AMERICAN ODYSSEY FUNDS INC /MD/, 485BPOS, 1999-04-30

AMERICAN ODYSSEY FUNDS INC /MD/
485BPOS, 1999-04-30

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<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1999.

REGISTRATION NOS. 33-57536
811-7450

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 11
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 12
---------------------
AMERICAN ODYSSEY FUNDS, INC.
(EXACT NAME OF REGISTRANT)

TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
(732) 514-2000

(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)

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

PAUL S. FEINBERG, ESQ.

PRESIDENT

AMERICAN ODYSSEY FUNDS, INC.
TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
(NAME AND ADDRESS OF AGENT FOR SERVICE)

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

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

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1999 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on May 1, 1999 pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on ________ pursuant to paragraph (a)(2) of Rule 485

If appropriate check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
PART A

INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 3
American Odyssey Funds, Inc. Prospectus
Supplement
May 1, 1999

This page supplements the May 1, 1999 prospectus for American Odyssey Funds,
Inc.

1. On the performance bar chart for the Emerging Opportunities Fund on
page 6, the 1994 total return is revised to 9.69%.

2. Under the Fees and Expenses table on the top of page 8, the fees for
the Global High-Yield Bond Fund and the Emerging Opportunities Fund are
revised as follows:

GLOBAL
HIGH-YIELD EMERGING
BOND OPPORTUNITIES
FUND FUND
---- ----

Management Fees 0.68%(1) 0.77%(2)
Distribution (12b-1) Fees None None
Other Expenses 0.16%(1) 0.14%
----- -----
Total Annual Fund Operating Expenses 0.84%(1) 0.91%(2)

(1) Fees and expenses for the Global High-Yield Bond Fund reflect
the period 5/1/98-12/31/98. On May 1, 1998, the Fund adopted
its current fee structure and investment objective and
strategy.

(2) Management fees for the Emerging Opportunities Fund reflect
the period 5/1/98-12/31/98. On May 1, 1998, the Fund adopted
its current fee structure.

3. The Fees and Expenses Example table on the bottom of page 8 is revised
to read as follows:

3 years $ 268.09 $ 233.38 $ 290.13 $ 208.03 $ 192.17 $ 192.17

5 years $ 465.92 $ 406.01 $ 503.87 $ 362.24 $ 334.80 $ 334.80

10 years $ 1,037.16 $ 906.45 $ 1,119.56 $ 810.44 $ 750.03 $ 750.03
</TABLE>

4. Note 1 to the chart on page 16 is revised to read as follows:

"The Global High-Yield Bond Fund's fee structure changed effective May
1, 1998, when the Fund converted from the Short-Term Bond Fund.
Advisory fees for the period 5/1/98-12/31/98 equaled 0.68% of average
net assets on an annualized basis."
<PAGE> 4

PROSPECTUS

May 1, 1999

AMERICAN ODYSSEY

Global High-Yield Bond Fund
International Equity Fund
Emerging Opportunities Fund
Core Equity Fund
Long-Term Bond Fund
Intermediate-Term Bond Fund

You may invest in the Funds only if you have purchased a variable annuity
contract or variable life insurance contract that offers the Funds, or
participate in a qualified retirement plan (including an arrangement under
section 403(b) of the Internal Revenue Code).

__________________

As with all mutual funds, neither the Securities and Exchange Commission nor
any state securities commission has approved or disapproved of these securities
or passed upon the adequacy of this prospectus. Any representation to the
contrary is a criminal offense.

[LOGO]

AMERICAN
ODYSSEY (R)
- ---------
FUNDS
<PAGE> 5

PROSPECTUS CONTENTS

<TABLE>
<S> <C>
Summary of Investment Objectives and Strategies............. 2
Summary of Investment Risks................................. 4
Performance................................................. 6
Fees and Expenses........................................... 8
Investment Objectives, Strategies, and Risks................ 9
American Odyssey Global High-Yield Bond Fund........... 9
American Odyssey International Equity Fund............. 11
American Odyssey Emerging Opportunities Fund........... 11
American Odyssey Core Equity Fund...................... 12
American Odyssey Long-Term Bond Fund................... 12
American Odyssey Intermediate-Term Bond Fund........... 14
Temporary Defensive Positions.......................... 15
Year 2000 Risks........................................ 15
Management of the Funds..................................... 16
Pricing, Purchase, and Redemption of Shares................. 20
Pricing of Shares...................................... 20
Purchase of Shares..................................... 20
Redemption of Shares................................... 20
Distributions.......................................... 21
Other Information........................................... 21
Federal Income Taxes................................... 21
Preparing for the Year 2000............................ 21
Monitoring for Possible Conflict....................... 21
Conversion of Short-Term Bond Fund to Global High-Yield
Bond Fund............................................. 21
Previous Subadviser for Emerging Opportunities Fund.... 22
Financial Highlights........................................ 22
</TABLE>

1
<PAGE> 6

SUMMARY OF INVESTMENT OBJECTIVES AND STRATEGIES

GLOBAL HIGH-YIELD BOND FUND

Objective:Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in high-yield debt securities (which are
sometimes referred to as junk bonds and which typically are rated
below investment grade) from the United States and abroad.

Strategy: Invests (in order of importance) in:

- High-yield bonds from the United States.

- High-yield bonds, commonly known as "junk bonds," pay more
interest than investment-grade bonds because of the greater
risk that the issuer will miss an interest payment or fail to
repay the principal.

- High-yield bonds from foreign countries, particularly those with
emerging or developing markets.

- Investment-grade bonds.

- Investment-grade bonds are bonds that bond-rating
organizations or the Fund believe are reasonably likely to
meet their interest and principal payment obligations.
Investment-grade bonds pay less interest than high-yield
bonds.

- Stocks that pay high dividends or that resemble or are related to
bonds in some way.

INTERNATIONAL EQUITY FUND

Objective:
Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in common stocks of established non-U.S.
companies.

Strategy:Invests in stocks of companies from at least five foreign countries.

- The companies in which the Fund invests are generally large and
well-established in their home country.

- The Fund invests primarily in countries with developed economies.

- The Fund chooses companies that it expects to increase in value
over the long-term.

EMERGING OPPORTUNITIES FUND

Objective:
Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in common stocks of small, rapidly growing
companies.

Strategy:Invests in stocks of companies with a market value of less than $1
billion that the Fund expects will increase in value more quickly than
larger, well-established companies.

2
<PAGE> 7

CORE EQUITY FUND

Objective:Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in common stocks of well-established companies.

Strategy: Invests in stocks of larger, well-established companies that the Fund
expects to increase in value faster than the overall market.

LONG-TERM BOND FUND

Objective:Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in long-term corporate debt securities, U.S.
government securities, mortgage-related securities and asset-backed
securities, as well as money market instruments.

Strategy: Invests in bonds that will mature (i.e., repay principal) in, on
average, between eight and twenty-five years. The Fund invests
especially in the following types of bonds, which are listed in order
of importance:

- Investment-grade corporate bonds

- Investment-grade bonds are bonds that bond-rating
organizations or the Fund believe are reasonably likely to
meet their interest and principal payment obligations.

- U.S. government bonds.

- Foreign government bonds.

- Mortgage-related securities.

- Mortgage-related securities provide an interest in a pool of
home or commercial mortgages.

- Asset-backed securities

- Asset-backed securities (which provide an interest in a pool
of assets like trade receivables).

- High-yield bonds

INTERMEDIATE-TERM BOND FUND

Objective:
Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in intermediate-term corporate debt securities,
U.S. government securities, mortgage-related securities and
asset-backed securities, as well as money market instruments.

Strategy:The Fund invests in bonds that will mature (i.e., repay principal) in,
on average, between two and seven years. The Fund invests especially in
the following types of bonds, which are listed in order of importance:

- Investment-grade corporate bonds.

- U.S. government bonds.

- Foreign government bonds.

- Mortgage-related securities.

- Asset-backed securities.
3
<PAGE> 8

SUMMARY OF INVESTMENT RISKS

Throughout this prospectus, the Funds appear in declining order of risk.
For each of the Funds, the share price fluctuates over time. The total return of
a Fund could be negative during the period you invest in it, in which case you
would lose part of your investment when you redeemed your shares.

We describe below some of the risks specific to each Fund.

GLOBAL HIGH-YIELD BOND FUND

The Fund invests primarily in high-yield bonds, including high-yield bonds
from emerging markets.

- High-yield bonds have a greater risk of default than investment grade
bonds. Default means the bond's issuer -- the company or country that
issues the bond -- fails to make one or more interest payments, or fails
to repay the principal. If an issuer defaults on a bond held by the
Fund, the bond's value will decrease, possibly to zero, and the Fund's
net asset value and total return will decline.

- The value of high-yield bonds may change drastically in response to
economic events or in response to the financial health of the issuer.
These price swings will affect the net asset value and total return of
the Fund.

- Prices of high-yield bonds in emerging markets can be significantly more
volatile than in more developed nations.

- Changing currency exchange rates can decrease the U.S. dollar value of
bonds from foreign countries.

INTERNATIONAL EQUITY FUND

The prices of all stocks, foreign and domestic, fluctuate depending upon
the performance of the company, the market's perception of the company, and
overall market conditions.

All other things being equal, foreign stocks tend to be more risky than the
stocks of U.S. corporations.

- Adverse political or economic events in a foreign country could cause
the price of a foreign company's stock to fall.

- Because each country has its own laws about what records a company must
maintain and what information a company must disclose, less information
may be available for some foreign companies than is available for U.S.
companies.

- Changing currency exchange rates can decrease the U.S. dollar value of
foreign stocks.

EMERGING OPPORTUNITIES FUND

The prices of all stocks fluctuate depending upon the performance of the
company, the market's perception of the company, and overall market
conditions.

- The prices of small companies tend to fluctuate more than those of
larger, more established companies.

4
<PAGE> 9

CORE EQUITY FUND

The prices of all stocks fluctuate depending upon the performance of the
company, the market's perception of the company, and overall market
conditions.

- Investing in larger, well-established companies, such as the ones the
Fund invests in, is usually less risky than investing in the stocks of
smaller companies.

LONG-TERM BOND FUND

The prices of bonds fluctuate depending upon interest rates.

- As interest rates go up, the value of bonds tends to decrease, and when
interest rates go down, the value of bonds tends to increase.

- The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.

- Because the Fund invests primarily in long-term bonds, shares of the
Fund may fluctuate a great deal in response to changes in interest
rates. In particular, the Fund's shares will decrease in value when
interest rates increase.

INTERMEDIATE-TERM BOND FUND

The prices of bonds fluctuate depending upon interest rates.

- As interest rates go up, the value of bonds tends to decrease, and when
interest rates go down, the value of bonds tends to increase. As a
result, the Fund's shares will decrease in value when interest rates
increase.

- The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.

- Because the Fund invests primarily in intermediate-term bonds, shares of
the Fund will generally fluctuate less than shares of the Long-Term Bond
Fund in response to changes in interest rates.

5
<PAGE> 10

PERFORMANCE

The bar charts and tables shown below provide an indication of the risks of
investing in each Fund by showing changes in the Fund's performance from year to
year since the Fund commenced operations and by showing how each Fund's average
annual returns for one year, five years, and the life of the Fund compare to
those of a broad-based securities market index. How each Fund has performed in
the past is not necessarily an indication of how the Fund will perform in the
future.

GLOBAL HIGH-YIELD BOND FUND

1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -0.14% 10.86% 3.00% 6.11% -3.76%
</TABLE>

<TABLE>
<S> <C>
Highest Quarterly
Return: 4.48% (4th quarter 1998)
Lowest Quarterly
Return: -9.68% (3rd quarter 1998)
</TABLE>

AVERAGE ANNUAL TOTAL RETURN

(FOR THE PERIOD ENDING 12/31/98)

<TABLE>
<CAPTION>
CS FIRST LBGC
BOSTON 1-5 YEAR
HIGH YIELD BOND
THE FUND INDEX INDEX
<S> <C> <C> <C>
Past 1 Year: -3.76% 0.58% 7.64%
Past 5 Years: 3.26% 8.16% 6.23%
Life of Fund: 3.42% 8.94% 6.20%
(since 5/17/93)
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 different investment
objective, strategy, subadviser, and investment
portfolio. Information about performance prior to May
1, 1998 is therefore unlikely to be helpful to you.
</TABLE>

INTERNATIONAL EQUITY FUND

1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -6.98% 19.00% 21.93% 5.04% 14.91%
</TABLE>

<TABLE>
<S> <C>
Highest Quarterly
Return: 19.24% (4th quarter 1998)
Lowest Quarterly
Return: -16.62% (3rd quarter 1998)
</TABLE>
[/R]

AVERAGE ANNUAL TOTAL RETURN

(FOR THE PERIOD ENDING 12/31/98)

<TABLE>
<CAPTION>
MORGAN STANLEY
CAPITAL INTERNATIONAL
EUROPE, AUSTRALIA,
THE FUND FAR EAST INDEX
<S> <C> <C>
Past 1 Year: 14.91% 20.33%
Past 5 Years: 10.25% 9.50%
Life of Fund: 12.88% 9.61%
(since 5/17/93)
</TABLE>

EMERGING OPPORTUNITIES FUND

1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
9.68% 32.23% -3.03% 6.78% -8.65%
</TABLE>

<TABLE>
<S> <C>
Highest Quarterly
Return: 16.61% (2nd quarter 1995)
Lowest Quarterly
Return: -23.16% (3rd quarter 1998)
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/98)

<TABLE>
<CAPTION>
THE FUND RUSSELL 2500 INDEX
<S> <C> <C>
Past 1 Year: -8.65% 0.38%
Past 5 Years: 6.50% 14.13%
Life of Fund: 7.56% 14.53%
(since 5/17/93)
</TABLE>

6
<PAGE> 11

If you have received this prospectus because you own or are considering the
purchase of a variable life insurance or annuity contract, you should note that
the performance shown does not include charges of the contract itself, such as
mortality and expense risk charges. The performance would be lower if it did
include these types of charges.

