. 3,432,852
346,500 Cable & Wireless................................. 4,260,391
81,900 Koninklijke - KPN NV............................. 4,102,273
756,261 Telecom Italia SpA............................... 6,466,939
483,150 Vodafone Group Plc............................... 7,845,728
---------------
26,108,183
---------------
Conglomerates -- 1.0%
2,490 Alusuisse Lonza Holdings......................... 2,900,656
---------------
Electric Utilities -- 2.2%
45,725 EDP - Electricidade de
Portugal SA...................................... 1,006,755
60,150 Veba AG.......................................... 3,600,639
3,313 Viag AG.......................................... 1,943,412
---------------
6,550,806
---------------
Electrical Equipment -- 1.7%
13,600 Keyence Corp..................................... 1,675,938
899,080 Siebe Plc........................................ 3,545,252
---------------
5,221,190
---------------
Electronics -- 3.8%
63,000 Murata Manufacturing Co., Ltd.................... 2,619,496
24,000 Rohm Co. Ltd..................................... 2,189,426
88,750 Sony Corp........................................ 6,475,484
---------------
11,284,406
---------------
Entertainment & Leisure -- 2.8%
364,920 Granada Group Plc................................ 6,451,019
519,700 Ladbroke Group................................... 2,088,207
---------------
8,539,226
---------------
Financial Services -- 0.2%
392,100 Grupo Financiero Banamex*........................ 514,631
---------------
Food Retailers -- 1.7%
88,855 Koninklijke Ahold NV............................. 3,285,893
327,150 TI Group Plc..................................... 1,762,226
---------------
5,048,119
---------------
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Heavy Machinery -- 4.2%
109,305 Mannesmann AG...................................$ 12,534,944
---------------
Insurance -- 12.9%
421,755 Allied Zurich Plc*.............................. 6,290,898
47,270 Axa............................................. 6,854,396
181,575 International Nederlanden
Groep........................................... 11,078,327
415,630 Prudential Corp................................. 6,275,597
3,193 Schw Ruckversicher.............................. 8,324,921
---------------
38,824,139
---------------
Media - Broadcasting
& Publishing -- 3.2%
141,000 Elsevier NV..................................... 1,976,002
771,000 News Corp. Ltd.................................. 5,097,852
228,453 Singapore Press Holdings Ltd.................... 2,478,441
---------------
9,552,295
---------------
Medical Supplies -- 2.9%
225,000 Takeda Chemical Industries
Ltd............................................. 8,677,125
---------------
Office Equipment -- 2.0%
277,000 Canon........................................... 5,930,625
---------------
Oil & Gas -- 4.6%
222,877 Ente Nazionale Idrocarburi SpA.................. 1,459,822
61,510 Royal Dutch Petroleum Co........................ 3,064,570
743,550 Shell Transport & Trading....................... 4,568,074
47,760 Total SA - B.................................... 4,839,263
---------------
13,931,729
---------------
Pharmaceuticals -- 10.3%
240,050 Glaxo Wellcome Plc.............................. 8,259,496
81,245 Hoechst AG...................................... 3,360,968
4,022 Novartis........................................ 7,906,472
491 Roche Holding AG................................ 5,991,380
126,900 Zeneca Group.................................... 5,525,429
---------------
31,043,745
---------------
Retailers -- 3.5%
169,000 KAO Corp........................................ $ 3,820,600
276,678 Kingfisher...................................... 2,994,486
371,700 Safeway Plc..................................... 1,867,681
145,000 Shiseido Co., Ltd............................... 1,866,542
---------------
10,549,309
---------------
Telephone Systems -- 3.5%
71 NTT Mobile Communcations
Network, Inc.................................... 2,926,950
14,520 Tele Danmark A/S - B............................ 1,959,773
49,690 Telefonica SA................................... 2,212,865
698,700 Telstra Corp., Ltd.............................. 3,269,846
---------------
10,369,434
---------------
Transportation -- 0.8%
77,900 TNT Post Group.................................. 2,511,340
---------------
Total Common Stocks
(Cost $224,993,418).......................................... 291,680,252
---------------
Rights -- 0.0%
Telephone Systems -- 0.0%
49,690 Telefonica De Espana*........................... 44,187
---------------
Total Rights
(Cost $0).................................................... 44,187
---------------
Total Investments -- 97.2%
(Cost $224,993,418).......................................... 291,724,439
Other assets in excess of liabilities -- 2.8%................... 8,347,302
---------------
Total Net Assets-- 100.0%.......................................$ 300,071,741
===============
Notes to the Portfolio of Investments:
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
Investments by Country
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1998
- --------------------------------------------------------------------------------
Percentage of
COUNTRY Net Assets
---------------------------------------------------------------------
Great Britain 29.8%
Japan 14.3
Switzerland 13.1
Netherlands 9.5
Germany 9.3
France 8.2
Australia 4.5
Italy 2.6
Singapore 2.0
Spain 1.9
Denmark 0.7
Thailand 0.4
Portugal 0.3
Canada 0.2
Mexico 0.2
Philippines 0.1
Malaysia 0.1
------
Total 97.2%
======
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31, 1998
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
Common Stocks -- 95.6%
Advertising -- 0.6%
42,300 Lamar Advertising Co.* ........................ $ 1,575,675
----------------
Aerospace & Defense -- 2.3%
121,238 AAR Corp. ........................................ 2,894,532
118,300 Kellstrom Industries, Inc.* ...................... 3,401,125
----------------
6,295,657
----------------
Apparel Retailers -- 1.0%
33,600 Brylane, Inc.* ................................... 781,200
50,400 Claire's Stores, Inc. ............................ 1,033,200
158,600 The Sports Authority, Inc.* ...................... 832,650
----------------
2,647,050
----------------
Automotive -- 0.4%
72,495 Republic Industries, Inc.* .................... 1,069,301
----------------
Banking -- 0.6%
36,500 Alliance Bancorp, Inc. ........................... 714,031
27,900 Bay Bancshares, Inc. ............................. 404,550
10,395 Community Capital Corp.* ......................... 98,753
22,700 Union Bancorp, Inc. .............................. 383,063
----------------
1,600,397
----------------
Beverages, Food & Tobacco -- 0.7%
21,000 Armanino Foods of Distinction, Inc.* ............. 11,813
50,350 Flowers Industries, Inc. ......................... 1,205,253
44,850 Tasty Baking ..................................... 681,159
----------------
1,898,225
----------------
Building Materials -- 0.5%
26,200 Lone Star Industries ............................. 964,488
4,300 Southdown, Inc. .................................. 254,506
----------------
1,218,994
----------------
Chemicals -- 1.1%
33,700 Agrium, Inc. ..................................... 292,769
236,000 Calgon Carbon Corp. .............................. 1,770,000
11,700 Potash Corp. of Saskatchewan, Inc. ............... 747,338
----------------
2,810,107
----------------
Commercial Services -- 8.0%
164,143 Allied Waste Industries,
Inc.* ............................................ 3,877,878
29,300 Ambassadors International, Inc.* ................. 432,175
108,500 Boron LePore & Associates, Inc.* ................. 3,743,250
71,997 Concord EFS, Inc.* ............................... 3,050,873
126,800 COR Therapeutics, Inc.* .......................... 1,680,100
170,100 ICF International, Inc. -
Class A* ......................................... 244,519
47,300 Lo-Jack Corp.* ................................... 561,688
4,900 Madison Gas & Electric Co. ....................... 111,475
225,734 Personnel Group of American, Inc.* ...............
