<PAGE> 1
ANNUAL REPORT
December 31, 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
AMERICAN
[LOGO] ODYSSEY(R)
---------
F U N D S
<PAGE> 2
Dear American Odyssey Funds Shareholders:
The year 1999 was a year of broadening in the global equity markets. No longer
did the U.S. large capitalization companies dominate the markets, but rather
strong market performance was widespread among all capitalization ranges as well
as in foreign equity markets. The fixed income markets, however, ended 1999 as
one of the worst performing years in recent history. The spectrum of duration
was marked by low single digit returns and in most cases, negative performances.
Thanks to restructuring changes made in prior years, 1999 overall proved to be a
notable year for the American Odyssey Funds. The American Odyssey Emerging
Opportunities Fund made a dramatic turnaround in 1999, finishing 12.5% ahead of
its benchmark, the Russell 2500. The International Equity Fund continued to
deliver superior performance finishing 5.2% over its benchmark, the Morgan
Stanley Capital International EAFE Index. Coupled with the strong performance of
the emerging market sector, the Global High-Yield Bond Fund also performed well,
up 10.68% versus its composite benchmark's (75% CS First Boston High Yield and
25% JP Morgan EMBI Plus Index) return of 8.73%, The Intermediate-Term Bond Fund
managed to post a 1.5% return versus 0.39% in the Lehman Brothers
Government/Corporate Intermediate Bond Index. However, both the Core Equity and
Long-Term Bond Funds under performed versus their respective benchmarks. The
Core Equity Fund's value style proved to be detrimental to performance in 1999,
finishing a negative 0.28% versus the S&P 500's 20.9%. The Long-Term Bond Fund
was also in the negative, down 2.74% versus the Salomon Core +5's negative
1.69%, largely on the shadows of long duration's terrible showing.
Assets overall grew at a mature pace in 1999, ending with more than $1.7 billion
in retirement assets for over 130,000 plan participants.
American Odyssey Fund Management, Inc.'s commitment to be competitive over the
long-term and with a clear objective of delivering value to our participants
will remain.
We thank you for your lasting confidence.
Very Truly Yours,
/s/ ROBERT C. DUGHI
ROBERT C. DUGHI
Chairman of the Board and President
American Odyssey Funds Management, Inc.
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AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
The American Odyssey Global High-Yield Bond Fund returned 10.68% for the
year ended December 31, 1999. The blended benchmark (75% CS First Boston High
Yield Index and 25% J.P. Morgan Emerging Markets Bond Index Plus) returned 8.73%
for the same period.
THE MARKETS:
U.S. high yield and emerging market debt rebounded in 1999 from the
meltdown in global markets that sent all but the highest-quality fixed income
instruments plunging in value the prior year. Both categories meaningfully
outperformed investment-grade debt securities in 1999.
In general, both high yield and emerging debt gained support from
investors' growing sense of comfort with relatively risky assets, which also
helped to restore confidence to the world's stock markets.
Activity in high yield additionally benefited from these factors:
[ ] The U.S. economy was vibrant, which historically has proved favorable for
issuers of high yield debt.
[ ] There was a spate of mergers and takeovers (both rumored and actual) in
industries that are heavily represented in the high yield market, notably
telecommunications, cable/media and gaming.
[ ] A number of new securities backed by existing high yield bonds were issued,
which increased demand for the underlying high yield bonds.
[ ] European investors began to buy high yield securities in larger volumes
than in previous years.
Conditions in emerging debt markets significantly improved over the course
of the year. A key reason for this improvement was the increasing trend toward
better economic growth throughout the world, which typically translates into
greater demand for many of the goods and services produced by emerging nations.
The prices of major global commodities (notably oil) strengthened, which was
good news for the many emerging countries whose economic health is closely tied
to the export of commodities and related products.
We also note that much of the high leverage from hedge funds and other
investors that disproportionately hurt emerging market debt in 1998 was wrung
out of the market by early 1999. By the time Brazil devalued its currency in
mid-January -- which was widely considered one of the last of the potential
disasters that could strike the global financial system -- emerging market debt
was thus able to bounce back more quickly than it did in 1998, and any so-called
"contagion effect" on other markets was much less severe.
PERFORMANCE:
The Fund benefited from being invested in high yield and emerging market
debt, two of the best performing sectors of the fixed income market. In
particular, the fund's meaningful exposure to emerging market debt contributed
to the strong performance since emerging market debt (as measured by the JP
Morgan Emerging Market Bond Index Plus) returned 26% for the year.
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Returns were best in emerging market debt, in which we took several steps
that paid off well. Early in the year, for instance, we felt that bond prices
were unfairly low due to expectations that some governments might default on
their debts. We therefore began to add riskier securities from countries like
Russia, Venezuela and Indonesia. Other successful moves included a well-executed
trade in Asian markets in the first quarter; our decision to de-emphasize
Argentina, where conditions worsened as the year progressed; and our decision to
raise exposure to Brazil, which turned out to be one of the world's strongest
bond markets in 1999.
In high yield, our core industry weightings in telecommunications,
cable/media and gaming all fared better than the high yield market as a whole.
Our telecommunications holdings were particularly helpful, rising as a result of
positive industry developments and good security selection. We reaped additional
benefits from our weightings in the paper and health care industries, as well as
our avoidance of industries that experienced relatively high debt default rates.
OUTLOOK:
Our outlook for both portions of the Fund is somewhat cautious. With regard
to high yield, we expect investors to increasingly focus on watching for signs
of the Federal Reserve's intentions concerning the direction of interest rates.
This should outweigh consideration of company- or industry-level fundamentals
for the next few months. We have a similar view on emerging debt markets, in
which we anticipate fairly high volatility in the year's first half due to
uncertainty both about the Fed and the Mexican elections to be held in July.
STRATEGY:
Our primary strategy in high yield, which is to most heavily favor the
telecommunications, cable/media and gaming industries, is unchanged. We are also
selectively adding to positions in economically sensitive industries such as
paper and energy, whose underlying fundamentals are beginning to show genuine
signs of improvement.
As for the Fund's emerging allocation, we are reducing risk based on our
concerns about emerging debt prices' vulnerability to what happens in the U.S.
More specifically, we are: emphasizing Eastern European nations like Bulgaria,
Croatia and Turkey, which have greater exposure to the upbeat scenario we
envision for Western Europe; raising the allocation to Argentina, whose
short-duration assets offer good value; and lowering the Fund's positions in
Russia and Mexico, as we perceive greater downside than upside in those
countries.
ASSET ALLOCATION:
As of December 31, 1999 we were maintaining exposure to high yield at a
level slightly below 75% of total assets, and keeping emerging market debt
slightly above 25%. We continually monitor our asset allocations, and we may
change them in response to market developments.
CREDIT SUISSE ASSET MANAGEMENT
INVESTMENT SUBADVISER TO THE AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND,
CS FIRST BOSTON HIGH YIELD INDEX, AND THE LBGC 1-5 YEAR BOND INDEX
<TABLE>
<CAPTION>
CSFB HIGH YIELD LBGC 1-5 YEAR BOND
GLOBAL HIGH-YIELD BOND INDEX*** INDEX***
---------------------- --------------- ------------------
<S> <C> <C> <C>
5/17/93 10000 10000 10000
12/31/93 10275 10894 10340
12/31/94 10261 10788 10264
12/31/95 11378 12663 11587
12/31/96 11807 14236 12131
12/31/97 12533 16033 12996
12/31/98 12063 16126 13988
12/31/99 13351 16655 14282
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Prior to May 1, 1998, the Global High-Yield Bond Fund was named the
Short-Term Bond Fund and had a substantially different investment
objective and investment program. In accordance with SEC requirements,
the above chart shows the performance of two indices -- both short-term
bond and high-yield bond -- during the entire period that the Fund has
been in operation.
** Fund's inception date.
*** The inception date of the indices presented for comparison purposes is
May 31, 1993.
CS FIRST BOSTON HIGH YIELD INDEX
This is an unmanaged, trader priced index comprised of issues rated BB and
below, constructed to mirror the performance of the public high yield market.
All new and downgraded issues must have a minimum par value of $75 million.
4
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LEHMAN BROTHERS GOVERNMENT/CORPORATE 1-5 YEAR BOND INDEX
This Index is composed of all domestic bonds that are investment grade
(rated Baa or higher by Moody's or BBB or higher by Standard & Poor's) which are
between 1 and 5 years to maturity. Issues must have amounts outstanding in
excess of $25 million. Total return comprises price appreciation/depreciation
and income as a percentage of the original investment. Index is rebalanced
monthly by market capitalization.
5
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND, THE
COMPOSITE OF CS FIRST BOSTON HIGH YIELD INDEX (75%)
AND J.P. MORGAN EMERGING MARKETS BOND INDEX PLUS (25%)
AND CS FIRST BOSTON HIGH YIELD INDEX
<TABLE>
<CAPTION>
GLOBAL HIGH-YIELD BOND
FUND COMPOSITE INDEX CSFB HIGH YIELD INDEX
---------------------- --------------- ---------------------
<S> <C> <C> <C>
5/1/98 10000.00 10000.00 10000.00
12/31/98 9417.00 9409.00 9692.00
12/31/99 10426.00 10223.00 10191.00
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
This graph shows performance of the Fund only since it became the Global
High-Yield Bond Fund. A composite of two indices is used to reflect the Fund's
policy of investing in U.S. high yield debt and emerging markets debt.