CORE EQUITY FUND

1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -1.01% 38.56% 23.20% 31.67% 15.54%
</TABLE>

<TABLE>
<S> <C> <C>
Highest Quarterly
Return: 15.31% (2nd quarter 1997)
Lowest Quarterly
Return: -12.64% (3rd quarter 1998)
</TABLE>

AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/98)

<TABLE>
<CAPTION>
THE FUND S&P 500 INDEX
<S> <C> <C>
Past 1 Year: 15.54% 28.58%
Past 5 Years: 20.76% 24.06%
Life of Fund: 19.05% 22.43%
(since 5/17/93)
</TABLE>

LONG-TERM BOND FUND

1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -5.79% 22.44% 1.34% 12.01% 9.04%
</TABLE>

<TABLE>
<S> <C> <C>
Highest Quarterly
Return: 7.34% (2nd quarter 1995)
Lowest Quarterly Return: -4.62% (1st quarter 1996)
</TABLE>
[/R]

AVERAGE ANNUAL TOTAL RETURN

(FOR THE PERIOD ENDING 12/31/98)

<TABLE>
<CAPTION>
SALOMON BROTHERS
THE FUND CORE +5 BOND INDEX
<S> <C> <C>
Past 1 Year: 9.04% 9.08%
Past 5 Years: 7.37% 7.79%
Life of Fund: 8.48% 7.91%
(since 5/17/93)
</TABLE>

INTERMEDIATE BOND FUND

1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -2.85% 15.01% 3.95% 7.50% 8.48%
</TABLE>

<TABLE>
<S> <C> <C>
Highest Quarterly
Return: 5.06% (2nd quarter 1995)
Lowest Quarterly Return: -2.13% (1st quarter 1994)
</TABLE>
[/R]

AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/98)

<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOV'T/CORPORATE
INTERMEDIATE
THE FUND BOND INDEX
<S> <C> <C>
Past 1 Year: 8.48% 8.42%
Past 5 Years: 6.25% 6.59%
Life of Fund: 6.44% 6.64%
(since 5/17/93)
</TABLE>

7
<PAGE> 12

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of each Fund. If you have received this prospectus because you own
or are considering the purchase of a variable life insurance or annuity
contract, you should refer instead to the corresponding table in its prospectus.

<TABLE>
<CAPTION>
GLOBAL LONG- INTERMEDIATE-
HIGH-YIELD INT'L EMERGING CORE TERM TERM
BOND EQUITY OPPORTUNITIES EQUITY BOND BOND
FUND FUND FUND FUND FUND FUND
---------- ------ ------------- ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES (paid directly from your investment) None None None None None None
Sales Charge (Load) on Purchases
Deferred Sales Charge (Load) None None None None None None
Sales Charge (Load) on Reinvested Dividends None None None None None None
Redemption Fee None None None None None None
Exchange Fee None None None None None None
Account Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(expenses deducted from Fund Assets)
Management Fees 0.63%(1) 0.60% 0.73%(2) 0.56% 0.50% 0.49%
Distribution (12b-1) Fees None None None None None None
Other Expenses 0.15%(1) 0.13% 0.14% 0.09% 0.10% 0.11%
----- ----- ----- ----- ----- -----
TOTAL ANNUAL FUND OPERATING EXPENSES 0.78%(1) 0.73% 0.87%(2) 0.65% 0.60% 0.60%
</TABLE>

- ----------

1 Fees and expenses for the Global High-Yield Bond Fund reflect the period
5/1/98-12/31/98. On May 1, 1998, the Fund adopted its current fee structure
and investment objective and strategy.
2 Management fees for the Emerging Opportunities Fund reflect the period
5/1/98-12/31/98. On May 1, 1998, the Fund adopted its current fee structure.

EXAMPLE

This Example is meant to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds. If you have received this
prospectus because you own or are considering the purchase of a variable annuity
contract or variable life insurance policy, this Example does not include any
expenses charged under that contract.

The Example assumes that you invest $10,000 in the Fund for the periods
indicated and then redeem all of your shares at the end of those periods. The
example assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
GLOBAL LONG- INTERMEDIATE-
HIGH-YIELD INT'L EMERGING CORE TERM TERM
BOND EQUITY OPPORTUNITIES EQUITY BOND BOND
FUND FUND FUND FUND FUND FUND
---------- ------- ------------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 year.......................... $ 79.65 $ 74.56 $ 88.60 $ 66.41 $ 61.32 $ 61.32
3 years......................... $249.17 $233.38 $ 277.54 $208.03 $192.17 $192.17
5 years......................... $433.30 $406.01 $ 482.20 $382.24 $334.80 $334.80
10 years........................ $966.08 $906.45 $$1,072.54 $610.44 $760.03 $750.03
</TABLE>

You would pay the same expenses if you did not redeem your shares.

8
<PAGE> 13

INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS

The investment objectives, strategies, and risks for each Fund appear
below. As with all mutual funds, it is possible that a Fund could fail to
achieve its objective.

GLOBAL HIGH-YIELD BOND FUND

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

Investment Strategies. To achieve its objective, the Fund invests primarily
in:

- High-yield bonds from the United States.

- High-yield bonds, commonly known as "junk bonds," pay more interest
because of the greater risk that the issuer will miss an interest
payment or fail to repay the principal.

- Bond-rating organizations rate high-yield bonds as below investment
grade.

- Compared to investment-grade bonds, high-yield bonds are high risk
securities.

- High-yield bonds from foreign countries, particularly those with
emerging or developing markets.

- Foreign governments and foreign companies can both issue foreign
high-yield bonds.

- Foreign high-yield bonds may pay interest and principal in a foreign
currency or, in some cases, in U.S. dollars.

- Emerging markets currently include all countries except Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom, and the United States.

- Investment-grade bonds.

- Investment-grade bonds pay less interest than high-yield bonds. They
also have less risk that their issuers will miss an interest payment
or fail to repay the principal.

- Stocks that pay high dividends or that resemble or are related to bonds
in some way. These include:

- Preferred or common stock that pays high dividends.

- Securities that combine characteristics of both stocks and bonds.

- Convertible securities, that is, bond-like securities that give the
owner the option of converting them into stock. If the Fund does
choose to convert these types of securities to stock, the Fund may
retain the stock after the conversion.

The Fund may also buy and sell foreign currency forward contracts.

- Foreign currency forward contracts provide the right to buy or sell
foreign currency at a set price some time in the future.

- The Fund can profit from buying these types of forward contracts if it
accurately predicts whether currency exchange rates will increase or
decrease.

9
<PAGE> 14

Most securities in which the Fund invests have the potential to generate
relatively high income in the form of interest payments or dividends. The Fund
also considers whether a security has the potential to increase in price. The
Fund will generally have more of its assets invested in domestic high-yield
bonds than in foreign high-yield bonds.

Investment Risks.

- High-yield bonds have a greater risk of default than investment grade
bonds. Default means the bond's issuer -- the company or country that
issues the bond -- fails to make one or more interest payments, or
fails to repay the principal. If an issuer defaults on a bond held by
the Fund, the bond's value will decrease, possibly to zero, and the
Fund's net asset value and total return will decline.

- When the economy is performing poorly, more high-yield bonds may
default than normal.

- High-yield bonds may not trade as often as higher quality bonds.

- The Fund may have difficulty selling a large quantity of high-yield
bonds at once.

- The exact price of a bond that does not trade often may be difficult
to determine.

- Prices of high-yield bonds in emerging markets can be significantly
more volatile than in more developed nations. Compared to countries
with more developed economies, countries with emerging markets may
have:

- Unstable governments.

- The possibility of nationalization of businesses.

- Restrictions on foreign ownership.

- Less protection of property rights.

- An economy dependent on only a few industries.

- An economy that can be greatly affected by changes in local or global
trade conditions.

- Volatile, high debt burdens or inflation rates.

- A local securities market in which only a small number of securities
trade on a daily basis and which may not function if trading volume
increases.

- Far less reporting of and information about the finances of the
government or company that issued the bonds. This makes it more
difficult to determine the underlying value of the bonds.

- Changing currency exchange rates can decrease (or increase) the U.S.
dollar value of foreign securities.

- More difficulty dealing with any computer problems related to the
Year 2000.

- Investing in foreign currency forward contracts for investment purposes
depends upon the accurate forecast of foreign exchange rates.

- Forward contracts of this type are a speculative investment.

- If the Fund incorrectly forecasts the direction of foreign exchange
rates, the Fund's return will decline.

10
<PAGE> 15

AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND

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

Investment Strategies. The Fund invests in stocks of companies from at
least five foreign countries.

- The companies in which the Fund invests are generally large and
well-established in their home country.

- The Fund invests primarily in countries with developed economies.

- The Fund chooses companies that it expects to increase in value over
the long-term.

Investment Risks.

- The prices of all stocks, foreign and domestic, fluctuate depending
upon the performance of the company, the market's perception of the
company, and overall market conditions.

- All other things being equal, foreign stocks tend to be more risky than
the stocks of U.S. corporations.

- Adverse political or economic events in a foreign country could cause
the price of a foreign company's stock to fall.

- Because each country has its own laws about what records a company
must maintain and what information a company must disclose, less
information may be available for some foreign companies than is
available for U.S. companies.

- Changing currency exchange rates can decrease (or increase) the U.S.
dollar value of foreign stocks.

- Foreign companies may have greater difficulties dealing with computer
problems relating to the Year 2000.

AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND

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

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

- The Fund uses two separate investment strategies.

- For some of its assets, the Fund uses a "value" approach, which
emphasizes, among other things, a focus on smaller companies that
have fallen out of favor with, or are not well covered by, Wall
Street analysts.

- For some of its assets, the Fund uses a "growth" approach, which
focuses on small companies expected to experience significant growth
in earnings over the long term.

- The Fund invests primarily in U.S. companies, but may also invest some
of its assets in foreign companies as well.

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<PAGE> 16

Investment Risks.

- The prices of all stocks fluctuate depending upon the performance of
the company, the market's perception of the company, and overall market
conditions.

- The stock prices of all small companies tend to fluctuate more than
those of larger, more established companies.

- Foreign stocks are subject to the risks described above in connection
with the International Equity Fund.

AMERICAN ODYSSEY CORE EQUITY FUND

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

Investment Strategies. To achieve its objective, the Fund invests primarily
in the stocks of larger, well-established companies that the Fund expects to
increase in value faster than the overall market.

- The Fund invests primarily in the stocks of United States companies,
but may also invest some of its assets in the stocks of large,
well-established foreign companies.

Investment Risks.

- The prices of all stocks fluctuate depending upon the performance of
the company, the market's perception of the company, and overall market
conditions.

- Investing in larger, well-established companies, such as the ones the
Fund invests in, is usually less risky than investing in the stocks of
smaller companies.

- Foreign stocks are subject to the risks described above in connection
with the International Equity Fund.

AMERICAN ODYSSEY LONG-TERM BOND FUND

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

Investment Strategies. The Fund invests in bonds that will mature (i.e.,
repay principal) in, on average, between eight and twenty-five years. The Fund
invests primarily in the following types of bonds, which are listed in order of
importance:

- Investment-grade corporate bonds.

- Investment-grade bonds are bonds that bond-rating organizations or
the Fund believe are reasonably likely to meet their interest and
principal payment obligations.

- U.S. government bonds, including:

- Direct obligations of the United States Treasury (such as Treasury
bonds and Treasury bills).

- Bonds issued by agencies of the United States that the United States
Treasury guarantees (such as bonds issued by the Farmers Home
Administration and the Export-Import Bank).

12
<PAGE> 17

- Bonds issued by agencies and instrumentalities of the United States
that are not guaranteed by the United States Treasury (such as bonds
issued by Federal Land Banks or the Central Bank for Cooperatives).

- Foreign government bonds.

- Mortgage-related securities (which provide an interest in a pool of
home or commercial mortgages).

- Asset-backed securities (which provide an interest in a pool of assets
like trade receivables).

- High-yield bonds (which are commonly known as "junk bonds," and which
pay more interest than investment-grade bonds because of the greater
risk that the issuer will miss an interest payment or fail to repay the
principal). The Fund may invest up to 15% of its assets in these types
of bonds.

Although the Fund invests primarily in domestic bonds, the Fund may invest
up to 25% of its assets in bonds issued by foreign companies or governments.
These bonds may pay interest and principal in a foreign currency or, in some
cases, in U.S. dollars.

Investment Risks.

- The prices of bonds fluctuate depending upon interest rates.

- As interest rates go up, the value of bonds tends to decrease, and
when interest rates go down, the value of bonds tends to increase.

- The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.

- In particular, the Fund's shares will decrease in value when interest
rates increase.

- Because the Fund invests primarily in long-term bonds, shares of the
Fund may fluctuate a great deal in response to changes in interest
rates.

- The Long-Term Bond Fund will likely be subject to greater fluctuation
in value than the Intermediate-Term Bond Fund.

- Mortgage-related securities decrease in value when interest rates rise,
but may not increase in value as much as other types of bonds when
interest rates decline.

- Mortgage borrowers often refinance if interest rates decline, which
causes the value of the security to fall.

- High-yield bonds are subject to the risks described above in connection
with the Global High-Yield Bond Fund.

- Foreign bonds may pose greater risks than domestic bonds.

- Adverse political or economic events in a foreign country could cause
the price of a foreign bond to fall.

- Because each country has its own laws about what records a company
must maintain and what information a company must disclose, less
information may be available for some foreign bonds than is available
for domestic bonds.

13
<PAGE> 18

- Changing currency exchange rates can decrease (or increase) the U.S.
dollar value of foreign bonds.

- Foreign companies and governments may have greater difficulties
dealing with computer problems relating to the Year 2000.

- The Fund generally engages in active and frequent bond trading.
Although brokerage expenses increase as turnover increases, the Fund
believes that the benefits of more active trading exceed the additional
costs.

AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND

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

Investment Strategies. To achieve its objective, the Fund generally invests
its assets in bonds that will mature (i.e., repay principal) in, on average,
between two and seven years. The Fund invests primarily in the following types
of bonds, each of which is described above in connection with the Long-Term Bond
Fund:

- Investment-grade corporate bonds.

- U.S. government bonds.

- Foreign government bonds.

- Mortgage-related securities.

- Asset-backed securities.

- High-yield bonds, which are described above in connection with the
Global High-Yield Bond Fund. The Fund may invest up to 15% of its
assets in these types of bonds.

Although the Fund invests primarily in domestic bonds, the Fund may invest
up to 25% of its assets in bonds issued by foreign companies or governments.
These foreign bonds may pay interest and principal in a foreign currency or, in
some cases, in U.S. dollars.

Investment Risks.

- The prices of bonds fluctuate depending upon interest rates.

- As interest rates go up, the value of bonds tends to decrease, and
when interest rates go down, the value of bonds tends to increase.

- The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.

- In particular, the Fund's shares will decrease in value when interest
rates increase.

- Because the Fund invests primarily in intermediate-term bonds, shares
of the Fund may fluctuate in value less than the Long-Term Bond Fund.

- Mortgage-related securities decrease in value when interest rates rise,
but may not increase in value as much as other types of bonds when
interest rates decline.

14
<PAGE> 19

- Mortgage borrowers often refinance if interest rates decline, which
causes the value of the security to fall.

- High-yield bonds are subject to the risks described above in connection
with the Global High-Yield Bond Fund.

- Foreign bonds may pose greater risks than domestic bonds.

- Adverse political or economic events in a foreign country could cause
the price of a foreign bond to fall.

- Because each country has its own laws about what records a company
must maintain and what information a company must disclose, less
information may be available for some foreign bonds than is available
for domestic bonds.

- Changing currency exchange rates can decrease (or increase) the U.S.
dollar value of foreign bonds.

- Foreign companies and governments may have greater difficulties
dealing with computer problems relating to the Year 2000.

TEMPORARY DEFENSIVE POSITIONS

Each Fund may, at times, adopt a temporary defensive position in which the
Fund invests a greater proportion of its assets than normal in cash or high
quality bonds. A Fund would adopt such a defensive position in response to
adverse market, economic, political, or other conditions, or to enable the Fund
to take advantage of buying opportunities. If a Fund adopts a defensive position
at an inappropriate time, the Fund's return may be lower than it otherwise would
have been.