3,950,345
82,062 Rental Service Corp.* ............................ 1,287,348
79,100 Safety-Kleen Corp.* .............................. 1,117,288
22,700 St. Joseph Light & Power ......................... 407,181
68,800 Transition Systems, Inc.* ........................ 1,032,000
----------------
21,496,120
----------------
Communications -- 0.9%
13,600 Powerwave Technologies, Inc.* .................... 253,300
29,700 Uniphase Corp.* .................................. 2,060,438
----------------
2,313,738
----------------
Computer Hardware -- 0.2%
16,700 Creative Technology Ltd.* ........................ 250,500
11,900 Tektronix, Inc. .................................. 357,744
----------------
608,244
----------------
Computer Services -- 3.1%
84,900 BISYS Group, Inc.* ............................... 4,382,963
51,900 Mentor Graphics Corp.* ........................... 441,150
126,100 Sequent Computer* ................................ 1,521,081
114,228 SPR, Inc.* ....................................... 1,970,433
----------------
8,315,627
----------------
Computer Software -- 9.3%
53,100 Best Software, Inc.* ............................. 1,261,125
84,700 Electronics for Imaging* ......................... 3,403,881
55,900 Information Resources, Inc.* ..................... 569,481
42,595 Intuit, Inc.* .................................... 3,088,138
40,400 Mercury Interactive Corp.* ....................... 2,555,300
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
118,000 Micromuse Inc.* ................................ $ 2,301,000
222,000 Novell, Inc.* .................................. 4,023,750
56,100 Object Design, Inc.* ........................... 371,663
88,433 PRI Automation, Inc.* .......................... 2,299,258
46,500 Santa Cruz Operation, Inc.* .................... 206,344
150,117 Summit Design, Inc.* ........................... 1,397,965
41,800 Symix Systems, Inc.* ........................... 877,800
43,400 Transaction Systems* ........................... 2,170,000
134,900 Versant Object
Technology Corp.* .............................. 295,094
------------------
24,820,799
------------------
Education -- 0.3%
24,100 Strayer Education, Inc. ..................... 849,525
------------------
Electric Utilities -- 0.0%
12,000 Independent Energy Holdings ADR* ............ 108,000
------------------
Electronics -- 5.4%
8,300 KLA-Tencor Corporation* ........................ 360,013
44,036 PMC-Sierra, Inc.* .............................. 2,779,773
65,500 REMEC, Inc.* ................................... 1,179,000
60,800 RF Micro Devices, Inc.* ........................ 2,819,600
128,420 Semtech Corp.* ................................. 4,607,068
17,500 Teradyne, Inc.* ................................ 741,563
26,700 TriQuint Semiconductor, Inc.* .................. 513,975
86,300 VideoServer, Inc.* ............................. 1,585,763
------------------
14,586,755
------------------
Entertainment & Leisure -- 2.3%
109,411 King World Productions,
Inc.* .......................................... 3,220,786
100,398 Premier Parks, Inc.* ........................... 3,037,040
------------------
6,257,826
------------------
Food Retailers -- 0.6%
103,148 General Nutrition Co.,
Inc.* ....................................... 1,676,155
------------------
Forest Products & Paper -- 0.3%
12,200 Boise Cascade Corp. ............................ 378,200
6,100 Georgia-Pacific Group .......................... 357,231
------------------
735,431
------------------
Health Care Providers -- 9.1%
151,154 American Retirement Corp.* ..................... $ 2,371,228
153,500 Coventry Health Care, Inc.* .................... 1,352,719
90,600 Eclipsys Corp.* ................................ 2,627,400
95,949 Health Management Associates, Inc. -
Class A* ....................................... 2,074,897
551,000 Mid Atlantic Medical Services* ................. 5,406,688
2,400 Pediatrix Medical Group, Inc.* ................. 143,850
136,700 Physician Reliance Network,
Inc.* .......................................... 1,794,188
117,992 Province Healthcare Co.* ....................... 4,232,963
83,254 Sunrise Assisted Living,
Inc.* .......................................... 4,318,801
------------------
24,322,734
------------------
Heavy Machinery -- 2.3%
38,600 Brooks Automation, Inc.* ....................... 564,525
61,500 New Holland N.V. ............................... 841,781
79,800 Smith International, Inc.* ..................... 2,009,963
63,000 Stewart & Stevenson Services, Inc. ............. 614,250
53,400 Tokheim Corp.* ................................. 520,650
218,300 Varco International, Inc.* ..................... 1,691,825
------------------
6,242,994
------------------
Home Construction, Furnishings & Appliances -- 0.5%
15,000 American Woodmark Corp. ........................ 513,750
12,400 Gemstar International Group, Ltd.* ............. 709,900
------------------
1,223,650
------------------
Insurance -- 3.5%
139,600 Annuity and Life Re (Holdings), Ltd. ........... 3,769,200
14,800 Gryphon Holdings, Inc.* ........................ 275,650
27,636 Hartford Life, Inc. - Class A .................. 1,609,797
77,300 Humana, Inc.* .................................. 1,376,906
29,800 Motor Club of America* ......................... 426,513
49,000 Trigon Healthcare, Inc.* ....................... 1,828,313
------------------
9,286,379
------------------
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Lodging -- 1.9%
33,300 MGM Grand, Inc.* ................................ $ 903,263
94,968 Sun International Hotels Ltd.* .................. 4,315,109
------------------
5,218,372
------------------
Media - Broadcasting
& Publishing -- 3.6%
87,900 Allegiance Telecom, Inc.* ....................... 1,065,788
41,700 Central European Media Enterprises Ltd.*......... 273,656
4,200 Emmis Communications - Class A* ................. 182,934
213,000 Readers Digest Association, Inc. ................ 5,364,938
81,066 USA Networks, Inc.* ............................. 2,685,311
------------------
9,572,627
------------------
Medical Supplies -- 3.1%
56,000 Arterial Vascular Engineering, Inc.* ............ 2,940,000
53,500 Mentor Corp. .................................... 1,251,563
126,410 Mettler-Toledo International, Inc.* ............. 3,547,381
26,500 Orthofix International N.V.* .................... 371,000
16,965 Schick Technologies, Inc.* ...................... 171,771
------------------
8,281,715
------------------
Metals -- 3.9%
83,400 Armco, Inc.* .................................... 364,875
342,100 Battle Mountain Gold Co. ........................ 1,411,163
116,400 Birmingham Steel Corp. .......................... 487,425