The Global High-Yield Blended Index is comprised of 75% CS First Boston
High-Yield Index and 25% J.P. Morgan EMBI+. The J.P. Morgan Emerging Markets
Bond Index Plus is a capitalization weighted total return index that consists of
external currency-denominated debt instruments of emerging markets. It includes
Brady bonds, Eurobonds and local market instruments from 14 countries, each
having a minimum outstanding value of $500 million.
6
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AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
The American Odyssey International Equity Fund returned 32.52% for the year
ended December 31, 1999. The MSCI EAFE Index returned 27.31% for the same
period.
As they had ended 1998, telecom stocks continued to drive the Fund ahead
during 1999. Corporate activity among these stocks was the dominant influence on
the Fund's performance. This is best illustrated by looking at the example of
Vodafone. After acquiring Airtouch, the largest independent US wireless company
in the first quarter of the year, it then proceeded to merge its US cellular
business with that of Bell Atlantic, giving it a presence on both coasts. Then
in the final quarter of the year, it launched a hostile bid for Mannesmann, the
Fund's largest holding. If this bid succeeds, it will represent the largest deal
ever in corporate Europe.
NTT DoCoMo was the single biggest contributor to the Fund's performance
over the year. DoCoMo continues to easily be the largest mobile operator in
Japan while at the same time increasing its foreign holdings, evidenced through
its acquisition of a minority holding in the Hutchison Whampoa wireless business
in Hong Kong. The company is at the forefront of development of the mobile phone
product and it launched its new Icom product during the year, which allows easy
access to the Internet. This has been a big success in Japan where the level of
home PC ownership is lower than that of the US or Europe.
Japanese quoted stocks within our Technological Innovation theme also
performed strongly during the year, especially during the fourth quarter, where
over half the performance for the year materialized. Companies such as Murata,
Rohm and Keyence have flourished this year on the back of buoyant global demand
for electrical appliances, mobile phones, and similar products. Murata reported
an 85% rise in net income for the full year while Rohm, the semiconductor
company, continues to benefit as the Asian recovery gathers pace.
Sony was also a strong performer during the year. It increased its revenue
from electronics and also formed new alliances, such as one with 3Com, to
develop new handheld devices with audio and video capabilities. Investor
sentiment was boosted throughout the year as success is anticipated for a
variety of its new products, in particular the Playstation II video game
console.
On the negative side, the stocks in our financial themes, after starting
the year positively, suffered on continued fears of inflation. The stocks in our
Healthcare theme also performed quite poorly over the year. There have been
fears concerning about how these companies will boost profits given that the
patent protection for many major drugs will expire in the next few years.
However, there has been renewed speculation of mergers within the industry,
which many believe will boost investor sentiment during 2000.
The solid economic growth that is forecast for 2000 is likely to prompt
central banks globally to raise interest rates. As a result of the strong
performance in 1999, many stock valuations are once again stretched and, unless
profit growth matches rosy expectations, the number of stocks driving stock
market performance is likely to narrow even further.
In Europe, growth looks set to move towards 3% this year following several
years of sluggishness. Inflation is rising in most economies within the
Euro-zone. Against this background, central bank
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<PAGE> 9
tightening or the prospect of rate increases has overshadowed markets in the
latter half of 1999, and we expect this trend to continue into the new
millennium.
The current proposal in Germany to eliminate capital gains tax on the
equity holdings of German companies should prove to be a stimulus for the equity
market. Historically, many of Germany's largest companies, such as Allianz,
Deutsche Bank and Munich Re, had held cross-holdings in other financial and
industrial stocks. If this proposal is implemented, it should lead to
consolidation and restructuring among many of these stocks and in theory will
facilitate a more shareholder-focused use of capital.
In Asia, the outlook is still generally favorable looking into 2000, but
valuations are now quite demanding. Companies will need to deliver strong
earnings to maintain market momentum. Troubles elsewhere could hamper the
recovery given their export dependence. However, the trend towards better
economic and corporate management is likely to persist and provide
opportunities. For example, one of our portfolio holdings, POSCO (the Korean
steel company) bought back 3% of its shares from a major shareholder before
Christmas. Buybacks were unheard of in Korea in pre-crisis days. Asia is also
coming off a lower base in terms of consumption activity and spare capacity
still abounds in many areas. High current account surpluses in most countries
should provide good liquidity support even if global bond yields are rising.
Australia and New Zealand, in contrast, have high current account deficits.
However, improving commodity export prices and volumes should improve their
trade picture this year. Unlike the rest of Asia, valuations in many sectors
have contracted. Higher interest rates may make progress more difficult, but
reasonably high dividend yields relative to bonds suggest much more of this has
been discounted.
We continue to closely monitor developments in Japan, where questions still
remain about the sustainability of the embryonic economic recovery. We have
taken profits in some of our holdings that have performed exceptionally well
during 1999. We are also monitoring other Japanese companies that are either
restructuring or which stand to benefit from a more buoyant Japanese economy.
Outside of Japan, we have also taken profits from some holdings that
performed very well last year. Additionally, we have been selectively reducing
our exposure to certain interest-rate sensitive stocks.
Looking forward to the current year, equity markets must balance the
negative influence of rising interest rates against the positive impact of
stronger economic conditions. We expect equity returns to be lower in 2000 given
recent strong performance and current high valuations. While growth in the
telecommunications and technology sectors remains impressive, we would expect
performance in 2000 to be more broad-based and we continue to find value in high
quality companies that have not participated in recent bull markets.
BANK OF IRELAND ASSET MANAGEMENT (US) LIMITED
INVESTMENT SUBADVISER TO THE AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
8
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
AND MSCI EAFE INDEX*
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND MSCI EAFE*
------------------------- ----------
<S> <C> <C>
5/17/93 10000 10000
12/31/93 11980 10570
12/31/94 11144 11423
12/31/95 13260 12741
12/31/96 16159 13551
12/31/97 17126 13875
12/31/98 19673 16696
12/31/99 26071 21256
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* South Africa-Free from 5/93 - 12/93. The inception date of the index
presented for comparison purposes is May 31, 1993.
** Fund's inception date
MORGAN STANLEY CAPITAL INTERNATIONAL --
EUROPE, AUSTRALIA, FAR EAST INDEX
The arithmetic, market value-weighted average of the performance of over
900 securities listed on the stock exchanges of the following 20 countries:
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand, Norway, Singapore,
Spain, Sweden, Switzerland, and the United Kingdom. The Index is calculated on a
total return basis, which includes reinvestment of gross dividends before
deduction of withholding taxes.
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AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
The American Odyssey Emerging Opportunities Fund returned 36.71% for the
year ended December 31, 1999. The Russell 2500 Index returned 24.15% for the
same period.
The following commentary has been provided by CHARTWELL INVESTMENT
PARTNERS, co-investment subadviser to the American Odyssey Emerging
Opportunities Fund. Chartwell Investment Partners managed 60% of the Fund as of
December 31, 1999.
For the majority of 1999, small cap stocks represented by the Russell 2000
significantly lagged their large cap counterparts represented by the S&P 500.
With a return of 5.3% versus 2.4% for the first three quarters of 1999, it
appeared as if the S&P would lengthen its streak of dominance over the Russell
2000 to 6 years. The more recent performance differential can be explained by
relative earnings growth with small cap profit growth lagging large cap profit
growth since the second quarter of 1998. And although large cap earnings growth
is expected to continue to outpace small cap earnings growth, the Russell 2000
out-performed the S&P 500 for 1999 with returns of 21.4% versus 21.03%,
respectively. The out-performance by the Russell 2000 occurred primarily in the
fourth quarter, which was led by technology and internet stocks. In the first
three quarters of 1999, technology provided 4.6% and 5.3% of contribution to the
Russell 2000 and the S&P 500, respectively. However, in the fourth quarter of
1999, technology provided 14.3% and 7.9% of contribution to the respective
industries. The emergence of new and exciting industries such as the internet,
computer networking and telecommunications helped catapult small cap technology
earnings growth and stock performance past their large cap counterparts. Despite
overall small cap earnings growth still lagging that of large caps, small cap
technology earnings growth began to out-pace that of large caps in the third
quarter of 1999 at 56.7% versus 50.0% due to greater focus on and exposure to
these growth opportunities.
For the second consecutive year, the Russell 2000 Growth index out-paced
the Russell 2000 Value index with a 42.8% return versus a 1.3% return. The same
technology bias is evident in the relative performances of the growth and value
indices. Backing out the technology contribution, the growth's return would have
been 8.8% and the value index's return would have been -5.8%. Although there is
some overlap in the technology sectors of these two indices, the growth's
technology weighting of 43% versus the 11% weighting in the value index was the
driving factor in the relative out-performance. The financial services sector
was another source of out-performance. The financial services sector of the
growth index was driven by investment bankers/brokers, who have seen strong
increases in trading volume and new subscribers. In fact, the growth index
out-performed the value index in every major economic sector.
In 1999, the portion of the American Odyssey Emerging Opportunities Fund
managed by Chartwell Investment Partners returned 45.1%, out-performing the
Russell 2000 Growth Index by 2.3%. The out-performance can be attributed to our
overweight position and generally solid stock picking in the technology sector.