YEAR 2000 RISKS

Some computer software and hardware cannot distinguish the year 2000 from
the year 1900 because of the way that dates are encoded and calculated.
Companies have been working to address this "Year 2000" problem. If companies
confront Year 2000 problems they cannot resolve, the securities markets in
general and the securities issued by these companies in particular could suffer
an adverse impact. This risk may be greater for foreign securities than for U.S.
securities. Each Fund may have a lower return if it holds securities that
experience an adverse effect from Year 2000 problems.

15
<PAGE> 20

MANAGEMENT OF THE FUNDS

The Company utilizes a Manager/Subadviser structure for advisory services.

- The Manager has ultimate responsibility for all investment advisory
services and supervises the subadvisers' performance of these services.

- The subadvisers make the day-to-day investment decisions for the Funds.

- Each Fund may change or add subadvisers, or change the agreements with
its subadvisers, if it concludes that doing so is in the best interest
of the Fund's shareholders. The Fund can make these changes without
shareholder approval, but will notify you within ninety days of such a
change. The Manager monitors the subadvisers' performance and
recommends to the Funds when to make these kinds of changes.

- For each Fund with more than one subadviser (currently, only the
Emerging Opportunities Fund), the Manager decides how to allocate the
Fund's assets among the subadvisers.

- Each Fund pays an investment advisory fee to the Manager and to the
subadviser(s).

The following chart lists each Fund's subadviser(s), the total investment
advisory fees the Fund paid in 1998 as a percentage of the Fund's average net
assets, and the maximum advisory fees the Fund is permitted to pay, also as a
percentage of average net assets.

<TABLE>
<CAPTION>
MAXIMUM
TOTAL ADVISORY PERMISSIBLE
FUND SUBADVISER(s) FEES IN 1998 ADVISORY FEE
---- ------------- -------------- ------------
<S> <C> <C> <C>
Global High-Yield Bond Fund Credit Suisse Asset Management 0.63%(1) 0.78%
International Equity Fund Bank of Ireland Asset Management 0.60% 0.80%
(U.S.) Limited
Emerging Opportunities Fund SG Cowen Asset Management and 0.73%(2) 1.05%
Chartwell Investment Partners
Core Equity Fund Equinox Capital Management, LLC 0.56% 0.70%
Long-Term Bond Fund Western Asset Management Company 0.50% 0.60%
Intermediate-Term Bond Fund Travelers Asset Management 0.49% 0.60%
International Corporation
</TABLE>

- ----------

1 The Global High-Yield Bond Fund's fee structure changed effective May 1,
1998, when the Fund converted from the Short-Term Bond Fund. Advisory fees
for the period 5/1/98-12/31/98 equaled 0.67% of average net assets on an
annualized basis.

2 The Emerging Opportunities Fund's fee structure changed effective May 1,
1998, when Chartwell Investment Partners became one of the Fund's two
subadvisers. Advisory fees for the period 5/1/98-12/31/98 equaled 0.77% of
average net assets on an annualized basis. As of December 31, 1998, SG Cowen
Asset Management managed 43% of the Fund's assets, and Chartwell Investment
Partners managed the other 57% of the Fund's assets. These allocations vary
periodically.

Information about the Manager and about each of the Subadvisers appears
below.

AMERICAN ODYSSEY FUNDS MANAGEMENT, INC. (the "Manager") serves as the
overall investment adviser to the Funds. The Manager was organized at the same
time as the Funds and has managed them since their inception. The Manager is a
member of The Copeland Companies and is, like all of The Copeland Companies,
owned by Citigroup Inc., one of the world's largest financial services
companies. The Manager retains consultants to assist it in monitoring and
evaluating the performance of the subadvisers. The Manager's address is Two
Tower Center, P.O. Box 1063, East Brunswick, New Jersey 08816-1063.

16
<PAGE> 21

CREDIT SUISSE ASSET MANAGEMENT ("CSAM") serves as subadviser for the Global
High-Yield Bond Fund. Its offices are at One Citicorp Center, 153 East 53rd
Street, New York, New York 10022. It is an indirect wholly-owned subsidiary of
Credit Suisse Group, a Swiss corporation. CSAM serves as an investment adviser
to a variety of individual and institutional investors, including mutual funds.
As of December 31, 1998, CSAM managed more than $39.6 billion of assets in the
United States and abroad. The following individuals are responsible for the
day-to-day management of the Global High-Yield Bond Fund:

Richard Lindquist serves as Executive Director and is a Portfolio Manager
at CSAM and heads its high-yield portfolio team. Mr. Lindquist joined CSAM
in 1995 as a result of CSAM's acquisition of CS First Boston Investment
Management. Prior to joining CS First Boston, Mr. Lindquist worked for
Prudential Insurance Company of America, where he managed high-yield
portfolios totaling approximately $1.3 billion, and T. Rowe Price
Associates, where he managed a high-yield bond mutual fund. Mr. Lindquist
has had responsibility for the Global High-Yield Bond Fund since 1998.

Gregg Diliberto serves as Managing Director and is a Portfolio Manager at
CSAM, where he is responsible for the interest rate sensitivity of all CSAM
bond assignments and the management of structured fixed income portfolios
(domestic and international) and insurance accounts. His work includes
managing interest rate futures, options, municipals, and convertibles, as
well as more conventional securities. Mr. Diliberto built CSAM's
proprietary computer models for trading, option valuation, and asset
liability modeling. Prior to joining CSAM in 1984, Mr. Diliberto spent
seven years at Buck Consultants, where he analyzed pension fund finances.
Mr. Diliberto has had responsibility for the Global High-Yield Bond Fund
since 1998.

Diane Damskey serves as Senior Vice President and is a Portfolio Manager at
CSAM. Ms. Damskey joined CSAM in 1997 as a portfolio manager dedicated to
emerging markets fixed income. She has spent 16 years in investment or
financial capacities focused on emerging markets, and her experience spans
the entire universe of developing nations. Previously, she managed fixed
income portfolios at Global Emerging Markets Advisors; developed and
marketed emerging market debt strategies for The First National Bank of
Chicago; advised and represented the Republic of Venezuela regarding the
restructuring of its commercial bank debt into Brady bonds while at
Shearson Lehman Hutton; and served as a credit officer and risk analyst at
Manufacturers Hanover Trust Company. Ms. Damskey has had responsibility for
the Global High-Yield Bond Fund since 1998.

BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED ("BIAM") serves as
subadviser for the International Equity Fund. It is an indirect wholly-owned
subsidiary of Bank of Ireland, an Irish corporation. Its head offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. Its U.S. offices are at Two Greenwich
Plaza, Greenwich, CT 06830. Bank of Ireland established its worldwide investment
management operations, BIAM, in 1966 and currently manages over $38 billion in
global securities for a variety of clients in the United States and abroad. BIAM
(U.S.) was established in 1987 to provide services to North American investors
and opened its U.S. office in 1988. As of December 31, 1998, BIAM (U.S.) has
over $16 billion under management on behalf of its U.S. and Canadian clients.
BIAM's Strategy Group makes all the investment decisions for the International
Equity Fund, and no person(s) is primarily responsible for making
recommendations to that Group.

CHARTWELL INVESTMENT PARTNERS ("Chartwell") serves as one of the two
subadvisers for the Emerging Opportunities Fund. Its offices are at 1235
Westlakes Drive, Suite 330, Berwyn, PA 19312. Chartwell serves as an investment
adviser to a variety of individual and institutional investors, including mutual
funds. As of December 31, 1998, Chartwell managed approximately $2.7 billion of
assets. The following

17
<PAGE> 22

individuals are responsible for the day-to-day management of the portion of the
Emerging Opportunities Fund managed by Chartwell:

Edward N. Antoian co-founded Chartwell in 1997 and is currently a partner
there. From 1984 to 1997, Mr. Antoian was a Senior Portfolio Manager at
Delaware Investment Advisers, managing institutional assets in small and
mid-cap growth styles as well as the Trend and DelCap Funds. Prior to
joining Delaware, Mr. Antoian was employed by E.F. Hutton in the
institutional equity division. Mr. Antoian has 19 years' experience in
equity investing. Mr. Antoian has had responsibility for the Emerging
Opportunities Fund since 1998.

David C. Dalrymple co-founded Chartwell in 1997 and is currently a partner
there. From 1991 to 1997, Mr. Dalrymple was a Portfolio Manager for
Delaware Investment Advisers, managing a small-cap value mutual fund, the
Value Fund, and previously assisting in managing mutual funds and
institutional assets in small and mid-cap styles. Prior to joining
Delaware, he was an assistant portfolio manager at Lord Abbet & Co. Mr.
Dalrymple has 12 years' experience in equity investing. Mr. Dalrymple has
had responsibility for the Emerging Opportunities Fund since 1998.

Michael D. Jones joined Chartwell in 1998 as a Portfolio Manager on the
Small Cap Growth team. From 1995 to 1998, Mr. Jones was a Portfolio Manager
at Pilgrim Baxter and Associates, where he managed institutional, small cap
growth assets. Mr. Jones was an equity portfolio manager at The Bank of New
York from 1990 to 1995. Mr. Jones has 14 years' experience in equity
investing. Mr. Jones has had responsibility for the Emerging Opportunities
Fund since 1998.

SG COWEN ASSET MANAGEMENT. SG Cowen Securities Corporation, through its
investment management division, SG Cowen Asset Management ("SG Cowen"), serves
as one of the Emerging Opportunities Fund's two subadvisers. Its principal
offices are at Financial Square, New York, NY 10005. SG Cowen serves as
investment adviser to a variety of individual and institutional investors,
including mutual funds. As of December 31, 1998, SG Cowen managed more than $5.5
billion of assets. The following individual is responsible for the day-to-day
management of the portion of the Fund managed by SG Cowen:

William Church, the portfolio manager, is Vice President and Senior
Investment Officer of SG Cowen Securities Corporation and Chief Investment
Officer of SG Cowen, and has been with SG Cowen and its predecessors since
1982. Mr. Church has had responsibility for the Emerging Opportunities Fund
since 1997.

EQUINOX CAPITAL MANAGEMENT, LLC serves as subadviser for the Core Equity
Fund. Its corporate offices are at 590 Madison Avenue, New York, NY 10022.
Equinox serves as an investment adviser to a variety of individual and
institutional investors. As of December 31, 1998, Equinox managed more than
$12.8 billion of assets. The following individuals are responsible for the
day-to-day management of the Core Equity Fund:

Ronald J. Ulrich founded Equinox in 1989 and has served as President and
Chief Investment Officer since the firm's inception. He oversees the firm's
portfolio construction and stock selection committees. Prior to Equinox,
Mr. Ulrich was with Morgan Stanley Asset Management, which he co-founded.
He served as Managing Director at Morgan Stanley, Inc. and was responsible
for equity management in their asset management division. Mr. Ulrich has
over 27 years' experience in the investment management field. Mr. Ulrich
has had responsibility for the Core Equity Fund since 1993.

Wendy D. Lee, C.F.A., joined Equinox in June 1992 as a Principal and Senior
Equity Analyst responsible for coverage of the consumer and basic materials
sectors. She was subsequently promoted

18
<PAGE> 23

in January 1994 to Managing Director and Director of Research. Ms. Lee,
together with Mr. Ulrich, oversees portfolio construction and stock
selection. From May 1985 through June 1992, she was a Partner and Senior
Equity Analyst at Brinson Partners. Ms. Lee has over 18 years' experience
in the investment management field. Ms. Lee has had responsibility for the
Core Equity Fund since 1993.

WESTERN ASSET MANAGEMENT COMPANY serves as subadviser for the Long-Term
Bond Fund. Its corporate offices are at 117 East Colorado Boulevard, Pasadena,
CA 91105. Western Asset Management serves as an investment adviser to a variety
of individual and institutional investors, including mutual funds. As of
December 31, 1998, Western Asset Management managed more than $45 billion of
assets. The following individual is responsible for the day-to-day management of
the Long-Term Bond Fund:

S. Kenneth Leech joined Western Asset in May 1990 and currently serves as
Director of Portfolio Management. He is responsible for overseeing the
implementation of the firm's investment strategy. Mr. Leech has 21 years'
experience with fixed income investing. Mr. Leech has had responsibility
for the Long-Term Bond Fund since 1993.

TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION ("TAMIC") serves as
subadviser for the Intermediate-Term Bond Fund. Like the Manager, TAMIC is a
wholly-owned indirect subsidiary of Citigroup Inc. TAMIC's corporate offices are
at One Tower Square, Hartford, CT 06183. It serves as an investment adviser to a
variety of individual and institutional investors, including mutual funds and
variable annuity portfolios. As of December 31, 1998, TAMIC managed more than
$9.1 billion of assets. The following individuals are responsible for the
day-to-day management of the Intermediate-Term Bond Fund:

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

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

19
<PAGE> 24

PRICING, PURCHASE, AND REDEMPTION OF SHARES

PRICING OF SHARES

The price of one share of each Fund is equal to that Fund's "net asset
value" per share. The net asset value per share of each Fund equals:

- The sum of the value of all the securities held by that Fund.

- We value stocks, options, and futures contracts based on market
quotations.

- We value bonds and other debt securities with remaining maturities of
60 days or more using an independent pricing service.

- We value bonds and other debt securities with remaining maturities of
less than 60 days based on an amortized cost basis.

- We convert quotations of foreign securities in a foreign currency to
U.S. dollars at the current rate we obtain from a recognized bank or
dealer.

- We value forward contracts at the current cost of covering or
offsetting the contracts.

- We value securities or assets without readily-available market
quotations at fair value as we reasonably determine.

- Plus any cash or other assets the Fund holds.

- Minus all of the Fund's liabilities.

- Liabilities include the Fund's expenses (such as the investment
advisory fees), which we compute daily.

- Divided by the total number of shares outstanding of the Fund.

We compute the net asset value of the shares of each Fund once daily, as of
4:15 p.m. New York City time, on each day the New York Stock Exchange is open
for business.

PURCHASE OF SHARES

We sell shares of the Funds at the first price set after we receive the
purchase order. You pay no sales charge or sales load on the purchase of any
shares.

REDEMPTION OF SHARES

We redeem shares for cash, within 7 days of receipt of proper notice of
redemption or sooner if required by law. We redeem the shares at the first price
set after we receive a proper request for redemption. You pay no redemption
charge. We may suspend the right to redeem shares or to receive payment if:

- the SEC tells us that trading on the New York Stock Exchange ("NYSE")
is restricted;

- the NYSE is closed (other than customary weekend and holiday closings);

- the SEC tells us that an emergency exists, so that we cannot readily
sell a Fund's securities or compute a Fund's net asset value; or

- the SEC orders the suspension to protect shareholders of a Fund.

20
<PAGE> 25

DISTRIBUTIONS

Each Fund distributes substantially all of its net investment income, if
any, and all of its net realized capital gains from selling securities. These
distributions are automatically reinvested in additional shares of the Fund.