81,300 Cambior, Inc. ................................... 401,419
116,400 Cyprus Amax Minerals Co. ........................ 1,164,000
103,200 Hecla Mining Co.* ............................... 374,100
133,200 Homestake Mining Co. ............................ 1,223,775
143,400 Kaiser Aluminum Corp.* .......................... 699,075
50,000 Kinross Gold Corp.* ............................. 115,625
119,500 LTV Corp. ....................................... 694,594
26,500 Mueller Industries* ............................. 538,281
54,400 Newmont Mining Corp. ............................ 982,600
14,200 Reynolds Metals Co. ............................. 748,163
7,300 Texas Industries, Inc. .......................... 196,644
460,000 TVX Gold, Inc.* ................................. 833,750
20,300 WHX Corporation* ................................ 204,269
------------------
10,439,758
------------------
Oil & Gas Distribution -- 0.4%
25,400 MCN Energy Group, Inc. .......................... 484,188
5,800 North Carolina Natural Gas
Corp. ........................................... 192,488
18,000 Washington Gas Light Co. ........................ 488,250
------------------
1,164,926
------------------
Oil & Gas Exploration -- 6.8%
92,000 Barrett Resources Corp.* ........................ 2,208,000
50,300 Bellwether Exploration Co.* ..................... 248,356
40,200 Canadian 88 Energy Corp.* ....................... 128,138
13,800 Chieftain International, Inc.* .................. 198,375
49,300 Devon Energy Corp. .............................. 1,512,894
260,400 EEX Corp.* ...................................... 1,822,800
84,600 Forest Oil Corp.* ............................... 719,100
113,900 HS Resources, Inc.* ............................. 861,369
46,100 Nuevo Energy Co.* ............................... 530,150
110,100 Oryx Energy Co.* ................................ 1,479,469
145,400 Pioneer Natural
Resources Co. ................................... 1,272,250
377,200 Santa Fe Energy
Resources, Inc.* ................................ 2,781,850
357,400 Seagull Energy Corp.* ........................... 2,256,088
139,300 Snyder Oil Corp. ................................ 1,854,431
43,200 Titan Exploration, Inc.* ........................ 283,500
------------------
18,156,770
------------------
Oil & Gas Field Services -- 6.5%
117,900 BJ Services Co.* ................................ 1,842,188
137,800 Global Marine, Inc.* ............................ 1,266,038
44,700 Hanover Compressor Co.* ......................... 1,148,231
16,300 Helmerich & Payne, Inc. ......................... 315,813
66,600 Marine Drilling Company, Inc.* .................. 511,988
61,500 Nabors Industries, Inc.* ........................ 834,094
77,800 Noble Drilling Corp.* ........................... 1,006,538
191,460 Ocean Energy, Inc.* ............................. 1,208,591
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
256,700 Oceaneering International, Inc.* ............... $ 3,850,500
64,400 Parker Drilling Co.* ........................... 205,275
68,600 Petroleum Geo-Services ADR* .................... 1,080,450
33,700 Precision Drilling Corp.* ...................... 381,231
111,600 Pride International, Inc.* ..................... 788,175
44,810 R&B Falcon Corp.* .............................. 341,676
32,000 Rowan Co., Inc.* ............................... 320,000
30,600 Santa Fe International Corp. ................... 447,525
41,000 UTI Energy Corp.* .............................. 297,250
54,000 Weatherford International, Inc.* ............... 1,046,250
79,400 Western Gas Resources, Inc. .................... 456,550
------------------
17,348,363
------------------
Pharmaceuticals -- 1.4%
11,000 ALZA Corp.* .................................... 574,750
48,300 Carter-Wallace ................................. 947,888
25,900 Fuisz Technologies, Ltd.* ...................... 333,463
79,300 Kos Pharmaceuticals, Inc.* ..................... 465,888
34,700 Matrix Pharmaceuticals, Inc.* .................. 91,088
30,200 Pharmaceutical Product Development,
Inc.* .......................................... 907,888
11,400 Pharmacyclics, Inc.* ........................... 290,700
7,100 West Co., Inc. ................................. 253,381
------------------
3,865,046
------------------
Real Estate -- 1.0%
18,300 Heartland Partners LP* ......................... 311,100
103,531 MeriStar Hospitality Corp. REIT ................ 1,921,794
7,800 Storage USA, Inc. REIT ......................... 252,038
16,900 Washington Real Estate Investment Trust......... 314,763
------------------
2,799,695
------------------
Restaurants -- 3.7%
58,500 Brinker International, Inc.* ................... 1,689,188
64,100 CKE Restaurants, Inc. .......................... 1,886,944
86,304 Mortons Restaurant Group, Inc.* ................ 1,628,988
82,704 Outback Steakhouse, Inc.* ...................... 3,297,822
33,300 Papa John's International, Inc.* ............... 1,469,363
------------------
9,972,305
------------------
Retailers -- 8.2%
41,200 CompUSA, Inc.* ................................. $ 538,175
69,500 Eagle Hardware &
Garden, Inc.* .................................. 2,258,750
45,800 Guitar Center, Inc.* ........................... 1,127,825
47,300 Homebase, Inc.* ................................ 301,538
117,278 Linens n Things, Inc.* ......................... 4,647,141
80,300 Michaels Stores* ............................... 1,452,932
81,400 Micro Warehouse, Inc.* ......................... 2,752,338
48,700 Musicland Stores Corp.* ........................ 727,456
87,949 Renters Choice, Inc.* .......................... 2,792,381
104,400 School Specialty, Inc.* ........................ 2,231,550
171,540 Trans World Entertainment
Corp.* ......................................... 3,269,981
------------------
22,100,067
------------------
Textiles, Clothing & Fabrics -- 0.5%
61,000 Osh Kosh B Gosh - Class A .................... 1,231,438
------------------
Transportation -- 1.6%
48,948 Coach USA, Inc.* ............................... 1,697,884
26,200 Kirby Corp.* ................................... 522,363
16,500 Newport News Shipbuilding, Inc. ................ 551,719
76,300 Offshore Logistics, Inc.* ...................... 906,063
50,300 Transport Corporation of America, Inc.*.........
603,600
------------------
4,281,629
------------------
Total Common Stocks
(Cost $268,309,911) .................................... 256,392,094
------------------
Total Investments -- 95.6%
(Cost $268,309,911) 256,392,094
Other assets in excess of liabilities-- 4.4% 11,937,711
==================
Total Net Assets-- 100.0% $ 268,329,805
==================
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.