Our bets on, and stock selection in, the computer software and semiconductor
industries worked well in 1999 but was somewhat diluted by our lack of exposure
to and relatively poor stock selection in the internet sector. Another major
source of out-performance was the consumer service sector. Despite poor
performances in retailers and restaurant stocks, our bets on and stock selection
in the radio broadcasting and cable television industries worked well. Our major
source
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<PAGE> 12
of under-performance was the healthcare sector. Poor industry bets and equally
poor stock picking in this sector tempered the strong performance of our
technology sector. Our overweight positions in the assisted living, hospital
management and services to the healthcare industry stocks and our underweight
position in biotechnology stocks provided more than 10% in underperformance.
As mentioned above, technology was the story in 1999, producing four of our
top five contributors. Micromuse, a service level management software provider
for information technology infrastructures, was the largest contributor to 1999
return. Strong growth in information technology networks and the complexity of
these networks led to strong demand for the company's products, which in turn,
provided an upside earnings surprise. Mercury Interactive (MERQ), an
applications testing software company, was second top contributor to 1999
return. A strong outlook for the company's software and solid execution by the
company led to a string of good quarters and the strong stock performance.
Semtech Corporation, an analog circuit designer and manufacturer, was our third
top-performing name in the third quarter. Strong demand from the communications,
computer and automated testing equipment industries for the company's power
management and protection products also led to a number of strong quarters and
healthy stock appreciation.
Despite the performance dominance and record valuations of technology
companies in 1999, small cap companies on the whole are significantly
under-valued versus their large cap counterparts. As such, we remain quite
bullish on the prospects for the small cap market with a broadening of market
performance, which should benefit small caps more than large caps.
The following commentary has been provided by SG COWEN ASSET MANAGEMENT,
co-investment subadviser to the American Odyssey Emerging Opportunities Fund. SG
Cowen Asset Management managed 40% of the Fund as of December 31, 1999.
In 1999 the portion of the Fund managed by SG Cowen Asset Management
returned 27.8% outperforming the Russell 2000 (21.4%), the average Lipper Small
Cap Core Manager (20.2%) and the average Lipper Small Cap Value Manager (1.3%),
respectively.
For the first year since 1994, small caps outperformed large caps. At the
same time, valuation measures of small cap stocks remain at historically
attractive levels. In the past, once small caps have started to outperform it
has been a multi-year wave of outperformance versus large cap stocks. We believe
that, with global strengthening, investors will be less concerned about
liquidity and will examine opportunities beyond U.S. large cap stocks. What they
will find is that one of the world's best investments is the U.S. small cap
sector, which is trading at historically low valuations with excellent growth
prospects.
Our small cap strategy is to seek companies that are selling at attractive
valuations. We then look for potential catalysts that can bring companies to
life, such as new management, products, or technology. We analyze a company's
fundamental strength, preferring those with improving balance sheets and cash
flows, growing market share, and experienced management with significant stock
ownership.
A prime example of the rewards of adhering to our long-held and time-tested
discipline was our emphasis on energy stocks last year during a period in which
most investors shunned them. We had
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<PAGE> 13
conviction that the $10 per barrel oil price was unsustainable, and that
recessions in oil-producing countries such as Saudi Arabia and Venezuela would
lead them to cut back production to boost prices. We also believed that Asia's
economic problems were temporary and that the Federal Reserve Board and other
major central banks would be successful in creating new liquidity. Finally, we
were beginning to see the first signs of geological restraint on oil output in
the form of less success from exploration and faster depletion rates. Our calm
and patience were rewarded. We believe that many energy stocks are still only
reflecting $14 per barrel oil price and that there continues to be significant
upside potential.
In addition to energy, health care has been an important source of
performance. Although healthcare as a group underperformed in 1999, our research
uncovered a number of very interesting companies whose stock price performance
exceeded the averages. Two examples include COR Therapeutics, a company engaged
in the discovery, development and commercialization of pharmaceutical products
for the treatment and prevention of cardiovascular diseases, and Zoll Medical,
which designs, manufacturers and markets non-invasive cardiac resuscitation
devices, external pacemaker/defibrillators, disposable electrodes, mobile EKG
systems, and software that automates patient records.
In technology, our investments in cellular, computer hardware, and
software/internet performed very well and in line with those sectors of the
market. As hard as it may seem, it is still possible to find value in the
overheated technology and telecommunications sectors.
Attractive valuations and consolidation in the metals sector led us to
overweight copper and nickel, which also helped the Fund. Finally, our
underweighting in financial services proved to be a major asset to performance,
as the group generated a negative return during the fiscal year.
We believe that our portion of the Fund contains a wide range of
attractively valued companies in a variety of industries: Newport News
Shipbuilding, a defense contractor likely to benefit from increases in U.S.
defense spending; Calgon Carbon, a technological leader in water purification
with accelerating earnings; Mid Atlantic, a well-managed HMO in a desirable
geographical market; FLIR Systems, an infrared technology company; and MSC
Industrial, a traditional industrial distribution company utilizing web-based
opportunities to gain market share.
The valuation characteristics remain very favorable compared to the S&P 500
Index and the Russell 2000. For example, of our portion of the Fund P/E ratio on
expected calendar year 2000 earnings is 15X compared to 30X for the S&P 500, and
23X for the Russell 2000. Meanwhile, our expected earnings growth rate is 25%
compared to 11% for the S&P 500 and 17% for the Russell 2000.
Historical analysis shows that performance comes in waves. While over the
last few years it certainly feels like small cap never outperforms, the opposite
is more often the case in the long run. This year small cap outperformed large,
and by adhering to our discipline we outperformed the small cap index and the
average small cap manager. We believe that our portion of the Fund is poised to
continue to deliver strong results in 2000.
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<PAGE> 14
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
AND RUSSELL 2500 INDEX
<TABLE>
<CAPTION>
EMERGING OPPORTUNITIES RUSSELL 2500**
---------------------- --------------
<S> <C> <C>
5/17/93 10000 10000
12/31/93 10940 11012
12/31/94 12000 10895
12/31/95 15867 14349
12/31/96 15361 17080
12/31/97 16432 21243
12/31/98 15018 21324
12/31/99 20531 26474
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
** The inception date of the index presented for comparison purposes is May
31, 1993.
RUSSELL 2500(R) INDEX
The 2,500 smallest capitalization securities in the Russell 3000 Index,
representing approximately 7% of the Russell 3000 total market capitalization.
The Index is reconstituted annually in June, based upon the May 31 market
capitalization rankings. The Index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
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<PAGE> 15
AMERICAN ODYSSEY CORE EQUITY FUND
The American Odyssey Core Equity Fund returned (0.28)% for the year ended
December 31, 1999. The S&P 500 Index returned 21.03% for the same period.
1999 was a difficult year for value-oriented investing notwithstanding the
strong move in the broad market averages. Thanks to dramatic price increases
among companies in the technology and telecom sectors, the market indices
reached new heights and the price appreciation among the internet and e-commerce
related stocks have been astounding. Among the various industry sectors, the
larger capitalization companies with a growth-orientation also did well.
The result of these events is that the market's performance was again
driven by a small number of large companies with a technological orientation.
Virtually all of these have very high valuations and few meet our normal
criteria of having lower valuations relative to the market.
The narrowness of the market posed a second hurdle that most value-oriented
investors had difficulty overcoming. The top 50 stocks in the S&P 500
contributed a return of 22.4%, actually beating the benchmark's return. The
average company in the Index, however, actually declined in price. Similarly,
the median company in the Russell Value Index was off 5.6%.
Fund performance compared unfavorably with the S&P 500 Index due largely to
negative contributions from individual stock decisions and a continued
underweight in technology stocks. The Fund's lesser exposure to technology
relative to the benchmark posed a significant hurdle. In fact, 14 percentage
points of the overall S&P 500's return came from the technology sector alone.
The Fund benefited from both good stock selection in several of the
interest rate sensitive sectors and significant exposure in the basic materials
sector. Individual stocks that had a particularly positive impact on the Fund
included Morgan Stanley, Dean Witter, the Tribune Company, and Columbia HCA
Healthcare. These positive results, however, were more than offset by
unfavorable stock contributions primarily in the technology and defense sectors.
Individual stocks that had a materially negative impact on performance during
the year included Compaq Computer Corp, Lockheed Martin, and McKesson HBOC.
Our view of the market during the coming year is that we expect to see
broader participation by stocks of companies that are able to generate
consistent earnings growth in a benign inflationary environment. We believe
those companies with global franchises, industry leadership positions, and
aggressive productivity and product innovation programs will be the most
advantaged. The broader market participation should encompass those large
capitalization value stocks that are already discounting the effects of a US
slowdown, but are not yet reflecting the benefits of globally accelerating
growth.
There are three sectors where we see salient themes developing. First, we
believe the technology sector will continue to benefit as companies accelerate
their productivity spending to lower costs and pursue new growth opportunities.
There are industry estimates suggesting that the current installed base of
servers represents only 20% of the number required to facilitate the projected
volume of business and consumer transactions on the internet. This year, the
industry should experience a
14
<PAGE> 16
particularly strong increase in technology spending, as capital which had been
directed at Y2K remediation, is redirected toward productivity objectives.