OTHER INFORMATION

FEDERAL INCOME TAXES

If you own or are considering buying a variable life insurance policy or
variable annuity contract that invests in the Funds, you should consult its
prospectus for a discussion of tax consequences of investing in the Funds.

The tax laws and regulations that apply to qualified retirement plans are
complex and vary according to the type of plan and its terms and conditions. In
many cases, qualified retirement plans enjoy a tax-advantaged status, so that
participants in such a plan will not be taxed on their interests in the plan
until they receive a distribution or payment from it. If you participate in a
qualified retirement plan that invests in the Funds, you should consult a
qualified tax adviser to learn about your specific tax situation.

PREPARING FOR THE YEAR 2000

The Funds rely upon a number of service providers, including the Manager,
the subadvisers, the Funds' principal underwriter (who sells and redeems shares
of the Funds), and the Funds' custodian (who keeps and tracks the Funds'
assets). The services that each of these entities provide depend upon the smooth
functioning of their respective computer systems. Some computer software and
hardware cannot distinguish the year 2000 from the year 1900 because of the way
that dates are encoded and calculated. If any of the Funds' service providers
have computer systems that suffer from this problem and they fail to correct or
replace those systems, important Fund and account services could be adversely
affected. Services vulnerable to this type of risk include, for example, the
handling of securities trades, the payment of dividends and other distributions,
and the pricing of the Funds' securities and of the Funds' shares. Although
there is a chance that the Funds could experience this type of adverse impact,
the Manager, the subadvisers, the principal underwriter, and the custodian have
advised the Funds that they are taking steps to prepare for the "Year 2000"
problem and that they expect to have put in place the necessary changes to their
computer systems in time to protect the Funds.

MONITORING FOR POSSIBLE CONFLICT

The Funds sell shares to fund variable annuity contracts, to fund variable
life insurance contracts, and to qualified retirement plans. It is possible that
the interests of variable life insurance policy owners, variable annuity
contract owners, and participants in qualified retirement plans could conflict
in a material way. The Funds will monitor the situation and, in the event that a
material conflict did develop, would determine what action to take in response.

CONVERSION OF SHORT-TERM BOND FUND TO GLOBAL HIGH-YIELD BOND FUND

Prior to May 1, 1998, the American Odyssey Global High-Yield Bond Fund was
named the American Odyssey Short-Term Bond Fund and had a different investment
objective, investment program, subadviser, investment portfolio, and asset base.
Specifically, the Short-Term Bond Fund invested in low-risk, low-yield bonds,
primarily from the United States, while the Global High-Yield Bond Fund

21
<PAGE> 26

invests in high-risk, high-yield bonds the United States and abroad. Because of
these differences, information about the Short-Term Bond Fund's performance,
expenses, fees, asset base, net asset value, operations, distributions,
investment portfolio, and other data is unlikely to be helpful to you. Smith
Graham & Co. Asset Managers, L.P., served as subadviser for the Short-Term Bond
Fund prior to its conversion to the Global High-Yield Bond Fund. Smith Graham's
corporate offices are at 6900 Texas Commerce Tower, 600 Travis Street, Houston,
TX 77002-3007. The Short-Term Bond Fund paid total advisory fees equal on an
annualized basis to 0.50% of its average net assets between January 1, 1998 and
April 30, 1998.

PREVIOUS SUBADVISER FOR EMERGING OPPORTUNITIES FUND

Prior to May 1, 1998, Wilke/Thompson Capital Management, Inc.
("Wilke/Thompson") served as one of the Emerging Opportunities Fund's two
subadvisers. Its corporate offices are at 3800 Norwest Center, 90 South 7th
Street, Minneapolis, Minnesota 55402-3934. On May 1, 1998, Chartwell Investment
Partners replaced Wilke/Thompson as a subadviser for the Fund. The Emerging
Opportunities Fund paid total advisory fees equal on an annualized basis to
0.66% of its average net assets between January 1, 1998 and April 30, 1998.

FINANCIAL HIGHLIGHTS

The financial highlights table is meant to help you understand the Funds'
financial performance for the last five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund assuming reinvestment of all dividends and distributions.
PricewaterhouseCoopers LLP has audited this information. PricewaterhouseCoopers'
report, along with the Funds' financial statements, appear in the Annual Report,
which we will send you on request. To learn how to obtain the Annual Report and
other information about the Funds, see the back cover.

22
<PAGE> 27

Financial Highlights
American Odyssey Funds, Inc.

<TABLE>
<CAPTION>
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.

23
<PAGE> 28

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.

24
<PAGE> 29

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>

25
<PAGE> 30

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>

26
<PAGE> 31

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>

27
<PAGE> 32

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>

28
<PAGE> 33

WHERE TO OBTAIN ADDITIONAL INFORMATION

You can obtain additional information about American Odyssey Funds, Inc. free
upon request, including the following.

The ANNUAL REPORT TO SHAREHOLDERS AND SEMI-ANNUAL REPORT TO
SHAREHOLDERS describe the Fund's performance and list what
securities each Fund held during the last year or half year.
The Annual Report also discusses the market conditions and
investment strategies that significantly affect the Fund's
performance during the last year.

The STATEMENT OF ADDITIONAL INFORMATION contains additional
information about American Odyssey Funds, Inc. and about the
Funds' investment strategies and policies. This prospectus
incorporates the Statement of Additional Information by
reference, which means that the Statement of Additional
Information is legally considered a part of the prospectus.

To obtain these documents, or for other inquiries about American Odyssey Funds,
Inc.:
Call 1-800-242-7884.

Write to American Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063,
East Brunswick, New Jersey 08816-1063.

To request other information about American Odyssey Funds, Inc., or to make
shareholder inquiries, please contact the Funds at the same address and phone
number.

In addition, you may obtain access to text-only versions of these documents
through the Securities and Exchange Commission:

You may visit the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. Call 1-800-SEC-0330 for more information.

You may visit the Securities and Exchange Commission's Internet site at
http://www.sec.gov.

You may also obtain copies of these documents, upon payment of a
duplication fee, by writing the Public Reference Section of the
Securities and Exchange Commission, Washington, D.C. 20549-6009.

[LOGO]

AMERICAN
ODYSSEY (R)
---------
FUNDS

American Odyssey Funds Management, Inc.
Two Tower Center
East Brunswick, NJ 08816
1-800-242-7884

AMERICAN ODYSSEY and the Sailing Ship Logo are
registered trademarks of American Odyssey Funds Management, Inc.
(C)Copyright 1993-1999 American Odyssey Funds Management, Inc.

American Odyssey Funds, Inc., SEC File No. 811-07450
<PAGE> 34
PART B

INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 35
AMERICAN ODYSSEY FUNDS, INC

AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
AMERICAN ODYSSEY CORE EQUITY FUND
AMERICAN ODYSSEY LONG-TERM BOND FUND
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1999

American Odyssey Funds, Inc. is a diversified open-end management
investment company that is currently made up of six different "series" or Funds.
Each Fund is, for investment purposes, a separate investment fund, and each
issues a separate class of capital stock representing an interest in that Fund.

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

This statement of additional information is not a prospectus. You
should read it in conjunction with the American Odyssey Funds, Inc. prospectus
dated May 1, 1999. You may obtain the prospectus without charge by writing to
American Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063, East Brunswick,
New Jersey 08816-1063, or by calling 1-800-242-7884. This statement of
additional information incorporates portions of the accompanying American
Odyssey Funds, Inc. Annual Report.

American Odyssey Funds, Inc.
Two Tower Center, P.O. Box 1063
East Brunswick, New Jersey 08816-1063
Telephone: (732) 514-2000
<PAGE> 36
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

PAGE
----

INVESTMENT OBJECTIVES AND PROGRAMS ..................................... 4

Equity Securities ............................................. 4
Preferred Stocks, Convertible Securities, and Warrants .. 4
Depository Receipts ..................................... 4

Debt Securities ............................................... 5
Mortgage-Related Securities ............................. 5
Asset-Backed Securities ................................. 6
Additional Types of High-Yield Debt Securities .......... 6

Options ....................................................... 7
Options on Equity Securities ............................ 8
Options on Stock Indices ................................ 11
Options on Debt Securities .............................. 14
Options on Foreign Currencies ........................... 16

Futures Contracts ............................................. 17
Stock Index Futures Contracts ........................... 18
Interest Rate Futures Contracts ......................... 19
Foreign Currency Futures Contracts ...................... 20
Options on Futures Contracts ............................ 20

Forward Foreign Currency Exchange Contracts ................... 21
Short Sales Against the Box ................................... 23
When-Issued and Delayed Delivery Securities ................... 24
Lending of Portfolio Securities ............................... 24
Temporary Defensive Positions ................................. 24
Money Market Instruments ...................................... 25
Ratings of Debt Securities .................................... 26
Ratings of Commercial Paper ................................... 30

INVESTMENT RESTRICTIONS ................................................ 31
<PAGE> 37
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

PAGE
----

MANAGEMENT OF THE FUNDS ................................................ 35

The Company .................................................. 35

Directors and Officers ....................................... 36

Investment Advisers .......................................... 39
Structure ............................................... 39
Control ................................................. 42
Fees .................................................... 43

Other Service Providers ...................................... 45

PORTFOLIO TRANSACTIONS ................................................. 46

NET ASSET VALUE OF SHARES .............................................. 51

PERFORMANCE INFORMATION ................................................ 53

TAXES .................................................................. 55

OWNERSHIP OF SHARES .................................................... 56

FINANCIAL STATEMENTS ................................................... 57
<PAGE> 38
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

INVESTMENT OBJECTIVES AND PROGRAMS

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

EQUITY SECURITIES

PREFERRED STOCKS, CONVERTIBLE SECURITIES, AND WARRANTS

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

DEPOSITORY RECEIPTS

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

4
<PAGE> 39
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

DEBT SECURITIES

MORTGAGE-RELATED SECURITIES

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

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

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

5
<PAGE> 40
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

ASSET-BACKED SECURITIES

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

ADDITIONAL TYPES OF HIGH-YIELD DEBT SECURITIES

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

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

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

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

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

Pay-in-kind Bonds. Pay-in-kind ("PIK") bonds pay interest either in cash or in
additional securities at the issuer's option for a specified period. Like zero
coupon bonds, PIK bonds are designed to give the issuer flexibility in managing
cash flow. Unlike zero coupon bonds, however, PIK bonds offer the investor the
opportunity to sell the additional securities issued in lieu of interest and
thus obtain current income on the original investment. Interest rate changes
tend to affect the market prices of PIK bonds to a greater extent than
securities that pay interest in cash.

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

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

OPTIONS

Each Fund may write (i.e., sell) options under certain limitations described
below. In general, (1) the Global High-Yield Bond Fund, the International Equity
Fund, the Emerging Opportunities Fund, and the Core Equity Fund may purchase and
write (i.e., sell) put and call options on stocks or stock indices that are
traded on national securities exchanges or that are listed on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"); (2) any
Fund other than the Emerging Opportunities and the Core Equity Funds may
purchase and

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STATEMENT OF ADDITIONAL INFORMATION

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

OPTIONS ON EQUITY SECURITIES

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

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

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difference is maintained by the Fund in cash, Treasury bills or other liquid
high-grade short-term debt obligations in a segregated account.

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

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

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

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

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A Fund's use of options on equity securities is subject to certain special
risks, in addition to the risk that the market value of the security will move
adversely to the Fund's option position. An option position may be closed out
only on an exchange, board of trade or other trading facility which provides a
secondary market for an option of the same series. Although a Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the Fund would have to exercise its options in
order to realize any profit and would incur brokerage commissions upon the
exercise of such options and upon the subsequent disposition of the underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities or the exercise of put options. If a Fund as a covered
call option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.

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

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STATEMENT OF ADDITIONAL INFORMATION

OPTIONS ON STOCK INDICES

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

A Fund will write call options on stock indices only if they are covered, and
such options remain covered as long as the Fund is obligated as a writer. A call
option is covered if the Fund follows the segregation requirements set forth in
this paragraph. When a Fund writes a call option on a broadly based stock market
index, the Fund will segregate or pledge to a broker as collateral for the
option, cash, Treasury bills or other liquid high-grade short-term debt
obligations, or "qualified securities" (defined below) with a market value at
the time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts. A "qualified security" is an
equity security which is listed on a national securities exchange or listed on
NASDAQ against which the Fund has not written a stock call option and which has
not been hedged by the Fund by the sale of stock index futures. When a Fund
writes a call option on an industry or market segment index, it will segregate
or pledge to a broker as collateral for the option, cash, Treasury bills or
other liquid high-grade short-term debt obligations, or at least five qualified
securities, all of which are stocks of issuers in such industry or market
segment, with a market value at the time the option is written of not less than
100% of the current index value times the multiplier times the number of
contracts. Such stocks will include stocks which represent at least 50% of the
weighting of the industry or market segment index and will represent at least
50% of the Fund's holdings in that industry or market segment. No individual
security will represent more than 15% of the amount so segregated or pledged in
the case of broadly based stock market stock options or 25% of such amount in
the case of industry or market segment index

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

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

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

The purchase and sale of options on stock indices will be subject to the same
risks as options on equity securities, described above. In addition, the
distinctive characteristics of options on indices create certain risks that are
not present with stock options. Index prices may be distorted if trading of
certain stocks included in the index is interrupted. Trading in the index
options also may be interrupted in certain circumstances, such as if trading
were halted in a substantial number of stocks included in the index. If this
occurred, the Fund would not be

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STATEMENT OF ADDITIONAL INFORMATION

able to close out options which it had purchased or written and, if restrictions
on exercise were imposed, may be unable to exercise an option it holds, which
could result in substantial losses to the Fund. It is the policy of each Fund to
purchase or write options only on stock indices which include a number of stocks
sufficient to minimize the likelihood of a trading halt in options on the index.

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

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

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

There are also certain special risks involved in purchasing put and call
options on stock indices. If the Fund holds an index option and exercises it
before final determination of the

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STATEMENT OF ADDITIONAL INFORMATION

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

OPTIONS ON DEBT SECURITIES

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

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

A Fund may also write straddles (i.e., a combination of a call and a put
written on the same security at the same strike price where the same issue of
the security is considered "cover" for both the put and the call). In such
cases, the Fund will also segregate or deposit for the

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

A Fund may purchase "protective puts" in an effort to protect the value of a
security that they own against a substantial decline in market value. Protective
puts are described in OPTIONS ON EQUITY SECURITIES, page 8.

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

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

As explained in INVESTMENT RESTRICTIONS on page 31, no Fund other than the
Global High-Yield Bond Fund may invest more than 10% of its total assets
(determined at the time of investment) in illiquid securities, including debt
securities for which there is not an established market. The Global High-Yield
Bond Fund may invest up to 15% of its net assets (determined at the time of
investment) in such securities. The staff of the Securities and Exchange
Commission has taken the position that purchased OTC options and the assets used
as "cover" for written OTC options are illiquid securities. However, pursuant to
the terms of

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STATEMENT OF ADDITIONAL INFORMATION

certain no-action letters issued by the staff, the securities used as cover for
written OTC options may be considered liquid provided that the Fund sells OTC
options only to qualified dealers who agree that the Fund may repurchase any OTC
option it writes for a maximum price to be calculated by a predetermined
formula. In such cases, the OTC option would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.