45
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund / December 31, 1998
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Common Stocks -- 99.0%
Aerospace & Defense -- 1.8%
100,900 Lockheed Martin Corp. .........................$ 8,551,275
------------------
Airlines -- 2.9%
105,400 AMR Corp.*...................................... 6,258,125
143,800 Delta Air Lines, Inc............................ 7,477,600
------------------
13,735,725
------------------
Automotive -- 3.6%
173,700 Ford Motor Co................................... 10,194,019
99,000 General Motors Corp............................. 7,084,688
------------------
17,278,707
------------------
Banking -- 12.6%
110,462 Associates First
Capital Corp.................................... 4,680,827
206,987 BankAmerica Corp................................ 12,445,093
189,756 Chase Manhattan Corp............................ 12,915,268
296,200 Fleet Financial Group, Inc...................... 13,236,438
176,884 Washington Mutual, Inc.......................... 6,754,758
240,000 Wells Fargo Co.................................. 9,585,000
------------------
59,617,384
------------------
Beverages, Food & Tobacco -- 4.6%
218,900 Conagra, Inc.................................... 6,895,350
141,600 Pepsico, Inc.................................... 5,796,750
170,300 Philip Morris Co., Inc.......................... 9,111,050
------------------
21,803,150
------------------
Computer Software
& Processing -- 2.5%
233,098 Electronic Data
Systems Corp.................................... 11,713,175
------------------
Computers & Information -- 4.8%
133,300 Compaq Computer................................. 5,590,269
93,000 IBM Corp........................................ 17,181,750
------------------
22,772,019
------------------
Electric Utilities -- 8.4%
126,400 Consolidated Edison, Inc........................ 6,683,400
71,500 FPL Group, Inc.................................. 4,406,188
331,200 PacifiCorp...................................... 6,975,900
127,300 PECO Energy Co.................................. 5,298,863
289,685 PG&E Corp....................................... 9,125,078
182,100 Unicom Corp..................................... 7,022,231
------------------
39,511,660
------------------
Electronics -- 2.7%
109,000 Xerox Corp...................................... 12,862,000
------------------
Entertainment & Leisure -- 2.8%
122,870 Eastman Kodak Co................................ 8,846,640
121,000 Hasbro, Inc..................................... 4,371,125
------------------
13,217,765
------------------
Financial Services -- 5.3%
153,900 Federal National
Mortgage Association............................ 11,388,600
192,524 Morgan Stanley, Dean Witter and Co.............. 13,669,204
------------------
25,057,804
------------------
Forest Products & Paper -- 2.5%
112,900 Fort James Corp................................. 4,516,000
160,800 International Paper Co.......................... 7,205,850
------------------
11,721,850
------------------
Health Care Providers -- 2.1%
398,800 Columbia/HCA
Healthcare Corp................................. 9,870,300
------------------
Heavy Construction -- 0.3%
96,800 Foster Wheeler Corp............................. 1,276,550
------------------
Heavy Machinery -- 0.5%
46,800 Ingersoll-Rand Co............................... 2,196,675
------------------
Home Construction, Furnishings & Appliances -- 1.5%
129,300 Whirlpool Corp.................................. 7,159,988
------------------
Insurance -- 7.4%
112,600 Aetna, Inc...................................... 8,853,170
216,866 Allstate Corp................................... 8,376,449
174,000 Conseco, Inc.................................... 5,317,875
149,600 Hartford Financial Services Group, Inc.......... 8,209,300
38,600 TransAmerica Corp............................... 4,458,300
------------------
35,215,094
------------------
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund / December 31, 1998 (continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Media - Broadcasting
& Publishing -- 2.5%
98,200 Time Warner, Inc................................. $ 6,094,538
90,600 Tribune Co....................................... 5,979,600
------------------
12,074,138
------------------
Medical Supplies -- 1.7%
127,700 Baxter International, Inc........................ 8,212,706
------------------
Metals -- 1.5%
138,000 Reynolds Metals Co............................... 7,270,875
------------------
Oil & Gas -- 9.8%
166,400 Amerada Hess Corp................................ 8,278,400
58,400 Atlantic Richfield Co............................ 3,810,600
128,400 Coastal Corp..................................... 4,485,975
337,200 Conoco, Inc. Class A*............................ 7,039,050
126,100 Exxon Corp....................................... 9,221,063
65,800 Mobil Corp....................................... 5,732,825
144,600 Texaco, Inc...................................... 7,645,725
------------------
46,213,638
------------------
Pharmaceuticals -- 1.9%
65,500 Bristol Myers Squibb Co.......................... 8,764,719
------------------
Retailers -- 2.1%
94,700 J.C. Penney Co., Inc............................. 4,439,063
130,400 Sears Roebuck & Co............................... 5,542,000
------------------
9,981,063
------------------
Telephone Systems -- 12.6%
200,100 AT&T Corp........................................ 15,057,525
230,056 Bell Atlantic Corp............................... 12,192,968
76,659 GTE Corporation.................................. 4,982,835
230,600 MCI Worldcom, Inc.*.............................. 16,545,550
197,400 SBC Communications, Inc.......................... 10,585,575
------------------
59,364,453
------------------
Transportation -- 0.6%
50,800 FMC Corp.*....................................... 2,844,800
------------------
Total Common Stocks
(Cost $364,025,648)......................................... 468,287,513
------------------
Total Investments -- 99.0%
(Cost $364,025,648) 468,287,513
Other assets in excess of liabilities -- 1.0% 4,665,749
==================
Total Net Assets -- 100.0% $ 472,953,262
==================
Notes to the Portfolio of Investments:
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
FOREIGN OBLIGATIONS -- 13.0%
Corporate Debt
$ 600,000 Comtel Brasileira Ltd., 144A,
Yankee-Dollar
10.750%, 09/26/04 ................. $ 472,500
3,500,000 Petroleos Mexicanos,
Yankee-Dollar
8.850%, 09/15/07 .................. 3,150,350
2,300,000 Sumitomo Bank Treasury 144A,
Variable Rate
9.400%, 12/29/49 .................. 2,264,764
1,818,429 YPF Sociedad Anonima, Yankee-Dollar
7.000%, 10/26/02 .................. 1,798,771
-----------------
7,686,385
-----------------
Government Obligations
1,230,000 Manitoba (Province) - Series EE,
Yankee-Dollar
9.500%, 09/15/18 .................. 1,719,540
910,000 Ministry of Finance Russia, 144A
12.750%, 06/24/28 ................. 230,958
2,000,000 Quebec Province
Yankee-Dollar
5.670%, 02/27/26 .................. 2,189,380
3,340,000 Republic of Argentina - Series WW
11.000%, 12/04/05 ................. 3,340,000
5,950,200 Republic of Argentina Series BB,
Variable Rate
6.188%, 03/31/05 .................. 5,030,299
7,295,356 Republic of Brazil - C Bond,
Variable Rate (PIK)
8.000%, 04/15/14 .................. 4,386,262
4,396,800 Republic of Brazil Series EI-L,
Variable Rate
6.125%, 04/15/06 .................. 2,873,089
2,000,000 Republic of Korea
8.875%, 04/15/08 .................. 2,057,330
2,660,000 United Mexican States Global Bond
11.500%, 05/15/26 ................. 2,826,250
780,000 United Mexican States Series W-A
6.250%, 12/31/19 .................. 605,746
-----------------
25,258,854
-----------------
Total Foreign Obligations
(Cost $35,584,443) .............................. 32,945,239
-----------------
U.S. CORPORATE OBLIGATIONS -- 27.2%
Asset Backed and Mortgage Backed
5,000,000 Asset Securitization Corp.
6.660%, 02/14/41 .................. 5,261,225
1,020,000 Nomura Assets Securities Corp.,
REMIC
7.120%, 04/13/36 .................. 1,101,156
-----------------
6,362,381
-----------------
Corporate Bonds & Notes
2,000,000 Associates Corporation of North
America
8.150%, 08/01/09 .................. 2,376,180
2,400,000 Bellsouth Telecommunication Corp.
7.000%, 10/01/25 .................. 2,689,344
390,000 Burlington North Santa Fe
6.375%, 12/15/05 .................. 402,051
1,000,000 Cit Group Holdings
8.375%, 11/01/01 .................. 1,073,840
1,500,000 Citicorp Capital I(e)
7.933%, 02/15/27 .................. 1,652,610
1,350,000 Commonwealth Edison Co.
8.375%, 02/15/23 .................. 1,488,537
500,000 Commonwealth Edison Co.
8.625%, 02/01/22 .................. 550,690
760,000 CSX Corp.
7.450%, 05/01/07 .................. 828,180
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 400,000 Dean Witter Discover & Co.
6.250%, 03/15/00 .................. $ 402,736
2,500,000 Ford Motor Co.
7.700%, 05/15/99 .................. 2,883,700
2,000,000 Ford Motor Credit Corp.