Second, pharmaceutical stocks are becoming increasingly attractive
investment opportunities. These have come under selling pressure in anticipation
of possible policy proposals which could negatively impact drug prices. We are
actively looking to exploit this sell-off and invest in stocks that have
promising near-term pipelines.
Finally, our exposure to the basic material sector is predicated on our
belief that the initial positive impact of any global acceleration of economic
growth will be first seen in the prices of globally traded commodities.
Our approach will be to continue to pursue the less expensive areas of the
market but at the same time emphasize market leaders and companies that
effectively utilize technology and emerge as leaders within their business
sector. We believe it will be important to avoid companies where the competency
of management, accounting, or litigation is a major concern regardless of how
inexpensive they seem. There will be ample opportunity in this environment to
purchase very inexpensive companies that are positioned to do well over the next
few years and we are dedicated to succeed in this endeavor.
EQUINOX CAPITAL MANAGEMENT, L.L.C.
INVESTMENT SUBADVISER TO THE AMERICAN ODYSSEY CORE EQUITY FUND
15
<PAGE> 17
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
AMERICAN ODYSSEY CORE EQUITY FUND AND S&P 500 INDEX
<TABLE>
<CAPTION>
CORE EQUITY S&P 500**
----------- ---------
<S> <C> <C>
5/17/93 10000 10000
12/31/93 10392 10527
12/31/94 10287 10666
12/31/95 14253 14674
12/31/96 17555 18043
12/31/97 22916 24070
12/31/98 26478 30948
12/31/99 26404 37456
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
** The inception date of the index presented for comparison purposes is May
31, 1993.
S&P 500(R) INDEX
Capitalization weighted index of 500 large stocks, representing
approximately 70% of the broad U.S. equity market. Membership is decided upon by
the Standard & Poor's 500 committee. The Index is calculated on a total return
basis, which includes reinvestment of gross dividends before deduction of
withholding taxes.
16
<PAGE> 18
AMERICAN ODYSSEY LONG-TERM BOND FUND
The American Odyssey Long-Term Bond Fund returned (2.74)% for the year
ended December 31, 1999. The Salomon Core+5 Bond Index returned (1.69)% for the
same period.
The Long-Term Bond Fund's performance over the past 12 months trailed its
benchmark by 105 basis points, as strategies produced mixed results. Mortgage
and corporate overexposure was a significant positive for performance, as
spreads narrowed and volatility decreased somewhat during the year. Yield curve
exposure was positive as we captured the changes in yield curve during the
period. Emerging market exposure was also positive for performance, and our
decision to reduce portfolio convexity through the sale of options was rewarded
since prices were relatively stable over the period. Unfortunately, these gains
were offset by our long duration exposure throughout the period, as yields rose
across the curve. Exposure to TIPS was also a drag on performance since real
yields rose in line with nominal yields.
The New Year is shaping up as one that promises relief from the tensions
that have accumulated in the bond market over the past year. We've already seen
some relief from the terrible spread widening of 1998, but there's room for
more. Spreads eased somewhat in the first half of last year, only to swell again
in the third quarter in a climax of Y2K-related hedging and new issuance.
Spreads have narrowed recently as Y2K turned out to be a non-event and the
outlook for earnings remained healthy. Progress toward tighter spreads has been
most noticeable in the more risky sectors, particularly high yield and emerging
markets. Yet spreads still remain substantially higher than long-term averages
and of course, interest rates remain significantly higher than suggested by the
inflation fundamentals.
Despite the continued rise in interest rates, our outlook has not changed
materially. We continue with our long-held beliefs that inflation will remain
low thanks to restrictive monetary policy, and that low inflation is compatible
with and even conducive to healthy economic growth. Both nominal and real yields
thus appear very attractive at these levels, but our long duration exposure is
tempered somewhat by the Federal Reserve's apparent focus on the strength of the
economy and the level of difficulty involved in trying to anticipate this
strength. Relatively high volatility continues to argue for holding a somewhat
negatively convex exposure as a defensive strategy. We do not think the economic
fundamentals warrant more monetary tightening than the market has already priced
in, so we continue to emphasize a neutral to somewhat bulleted yield curve
exposure. Corporate spreads continue to represent excellent value, so we remain
overweight to the sector, particularly to credits in the lower end of the
quality scale. Mortgage spreads, on the other hand, have declined enough to
warrant a somewhat less aggressive overweight position than in the past. With
the continued rise in real interest rates, inflation-indexed bonds continue to
offer exceptional value as well as attractive hedging properties, so we remain
aggressively overweight. High yield and emerging market sectors continue to
offer excellent value, but lingering systemic risk argues for careful selection
and well-diversified exposures.
WESTERN ASSET MANAGEMENT COMPANY
INVESTMENT SUBADVISER TO THE AMERICAN ODYSSEY LONG-TERM BOND FUND
17
<PAGE> 19
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY LONG-TERM BOND FUND
AND SALOMON CORE +5 BOND INDEX
<TABLE>
<CAPTION>
LONG-TERM BOND SALOMON CORE +5**
-------------- -----------------
<S> <C> <C>
5/17/93 10000 10000
12/31/93 11072 10513
12/31/94 10433 10130
12/31/95 12773 12283
12/31/96 12947 12677
12/31/97 14445 14027
12/31/98 15750 15300
12/31/99 15318 15041
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
** The inception date of the index presented for comparison purposes is May
31, 1993.
SALOMON BROTHERS CORE +5 BOND INDEX
This Index is composed of all domestic bonds that are investment grade
(rated Baa or higher by Moody's or BBB or higher by Standard & Poor's) with the
exception of government issues with less than 5 years to maturity. Total return
comprises price appreciation/depreciation and income as a percentage of the
original investment. Index is rebalanced monthly by market capitalization.
18
<PAGE> 20
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
The American Odyssey Intermediate-Term Bond Fund returned 1.50% for the
year ended December 31, 1999. The Lehman Government/Corporate Intermediate Bond
Index returned 0.39% for the same period.
In the U.S., the decade closed out with peace and prosperity. Rolling
12-month core inflation and unemployment both hit 30-year lows, while consumer
confidence hit a 30-year high and productivity a 7-year high. Housing and auto
activity broke records, but both contributed to some small inflationary signs
and began to taper as interest rates had some minor impact. Consumers continued
to drive the economy by spending. The savings rate dropped to negative
territory, as compared to income, but this is justified in consumers' minds by
enormous wealth creation powered by the stock market. Spending as a fraction of
assets is actually low. The budget surplus and trade deficit both widened, while
the dollar hit euro parity. The year pulled the U.S. economic expansion to
within two months of shattering an all-time longevity record. In the process, it
brought the Treasury curve higher by 179 basis points at the 10-year level to
6.44% and surged equities once again, the S&P exceeding a 20% total return for
the fifth year in a row. The Federal Open Market Committee drove a 75 basis
points tightening in three separate moves that reversed three crisis-driven
decreases in the overnight rate the previous year. This was done as economies
worldwide recovered from the Asian contagion.
The bond market is bearish, having priced in 75 more basis points of Fed
tightening in the first six months of the year. Higher rates are not drawing as
much attention to bonds as they normally would, given the type of equity returns
seen recently. This complacency indicates that rate-increase anticipation is
warranted. We are therefore of a slightly short-duration mindset, remaining very
close to neutral due to the negative sentiment that has already been priced in.
The risk to an upward rate surprise lies in the potential for the market to view
the Fed as being behind the curve in the control of inflation. Additionally, a
weakening of the dollar would also contribute to rising rates.
Spreads have tightened since their wide levels last summer but remain
historically high and therefore could continue to tighten 20-25 basis points in
the next 6-12 months. Dealer appetite bouncing back after position-reductions
following 1998's crisis and Y2K should push this trend. An opposing spread force
remains the fact that government debt will probably continue to decrease,
thereby lowering treasury yields.
TRAVELERS ASSET MANAGEMENT INTERNATIONAL CORPORATION
INVESTMENT SUBADVISER TO THE AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
19
<PAGE> 21
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
AND LBGC INTERMEDIATE BOND INDEX
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND LBGC INTERMEDIATE**
---------------------- -------------------
<S> <C> <C>
5/17/93 10000 10000
12/31/93 10455 10403
12/31/94 10157 10203
12/31/95 11682 11763
12/31/96 12143 12241
12/31/97 13066 13204
12/31/98 14315 14168
12/31/99 14381 14371
</TABLE>
Past performance is not predictive of future performance. Persons who
invest in the Fund through a variable annuity contract should note this graph
does not reflect separate account expenses deducted by the insurance company.
- ---------------
* Fund's inception date
** The inception date of the index presented for comparison purposes is May
31, 1993.
LEHMAN BROTHERS GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX
This Index is composed of all domestic bonds that are investment grade
(rated Baa or higher by Moody's or BBB or higher by Standard & Poor's) which are
between 1 and 10 years to maturity. Issues must have amounts outstanding in
excess of $25 million. Total return comprises price appreciation/depreciation
and income as a percentage of the original investment. Index is rebalanced
monthly by market capitalization.