The Funds' purchase and sale of exchange-traded options on debt securities will
be subject to the risks described in OPTIONS ON EQUITY SECURITIES on page 8.

OPTIONS ON FOREIGN CURRENCIES

The Funds may purchase and write put and call options on foreign currencies
traded on U.S. or foreign securities exchanges or boards of trade to hedge
against unfavorable changes in exchange rates and to facilitate transactions
involving foreign securities. Options on foreign currencies are similar to
options on stock, except that the option holder has the right to take or make
delivery of a specified amount of foreign currency, rather than stock.

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

If, on the other hand, a subadviser anticipates purchasing a foreign security
and also anticipates a rise in such foreign currency (thereby increasing the
cost of such security), a Fund may purchase call options on the foreign
currency. The purchase of such options could offset, at least partially, the
effects of the adverse movements of the exchange rates. Alternatively, a Fund
could write a put option on the currency and, if the exchange rates move as
anticipated, the option would expire unexercised.

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

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

FUTURES CONTRACTS

Each Fund may enter into futures contracts and options thereon under certain
limitations described below. In general, (1) the Global High-Yield Bond Fund,
the International Equity Fund, the Emerging Opportunities Fund, and the Core
Equity Fund may buy and sell stock index futures contracts traded on a
commodities exchange or board of trade and options thereon; (2) any Fund other
than the Emerging Opportunities and the Core Equity Funds may buy and sell
futures contracts on interest bearing securities (such as U.S. Treasury Bonds,
U.S. Treasury Notes, 3-month U.S. Treasury Bills, and GNMA certificates) or
interest rate indices and options thereon; and (3) any Fund may buy and sell
futures contracts on foreign currencies or groups of foreign currencies and
options thereon. The Funds use these instruments as a hedge against or to
minimize adverse principal fluctuations or as an efficient means of adjusting
their exposure to the market. The Funds do not use futures contracts or options
thereon for speculation. Each Fund limits its use of futures contracts and
options thereon so that no more than 5% of the Fund's total assets will be
committed to initial margin deposits or premiums on options. Furthermore,
immediately after entering into such contracts or purchasing such options, no
more than 30% of a Fund's total assets may be represented by such contracts and
options (other than futures contracts and options thereon relating to money
market instruments, such as Eurodollar futures and related options). These
contracts and

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STATEMENT OF ADDITIONAL INFORMATION

options entail certain risks, including (but not limited to) the following: (1)
no assurance that futures contracts transactions can be offset at favorable
prices; (2) possible reduction of the Fund's total return due to the use of
hedging; (3) possible reduction in value of both the securities hedged and the
hedging instrument; (4) possible lack of liquidity due to daily limits on price
fluctuation or other factors; (5) an imperfect correlation between price
movements in the contract and in the securities being hedged; and (6) potential
losses in excess of the amount invested in the futures contracts themselves.

STOCK INDEX FUTURES CONTRACTS

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

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

A Fund's successful use of stock index futures contracts depends upon the
subadviser's ability to predict the direction of the market and is subject to
various additional risks. The correlation between movement in the price of the
stock index future and the price of the securities being hedged is imperfect and
the risk from imperfect correlation increases as the composition of the Fund's
securities portfolio diverges from the composition of the relevant index. In
addition, the ability of a Fund to close out a futures position depends on a
liquid

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secondary market. There is no assurance that liquid secondary markets will exist
for any particular stock index futures contract at any particular time.

Under regulations of the Commodity Futures Trading Commission ("CFTC"),
investment companies registered under the Investment Company Act of 1940 are
excluded from regulation as commodity pools or commodity pool operators if their
use of futures is limited in certain specified ways. The Funds will use futures
in a manner consistent with the terms of this exclusion.

INTEREST RATE FUTURES CONTRACTS

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

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

A Fund's successful use of interest rate futures contracts depends upon the
subadviser's ability to predict interest rate movements. Further, because there
are a limited number of types of interest rate futures contracts, it is likely
that the interest rate futures contracts available to a Fund will not exactly
match the debt securities the Fund intends to hedge or acquire. To compensate
for differences in historical volatility between securities a Fund intends to
hedge or acquire and the interest rate futures contracts available to it, a Fund
could purchase or sell futures contracts with a greater or lesser value than the
securities it wished to hedge or intended to purchase. Interest rate futures
contracts are subject to the same risks regarding closing transactions and the
CFTC limits as described in STOCK INDEX FUTURES CONTRACTS on page 18.

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FOREIGN CURRENCY FUTURES CONTRACTS

To the extent permitted by applicable regulations, a Fund may buy and sell for
hedging purposes futures contracts on foreign currencies or groups of foreign
currencies. A Fund will engage in transactions in only those futures contracts
and options thereon that are traded on a commodities exchange or a board of
trade. See STOCK INDEX FUTURES CONTRACTS on page 18 for a general description of
futures contracts. A Fund intends to engage in transactions involving futures
contracts as a hedge against changes in the value of the currencies in which
they hold investments or in which they expect to pay expenses or pay for future
purchases. To the extent permitted by federal regulations, a Fund may also
engage in such transactions when they are economically appropriate for the
reduction of risks inherent in portfolio management.

The use of these futures contracts is subject to risks similar to those
involved in the use of options on foreign currencies and the use of any futures
contract. A Fund's successful use of foreign currency futures contracts depends
upon the subadviser's ability to predict the direction of currency exchange
markets and political conditions. In addition, the correlation between movements
in the price of futures contracts and the price of currencies being hedged is
imperfect, and there is no assurance that liquid markets will exist for any
particular futures contract at any particular time. Those risks are discussed
more fully under OPTIONS ON FOREIGN CURRENCIES on page 16 and STOCK INDEX
FUTURES CONTRACTS on page 18.

OPTIONS ON FUTURES CONTRACTS

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

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can be effected. The Funds intend to utilize options on futures contracts for
the same purposes that they intend to use the underlying futures contracts.

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

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

To facilitate the purchase and sale of foreign securities and to manage foreign
exchange risk, each of the Funds may enter into forward contracts to purchase or
sell foreign currencies. Although such instruments may reduce the risk of loss
due to a decline in the value of the currency that is sold, they also limit any
possible gain that might result should the currency increase. Similarly,
although such instruments are used primarily to protect a Fund from adverse
currency movements, they also involve the risk that anticipated currency
movements will be accurately predicted, thus adversely affecting the Fund's
total return.

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

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other Funds will use forward foreign currency exchange contracts strictly for
hedging purposes and to facilitate the purchase and sale of foreign securities.

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

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

It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for a Fund to purchase additional foreign currency on the spot
market (and bear the expense of such

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purchase) if the market value of the security is less than the amount of foreign
currency that the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.

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

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

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

SHORT SALES AGAINST THE BOX

The Global High-Yield Bond Fund, the International Equity Fund, the Emerging
Opportunities Fund, and the Core Equity Fund may make short sales of securities
or maintain a short position, provided that at all times when a short position
is open the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, with or without

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STATEMENT OF ADDITIONAL INFORMATION

payment of any further consideration, for an equal amount of the securities of
the same issuer as the securities sold short (a "short sale against the box");
provided, that if further consideration is required in connection with the
conversion or exchange, cash or U.S. government securities in an amount equal to
such consideration must be put in a segregated account.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

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

LENDING OF PORTFOLIO SECURITIES

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

TEMPORARY DEFENSIVE POSITIONS

As discussed in the prospectus, each Fund may, at times, adopt a temporary
defensive position. In such instances, the Fund may invest a greater proportion
of its assets than normal

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STATEMENT OF ADDITIONAL INFORMATION

in money market instruments, which are described below, and in investment-grade
short-term debt instruments.

MONEY MARKET INSTRUMENTS

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

Eurodollars are dollars deposited in banks outside the United States.

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

Repurchase Agreements. When a Fund purchases money market securities, it may on
occasion enter into a repurchase agreement with the seller wherein the seller
and the buyer agree at the time of sale to a repurchase of the security at a
mutually agreed upon time and price. The period of maturity is usually quite
short, possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed upon market rate effective for the period of time the Fund's money is
invested in the security, and is not related to the coupon rate of the purchase
security. Repurchase agreements may be considered loans of money to the seller
of the underlying security, which are collateralized by the securities
underlying the repurchase agreement. A Fund will not enter into repurchase
agreements unless the agreement is fully collateralized (i.e., the value of the
securities is, and during the entire term of the agreement remains, at least
equal to the amount of the loan including interest). The Fund will take
possession of the

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STATEMENT OF ADDITIONAL INFORMATION

securities underlying the agreement and will value them daily to assure that
this condition is met. In the event that a seller defaults on a repurchase
agreement, the Fund may incur loss in the market value of the collateral, as
well as disposition costs; and, if a party with whom the Fund has entered into a
repurchase agreement becomes involved in a bankruptcy proceeding, the Fund's
ability to realize on the collateral may be limited or delayed and a loss may be
incurred if the collateral securing the repurchase agreement declines in value
during the bankruptcy proceeding.

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

RATINGS OF DEBT SECURITIES

Investment-grade bonds are debt securities that have been rated investment
grade by a nationally recognized statistical rating organization ("NRSRO"),
e.g., corporate debt rated at least Baa by Moody's Investors Service, Inc.
("Moody's") or at least BBB by Standard & Poor's Corporation ("S&P") at the time
of purchase. Investment-grade bonds also include unrated debt securities that a
Fund's subadviser determines to be of comparable quality. High-yield debt (also
know as "junk bonds") are, in contrast, generally rated below investment grade
by NRSROs -- for example, ratings of Ba or lower by Moody's or of BB or lower by

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S&P. High-yield debt also includes unrated debt securities that a Fund's
subadvisers determines to be of comparable quality.

A description of Moody's and S&P's ratings follows.

Moody's Investors Service, Inc.

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

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

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

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

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

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

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

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

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

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

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Standard & Poor's Corporation

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

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

- - Nature of and provisions of the obligation; and

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

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

Bond ratings are as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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RATINGS OF COMMERCIAL PAPER

Moody's Investors Service, Inc.

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

Standard & Poor's Corporation

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

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INVESTMENT RESTRICTIONS

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

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

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

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

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

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

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

31
<PAGE> 66
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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

32
<PAGE> 67
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

13. Invest in illiquid securities (including repurchase agreements maturing
in more than 7 days) or in the securities of issuers (other than U.S.
government agencies or instrumentalities) having a record, together
with predecessors, of less than 3 years' continuous operation if,
regarding all such securities, more than 10% of the Fund's total assets
would be invested in them, except that this restriction shall not apply
to

33
<PAGE> 68
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

the Global High-Yield Bond Fund. For purposes of this restriction,
illiquid securities are those that are subject to legal or contractual
restrictions on resale or for which no readily available market exists.
Restricted securities that have not been registered but may be sold and
resold to institutional investors are not considered illiquid for
purposes of this restriction, provided that there is dealer or
institutional trading market in such securities.

The following restrictions are nonfundamental investment policies, which means
that the Board of Directors may change them without shareholder approval:

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

Neither the Long-Term Bond Fund nor the Intermediate-Term Bond Fund
will invest more than 7.5% of total assets in debt securities from
emerging markets.

No Fund will purchase an issuer's securities if, as a result of that
investment, the Funds together would own more than 5% of the
outstanding voting securities of the issuer.

34
<PAGE> 69
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

MANAGEMENT OF THE FUNDS

THE COMPANY

American Odyssey Funds, Inc. (the "Company") was organized as a Maryland
corporation in December 1992. It is registered under the Investment Company Act
of 1940, as amended ("1940 Act") as an open-end diversified management
investment company, commonly known as a "mutual fund." It is currently made up
of six different "series" or Funds. Each Fund is, for investment purposes, a
separate investment fund, and each issues a separate class of capital stock: (1)
American Odyssey Core Equity Fund Stock; (2) American Odyssey Emerging
Opportunities Fund Stock; (3) American Odyssey International Equity Fund Stock;
(4) American Odyssey Long-Term Bond Fund Stock; (5) American Odyssey
Intermediate-Term Bond Fund Stock; and (6) American Odyssey Global High-Yield
Bond Fund Stock. Each share of capital stock issued with respect to a Fund has a
pro-rata interest in the assets of that Fund and has no interest in the assets
of any other Fund. Each Fund bears its own liabilities and also its
proportionate share of the general liabilities of the Company.

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

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

35
<PAGE> 70
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

reimbursement of organizational expenses; and (8) expenses of printing and
mailing prospectuses and other expenses related to shareholder communications.

DIRECTORS AND OFFICERS

The affairs of the Company are managed under the direction of its Board of
Directors. The Company utilizes a Manager/Subadviser structure for advisory
services. The Directors decide upon matters of general policy and review the
actions of the Company's investment manager and subadvisers. Pursuant to an
order issued by the Securities and Exchange Commission, the Company's Board of
Directors may change or add subadvisers, or amend existing subadvisory
agreements in certain respects, without shareholder approval. For further
information, see INVESTMENT ADVISERS, page 39.

The Company's Directors and principal officers, their business addresses, and
principal occupations for the past five years are set forth in the following
table.

<TABLE>
<CAPTION>
NAME, ADDRESS, POSITION WITH PRINCIPAL OCCUPATION
AND AGE THE COMPANY DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert C. Dughi* Chairman of the Chairman of the Board and Chief Executive
Two Tower Center Board Officer, The Copeland Companies. Also:
East Brunswick, NJ Chairman of the Board and President of
08816 Copeland Financial Services, Inc. ("CFS")
Age: 52 and the Manager.+

Linda Walker Bynoe Director President and Chief Operating Officer,
875 N. Michigan Avenue Telemat, Ltd. (consulting).
Suite 2505
Chicago, IL
60611
Age: 47
</TABLE>

36
<PAGE> 71
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
NAME, ADDRESS POSITION WITH PRINCIPAL OCCUPATION
AND AGE THE COMPANY DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jane DiRenzo Pigott Director Partner, Environmental Law Department,
35 West Wacker Drive Winston & Strawn (law firm). Prior to May
Suite 4000 1993, Partner and Chairperson of
Chicago, IL Environmental Law Dept., Katten Muchin &
60601 Zavis (law firm).
Age: 42

John G. Beam, Jr. Director Chairman of the Board, Acordia of Kentucky,
501 South 2nd Street Inc. (insurance). Prior to 1998, Chairman
Louisville, KY of the Board, Harris & Harris of Kentucky,
40202 Inc. (insurance).
Age: 52

Nicholas D. Yatrakis Director Physician in private practice
1 Wedgewood Way
Scotch Plains, NJ
07076
Age: 52

William A. Arnold Senior Vice President Senior Vice President, Chief Financial
Two Tower Center and Treasurer Officer, and Treasurer, The Copeland
East Brunswick, NJ Companies. Also: Senior Vice President,
08816 Chief Financial Officer and Treasurer of
Age: 36 CFS and the Manager.+ Prior to January
1998, Vice President and Asst. Financial
Officer, The Travelers Insurance Company.