5.750%, 01/25/01 .................. 2,017,320
350,000 General Motors Acceptance Corp.
9.625%, 12/15/01 .................. 389,326
4,700,000 General Motors
Acceptance Corp.- Units
0.000%(a), 06/15/15 ............... 1,529,850
356,800 GG1B Funding Corp.
7.430%, 01/15/11 .................. 370,851
2,400,000 GTE Corp.
6.940%, 04/15/28 .................. 2,606,520
550,000 IBJ Preferred Cap L.L.C., 144A,
Variable Rate, FLIRB
8.790%, 12/29/49 .................. 482,438
2,000,000 International Paper Co.
7.000%, 06/01/01 .................. 2,049,120
2,000,000 JP Morgan Co., Variable Rate
6.918%, 02/15/12 .................. 1,800,000
1,500,000 JPM Capital Trust I
7.540%, 01/15/27 .................. 1,571,835
2,000,000 Lockheed Martin
6.850%, 05/15/01 .................. 2,057,500
600,000 Loews Corp.
7.625%, 06/01/23 .................. 605,448
700,000 NBD Bank N.A.
8.250%, 11/01/24 .................. 858,130
600,000 News America Holdings
8.250%, 10/17/96 .................. 656,958
400,000 News America, Inc.
6.750%, 01/09/38 .................. 409,364
1,400,000 News America, Inc., 144A
7.625%, 11/30/28 .................. 1,498,280
900,000 Niagara Mohawk Power Series G
7.750%, 10/01/08 .................. 989,640
900,000 Niagara Mohawk Power Series H,
Step Up
8.500%, 07/01/10 .................. 693,000
2,000,000 Niagara Mohawk
Power Corp.
7.750%, 05/15/06 .................. 2,195,980
740,000 Philip Morris Co., Inc.
7.000%, 07/15/05 .................. 786,909
690,000 Raytheon Co.
6.750%, 08/15/07 .................. 730,510
1,600,000 Republic of New York Corp.
7.200%, 07/15/97 .................. 1,683,552
2,000,000 RJR Nabisco, Inc.
6.850%, 06/15/05 .................. 1,996,600
200,000 RJR Nabisco, Inc.
8.500%, 07/01/07 .................. 198,524
380,000 RJR Nabisco, Inc.
8.750%, 08/15/05 .................. 383,447
4,260,000 Seagram (Joseph) & Sons, Inc.
7.600%, 12/15/28 .................. 4,288,883
2,000,000 Southern California Edison
6.500%, 06/01/01 .................. 2,051,900
400,000 Southern Union Co.
7.600%, 02/01/24 .................. 418,796
950,000 TCI Communications
8.750%, 08/01/15 .................. 1,180,176
1,860,000 TCI Communications
9.650%, 03/31/27 .................. 2,296,802
800,000 Telecommunications, Inc.
7.875%, 08/01/13 .................. 937,256
2,000,000 Time Warner Entertainment
8.375%, 03/15/23 .................. 2,427,960
1,000,000 Time Warner Entertainment
8.375%, 07/15/33 .................. 1,225,540
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
- -------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund December 31, 1998
(continued)
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 2,400,000 U.S. West Capital Funding, Inc.
6.875%, 07/15/28 ..................
$ 2,563,032
2,400,000 Worldcom, Inc.
6.950%, 08/15/28 .................. 2,576,736
-----------------
62,876,051
-----------------
Total U.S. Corporate Obligations
(Cost $64,514,282) ................................ 69,238,432
-----------------
U.S. Government and Agency Obligations -- 57.2%
U.S. Government Agency Mortgage Backed Obligations
19,091,625 Federal Home Loan
Mortgage Corp.
6.500%, 09/01/27 .................. 19,222,403
11,748,870 Federal Home Loan
Mortgage Corp.
7.000%, 01/01/28 .................. 11,986,432
7,161,417 Federal Home Loan
Mortgage Corp., 30 yr. Gold
7.000%, 01/01/26 .................. 7,304,645
923,972 Federal National
Mortgage Association
6.000%, 02/01/26 .................. 912,848
934,220 Federal National
Mortgage Association
6.000%, 10/01/27 .................. 922,384
10,510,250 Federal National
Mortgage Association
6.500%, 03/01/28 .................. 10,582,508
8,371,802 Federal National
Mortgage Association
7.000%, 03/01/28 .................. 8,541,080
905,239 Federal National
Mortgage Association
7.000%, 04/01/28 .................. 923,543
565,327 Federal National
Mortgage Association
8.500%, 12/01/26 .................. 591,999
1,383,721 Federal National
Mortgage Association
8.500%, 07/01/27 .................. 1,449,005
2,500,000 Federal National
Mortgage Association, TBA
6.500%, 01/01/29 .................. 2,467,575
40,197 Government National Mortgage
Association
7.000%, 01/15/23 .................. 41,162
5,607,256 Government National Mortgage
Association
7.000%, 04/15/23 .................. 5,741,774
58,620 Government National Mortgage
Association
7.000%, 05/15/23 .................. 60,026
631,983 Government National Mortgage
Association
7.000%, 07/15/23 .................. 647,144
693,989 Government National Mortgage
Association
7.000%, 08/15/23 .................. 710,638
427,476 Government National Mortgage
Association
7.500%, 10/15/22 .................. 441,159
155,100 Government National Mortgage
Association
7.500%, 01/15/23 .................. 160,065
1,047,215 Government National Mortgage
Association
7.500%, 04/15/23 .................. 1,080,736
77,559 Government National Mortgage
Association
7.500%, 05/15/23 .................. 80,041
727,286 Government National Mortgage
Association
7.500%, 06/15/23 .................. 750,567
268,491 Government National Mortgage
Association
7.500%, 07/15/23 .................. 277,085
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 915,659 Government National Mortgage
Association
7.500%, 08/15/23 .................. $ 944,968
1,022,993 Government National Mortgage
Association
7.500%, 10/15/23 .................. 1,055,739
105,529 Government National Mortgage
Association
7.500%, 11/15/23 .................. 108,907
1,828,572 Government National Mortgage
Association
7.500%, 07/15/28 .................. 1,887,105
194,728 Government National Mortgage
Association
9.500%, 09/15/30 .................. 213,305
-----------------
79,104,843
-----------------
U.S. Government Agency Obligations
3,000,000 Federal Home Loan Bank
5.920%, 06/29/00 .................. 3,039,840
3,000,000 Federal Home Loan
Mortgage Corp.
6.783%, 08/18/05 .................. 3,250,770
3,000,000 Federal National
Mortgage Association
6.140%, 11/25/05 .................. 3,165,771
20,000,000 Resolution Funding Corp.,
TIGER Coupon Strip
8.625%, 01/15/11(b) ............... 10,522,600
15,000,000 Resolution Funding Corp.,
TIGER Principal Strip
8.625%, 01/15/30 .................. 2,735,550
-----------------
22,714,531
-----------------
U.S. Treasury Bonds
13,707,793 3.625%, 04/15/28II ................ 13,296,559
-----------------
13,296,559
-----------------
U.S. Treasury Notes
10,557,408 3.375%, 01/15/07II ................ 10,204,368
10,241,955 3.625%, 01/15/08II ................ 10,043,518
5,230,000 5.625%, 12/31/02(c) ............... 5,404,054
1,300,000 6.625%, 07/31/01(b) ............... $ 1,362,153
-----------------
27,014,093
-----------------
U.S. Treasury Principal Strip
8,500,000 0.000%, 08/15/20 .................. 2,562,665
2,460,000 0.000%, 02/15/23 .................. 663,292
-----------------
3,225,957
-----------------
Total U.S. Government and Agency Obligations
(Cost $142,893,706) ............................... 145,355,983
-----------------
Purchased Options -- 0.1%
315,000 Eurodollar Future Call Option,
expires 1/15/99, Strike price
$95.00 (cost $59,633).............. 22,050
365,000 Eurodollar Future Call Option,
expires 3/15/99, Strike price
$94.50 (cost $173,395).............