20
<PAGE> 22
Intentionally Left Blank
<PAGE> 23
Statements of Assets and Liabilities
American Odyssey Funds, Inc. / December 31, 1999
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------- --------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in
securities, at
cost................. $ 96,722,187 $ 242,368,404 $ 297,137,847 $ 378,516,923 $ 250,106,091 $ 131,342,510
- ----------------------------------------------------------------------------------------------------------------------------
Investments in
securities, at value
(see accompanying
Portfolio of
Investments) (Note
2)..................... $ 92,774,210 $ 382,674,318 $ 369,840,596 $ 455,017,013 $ 239,132,697 $ 128,916,305
Cash................... 1,869,566 3,399,279 8,069,976 16,114,993 17,710,386 1,583
Cash, denominated in
foreign currency (cost,
$3,457,443)............ -- 2,895,251 -- -- -- --
Receivables for:
Investment securities
sold................. -- -- 4,386,289 46,146 -- --
Capital share
subscriptions........ 30,807 105,416 81,431 112,847 63,810 117,815
Unrealized appreciation
on forward foreign
currency contracts
(Note 8)............. -- 23,888 -- -- -- --
Interest............... 2,142,970 10,227 19,602 44,908 2,685,397 2,240,903
Dividends.............. -- 115,874 99,162 881,927 -- --
Foreign tax reclaims... -- 288,879 290 163 -- --
Prepaid expenses......... -- -- -- 54,887 -- --
------------ ------------- ------------ ------------ ------------ ------------
Total assets........... 96,817,553 389,513,132 382,497,346 472,272,884 259,592,290 131,276,606
------------ ------------- ------------ ------------ ------------ ------------
LIABILITIES
Payables for:
Investment securities
purchased............ -- -- 8,173,484 1,164,664 -- --
Delayed delivery
transactions (Note
9)................... -- -- -- -- 4,757,688 --
Capital share
redemptions.......... 102,909 374,073 459,291 445,380 213,031 77,582
Unrealized depreciation
on forward foreign
currency contracts
(Note 8)............. -- 433,706 -- -- -- --
Variation margin on
open futures
contracts (Note 6)... -- -- -- -- 33,031 --
Options written
(premiums received
$158,007) (Note 7)... -- -- -- -- 89,281 --
Payable to Adviser....... 54,587 183,127 217,262 220,739 106,779 54,106
Accrued expenses......... 38,393 29,904 8,981 24,736 24,910 21,641
------------ ------------- ------------ ------------ ------------ ------------
Total liabilities...... 195,889 1,020,810 8,859,018 1,855,519 5,224,720 153,329
------------ ------------- ------------ ------------ ------------ ------------
NET ASSETS............... $ 96,621,664 $ 388,492,322 $ 373,638,328 $ 470,417,365 $ 254,367,570 $ 131,123,277
============ ============= ============ ============ ============ ============
Capital shares
outstanding............ 9,382,126 17,396,094 22,758,704 26,709,805 24,991,095 12,658,199
============ ============= ============ ============ ============ ============
Net asset value per
share.................. $ 10.30 $ 22.33 $ 16.42 $ 17.61 $ 10.18 $ 10.36
============ ============= ============ ============ ============ ============
- ----------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Capital shares at par.... $ 93,821 $ 173,961 $ 227,587 $ 267,098 $ 249,911 $ 126,582
Additional
paid-in-capital........ 96,712,113 231,527,649 286,221,789 366,741,041 256,451,243 129,092,295
Undistributed net
investment income...... 9,124,401 3,371,638 55,097 5,738,472 16,204,242 7,390,343
Accumulated net realized
gain (loss) on
investments, futures
contracts, option
contracts and foreign
currency
transactions........... (5,360,694) 14,098,563 14,431,106 21,170,664 (7,349,889) (3,059,738)
Net unrealized
appreciation
(depreciation) on
investments,
translation of assets
and liabilities in
foreign currencies,
futures contracts and
option contracts....... (3,947,977) 139,320,511 72,702,749 76,500,090 (11,187,937) (2,426,205)
------------ ------------- ------------ ------------ ------------ ------------
$ 96,621,664 $ 388,492,322 $ 373,638,328 $ 470,417,365 $ 254,367,570 $ 131,123,277
============ ============= ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 24
Statements of Operations
American Odyssey Funds, Inc. / For the year ended December 31, 1999
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------- --------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................ $ -- $ 5,044,573 (1) $ 1,175,460 (2) $ 8,440,784 (3) $ 35,000 $ --
Interest................. 9,803,352 206,432 350,830 273,015 17,419,117 8,138,446
----------- ------------ ------------ ------------ ------------ -------------
Total Income........... 9,803,352 5,251,005 1,526,290 8,713,799 17,454,117 8,138,446
----------- ------------ ------------ ------------ ------------ -------------
EXPENSES
Management fees (Note
3)..................... 597,092 1,907,212 2,230,930 2,695,731 1,244,205 620,940
Audit fees............... 16,801 16,801 14,699 14,699 15,199 15,199
Director's fees &
expenses............... 6,673 23,159 20,083 36,237 19,768 9,961
Custodian fees........... 87,722 337,400 218,025 261,217 166,015 80,071
Legal fees............... 12,637 14,232 8,647 13,536 7,386 3,196
Printing expense......... 9,552 32,592 61,120 45,107 25,078 12,693
Miscellaneous expense.... 3,232 12,669 13,311 24,710 10,635 5,315
----------- ------------ ------------ ------------ ------------ -------------
Total expenses before
directed brokerage
arrangements......... 733,709 2,344,065 2,566,815 3,091,237 1,488,286 747,375
----------- ------------ ------------ ------------ ------------ -------------
Less:
Expenses paid under
directed brokerage
arrangements (Note
4)................. -- (31,943) (100,493) (117,187) -- --
----------- ------------ ------------ ------------ ------------ -------------
Total expense
reductions......... -- (31,943) (100,493) (117,187) -- --
----------- ------------ ------------ ------------ ------------ -------------
Net expenses......... 733,709 2,312,122 2,466,322 2,974,050 1,488,286 747,375
----------- ------------ ------------ ------------ ------------ -------------
Net investment income
(loss)............. 9,069,643 2,938,883 (940,032) 5,739,749 15,965,831 7,391,071
----------- ------------ ------------ ------------ ------------ -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized gain
(loss) on investment
transactions, futures
contracts and option
contracts............ (111,640) 20,320,218 17,511,829 21,659,887 (7,494,141) (3,059,738)
Net realized loss on
foreign currency
transactions......... (50,204) (332,971) -- -- -- --
Net increase (decrease)
in unrealized
appreciation of
investments, futures
contracts and option
contracts............ 136,297 73,574,893 84,620,566 (27,761,775) (15,331,895) (2,404,548)
Net change in
unrealized
appreciation of
foreign currency
transactions......... 748 6,254 -- -- -- --
----------- ------------ ------------ ------------ ------------ -------------
Net realized and
unrealized gain
(loss) on
investments........ (24,799) 93,568,394 102,132,395 (6,101,888) (22,826,036) (5,464,286)
----------- ------------ ------------ ------------ ------------ -------------
Net increase (decrease)
in net assets from
operations........... $ 9,044,844 $ 96,507,277 $101,192,363 $ (362,139) $ (6,860,205) $ 1,926,785
=========== ============ ============ ============ ============ =============
</TABLE>
(1) Net of foreign taxes withheld of $644,879
(2) Net of foreign taxes withheld of $10,796
(3) Net of foreign taxes withheld of $14,516
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 25
Statements of Changes in Net Assets
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Global High-Yield Bond Fund International Equity Fund
------------------------------------- ------------------------------------
Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income
(loss)................. $ 9,069,643 $ 5,449,397 $ 2,938,883 $ 3,398,408
Net realized gain (loss)
on investment
transactions, futures
contracts, option
contracts and foreign
currency
transactions........... (161,844) (4,430,589) 19,987,247 (8,298,571)
Net increase (decrease)
in unrealized
appreciation
(depreciation) of
investments, futures
contracts, option
contracts and foreign
currency
transactions........... 137,045 (4,468,929) 73,581,147 41,865,674
------------- ------------- -------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 9,044,844 (3,450,121) 96,507,277 36,965,511
------------- ----------- ------------- -------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income................. (5,442,107) (20,259) -- (5,154,657)
From net realized gains
on investment
transactions........... -- -- -- (10,221,210)
------------- ------------- ------------- -------------
Total distributions to
shareholders......... (5,442,107) (20,259) -- (15,375,867)
------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from sales of
shares................. 11,770,533 30,761,703 37,055,222 44,196,631
Distributions
reinvested............. 5,442,107 20,259 -- 15,375,867
Cost of shares
repurchased............ (6,201,785) (4,124,056) (45,141,918) (17,661,458)
------------- ------------- ------------- -------------
Net increase from
capital share
transactions.......... 11,010,855 26,657,906 (8,086,696) 41,911,040
------------- ------------- ------------- -------------
Net increase (decrease)
in net assets.......... 14,613,592 23,187,526 88,420,581 63,500,684
NET ASSETS
Beginning of year........ 82,008,072 58,820,546 300,071,741 236,571,057
------------- ------------- ------------- -------------
End of year.............. $ 96,621,664 $ 82,008,072 $ 388,492,322 $ 300,071,741
============= ============= ============= =============
Undistributed net
investment income...... $ 9,124,401 $ 5,442,468 $ 3,371,638 $ 797,921
============= ============= ============= =============
CAPITAL SHARES
Capital shares
outstanding, beginning
of year................ 8,265,528 5,704,494 17,809,092 15,277,557
Capital shares issued.... 1,172,084 2,964,963 2,008,249 2,695,337
Capital shares from
distributions
reinvested............. 554,751 1,925 -- 918,510
Capital shares
redeemed............... (610,237) (405,854) (2,421,247) (1,082,312)
------------- ------------- ------------- -------------
Capital shares
outstanding, end of