Paul S. Feinberg President Senior Vice President and General Counsel,
Two Tower Center The Copeland Companies. Also: Senior Vice
East Brunswick, NJ President and General Counsel of CFS and
08816 the Manager.+
Age: 57
</TABLE>

37
<PAGE> 72
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
NAME, ADDRESS POSITION WITH PRINCIPAL OCCUPATION
AND AGE THE COMPANY DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Steven I. Weinstein Director Deputy General Counsel, Foster Wheeler
Perryville Corporate Park Corporation; President and Director, Foster
Clinton, NJ Wheeler Real Estate Development Corporation.
08809
Age: 53

Mark E. Freemyer Vice President Vice President, The Copeland Companies.
Two Tower Center Also: Vice President of CFS and the
East Brunswick, NJ Manager.+ Prior to February 1995, Vice
08816 President, Kidder, Peabody & Co.,
Age: 42 Incorporated.

Lori M. Renzulli Secretary Assistant Counsel, The Copeland Companies.
Two Tower Center Prior to January 1998, Legal Assistant, The
East Brunswick, NJ Copeland Companies.+
08816
Age: 33
</TABLE>

* Indicates Directors who are "interested persons" (as defined in the 1940 Act)
by virtue of their affiliation with the Company.

+ Indicates positions held with affiliated persons or principal underwriters of
the Company.

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION AOF AND FUND COMPLEX
NAME OF DIRECTOR FROM AOF PAID TO DIRECTORS
---------------- ---------------------- -----------------------
<S> <C> <C>
Robert C. Dughi $0 $0

Kent A. Kelley $0 $0

Linda Walker Bynoe $19,500 $19,500

Steven I. Weinstein $19,500 $19,500

Jane DiRenzo Pigott $18,000 $18,000

Mark M. Skinner $0 $0

John G. Beam, Jr. $19,500 $19,500

Nicholas D. Yatrakis $19,500 $19,500
</TABLE>

38
<PAGE> 73
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

As of May 1, 1999, the directors and officers owned in the aggregate less than
1% of the outstanding shares of each Fund.

INVESTMENT ADVISERS
STRUCTURE

The Company utilizes a Manager/Subadviser structure for advisory services.
American Odyssey Funds Management, Inc. (the "Manager") serves as the overall
investment adviser to the Company. The subadvisers perform the actual day-to-day
management of the Funds. The Manager monitors the performance of the subadvisers
and will recommend changes to the Board of Directors if warranted. For those
Funds with more than one subadviser (currently, only the Emerging Opportunities
Fund), the Manager allocates the Fund's assets between or among the Fund's
subadvisers.

The Company has obtained an order from the Securities and Exchange Commission
that permits the Board of Directors to change subadvisers, hire additional
subadvisers, or amend existing subadvisory agreements without shareholder
approval. The new or amended subadvisory agreements may have different fee
structures or rates than the current agreements, subject to the following
maximum annual rates expressed as a percentage of average daily net assets:
Global High-Yield Bond Fund, 0.525%; International Equity Fund, 0.55%; Emerging
Opportunities Fund, 0.80%; Core Equity Fund, 0.45%; Long-Term Bond Fund, 0.35%;
and Intermediate-Term Bond Fund, 0.35%. These fees are in addition to the fee
paid to the Manager, which is equal to an annual rate of 0.25% of each Fund's
average daily net assets. The Board of Directors will approve a Fund's new or
amended subadvisory agreement only if the Board determines that doing so is in
the best interests of the Fund and its shareholders. In particular, the Board
will not approve a new or amended subadvisory agreement that pays a subadvisory
fee within these maximums but higher than the Fund currently pays unless the
Board determines that the new or amended subadvisory agreement is in the best
interest of the Fund and its shareholders. Any subadvisory agreement that would
pay a subadvisory fee higher than these maximum rates would require shareholder
approval in addition to the Board's approval.

39
<PAGE> 74
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

Pursuant to the order obtained from the Securities and Exchange Commission
granting the Board of Directors authority to enter into subadvisory agreements
without shareholder approval, the Company and the Manager have agreed to comply
with the following conditions:

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

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

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

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

40
<PAGE> 75
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

Independent Directors will be placed within the discretion of the then
existing Independent Directors.

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

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

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

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

41
<PAGE> 76
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

CONTROL

The Manager is a wholly-owned subsidiary of The Copeland Companies (Holding
Company), which is a wholly-owned subsidiary of The Plaza Corporation, which is
a wholly-owned subsidiary of The Travelers Insurance Company, which is a
wholly-owned subsidiary of The Travelers Insurance Group Inc., which is a
wholly-owned subsidiary of PFS Services, Inc., which is a wholly-owned
subsidiary of Associated Madison Companies, Inc., which is a wholly-owned
subsidiary of Citigroup, Inc., a publicly-owned corporation.

Credit Suisse Asset Management, the Global High-Yield Bond Fund's subadviser,
is a wholly-owned subsidiary of Credit Suisse Capital Corp, which is a
wholly-owned subsidiary of Credit Suisse Investment Corp., which is a
wholly-owned subsidiary of Credit Suisse Group, a publicly-traded Swiss
corporation.

Bank of Ireland Asset Management (U.S.) Limited, subadviser to the
International Equity Fund, is a wholly-owned subsidiary of Bank of Ireland Asset
Management Limited, which is a wholly-owned subsidiary of Investment Bank of
Ireland Limited, which is a wholly-owned subsidiary of Bank of Ireland Group.

Chartwell Investment Partners, one of the two subadvisers to the Emerging
Opportunities Fund, is a limited partnership, the general partner for which is
Chartwell G.P., Inc.

Equinox Capital Management, LLC, the Core Equity Fund's subadviser, is a
limited liability company.

SG Cowen Securities Corporation, one of the two subadvisers to Emerging
Opportunities Fund, is a wholly-owned subsidiary of Societe Generale, an
international commercial and investment bank headquartered in France.

Western Asset Management Company, the Long-Term Bond Fund's subadviser, is a
wholly-owned subsidiary of Legg Mason, Inc.

Travelers Asset Management International Corporation, the Intermediate-Bond
Fund's subadviser, is a wholly-owned subsidiary of The Plaza Corporation, which
is a wholly-owned subsidiary of The Travelers Insurance Company, which is a
wholly-owned subsidiary of The Travelers Insurance Group Inc., which is a
wholly-owned subsidiary of PFS Services, Inc., which is a wholly-owned
subsidiary of Associated Madison Companies, Inc., which is a wholly-owned
subsidiary of Citigroup, Inc., a publicly-owned corporation.

42
<PAGE> 77
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

FEES

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

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

FUND & SUBADVISER SUBADVISER'S FEE
- ----------------- ----------------
<S> <C>
Global High-Yield Bond Fund
- Credit Suisse Asset Management 0.425% of assets

International Equity Fund
- Bank of Ireland Asset Management (U.S.) Limited 0.45% for first $50 million in assets, plus
0.40% for next $50 million in assets, plus
0.30% for assets over $100 million

Emerging Opportunities Fund
- SG Cowen Asset Management 0.50% for first $50 million in assets, plus
0.45% for next $50 million in assets, plus
0.40% for assets over $100 million

- Chartwell Investment Partners 0.70% for first $50 million in assets, plus
0.50% for next $50 million in assets, plus
0.45% 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 first $250 million in assets, plus

0.15% for assets over $250 million
</TABLE>
43
<PAGE> 78
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>

<S> <C>
Intermediate-Term Bond Fund
- Travelers Asset Management International 0.25% for first $100 million in assets, plus
Corporation 0.20% for next $100 million in assets, plus

0.15% for assets over $200 million
</TABLE>

For the years 1996 and 1997, the Short-Term Bond Fund paid the Manager fees of
$113,867 and $161,395 respectively. In 1996 and 1997, the Fund also paid the
Manager $21,289 and $42,792 respectively, as a repayment of expenses previously
reimbursed under an expense limitation agreement. For the period January 1
through April 30, 1998, the Fund paid the Manager $99,599. On May 1, 1998, the
Fund became the Global High-Yield Bond Fund and adopted a different fee
structure. For the period May 1, 1998 through December 31, 1998, the Fund paid
the Manager and Credit Suisse Asset Management fees of $130,425 and $221,908
respectively.

For the years 1996, 1997, and 1998, the International Equity Fund paid the
Manager fees of $823,891, $1,320,135, $984,501 respectively. In 1998, the Fund
paid Bank of Ireland Asset Management (U.S.) Limited fees of $650,495.

For the years 1996, 1997, and 1998, the Emerging Opportunities Fund paid the
Manager fees of $1,169,885, $1,405,303, and $1,019,925 respectively. In 1998,
the Fund paid SG Cowen Asset Management and Chartwell Investment Partners fees
of $372,679 and $499,065 respectively.

For the years 1996, 1997, and 1998, the Core Equity Fund paid the Manager fees
of $1,362,267, $2,022,000, and $1,598,522 respectively. In 1998, the Fund paid
Equinox Capital Management, LLC fees of $954,481.

For the years 1996, 1997, and 1998, the Long-Term Bond Fund paid the Manager
fees of $718,488, $945,274, and $785,689 respectively. In 1998, the Fund paid
Western Asset Management Company fees of $412,024.

For the years 1996 and 1997, the Intermediate-Term Bond Fund paid the Manager
fees of $442,594 and $493,298 respectively. In 1998, the Fund paid the Manager
and Travelers Asset Management International Corporation, an affiliate of the
Manager, aggregate fees of $589,370.

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

44
<PAGE> 79
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

OTHER SERVICE PROVIDERS

Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116 is the
custodian of the assets and is also the accounting services agent for the Funds
of the Company. In that capacity various personnel at Investors Bank & Trust
Company provide custodial and accounting services to, and keeps the accounts and
records of, the Company. The Company pays a monthly fee based upon the total
assets of the Funds at the end of the month at an annual rate of between 0.04%
and 0.08% plus reimbursement of out-of-pocket expenses for obtaining information
from pricing services and securities transaction charges. For both U.S. and
non-U.S. assets, the annual rate is 0.08% for assets up to $250 million, 0.06%
for assets over $250 million and up to $500 million, and 0.04% for assets over
$500 million. For non-U.S. assets, the Company paid additional custodial
expenses at annual rates of 0.04% and 0.13%, based upon the country. For the
years 1996, 1997, and 1998, the Company paid $671,232, $864,106, and $1,012,853
respectively to Investors Bank & Trust Company as custodian and accounting
services agent. Investors Bank and Trust Company also assists the Manager in
providing certain administrative services for the Company. For this assistance,
the Manager (not the Company) paid Investors Bank & Trust Company a fee of
$116,550 in 1996, $236,026 in 1997, and $294,071 in 1998.

American Odyssey Funds Management, Inc. (the "Manager"), Two Tower Center, P.O.
Box 1063, East Brunswick, NJ 08816-1063, serves as transfer agent and dividend
disbursing agent for the Company. The Company does not pay a separate fee for
this service; rather, it reimburses the Manager for reasonable out-of-pocket
expenses incurred in connection with providing the service. The Manager also
provides accounting services to and keeps the accounts and records of the
Company, other than those maintained by the custodian. It or an affiliated
company pays the salaries and expenses of all of its and the Company's personnel
except for fees and expenses of the non-interested directors. It or an
affiliated company provides necessary office space, staff assistance to the
Board, and all expenses incurred in connection with managing the ordinary course
of the Company's business, other than the fees and expenses that are paid
directly by the Company.

Beginning in 1999, KPMG Peat Marwick LLP, 99 High Street, Boston, MA
02110-2371, serves as the Company's independent accountants, providing audit
services. For 1998 and for

45
<PAGE> 80
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

previous years, PricewaterhouseCoopers LLP, One Post Office Square, Boston, MA
02109, and one of its predecessors served as independent public accountant for
the Company.

CFBDS, Inc., 21 Milk Street, Boston, Massachusetts 02109, serves as principal
underwriter of the shares of the Company.

BARRA Rogers Casey, Inc. ("RogersCasey"), 1 Parklands Drive, Darien, CT 06820,
assists the Manager in monitoring the performance of the subadvisers and
comparing that performance to that of other investment managers. For this
assistance, the Manager (not the Company) paid RogersCasey a fee of
approximately $135,000 in 1996, $140,000 in 1997, and $147,000 in 1998.

PORTFOLIO TRANSACTIONS

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

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

In purchasing and selling a Fund's portfolio securities, it is the subadvisers'
policy to seek quality execution at the most favorable prices through
responsible broker-dealers and, in the

46
<PAGE> 81
case of agency transactions, at competitive commission rates. In selecting
broker-dealers to execute a Fund's portfolio transactions, the subadviser will
consider such factors as the price of the security, the rate of the commission,
the size and difficulty of the order, the reliability, integrity, financial
condition, general execution and operational capabilities of competing
broker-dealers, and the brokerage and research services they provide to the
subadviser or the Fund.

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

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

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

47
<PAGE> 82
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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

48
<PAGE> 83
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
GLOBAL HIGH-YIELD BOND FUND
---------------------------
% of Dollars of
% Paid to Brokers Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C>
1996 $0 0% 0%
1997 $0 0% 0%
1998 $0 0% 0%

</TABLE>

Prior to May 1, 1998, the Global High-Yield Bond Fund was named the Short-Term
Bond Fund had a substantially different investment objective and investment
program. Information about commissions paid by the Short-Term Bond Fund is
unlikely to be helpful to investors and potential investors in the Global
High-Yield Bond Fund. For more information, see CONVERSION OF SHORT-TERM BOND
FUND TO GLOBAL HIGH-YIELD BOND FUND in the prospectus. In connection with the
conversion, the Fund purchased a new portfolio of securities, and for that
reason, 1998 commissions differed materially from the amounts paid during the
two preceding years.

INTERNATIONAL EQUITY FUND
-------------------------

<TABLE>
<CAPTION>
% of Dollars of
% Paid to Brokers Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------

Commissions in the amount of $2,228 in 1998 were paid to Salomon Smith Barney,
Inc., an affiliate of the Manager. In 1998, the Fund paid 0.98% of its aggregate
brokerage commissions to that broker for 0.87% of aggregate dollar amount of
transactions involving the payment of commissions.

49
<PAGE> 84
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

EMERGING OPPORTUNITIES FUND
---------------------------
<TABLE>
<CAPTION>
% of Dollars of
% Paid to Brokers Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------

Commissions in the amount of $273 in 1996 were paid to The Robinson-Humphrey
Company, Inc., an affiliate of the Manager. In 1998, the Fund did not pay any
commissions to that broker. Commissions in the amount of $810 in 1998 were paid
to Smith Barney Inc., an affiliate of the Manager. In 1998, the Fund paid 0.10%
of its aggregate brokerage commissions to that broker for 0.13% of aggregate
dollar amount of transactions involving the payment of commissions.