200,750
----------------
Total Purchased Options
(Cost $233,028) ................................. 222,800
-----------------
Short-Term Investments -- 0.9%
U.S. Government Agency Obligations -- 0.9%
$ 2,200,000 Federal National
Mortgage Association
5.200%(d), 02/17/99 ............. 2,185,065
-----------------
Total Short-Term Investments
(Cost $2,185,065) ............................... 2,185,065
-----------------
Total Investments -- 98.3%
(Cost $245,410,524) 249,947,519
Other assets in excess of liabilities -- 1.7% 4,417,297
=================
Total Net Assets-- 100.0% $ 254,364,816
=================
Notes to the Portfolio of Investments:
FLIRB -- Front Loaded Interest Reduction Bond
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
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
Variable rate -- The rates shown on variable rate securities reflect the current
interest rate at December 31, 1998, which are subject to change based upon
the terms of the security, including varying reset dates.
(a) Security is a zero coupon bond.
(b) All or a portion of these securities have been segregated to cover delayed
delivery transactions.
(c) Security has been pledged to cover collateral requirements for open futures.
(d) Rate noted reflects yield to maturity at issue.
(e) An affiliate of American Odyssey Funds Management, Inc.
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
FOREIGN OBLIGATIONS -- 7.2%
Corporate Debt
$ 5,000,000 Telecom Corporation of New Zealand,
Ltd. - 144A
6.250%, 02/10/03 ................... $ 5,093,365
---------------
Government Obligations
4,000,000 Province of Ontario Global Bond
5.500%, 10/01/08 ................... 4,015,400
---------------
Total Foreign Obligations
(Cost $9,004,154) ............................... 9,108,765
---------------
U.S. CORPORATE OBLIGATIONS -- 51.8%
Corporate Bonds & Notes
4,100,000 CarrAmerica Realty Corp.
6.625%, 10/01/00 ................... 4,089,791
3,000,000 Columbia/HCA Healthcare Corp.
6.870%, 09/15/03 ................... 2,887,890
1,500,000 Columbia/HCA Healthcare Corp.
8.700%, 02/10/10 ................... 1,570,680
6,000,000 Finova Capital Corp.
6.250%, 11/01/02 ................... 6,053,280
4,000,000 Halliburton Co.
5.625%, 12/01/08 ................... 4,051,532
4,600,000 Indiana Michigan Power Series MTNA
6.450%, 11/10/08 ................... 4,686,411
6,000,000 Marlin Water, 144A
7.090%, 12/15/01 ................... 6,032,676
3,000,000 Nationwide Health Properties
6.900%, 10/01/37 ................... 2,884,770
6,000,000 NorAm Energy Corp.
7.500%, 08/01/00 ................... 6,147,480
5,400,000 Norfolk Southern Corp.
6.875%, 05/01/01 ................... 5,552,334
5,600,000 Petroleum Geo-Services ASA 144A
6.250%, 11/19/03 ................... 5,545,680
3,420,000 Popular, Inc. Series MTN3
6.375%, 09/15/03 ................... 3,401,676
6,000,000 Raytheon Co., 144A
6.000%, 12/15/10 ................... 6,007,608
5,000,000 RJR Nabisco, Inc.
6.700%, 06/15/02 ................... 5,000,200
350,000 TCI Communications, Inc.
6.375%, 05/01/03 ................... 362,441
1,000,000 Time Warner Entertainment
7.250%, 09/01/08 ................... 1,098,200
---------------
65,372,649
---------------
Total U.S. Corporate Obligations
(Cost $65,360,106) .............................. 65,372,649
---------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 34.1%
U.S. Government Agency Obligations
20,000,000 Federal Home Loan Mortgage Corp.
4.750%, 12/14/01 ................... 19,918,800
---------------
U.S. Treasury Notes
5,000,000 4.250%, 11/15/03 ................... 4,935,950
5,200,000 5.875%, 11/15/05 ................... 5,546,944
12,000,000 6.625%, 04/30/02 ................... 12,699,360
---------------
23,182,254
---------------
Total U.S. Government and Agency Obligations
(Cost $43,239,865) .............................. 43,101,054
---------------
SHORT-TERM INVESTMENTS -- 7.2%
Commercial Paper
1,360,000 Coca Cola Co.
5.070%(a), 02/05/99 ................ 1,353,296
1,000,000 Dupont (EI) De Nemours Co.
5.000%(a), 02/25/99 ................ 992,361
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / December 31, 1998
(continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 5,000,000 General Electric Capital Corp.
5.950%(a), 01/08/99 ................ $ 4,994,215
1,814,000 Household Finance Corp.
5.050%(a), 01/04/99 ................ 1,813,237
---------------
9,153,109
---------------
Total Short-Term Investments
(Cost $9,153,109) ............................... 9,153,109
--------------
Total Investments -- 100.3%
(Cost $126,757,234) 126,735,577
Liabilities in excess of other assets -- (0.3)% (377,054)
---------------
Total Net Assets -- 100.0% 126,358,523
===============
Notes to the Portfolio of Investments:
144A -- Securities restricted for resale to Qualified
Institutional Buyers
(a) Rate noted reflects yield to maturity at issue.
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
American Odyssey Funds, Inc. / December 31, 1998
- --------------------------------------------------------------------------------
NOTE 1. Organization
American Odyssey Funds, Inc., (the "Company"), was organized as a Maryland
corporation in December 1992. It is registered under the Investment Company Act
of 1940 as an open-end diversified management investment company. It consists of
six separate funds (the "Fund(s)"): Global High-Yield Bond Fund, International
Equity Fund, Emerging Opportunities Fund, Core Equity Fund, Long-Term Bond Fund
and Intermediate-Term Bond Fund. Prior to May 1, 1998, the Global High-Yield
Bond Fund was named the Short-Term Bond Fund and had a substantially different
investment objective and investment program. Shares of the Funds are offered
only to life insurance company separate accounts to serve as the underlying
investment vehicle for variable annuity and variable life insurance contracts;
qualified retirement plans, including (s).403(b) arrangements, 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 their exposure to the stock and bond markets and to
fluctuations in interest rates and currency values and for investment purposes.
The primary risks associated with the use of these financial instruments 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.
55
<PAGE>
c) Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets due from the broker. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the value of the
contract at the end of each day's trading. Variation margin payments are made or
received and recognized as assets due from or liabilities due 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 Funds may enter into forward foreign currency contracts to manage their
exposure to fluctuations in certain foreign currency values. The Global
High-Yield Bond Fund may enter into forward foreign currency contracts for
investment purposes as well. A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a set price. The forward
currency contracts are valued at the forward rate and are marked-to-market
daily. The change in market value is recorded by the Fund as an unrealized gain
or loss. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. Risks arise from the possible
inability of counterparties to meet the terms of their contracts and from
movements in currency values and interest rates.