year................... 9,382,126 8,265,528 17,396,094 17,809,092
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 26
Statements of Changes in Net Assets
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Emerging Opportunities Fund Core Equity Fund Long-Term Bond Fund
----------------------------- ---------------------------- ----------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1999 1998 1999 1998 1999 1998
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income
(loss)................. $ (940,032) $ (559,128) $ 5,739,749 $ 6,077,410 $ 15,965,831 $ 14,292,425
Net realized gain (loss)
on investment
transactions, futures
contracts, option
contracts and foreign
currency
transactions........... 17,511,829 24,973,514 21,659,887 64,714,251 (7,494,141) 7,398,857
Net increase (decrease)
in unrealized
appreciation
(depreciation) of
investments, futures
contracts, option
contracts and foreign
currency
transactions........... 84,620,566 (45,105,846) (27,761,775) (4,421,205) (15,331,895) (853,133)
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations........... 101,192,363 (20,691,460) (362,139) 66,370,456 (6,860,205) 20,838,149
------------- ------------- ------------ ------------ ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income................. -- -- (6,078,603) (40,202) (14,567,381) (114,595)
From net realized gains
on investment
transactions........... (25,671,500) -- (65,203,554) (48,900,936) (6,872,189) (4,441,593)
------------- ------------- ------------ ------------ ------------ ------------
Total distributions to
shareholders......... (25,671,500) -- (71,282,157) (48,941,138) (21,439,570) (4,556,188)
------------- ------------- ------------ ------------ ------------ ------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from sales of
shares................. 37,091,677 49,422,449 44,663,905 58,159,646 33,031,799 31,060,308
Distributions
reinvested............. 25,671,500 -- 71,282,157 48,941,138 21,439,570 4,556,188
Cost of shares
repurchased............ (32,975,517) (19,287,612) (46,837,663) (66,274,935) (26,168,840) (16,387,992)
------------- ------------- ------------ ------------ ------------ ------------
Net increase from
capital share
transactions......... 29,787,660 30,134,837 69,108,399 40,825,849 28,302,529 19,228,504
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets.......... 105,308,523 9,443,377 (2,535,897) 58,255,167 2,754 35,510,465
NET ASSETS
Beginning of year........ 268,329,805 258,886,428 472,953,262 414,698,095 254,364,816 218,854,351
------------- ------------- ------------ ------------ ------------ ------------
End of year.............. $ 373,638,328 $ 268,329,805 $470,417,365 $472,953,262 $254,367,570 $254,364,816
============= ============= ============ ============ ============ ============
Undistributed net
investment income...... $ 55,097 -- $ 5,738,472 $ 6,077,406 $ 16,204,242 $ 14,565,934
============= ============= ============ ============ ============ ============
CAPITAL SHARES
Capital shares
outstanding, beginning
of year................ 20,493,456 18,071,430 22,953,325 20,812,710 22,145,289 20,383,564
Capital shares issued.... 2,777,931 3,809,758 2,346,314 2,836,416 3,132,985 2,806,155
Capital shares from
distributions
reinvested............. 1,903,002 -- 3,765,566 2,387,373 2,133,290 414,953
Capital shares
redeemed............... (2,415,685) (1,387,732) (2,355,400) (3,083,174) (2,420,469) (1,459,383)
------------- ------------- ------------ ------------ ------------ ------------
Capital shares
outstanding, end of
year................... 22,758,704 20,493,456 26,709,805 22,953,325 24,991,095 22,145,289
============= ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
-----------------------------
Year ended Year ended
December 31 December 31
1999 1998
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income
(loss)................. $ 7,391,071 $ 6,595,258
Net realized gain (loss)
on investment
transactions, futures
contracts, option
contracts and foreign
currency
transactions........... (3,059,738) 3,745,609
Net increase (decrease)
in unrealized
appreciation
(depreciation) of
investments, futures
contracts, option
contracts and foreign
currency
transactions........... (2,404,548) (608,893)
------------- -------------
Net increase (decrease)
in net assets
resulting from
operations........... 1,926,785 9,731,974
------------- -------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income................. (6,579,835) (37,668)
From net realized gains
on investment
transactions........... (3,746,306) (542,497)
------------- -------------
Total distributions to
shareholders......... (10,326,141) (580,165)
------------- -------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from sales of
shares................. 17,720,772 17,626,605
Distributions
reinvested............. 10,326,141 580,165
Cost of shares
repurchased............ (14,882,803) (9,595,690)
------------- -------------
Net increase from
capital share
transactions......... 13,164,110 8,611,080
------------- -------------
Net increase (decrease)
in net assets.......... 4,764,754 17,762,889
NET ASSETS
Beginning of year........ 126,358,523 108,595,634
------------- -------------
End of year.............. $ 131,123,277 $ 126,358,523
============ ============
Undistributed net
investment income...... $ 7,390,343 $ 6,579,802
============= =============
CAPITAL SHARES
Capital shares
outstanding, beginning
of year................ 11,356,645 10,531,347
Capital shares issued.... 1,678,567 1,650,973
Capital shares from
distributions
reinvested............. 1,012,367 54,629
Capital shares
redeemed............... (1,389,380) (880,304)
------------- -------------
Capital shares
outstanding, end of
year................... 12,658,199 11,356,645
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE> 27
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Global High-Yield Bond Fund
-----------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------------
1999 1998 (1) 1997 1996 1995
------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year...... $ 9.92 $ 10.31 $ 10.24 $ 10.22 $ 9.68
------- ------- ------- ------- -------
OPERATIONS
Net investment
income (2)........... 0.96 0.66 0.55 0.37 0.51
Net realized and
unrealized gain
(loss) on
investments.......... 0.07 (1.05) 0.08 0.02 0.54
------- ------- ------- ------- -------
Total from investment
operations........... 1.03 (0.39) 0.63 0.39 1.05
------- ------- ------- ------- -------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income.... (0.65) (0.00) (0.56) (0.37) (0.51)
------- ------- ------- ------- -------
Total distributions.... (0.65) (0.00) (0.56) (0.37) (0.51)
------- ------- ------- ------- -------
NET ASSET VALUE
End of year............ $ 10.30 $ 9.92 $ 10.31 $ 10.24 $ 10.22
======= ======= ======= ======= =======
TOTAL RETURN (3)......... 10.68% (3.76)% 6.11% 3.80% 10.86%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
year (000's
omitted)............. $96,622 $82,008 $58,821 $48,673 $25,855
Ratios of expenses to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements....... 0.83% 0.78% 0.66% 0.68% 0.76%
After
repayments/reimbursements
and before directed
brokerage
arrangements....... 0.83% 0.78% (5) 0.74% (5) 0.75% (5) 0.75% (5)
After
repayments/reimbursements
and directed
brokerage
arrangements (4)... 0.83% 0.78% 0.74% 0.75% 0.75%
Ratios of net
investment income to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements....... 10.25% 7.56% 5.53% 5.54% 5.77%
After
repayments/reimbursements
and directed
brokerage
arrangements....... 10.25% 7.56% 5.45% 5.47% 5.78%
Portfolio turnover
rate................. 45.15% 193.04% 200.78% 154.51% 93.37%
</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.
(5) Unaudited.
The accompanying notes are an integral part of the financial statements.
26
<PAGE> 28
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
International Equity Fund
---------------------------------------------------------------------------------------
Year ended December 31,
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
<S> <C> <C> <C> <C> <C>
Beginning of year ....... $ 16.85 $ 15.48 $ 15.08 $ 12.68 $ 10.76
----------- ----------- ----------- ----------- -----------
OPERATIONS
Net investment
income (1) ............ 0.17 0.09 0.57 0.29 0.17
Net realized and
unrealized gain on
investments ........... 5.31 2.21 0.19 2.48 1.87
----------- ----------- ----------- ----------- -----------
Total from investment
operations .............. 5.48 2.30 0.76 2.77 2.04
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income ..... -- (0.31) (0.24) (0.30) (0.12)
Distributions from net
realized gains on
investments ........... -- (0.62) (0.06) (0.07) --
Distributions in excess
of net investment
income or realized
gains ................. -- -- (0.06) -- --
----------- ----------- ----------- ----------- -----------
Total distributions ....... -- (0.93) (0.36) (0.37) (0.12)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
End of year ............. $ 22.33 $ 16.85 $ 15.48 $ 15.08 $ 12.68
=========== =========== =========== =========== ===========
TOTAL RETURN (2) .......... 32.52% 14.91% 5.04% 21.93% 19.00%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
year (000's
omitted) .............. $ 388,492 $ 300,072 $ 236,571 $ 187,109 $ 92,115
Ratios of expenses to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ........ 0.72% 0.73% 0.79% 0.86% 1.00%
After
repayments/reimbursements
and before directed
brokerage
arrangements ........ 0.72% 0.73% (4) 0.79% (4) 0.86% (4) 1.09%(4)
After
repayments/reimbursements
and directed
brokerage
arrangements (3) .... 0.71% 0.72% 0.77% 0.83% 1.08%
Ratios of net
investment income to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ........ 0.90% 1.22% 1.61% 1.51% 1.70%
After
repayments/reimbursements
and directed
brokerage
arrangements ........ 0.91% 1.23% 1.63% 1.54% 1.62%
Portfolio turnover
rate .................. 18.36% 20.65% 23.08% 21.54% 31.40%
</TABLE>
- ----------
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/ reimbursements and
dircted brokerage arrangements figure because of repayments by the Fund to
the Manager once the Fund is operating below the limitation.