CORE EQUITY FUND
----------------
<TABLE>
<CAPTION>
% of Dollars of
% Paid to Brokers Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1996 $333,930 63% 63%
1997 $414,992 50% 50%
1998 $548,482 49% 49%
</TABLE>

Commissions in the amount of $186 in 1996 were paid to Smith Barney Inc., an
affiliate of the Manager. In 1998, the Fund did not pay any commissions to that
broker.

50
<PAGE> 85
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

LONG-TERM BOND FUND
-------------------
<TABLE>
<CAPTION>
% of Dollars of
% Paid to Brokers Transactions through
Year Total Commissions Providing Research Brokers Providing Research
---- ----------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
1996 $66,218 0% 0%
1997 $94,185 0% 0%
1998 $122,145 0% 0%

</TABLE>
INTERMEDIATE-TERM BOND FUND
---------------------------
<TABLE>
<CAPTION>
% of Dollars of
% Paid to Brokers Transactions through
Year Total Commission Providing Research Brokers Providing Research
---- ---------------- ------------------ --------------------------

During 1998, the Funds acquired securities of its following regular
broker-dealers: Morgan Stanley, Dean Witter and Co. As of December 31, 1998,
that holding was worth approximately $13,669,204.

The annual portfolio turnover rate for the Global High-Yield Bond Fund,
International Equity, Emerging Opportunities, and Core Equity Funds are expected
to be less than 100%. The annual portfolio turnover rate for the Long-Term Bond
and Intermediate-Term Bond Funds are expected to be more than 100%. For a
listing of last year's portfolio turnover rates for all of the Funds, see
FINANCIAL HIGHLIGHTS in the prospectus.

NET ASSET VALUE OF SHARES

The Company sells and redeems shares of each Fund at its net asset value next
determined after receipt of the purchase or redemption order. There is no sales
charge or sales load on the purchase or redemption of shares.

51
<PAGE> 86
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

Options traded on national securities exchanges are valued at their last sale
price as of the close of option trading on such exchanges (which is currently
4:10 p.m. New York City time). Futures contracts are marked to market daily, and
options thereon are valued at their last sale

52
<PAGE> 87
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

price, as of the close of the applicable commodities exchanges (which is
currently 4:15 p.m. New York City time). Quotations of foreign securities in a
foreign currency are converted to U.S. dollar equivalents at the current rate
obtained by a recognized bank or dealer. Forward contracts are valued at the
current cost of covering or offsetting such contracts.

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

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

PERFORMANCE INFORMATION

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

Performance information for a Fund includes the effect of deducting that Fund's
expenses, but does not include charges and expenses attributable to any
particular insurance product. For that reason, if you have purchased a variable
contract that offers the American Odyssey Funds as an investment option, you
should not compare the Funds' performance information with funds that offer
their shares directly to the public because the performance figures provided by
the American Odyssey Funds do not reflect charges of the insurance company
issuing the variable contract. You should therefore consult your contract
prospectus to learn more about those charges.

53
<PAGE> 88
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

In addition to average annual total returns, the Funds may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, and/or a series of redemptions, over any
time period. Total returns may be broken down into their

54
<PAGE> 89
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns, yield and other performance
information may be quoted numerically or in a table, graph or similar
illustration.

The Funds' average annual total returns were as follows for the respective
periods ending December 31, 1998:

<TABLE>
<CAPTION>
Life of Fund
1 Year 5 Year (since 5/17/93)
------ ------ ---------------
<S> <C> <C> <C>
Global High-Yield Bond Fund (1) -3.76% 3.26% 3.42%
International Equity Fund 14.91% 10.25% 12.88%
Emerging Opportunities Fund -8.65% 6.50% 7.56%
Core Equity Fund 15.54% 20.76% 19.05%
Long-Term Bond Fund 9.04% 7.37% 8.48%
Intermediate-Term Bond Fund 8.48% 6.25% 6.44%
</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. Information about the Short-Term Bond Fund is
unlikely to be helpful to investors and potential investors in the Global
High-Yield Bond Fund. See CONVERSION OF SHORT-TERM BOND FUND TO GLOBAL
HIGH-YIELD BOND FUND in the prospectus.

TAXES

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

55
<PAGE> 90
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

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

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

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

OWNERSHIP OF SHARES

At December 31, 1998, Travelers Universal Annuity Fund U was the holder of
record of 97.03% of the Global High-Yield Bond Fund, 97.31% of the International
Equity Fund,

56
<PAGE> 91
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

97.30% of the Emerging Opportunities Fund, 97.10% of the Core
Equity Fund, 97.30% of the Long-Term Bond Fund, and 97.35% of the
Intermediate-Term Bond Fund. The address for Travelers Fund U is One Tower
Square, Hartford, CT 06183.

FINANCIAL STATEMENTS

The Company's financial statements and financial highlights for the fiscal year
ended December 31, 1998, and report of the auditor appear in the Company's
Annual Report and are incorporated herein by reference.

57
<PAGE> 92
PART C
OTHER INFORMATION

ITEM 23. EXHIBITS.

(a) (1) Articles of Incorporation (1)

(2) Amendment to Articles of Incorporation (3)

(b) By-Laws (8)

(d) Investment Advisory Contracts

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

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

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

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

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

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

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

(8) Subadvisory Agreement among Registrant, American Odyssey Funds
Management, Inc. and SG Cowen Securities Corporation (12)

(e) Underwriting Contracts

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

1
<PAGE> 93
(2) Amendment No. 1 to the Participation Agreement among Registrant,
Copeland Equities, Inc. and The Travelers Insurance Company (4)

(3) Distribution Agreement between Registrant and CFBDS, Inc. (12)

(f) Not Applicable

(g) Custodian Agreements

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

(2) Delegation Agreement between Registrant and Investors Bank &
Trust Company (12)

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

(i) Opinion of Counsel (5)

(j) Consent of Independent Accountants (13)

(k) Not Applicable

(l) Not Applicable

(m) Not Applicable

(n) Financial Data Schedules (13)

(o) Not Applicable

(p) Powers of Attorney

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

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

2
<PAGE> 94
(2) Incorporated by reference to Pre-Effective Amendment No. 1 filed April 22,
1993.

(3) Incorporated by reference to Post-Effective Amendment No. 1 filed November
24, 1993.

(4) Incorporated by reference to Post-Effective Amendment No. 2 filed March 1,
1994.

(5) Incorporated by reference to Post-Effective Amendment No. 3 filed November
24, 1993.

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

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

(8) Incorporated by reference to Post-Effective Amendment No. 6 filed February
28, 1997.

(9) Incorporated by reference to Post-Effective Amendment No. 7 filed April 30,
1997.

(10) Incorporated by reference to Post-Effective Amendment No. 8 filed March 2,
1998.

(11) Incorporated by reference to Post-Effective Amendment No. 9 filed April 24,
1998.

(12) Incorporated by reference to Post-Effective Amendment No. 10 filed February
26, 1999

(13) Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not Applicable

ITEM 25. INDEMNIFICATION.

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

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

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

3
<PAGE> 95
Manager and hold it harmless from all cost, damage and expenses,
including reasonable expenses for legal counsel, incurred by the
Manager resulting from actions for which for which it is relieved of
responsibility by this paragraph. The Manager shall indemnify the
Series Fund and hold it harmless from all cost, damage and expense,
including reasonable expenses for legal counsel, incurred by the
Series Fund resulting from actions for which the Manager is not
relieved of responsibility by this paragraph."

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

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

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

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

4
<PAGE> 96
See "Management of the Funds" both in the Prospectus constituting Part
A of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.

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

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

Mark M. Skinner Director and Executive Vice Executive Vice President and Chief Marketing
President Officer, The Copeland Companies and various
affiliates

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

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

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

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

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

William A. Arnold Director, Executive Vice President, Senior Vice President, Chief Financial
Chief Financial Officer, and Officer, and Treasurer, The Copeland
Treasurer Companies and various affiliates

</TABLE>

5
<PAGE> 97
<TABLE>
<CAPTION>
Name and Address Position with AOFM Principal Occupation
- ---------------- ------------------ --------------------
<S> <C> <C>
Ira M. Schwartz Director, Executive Vice President, Executive Vice President and Chief of
and Chief of Operations Operations, The Copeland Companies and
various affiliates
</TABLE>

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

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

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

(3) CHARTWELL INVESTMENT PARTNERS

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

(4) EQUINOX CAPITAL MANAGEMENT, LLC

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

(5) WESTERN ASSET MANAGEMENT COMPANY

6
<PAGE> 98
Information as to Western Asset Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-08162), as most recently amended, the text of which is
incorporated herein by reference.

(6) TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION

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

(7) CREDIT SUISSE ASSET MANAGEMENT

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

(h). SG COWEN SECURITIES CORPORATION

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

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

ITEM 27. PRINCIPAL UNDERWRITERS

(a) CFBDS, Inc. acts as principal underwriter of the Funds, in addition
to the following: CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Growth Portfolio, CitiFundsSM U.S. Treasury Reserves,
CitiFundsSM Cash Reserves, CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM Institutional U.S. Treasury
Reserves, CitiFundsSM Institutional Liquid Reserves, CitiFundsSM Institutional
Cash Reserves, CitiFundsSM Tax Free Reserves, CitiFundsSM Institutional Tax Free
Reserves, CitiFundsSM California Tax Free Reserves, CitiFundsSM

7
<PAGE> 99
Connecticut Tax Free Reserves, CitiFundsSM New York Tax Free Reserves,
CitiFundsSM New York Tax Free Income Portfolio, CitiFundsSM National Tax Free
Income Portfolio, CitiFundsSM California Tax Free Income Portfolio, CitiFundsSM
Intermediate Income Portfolio, CitiFundsSM Balanced Portfolio, CitiFundsSM Small
Cap Value Portfolio, CitiFundsSM Growth & Income Portfolio, CitiFundsSM Large
Cap Growth Portfolio, CitiFundsSM Small Cap Growth Portfolio, CitiSelect VIP
Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP Folio 400, CitiSelect VIP
Folio 500, CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400, and CitiSelect Folio 500.

CFBDS is also the placement agent for Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate Income
Portfolio, Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio, Large Cap Growth Portfolio, Small Cap Growth Portfolio, International
Equity Portfolio, Balanced Portfolio, Government Income Portfolio, Tax Free
Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio.

CFBDS also serves as the distributor for the following funds: The Travelers Fund
U for Variable Annuities, The Travelers Fund VA for Variable Annuities, The
Travelers Fund BD for Variable Annuities, The Travelers Fund BD II for Variable
Annuities, The Travelers Fund BD III for Variable Annuities, The Travelers Fund
BD IV for Variable Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Fund ABD II for Variable Annuities, The Travelers Separate Account PF
for Variable Annuities, The Travelers Separate Account PF II for Variable
Annuities, The Travelers Separate Account QP for Variable Annuities, The
Travelers Separate Account TM for Variable Annuities, The Travelers Separate
Account TM II for Variable Annuities, The Travelers Separate AccountFive for
Variable Annuities, The Travelers Separate Account Six for Variable Annuities,
The Travelers Separate Account Seven for Variable Annuities, The Travelers
Separate Account Eight for Variable Annuities, The Travelers Fund UL for
Variable Annuities, The Travelers Fund UL II for Variable Annuities, The
Travelers Variable Life Insurance Separate Account One, The Travelers Variable
Life Insurance Separate Account Two, The Travelers Variable Life Insurance
Separate Account Three, The Travelers Variable Life Insurance Separate Account
Four, The Travelers Separate Account MGA, The Travelers Separate Account MGA II,
The Travelers Growth and Income Stock Account for Variable Annuities, The
Travelers Quality Bond Account for Variable Annuities, The Travelers Money
Market Account for Variable Annuities, The Travelers Timed Growth and Income
Stock Account for Variable Annuities, The Travelers Timed Short-Term Bond
Account for Variable Annuities, The Travelers Timed Aggressive Stock Account for
Variable Annuities, The Travelers Timed Bond Account for Variable Annuities,
Emerging Growth Fund, Government Fund, Growth and Income Fund, International
Equity Fund, Municipal Fund, Balanced Investments, Emerging Markets Equity
Investments, Government Money Investments, High Yield Investments, Intermediate
Fixed Income Investments, International Equity Investments, International Fixed
Income Investments, Large Capitalization Growth Investments, Large
Capitalization Value Equity Investments, Long-Term Bond Investments, Mortgage
Backed Investments, Municipal Bond Investments, Small Capitalization Growth
Investments, Small Capitalization Value Equity

8
<PAGE> 100
Investments, Appreciation Portfolio, Diversified Strategic Income Portfolio,
Emerging Growth Portfolio, Equity Income Portfolio, Equity Index Portfolio,
Growth & Income Portfolio, Intermediate High Grade Portfolio, International
Equity Portfolio, Money Market Portfolio, Total Return Portfolio, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney Aggressive Growth Fund
Inc., Smith Barney Appreciation Fund, Smith Barney Arizona Municipals Fund Inc.,
Smith Barney California Municipals Fund Inc., Balanced Portfolio, Conservative
Portfolio, Growth Portfolio, High Growth Portfolio, Income Portfolio, Global
Portfolio, Select Balanced Portfolio, Select Conservative Portfolio, Select
Growth Portfolio, Select High Growth Portfolio, Select Income Portfolio, Concert
Social Awareness Fund, Smith Barney Large Cap Blend Fund, Smith Barney
Fundamental Value Fund Inc., Large Cap Value Fund, Short-Term High Grade Bond
Fund, U.S. Government Securities Fund, Smith Barney Balanced Fund, Smith Barney
Convertible Fund, Smith Barney Diversified Strategic Income Fund, Smith Barney
Exchange Reserve Fund, Smith Barney High Income Fund, Smith Barney Municipal
High Income Fund, Smith Barney Premium Total Return Fund, Smith Barney Total
Return Bond Fund, Cash Portfolio, Government Portfolio, Municipal Portfolio,
Concert Peachtree Growth Fund, Smith Barney Contrarian Fund, Smith Barney
Government Securities Fund, Smith Barney Hansberger Global Small Cap Value Fund,
Smith Barney Hansberger Global Value Fund, Smith Barney Investment Grade Bond
Fund, Smith Barney Special Equities Fund, Smith Barney Intermediate Maturity
California Municipals Fund, Smith Barney Intermediate Maturity New York
Municipals Fund, Smith Barney Large Capitalization Growth Fund, Smith Barney S&P
500 Index Fund, Smith Barney Mid Cap Blend Fund, Smith Barney Managed
Governments Fund Inc., Smith Barney Managed Municipals Fund Inc., SmithBarney
Massachusetts Municipals Fund, Cash Portfolio, Government Portfolio, Retirement
Portfolio, California Money Market Portfolio, Florida Portfolio, Georgia
Portfolio, Limited Term Portfolio, New York Money Market Portfolio, New York
Portfolio, Pennsylvania Portfolio, Smith Barney Municipal Money Market Fund,
Inc., Smith Barney Natural Resources Fund Inc., Smith Barney New Jersey
Municipals Fund Inc., Smith Barney Oregon Municipals Fund, Zeros Plus Emerging
Growth Series 2000, Smith Barney Security and Growth Fund, Smith Barney Small
Cap Blend Fund, Inc., Smith Barney Telecommunications Income Fund, Income and
Growth Portfolio, Reserve Account Portfolio, U.S. Government/High Quality
Securities Portfolio, Emerging Markets Portfolio, European Portfolio, Global
Government Bond Portfolio, International Balanced Portfolio, International
Equity Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio,
Alliance Growth Portfolio, GT Global Strategic Income Portfolio, MFS Total
Return Portfolio, Putnam Diversified Income Portfolio, Smith Barney High Income
Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney International
Equity Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith
Barney Money Market Portfolio, Smith Barney Pacific Basin Portfolio, TBC Managed
Income Portfolio, Van Kampen American Capital Enterprise Portfolio, Centurion
Tax-Managed U.S. Equity Fund, Centurion Tax-Managed International Equity Fund,
Centurion U.S. Protection Fund, Centurion International Protection Fund, Global
High-Yield Bond Fund, International Equity Fund, Emerging Opportunities Fund,
Core Equity Fund, Long-Term Bond Fund, Global Dimensions Fund L.P., Citicorp
Private Equity L.P., AIM V.I. Capital Appreciation Fund, AIM V.I. Government
Series Fund, AIM V.I. Growth Fund, AIM V.I. International Equity Fund, AIM V.I.
Value Fund, Fidelity VIP Growth Portfolio, Fidelity VIP High Income Portfolio,
Fidelity VIP Equity Income Portfolio, Fidelity