56
<PAGE>
f) Repurchase Agreements
The Funds may enter into repurchase agreements (on an individual Fund basis or
in conjunction with the other Funds) with the seller wherein the seller and the
buyer agree at the time of sale to a repurchase of the security at a mutually
agreed upon time and price. The Funds will not enter into repurchase agreements
unless the agreement is fully collateralized. Securities purchased subject to
the repurchase agreement are deposited with a custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value at least
equal to the repurchase price plus accrued interest. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
interest, the seller is required to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, the Funds maintain the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller. Repurchase agreements could involve certain risks in the event of
default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
g) Currency Translation
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the rate of exchange at the end of the period. Purchases and
sales of securities are translated at the rates of exchange prevailing when such
securities were acquired or sold. Income is translated at rates of exchange
prevailing when accrued.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
h) Organization Expenses
Organization expenses totaling $147,450 were deferred and amortized on a
straight-line basis over a five year period ending May 1998.
i) Taxes
It is the Company's policy to comply with the provisions of the Internal Revenue
Code Subchapter M 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
57
<PAGE>
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 deferral of losses due to wash sales
and the deferral of net realized capital losses recognized subsequent to October
31, 1998. Distributions which were the result of permanent differences between
book and tax rules, primarily due to the differing treatment of foreign currency
transactions and the inability to carry net operating losses forward to future
years, have been reclassified to additional paid-in capital, undistributed net
investment income and accumulated net realized gain on investments, futures
contracts, option contracts and foreign currency transactions.
k) Securities Transactions
Securities transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are determined on the identified
cost basis. Dividend income is recorded on the ex-dividend date. Interest income
is accrued daily as earned.
NOTE 3. Management, Subadvisory, and Transfer Agency Agreements and
Transactions with Affiliates
The Company has entered into a management agreement with American Odyssey Funds
Management, Inc. (AOFM), pursuant to which AOFM manages the investment
operations of the Company and administers the Company's affairs. AOFM has
entered into subadvisory agreements for investment advisory services in
connection with the management of each of the Funds. AOFM supervises the
subadvisors' performance of advisory services and will make recommendations to
the Company's Board of Directors with respect to the retention or renewal of the
subadvisory agreements. AOFM pays for the cost of compensating officers of the
Company, occupancy, and certain clerical and accounting costs of the Company.
The Company bears all other costs and expenses. Each Fund pays AOFM a fee for
its services that is computed daily and paid monthly at an annual rate of 0.25%
of the Fund's average net assets. Each Fund pays its respective subadvisor(s)
directly. Prior to May 1, 1998, AOFM paid each of the subadvisors out of the
fees it received from the Funds. AOFM's fee at that time was equal to an annual
rate (see table) plus 0.25% of each Fund's average net assets.
AOFM's management fees for the period January 1, 1998 to April 30, 1998 were
$2,595,046, of which $1,455,406 was paid to the subadvisors. AOFM's management
fees for the period May 1, 1998 to December 31, 1998 were $2,394,018. During the
period May 1, 1998 to December 31, 1998, the Funds also paid $3,329,619 to the
Subadvisors.
58
<PAGE>
Each Fund pays its subadvisor (or, for any Fund with more than one subadvisor,
each of its subadvisors) a fee that is computed daily and paid monthly at the
annual rates specified below based upon the value of the Fund's average daily
net assets allocated to that subadvisor.
<TABLE>
<CAPTION>
Fund & Subadvisor Subadvisor's Fee
- ----------------------------------------------------- ---------------------------------------------------
<S> <C>
Global High-Yield Bond Fund
- - Credit Suisse Asset Management . 0.425% of assets
(formerly BEA Associates)
International Equity Fund
- - Bank of Ireland Asset Management (U.S.) Limited . 0.45% for first $50 million in assets, plus
. 0.40% for next $50 million in assets, plus
. 0.30% for assets over $100 million
Emerging Opportunities Fund
- - Chartwell Investment Partners . 0.70% for the first $50 million in assets, plus
. 0.50% for the next $50 million in assets, plus
. 0.45% for assets over $100 million
- - SG Cowen Asset Management . 0.50% for the first $50 million in assets, plus
. 0.45% for the next $50 million in assets, plus
. 0.40% for assets over $100 million
Core Equity Fund
- - Equinox Capital Management, LLC . 0.35% for first $100 million in assets, plus
. 0.30% for assets over $100 million
Long-Term Bond Fund
- - Western Asset Management Company . 0.25% for the first $250 million in assets, plus
. 0.15% for assets over $250 million
Intermediate-Term Bond Fund
- - Travelers Asset Management
International Corporation . 0.25% for the first $100 million in assets, plus
. 0.20% for the next $100 million in assets, plus
. 0.15% for assets over $200 million
</TABLE>
On May 1, 1998 Chartwell Investment Partners replaced Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson") as a subadvisor of the Emerging
Opportunities Fund. Prior to this date, Wilke/Thompson was paid .40% for the
first $100 million in assets allocated to Wilke/Thompson and .30% for assets
over $100 million allocated to Wilke/Thompson.
On May 1, 1998 Credit Suisse Asset Management (formerly BEA Associates) replaced
Smith Graham Asset Managers, L.P. ("Smith Graham") as subadvisor of the
Short-Term Bond Fund. Prior to this date, Smith Graham was paid .25% for the
first $100 million in assets and .15% for assets over $100 million.
59
<PAGE>
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.
Travelers Asset Management International Corporation, an affiliate of AOFM,
serves as subadvisor for the Intermediate- Term Bond Fund.
The Core Equity Fund realized a gain of $2,892,455 and dividend income of
$62,656 related to the Fund's investment in an affiliate of AOFM.
NOTE 4. Directed Brokerage Arrangements
The International Equity Fund, Emerging Opportunities Fund and Core Equity Fund
have entered into brokerage service arrangements with certain broker-dealers.
The broker-dealers have agreed to pay certain Fund expenses in exchange for the
Fund directing a portion of the fund brokerage to these broker-dealers. In no
event would the Fund pay additional brokerage or receive inferior execution of
transactions for fund brokerage so allocated.
Under these arrangements for the year ended December 31, 1998, broker-dealers
paid custodian expenses for the International Equity Fund, Emerging
Opportunities Fund and the Core Equity Fund of $34,171, $41,721 and $148,247,
respectively.