(4) Unaudited.
The accompanying notes are an integral part of the financial statements.
27
<PAGE> 29
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Emerging Opportunities Fund
----------------------------------------------------------------------------------------
Year ended December 31,
----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ....... $ 13.09 $ 14.33 $ 13.42 $ 15.02 $ 11.84
----------- ----------- ----------- ----------- -----------
OPERATIONS
Net investment
loss (1) .............. (0.04) -- -- -- --
Net realized and
unrealized gain
(loss) on
investments ........... 4.58 (1.24) 0.91 (0.47) 3.81
----------- ----------- ----------- ----------- -----------
Total from investment
operations ............ 4.54 (1.24) 0.91 (0.47) 3.81
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
Distributions from net
realized gains on
investments ........... (1.21) -- -- (1.13) (0.58)
Distributions in excess
of net investment
income or realized
gains ................. -- -- -- -- (0.05)
----------- ----------- ----------- ----------- -----------
Total distributions ..... (1.21) -- -- (1.13) (0.63)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
End of year ............. $ 16.42 $ 13.09 $ 14.33 $ 13.42 $ 15.02
=========== =========== =========== =========== ===========
TOTAL RETURN (2) .......... 36.71% (8.65)% 6.78% (3.03)% 32.23%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
year (000's
omitted) .............. $ 373,638 $ 268,330 $ 258,886 $ 171,278 $ 157,193
Ratios of expenses to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ........ 0.87% 0.87% 0.86% 0.72% 0.77%
After
repayments/reimbursements
and before directed
brokerage
arrangements ........ 0.87% 0.87% (4) 0.86% (4) 0.72% (4) 0.77% (4)
After
repayments/reimbursements
and directed
brokerage
arrangements (3) .... 0.83% 0.86% 0.86% 0.72% 0.77%
Ratios of net
investment income to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ........ (0.36)% (0.23)% (0.20)% (0.34)% (0.26)%
After
repayments/reimbursements
and directed
brokerage
arrangements ........ (0.32)% (0.22)% (0.20)% (0.34)% (0.26)%
Portfolio turnover
rate .................. 113.01% 138.02% 80.36% 43.00% 36.02%
</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.
(4) Unaudited.
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 30
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Core Equity Fund
----------------------------------------------------------------------------------------
Year ended December 31,
----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ..... $ 20.61 $ 19.93 $ 15.49 $ 13.32 $ 10.06
----------- ----------- ----------- ----------- -----------
OPERATIONS
Net investment
income (1) .......... 0.22 0.26 0.24 0.26 0.25
Net realized and
unrealized gain
(loss) on
investments ......... (0.06) 2.82 4.65 2.83 3.63
----------- ----------- ----------- ----------- -----------
Total from investment
operations .......... 0.16 3.08 4.89 3.09 3.88
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income ... (0.27) (0.00) (0.24) (0.27) (0.24)
Distributions from net
realized gains on
investments ......... (2.89) (2.40) (0.21) (0.65) (0.37)
Distributions in excess
of net investment
income or realized
gains ............... -- -- -- -- (0.01)
----------- ----------- ----------- ----------- -----------
Total distributions ... (3.16) (2.40) (0.45) (0.92) (0.62)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
End of year ........... $ 17.61 $ 20.61 $ 19.93 $ 15.49 $ 13.32
=========== =========== =========== =========== ===========
TOTAL RETURN (2) ........ (0.28)% 15.54% 31.67% 23.20% 38.56%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
year (000's
omitted) ............ $ 470,417 $ 472,953 $ 414,698 $ 273,772 $ 183,735
Ratios of expenses to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ...... 0.64% 0.65% 0.67% 0.68% 0.72%
After
repayments/reimbursements
and before directed
brokerage
arrangements ...... 0.64% 0.65% (4) 0.67% (4) 0.68% (4) 0.72% (4)
After
repayments/reimbursements
and directed
brokerage
arrangements (3) .. 0.62% 0.61% 0.65% 0.66% 0.70%
Ratios of net
investment income to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ...... 1.17% 1.30% 1.36% 1.93% 2.32%
After
repayments/reimbursements
and directed
brokerage
arrangements ...... 1.19% 1.34% 1.38% 1.95% 2.33%
Portfolio turnover
rate ................ 56.15% 51.52% 45.54% 45.73% 38.44%
</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.
(4) Unaudited.
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 31
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Long-Term Bond Fund
--------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ......... $ 11.49 $ 10.74 $ 10.15 $ 10.53 $ 9.37
----------- ----------- ----------- ----------- -----------
OPERATIONS
Net investment income (1) . 0.65 0.66 0.61 0.50 0.53
Net realized and
unrealized gain (loss) on
investments ............. (0.98) 0.31 0.61 (0.36) 1.57
----------- ----------- ----------- ----------- -----------
Total from investment
operations .............. (0.33) 0.97 1.22 0.14 2.10
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net
investment income ....... (0.67) (0.01) (0.62) (0.52) (0.57)
Distributions from net
realized gains on
investments ............. (0.31) (0.21) (0.01) -- (0.27)
Distributions in excess
of net investment
income or realized gains -- -- -- -- (0.10)
----------- ----------- ----------- ----------- -----------
Total distributions ....... (0.98) (0.22) (0.63) (0.52) (0.94)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
End of year ............... $ 10.18 $ 11.49 $ 10.74 $ 10.15 $ 10.53
=========== =========== =========== =========== ===========
TOTAL RETURN (2) ............ (2.74)% 9.04% 12.01% 1.34% 22.44%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
year (000's
omitted) ................ $ 254,368 $ 254,365 $ 218,854 $ 160,695 $ 114,612
Ratios of expenses to
average net assets:
Before
repayments/reimbursements
and directed brokerage
arrangements ............ 0.60% 0.60% 0.62% 0.63% 0.66%
After
repayments/reimbursements
and before directed
brokerage arrangements .. 0.60% 0.60%(4) 0.62%(4) 0.63%(4) 0.70%(4)
After
repayments/reimbursements
and directed brokerage
arrangements (3) ........ 0.60% 0.60% 0.62% 0.63% 0.70%
Ratios of net
investment income to
average net assets:
Before
repayments/reimbursements
and directed brokerage
arrangements ............ 6.41% 5.96% 6.22% 5.88% 6.67%
After
repayments/reimbursements
and directed brokerage
arrangements ............ 6.41% 5.96% 6.22% 5.88% 6.63%
Portfolio turnover
rate .................... 81.29% 224.48% 358.67% 369.32% 381.53%
</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.
(4) Unaudited
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 32
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
--------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year ..... $ 11.13 $ 10.31 $ 10.20 $ 10.38 $ 9.61
----------- ----------- ----------- ----------- -----------
OPERATIONS
Net investment
income (1) .......... 0.59 0.58 0.59 0.61 0.54
Net realized and
unrealized gain
(loss) on
investments ......... (0.44) 0.29 0.17 (0.20) 0.90
----------- ----------- ----------- ----------- -----------
Total from investment
operations .......... 0.15 0.87 0.76 0.41 1.44
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income ... (0.59) (0.00) (0.60) (0.59) (0.55)
Distributions from net
realized gains on
investments ......... (0.33) (0.05) (0.05) -- (0.07)
Distributions in excess
of net investment
income or realized
gains ............... -- -- -- -- (0.05)
----------- ----------- ----------- ----------- -----------
Total distributions ... (0.92) (0.05) (0.65) (0.59) (0.67)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
End of year ........... $ 10.36 $ 11.13 $ 10.31 $ 10.20 $ 10.38
=========== =========== =========== =========== ===========
TOTAL RETURN (2) ........ 1.50% 8.48% 7.50% 3.95% 15.01%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
year (000's
omitted) ............ $ 131,123 $ 126,359 $ 108,596 $ 86,385 $ 73,480
Ratios of expenses to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ....... 0.59% 0.60% 0.63% 0.66% 0.68%
After
repayments/reimbursements
and before directed
brokerage
arrangements ....... 0.59% 0.60% (4) 0.63% (4) 0.66% (4) 0.75% (4)
After
repayments/reimbursements
and directed
brokerage
arrangements (3) ... 0.59% 0.60% 0.63% 0.66% 0.75%
Ratios of net
investment income to
average net assets:
Before
repayments/reimbursements
and directed
brokerage
arrangements ....... 5.83% 5.50% 5.90% 5.77% 6.19%
After
repayments/reimbursements
and directed
brokerage
arrangements ....... 5.83% 5.50% 5.90% 5.77% 6.11%
Portfolio turnover
rate ................ 317.23% 407.24% 215.97% 191.20% 137.14%
</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.
(4) Unaudited.
The accompanying notes are an integral part of the financial statements.