9
<PAGE> 101
VIP Overseas Portfolio, Fidelity VIP II Contrafund Portfolio, Fidelity VIP II
Index 500 Portfolio, MFS World Government Series, MFS Money Market Series, MFS
Bond Series, MFS Total Return Series, MFS Research Series, MFS Emerging Growth
Series, Salomon Brothers Institutional Money Market Fund, Salomon Brothers Cash
Management Fund, Salomon Brothers New York Municipal Money Market Fund, Salomon
Brothers National Intermediate Municipal Fund, Salomon Brothers U.S. Government
Income Fund, Salomon Brothers High Yield Bond Fund, Salomon Brothers Strategic
Bond Fund, Salomon Brothers Total Return Fund, Salomon Brothers Asia Growth
Fund, Salomon Brothers Capital Fund Inc, Salomon Brothers Investors Fund Inc,
Salomon Brothers Opportunity Fund Inc, Salomon Brothers Institutional High Yield
Bond Fund, Salomon Brothers Institutional Emerging Markets Debt Fund, Salomon
Brothers Variable Investors Fund, Salomon Brothers Variable Capital Fund,
Salomon Brothers Variable Total Return Fund, Salomon Brothers Variable High
Yield Bond Fund, Salomon Brothers Variable Strategic Bond Fund, Salomon Brothers
Variable U.S. Government Income Fund, and Salomon Brothers Variable Asia Growth
Fund.

(b) The information required by this Item 27 with respect to each
director and officer of CFBDS is incorporated by reference to Schedule A of Form
BD filed by CFBDS pursuant to the Securities and Exchange Act of 1934 (File
No.8-32417).

(c) CFBDS, Inc., who is not an affiliated person of the Registrant,
receives no commission or compensation, directly or indirectly, from the
Registrant.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the Rules thereunder are
maintained at the offices of (1) the Registrant and American Odyssey Funds
Management, Inc., Two Tower Center, P.O. Box 1063, East Brunswick, NJ
08816-1063; (2) Bank of Ireland Asset Management (U.S.) Limited, 26 Fitzwilliam
Place, Dublin 2, Ireland and 20 Horseneck Lane, Greenwich, CT 06830; (3)
Chartwell Investment Partners, 1235 Westlakes Drive, Suite 330, Berwyn, PA
19312; (4) Equinox Capital Management, L.L.C., 590 Madison Avenue, New York, NY
10022; (5) Western Asset Management Company, 117 East Colorado Boulevard,
Pasadena, CA 91105; (6) Travelers Asset Management International Corporation,
One Tower Square, Hartford, CT 06183; (7) Credit Suisse Asset Management, One
Citicorp Center, 153 East 53rd Street, New York, NY 10022; (8) SG Cowen
Securities Corporation, Financial Square, New York, NY 10005; and (9) Investors
Bank and Trust Company, 200 Clarendon Street, Boston, MA 02116.

ITEM 29. MANAGEMENT SERVICES

Not Applicable

ITEM 32. UNDERTAKINGS

Not Applicable

10
<PAGE> 102
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement under Rule
485(b) under the Securities Act and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
East Brunswick, and the State of New Jersey on the 30th day of April, 1999.

AMERICAN ODYSSEY FUNDS, INC.

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

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on April 30, 1999.

Signature and Title

/s/ Robert C. Dughi By:/s/ Paul S. Feinberg
- ------------------------ ----------------------
Robert C. Dughi Paul S. Feinberg
Chairman of the Board of Directors (Attorney-in-Fact)

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

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

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

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

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

11
<PAGE> 103
/s/ William A. Arnold By:/s/ Paul S. Feinberg
- ------------------------ ----------------------
William A. Arnold Paul S. Feinberg
Senior Vice President and Treasurer; (Attorney-in-Fact)
Principal Financial Officer;
Principal Accounting Officer

12
<PAGE> 104
EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION PAGE NUMBERS

23(j) Consent of Independent C-14
Accountants

23(n) Financial Data Schedules C-15

<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS

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

We consent to the inclusion in Amendment No. 12 to the Registration Statement of
the American Odyssey Funds, Inc., comprising, respectively, the International
Equity Fund, Emerging Opportunities Fund, Core Equity Fund, Long-Term Bond Fund,
Intermediate-Term Bond Fund, and Global High-Yield Bond Fund, (the "Funds"), on
Form N-1A (File No. 811-7450) under the Investment Company Act of 1940, as
amended, and Post-Effective Amendment No. 11 to the Registration Statement on
Form N-1A (File No. 33-57536) under the Securities Act of 1933, as amended, of
our report dated February 5, 1999, on our audits of the financial statements and
financial highlights of the Funds, which report is incorporated by reference in
the Amendment and Post-Effective Amendment to the Registration Statement.

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

PricewaterhouseCoopers LLP

Boston, Massachusetts
April 27, 1999

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from American
Odyssey Funds, Inc. form N-SAR for the period ending December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 224,993,418
<INVESTMENTS-AT-VALUE> 291,724,439
<RECEIVABLES> 15,409,371
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 307,133,810
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,062,069
<TOTAL-LIABILITIES> 7,062,069
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 239,788,307
<SHARES-COMMON-STOCK> 17,809,092
<SHARES-COMMON-PRIOR> 15,277,557
<ACCUMULATED-NII-CURRENT> 797,921
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 6,253,851
<ACCUM-APPREC-OR-DEPREC> 65,739,364
<NET-ASSETS> 300,071,741
<DIVIDEND-INCOME> 4,790,889
<INTEREST-INCOME> 588,701
<OTHER-INCOME> 0
<EXPENSES-NET> 1,981,182
<NET-INVESTMENT-INCOME> 3,398,408
<REALIZED-GAINS-CURRENT> (8,298,571)
<APPREC-INCREASE-CURRENT> 41,865,674
<NET-CHANGE-FROM-OPS> 36,965,511
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,154,657
<DISTRIBUTIONS-OF-GAINS> 10,221,210
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,695,337
<NUMBER-OF-SHARES-REDEEMED> 1,082,312
<SHARES-REINVESTED> 918,510
<NET-CHANGE-IN-ASSETS> 63,500,684
<ACCUMULATED-NII-PRIOR> 4,133,869
<ACCUMULATED-GAINS-PRIOR> 9,593,909
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,634,996
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,015,353
<AVERAGE-NET-ASSETS> 274,744,346
<PER-SHARE-NAV-BEGIN> 15.48
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 2.21
<PER-SHARE-DIVIDEND> 0.31
<PER-SHARE-DISTRIBUTIONS> 0.62
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.85
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from American
Odyssey Funds, Inc. form N-SAR for the period ended December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 268,309,911
<INVESTMENTS-AT-VALUE> 256,392,094
<RECEIVABLES> 23,546,446
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 279,938,540
<PAYABLE-FOR-SECURITIES> 5,794,292
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,844,443
<TOTAL-LIABILITIES> 11,608,735
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 256,661,715
<SHARES-COMMON-STOCK> 20,493,456
<SHARES-COMMON-PRIOR> 18,071,430
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,585,907
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (11,917,817)
<NET-ASSETS> 268,329,805
<DIVIDEND-INCOME> 898,120
<INTEREST-INCOME> 761,627
<OTHER-INCOME> 0
<EXPENSES-NET> 2,218,875
<NET-INVESTMENT-INCOME> (559,128)
<REALIZED-GAINS-CURRENT> 24,973,514
<APPREC-INCREASE-CURRENT> (45,105,846)
<NET-CHANGE-FROM-OPS> (20,691,460)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,809,758
<NUMBER-OF-SHARES-REDEEMED> (1,387,732)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,443,377
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,398,982
<GROSS-ADVISORY-FEES> 1,891,669
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,260,596
<AVERAGE-NET-ASSETS> 259,342,651
<PER-SHARE-NAV-BEGIN> 14.33
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> (1.24)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.09
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 364,025,648
<INVESTMENTS-AT-VALUE> 468,287,513
<RECEIVABLES> 18,727,176
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 487,014,689
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,601,427
<TOTAL-LIABILITIES> 14,601,427
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 297,899,740
<SHARES-COMMON-STOCK> 22,953,325
<SHARES-COMMON-PRIOR> 20,812,710
<ACCUMULATED-NII-CURRENT> 6,077,406
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 64,714,251
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,261,865
<NET-ASSETS> 472,953,262
<DIVIDEND-INCOME> 8,429,033
<INTEREST-INCOME> 443,868
<OTHER-INCOME> 0
<EXPENSES-NET> 2,795,491
<NET-INVESTMENT-INCOME> 6,077,410
<REALIZED-GAINS-CURRENT> 64,714,251
<APPREC-INCREASE-CURRENT> (4,421,205)
<NET-CHANGE-FROM-OPS> 66,370,456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40,202
<DISTRIBUTIONS-OF-GAINS> 48,900,936
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,836,416
<NUMBER-OF-SHARES-REDEEMED> 3,083,174
<SHARES-REINVESTED> 2,387,373
<NET-CHANGE-IN-ASSETS> 58,255,167
<ACCUMULATED-NII-PRIOR> 40,198
<ACCUMULATED-GAINS-PRIOR> 48,900,936
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,553,003
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,943,738
<AVERAGE-NET-ASSETS> 454,751,066
<PER-SHARE-NAV-BEGIN> 19.93
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 2.82
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 2.40
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.61
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 245,410,524
<INVESTMENTS-AT-VALUE> 249,947,519
<RECEIVABLES> 8,310,510
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 258,258,029
<PAYABLE-FOR-SECURITIES> 12,382
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,880,831
<TOTAL-LIABILITIES> 3,893,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 228,398,625
<SHARES-COMMON-STOCK> 22,145,289
<SHARES-COMMON-PRIOR> 20,383,564
<ACCUMULATED-NII-CURRENT> 14,565,934
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,256,299
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,143,958
<NET-ASSETS> 254,364,816
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,728,848
<OTHER-INCOME> 0
<EXPENSES-NET> 1,436,423
<NET-INVESTMENT-INCOME> 14,292,425
<REALIZED-GAINS-CURRENT> 7,398,857
<APPREC-INCREASE-CURRENT> (853,133)
<NET-CHANGE-FROM-OPS> 20,838,149
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 114,595
<DISTRIBUTIONS-OF-GAINS> 4,441,593
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,806,155
<NUMBER-OF-SHARES-REDEEMED> 1,459,383
<SHARES-REINVESTED> 414,953
<NET-CHANGE-IN-ASSETS> 35,510,465
<ACCUMULATED-NII-PRIOR> 114,594
<ACCUMULATED-GAINS-PRIOR> 4,572,544
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,197,713
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,436,423
<AVERAGE-NET-ASSETS> 239,708,090
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.49
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from American
Odyssey Funds, Inc. form N-SAR for the period ended December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 126,757,234
<INVESTMENTS-AT-VALUE> 126,735,577
<RECEIVABLES> 1,256,816
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127,992,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,633,870
<TOTAL-LIABILITIES> 1,633,870
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116,054,768
<SHARES-COMMON-STOCK> 11,356,645
<SHARES-COMMON-PRIOR> 10,531,347
<ACCUMULATED-NII-CURRENT> 6,579,802
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,745,610
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (21,657)
<NET-ASSETS> 126,358,523
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,314,817
<OTHER-INCOME> 0
<EXPENSES-NET> 719,559
<NET-INVESTMENT-INCOME> 6,595,258
<REALIZED-GAINS-CURRENT> 3,745,609
<APPREC-INCREASE-CURRENT> (608,893)
<NET-CHANGE-FROM-OPS> 9,731,974
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37,668
<DISTRIBUTIONS-OF-GAINS> 542,497
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,650,973
<NUMBER-OF-SHARES-REDEEMED> 880,304
<SHARES-REINVESTED> 54,629
<NET-CHANGE-IN-ASSETS> 17,762,889
<ACCUMULATED-NII-PRIOR> 37,666
<ACCUMULATED-GAINS-PRIOR> 516,170
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 589,370
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 719,559
<AVERAGE-NET-ASSETS> 119,808,234
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.13
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 82,763,579
<INVESTMENTS-AT-VALUE> 78,679,305
<RECEIVABLES> 3,871,896
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 82,551,201
<PAYABLE-FOR-SECURITIES> 452,554
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90,575
<TOTAL-LIABILITIES> 543,129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,767,886
<SHARES-COMMON-STOCK> 8,265,528
<SHARES-COMMON-PRIOR> 5,704,494
<ACCUMULATED-NII-CURRENT> 5,442,468
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,117,260
<ACCUM-APPREC-OR-DEPREC> (4,085,022)
<NET-ASSETS> 82,008,072
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,012,433
<OTHER-INCOME> 0
<EXPENSES-NET> 563,036
<NET-INVESTMENT-INCOME> 5,449,397
<REALIZED-GAINS-CURRENT> (4,430,589)
<APPREC-INCREASE-CURRENT> (4,468,929)
<NET-CHANGE-FROM-OPS> (3,450,121)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,259
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,964,963
<NUMBER-OF-SHARES-REDEEMED> 405,854
<SHARES-REINVESTED> 1,925
<NET-CHANGE-IN-ASSETS> 23,187,526
<ACCUMULATED-NII-PRIOR> 21,955
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 250,923
<GROSS-ADVISORY-FEES> 451,932
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 563,036
<AVERAGE-NET-ASSETS> 72,088,293
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> (1.05)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>