NOTE 5. Securities Transactions
The cost of purchases and proceeds from sales of investment securities
(excluding short-term investments and repurchase agreements), for the year ended
December 31, 1998 were:
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
--------------- ---------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Purchases:
U.S. Government......... $ 31,934,748 $ -- $ -- $ -- $ 489,914,203 $ 249,815,943
Non-U.S. Government..... 124,088,847 83,378,252 368,596,437 230,179,702 72,106,549 218,543,419
============== --------------- =============== =============== =============== ==============
Total................... $ 156,023,595 $ 83,378,252 $ 368,596,437 $ 230,179,702 $ 562,020,752 $ 468,359,362
============== =============== =============== =============== =============== ==============
Sales:
U.S. Government......... $ 70,098,013 $ -- $ -- $ -- $ 494,706,650 $ 242,035,878
Non-U.S. Government..... 56,395,021 53,911,573 337,840,916 228,256,514 27,120,355 211,229,003
============== =============== =============== =============== =============== ==============
Total................... $ 126,493,034 $ 53,911,573 $ 337,840,916 $ 228,256,514 $ 521,827,005 $ 453,264,881
============== =============== =============== =============== =============== ==============
</TABLE>
60
<PAGE>
At December 31, 1998, the cost of securities for federal income tax purposes and
the unrealized appreciation (depreciation) of investments for federal income tax
purposes for each Fund was as follows:
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
============== =============== =============== =============== ============== ==============
<S> <C> <C> <C> <C> <C> <C>
Federal Income Tax Cost.......... $ 83,167,015 $ 224,993,418 $ 270,394,081 $ 364,513,662 $ 245,429,029 $ 126,757,234
============== =============== =============== =============== ============== ==============
Gross Unrealized
Appreciation.................. $ 837,020 $ 78,897,135 $ 33,426,751 $ 118,310,503 $ 8,515,037 $ 469,514
Gross Unrealized
Depreciation.................. (5,324,730) (12,166,114) (47,828,738) (14,536,652) (3,996,547) (491,171)
============== =============== =============== =============== ============== ==============
Net Unrealized Appreciation
(Depreciation)................ $ (4,487,710) $ 66,731,021 $ (14,001,987)$ 103,773,851 $ 4,518,490 $ (21,657)
============== =============== =============== =============== ============== ==============
</TABLE>
NOTE 6. Futures Contracts
At December 31, 1998, the Long-Term Bond Fund had entered into the following
futures contracts:
<TABLE>
<CAPTION>
Unrealized
Number Underlying Expiration Nominal Nominal Appreciation/
of Contracts Face Value Securities Date Cost Value (Depreciation)
- ------------------ --------------- ------------------------------ --------------- ------------- ------------- ----------------
Long Position
- ------------------
<S> <C> <C> <C> <C> <C> <C>
93 $ 600,000 5 Year U.S. Treasury Note 3/31/99 $ 10,598,159 $ 10,540,969 $ (57,190)
146 500,000 U.S. Long-Term Treasury Bond 3/31/99 19,018,455 18,656,063 (362,392)
----------------
Total: $ (419,582)
================
</TABLE>
At December 31, 1998, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open future contracts.
NOTE 7. Written Options
The Long-Term Bond Fund's activity in written options during the year ended
December 31, 1998 was as follows:
<TABLE>
<CAPTION>
Number of
Options Premiums
------------- ----------------
<S> <C> <C>
Options Outstanding at December 31, 1997.................... -- $ --
Options Written........................................ 8,677 2,359,550
Options Canceled in Closing Transactions............... (7,875) (1,955,035)
Options Expired........................................ (683) (277,564)
Options Exercised...................................... -- --
------------- ----------------
Options Outstanding at December 31, 1998.................... 119 $ 126,951
============= ================
Cost of closing transactions................................ $ 1,450,911
================
</TABLE>
61
<PAGE>
NOTE 8. Forward Foreign Currency Contracts
The Global High-Yield Bond Fund and the International Equity Fund had forward
foreign currency contracts which contractually obligate the Funds to deliver or
receive currencies at specified future dates. The following contracts were open
at December 31, 1998 for the Global High-Yield Bond Fund:
<TABLE>
<CAPTION>
Local Foreign Unrealized
Principal Contract Settlement Current Appreciation/
Sales Amount U.S. $ Value Date U.S.$ Value (Depreciation)
- --------------------------------------- --------------- --------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
German Mark 281,000 $ 171,394 03/18/99 $ 168,994 $ 2,400
French Franc 1,685,360 298,183 02/18/99 301,559 (3,376)
--------------- --------------- ---------------- -----------------
Total Sales 1,966,360 $ 469,577 $ 470,553 $ (976)
=============== =============== ================ =================
</TABLE>
The following contracts were open at December 31, 1998 for the International
Equity Fund:
<TABLE>
<CAPTION>
Local Foreign Unrealized
Principal Contract Settlement Current Appreciation/
Sales Amount U.S. $ Value Date U.S.$ Value (Depreciation)
- -------------------------------------- ----------------- --------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
German Mark 3,340,000 $ 2,051,471 01/26/99 $ 2,003,945 $ 47,526
Japanese Yen 381,647,000 2,952,325 01/19/99 3,378,500 (426,175)
Japanese Yen 382,316,000 3,302,661 01/20/99 3,384,160 (81,499)
Japanese Yen 386,661,000 3,215,476 02/18/99 3,428,413 (212,937)
Japanese Yen 296,049,000 2,465,637 02/26/99 2,627,716 (162,079)
Japanese Yen 335,897,000 2,866,015 03/09/99 2,985,680 (119,665)
Japanese Yen 704,988,000 6,081,152 03/15/99 6,271,317 (190,165)
Swiss Franc 8,266,000 6,188,979 01/14/99 6,016,566 172,413
----------------- --------------- ---------------- -----------------
Total Sales 2,499,164,000 $ 29,123,716 $ 30,096,297 $ (972,581)
================= =============== ================ =================
</TABLE>
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, 1998, the Fund has entered into the following delayed delivery
transaction:
<TABLE>
<CAPTION>
Payable
Type Security Settlement Date Amount
- -------------- ------------------------------------------------- ------------------ -------------
<S> <C> <C> <C>
Buy Federal National Mortgage Association, TBA, 6.5% 1/14/99 $2,473,438
=============
</TABLE>
62
<PAGE>
NOTE 10. Federal Income Taxes:
For federal income tax purposes, the Funds indicated below have a capital
loss carryforward as of December 31, 1998 which is available to offset future
capital gains, if any.
Capital Loss
Carryforward Expiration Date
-------------- ----------------
Global High-Yield Bond $ 85,972 12/31/2000
148,584 12/31/2005
4,479,269 12/31/2006
-------------
$ 4,713,825
=============
International Equity $ 5,871,669 12/31/2006
=============
The International Equity Fund elected to defer to its fiscal year ending
December 31, 1999, $556,811 of losses recognized during the period November 1,
1998 to December 31, 1998.
================================================================================
Supplementary Information: Change in Accountants
For 1998 and for the previous years, PricewaterhouseCoopers LLP and its
predecessor ("PWC") served as independent public accountant for American Odyssey
Funds, Inc. ("AOF"). For 1999, AOF's Board of Directors selected KPMG Peat
Marwick LLP as independent public accountant for AOF. The Board's selection of
KPMG Peat Marwick LLP did not result from any dispute between AOF and PWC, and
PWC's reports for the last two years did not contain any adverse opinion or
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. There was no disagreement between PWC and
AOF of a type that an independent public accountant would refer to in its
report.
63
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors of the American Odyssey Funds, Inc.:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the American Odyssey Funds, Inc.,
comprising, respectively, the Global High-Yield Bond Fund (formerly the
Short-Term Bond Fund), International Equity Fund, Emerging Opportunities Fund,
Core Equity Fund, Long-Term Bond Fund, and Intermediate-Term Bond Fund, (the
"Funds"), at December 31, 1998, and the results of their operations, the changes
in their net assets and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
February 5, 1999
64
<PAGE>
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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 1999 American Odyssey Funds Management, Inc.