31
<PAGE> 33
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN OBLIGATIONS -- 37.9%
Corporate Debt -- 12.4%
$ 400,000 Ainsworth Lumber Co., Yankee-Dollar
(PIK)
12.500%, 07/15/07............................ $ 440,000
250,000 Algoma Steel, Inc., Yankee-Dollar
12.375%, 07/15/05............................ 234,375
1,000,000 Banco Nacional Comerico Exterior SNC
7.250%, 02/02/04............................. 936,250
350,000 Call-Net Enterprises, Inc., Yankee-Dollar
8.000%, 08/15/08............................. 266,000
250,000 Call-Net Enterprises, Inc.,
Yankee-Dollar, Step Up
8.940%, 08/15/08............................. 122,500
200,000 Canadian Airlines Corp., Yankee-Dollar
10.000%, 05/01/05............................ 153,000
200,000 Canadian Airlines Corp., Yankee-Dollar
12.250%, 08/01/06............................ 109,000
400,000 Cenargo International Plc, Yankee-Dollar
9.750%, 06/15/08............................. 333,000
500,000 Clearnet Communications, Inc.,
Yankee-Dollar, Step Up
14.750%, 12/15/05............................ 490,000
500,000 Diamond Cable Communications Plc,
Yankee-Dollar, Step Up
10.750%, 02/15/07............................ 398,750
500,000 Dolphin Telecom Plc, Yankee-Dollar, Step
Up
11.500%, 06/01/08............................ 228,750
150,000 Doman Industries Ltd., Yankee-Dollar
8.750%, 03/15/04............................. 129,000
<CAPTION>
Principal
Amount (a) Value
- -------------------------------------------------------------------------------
<S> <C> <C>
$ 200,000 Energis PLC
9.750%, 06/15/09............................. $ 208,000
350,000 Hermes Euro Rail, Yankee-Dollar
11.500%, 08/15/07............................ 357,875
400,000 HMV Media Group Plc Series B,
Yankee-Dollar
10.250%, 05/15/08............................ 348,000
300,000 Imax Corp., Yankee-Dollar
7.875%, 12/01/05............................. 282,000
360,000 Indah Kiat Fin Mauritius, Euro-Dollar
10.000%, 07/01/07............................ 266,400
400,000 International Utility Structures,
Yankee-Dollar
10.750%, 02/01/08............................ 338,000
250,000 Intrawest Corp., Yankee-Dollar
9.750%, 08/15/08............................. 246,250
500,000 MetroNet Communications Corp.,
Yankee-Dollar, Step Up
9.950%, 06/15/08............................. 394,760
500,000 Microcell Telecommunication, Inc.
Series B, Yankee-Dollar, Step Up
14.000%, 06/01/06............................ 440,000
400,000 Millar Western Forest Products,
Yankee-Dollar
9.875%, 05/15/08............................. 400,000
320,000 Nuevo Grupo Iusacell SA, 144A
14.250%, 12/01/06............................ 332,000
400,000 Regional Independent Media,
Yankee-Dollar
10.500%, 07/01/08............................ 407,500
400,000 Repap New Brunswick, Yankee-Dollar
10.625%, 04/15/05............................ 372,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 34
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
<S> <C> <C>
- ----------------------------------------------------------------------------
$ 250,000 RSL Communications Plc, Yankee-Dollar
10.500%, 11/15/08....................... $ 236,250
400,000 Sea Containers Inc.
10.750%, 10/15/06....................... 402,000
250,000 Sun International Hotels Ltd.,
Yankee-Dollar
9.000%, 03/15/07........................ 238,750
250,000 TeleWest Communications Plc,
Yankee-Dollar
9.625%, 10/01/06........................ 254,375
400,000 TeleWest Communications Plc,
Yankee-Dollar, Step Up
11.750%, 10/01/07....................... 373,000
1,230,000 Transportacion Ferroviaria Mexicana SA,
Yankee-Dollar, Step Up
0.000%, 06/15/09........................ 790,275
450,000 United Pan-Europe Communications NV,
144A, Step Up
12.500%, 08/01/09....................... 255,375
2,865,000 Vnesheconombank, Variable Rate
0.000%, 12/15/15........................ 466,133
300,000 Worldwide Fiber, Inc. 144A
12.000%, 08/01/09....................... 310,500
350,000 ZSC Specialty Chemical Plc 144A
11.000%, 07/01/09....................... 364,875
-----------
11,924,943
-----------
Government Obligations -- 25.5%
690,000 Bulgaria Government Discount Note
Series A, Variable Rate
6.500%, 07/28/24........................ 551,137
<CAPTION>
Principal
Amount (a) Value
- ----------------------------------------------------------------------------
<S> <C> <C>
$ 680,000 Bulgaria-FLIRB Series A, Variable Rate
2.750%, 07/28/12........................ $ 489,600
600,000 Bulgaria-FLIRB Series PDI (Brady)
6.500%, 07/28/11........................ 473,250
250,000 Central Bank of Nigeria Series WW,
Variable Rate
6.250%, 11/15/20........................ 145,625
809,223 Ecuador - PDI (Brady)
3.750%, 02/27/15........................ 194,214
1,387 Ecuador Global Bond - PDI
3.813%, 12/29/49........................ 333
133,900 Ecuador Global Bond - PDI, Variable Rate
3.750%, 02/27/15........................ 32,136
8,371 Ecuador Global Bond - PDI, Variable Rate
6.625%, 02/27/15........................ 2,009
825,000 Ministry of Finance Russia Global Bond
10.000%, 06/26/07....................... 491,933
1,065,000 Ministry of Finance Russia Global Bond
Series R
8.750%, 07/24/05........................ 662,962
175,000 Ministry of Finance Russia Global Bond
Series R
9.250%, 11/27/01........................ 137,922
780,000 Ministry of Finance Russia Global Bond,
Series REGS, Euro-Dollar
11.000%, 07/24/18....................... 471,900
950,000 Ministry of Finance Russia, 144A
11.000%, 07/24/18....................... 572,375
485,000 Ministry of Finance Russia, 144A
12.750%, 06/24/28....................... 335,862
520,000 Peru-FLIRB - Series US, Variable Rate
3.750%, 03/07/17........................ 321,100
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE> 35
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
<S> <C> <C>
- ---------------------------------------------------------------------------
<S> <C> <C>
$ 385,000 Peru-PDI - Series US, Variable Rate
4.500%, 03/07/17........................ $ 264,687
170,000 Poland - Bearer - PDI, Step Up
5.000%, 10/27/14........................ 150,450
705,000 Republic of Argentina
11.375%, 01/30/17....................... 701,475
600,000 Republic of Argentina Global Bond
9.750%, 09/19/27........................ 543,000
250,000 Republic of Argentina Global Bond
11.750%, 04/07/09....................... 251,250
390,000 Republic of Argentina Global Bond
Series BGL
11.000%, 10/09/06....................... 387,075
660,000 Republic of Argentina Global Bond,
Variable Rate
6.880%, 03/31/23........................ 523,050
1,909,600 Republic of Argentina Series BB,
Variable Rate
6.810%, 03/31/05........................ 1,737,736
1,550,000 Republic of Argentina Series L-GP, Step
Up
6.000%, 03/31/23........................ 1,019,125
1,276,183 Republic of Argentina Series PRO1,
(ARS) Variable Rate
2.953%, 04/01/07........................ 882,931
870,000 Republic of Brazil
10.125%, 05/15/27....................... 746,460
915,974 Republic of Brazil - C Bond, Variable
Rate
8.000%, 04/15/14........................ 688,125
2,535,609 Republic of Brazil - C Bond, Variable
Rate (PIK)
5.000%, 04/15/14........................ 1,904,876
5,802 Republic of Brazil - C Bond, Variable
Rate (PIK)
8.000%, 04/15/14........................ 4,359
<CAPTION>
Principal
Amount (a) Value
- ---------------------------------------------------------------------------
<S> <C> <C>
$1,240,000 Republic of Brazil - DCBL - Series 1
(Brady)
7.000%, 04/15/12........................ $ 923,800
510,000 Republic of Brazil - NMB L (Brady),
Variable Rate
5.938%, 04/15/09........................ 415,013
790,000 Republic of Brazil - Series RG,
Variable Rate
6.875%, 04/15/12........................ 588,550
16,061 Republic of Brazil C Bond Series L,
Variable Rate
8.000%, 04/15/14........................ 12,066
1,132,700 Republic of Brazil Series EI-L,
Variable Rate
6.940%, 04/15/06........................ 996,776
1,090,400 Republic of Brazil Series EI-RG,
Variable Rate
6.125%, 04/15/06........................ 959,552
175,000 Republic of Colombia
Global Bond Series NOV
9.750%, 04/23/09........................ 167,781
295,000 Republic of Colombia, Variable Rate,
Yankee-Dollar
11.440%, 08/13/05....................... 283,200
470,000 Republic of Panama
8.875%, 09/30/27........................ 394,800
700,000 Republic of Philippines Global Bond
9.875%, 01/15/19........................ 692,125
135,000 Republic of Turkey Global Bond
11.875%, 11/05/04....................... 139,725
1,150,000 Republic of Venezuela
9.250%, 09/15/27........................ 759,000
761,900 Republic of Venezuela Series DL,
Variable Rate
6.313%, 12/18/07........................ 599,996
90,000 United Mexican States Global Bond
11.500%, 05/15/26....................... 107,325
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 36
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- -----------------------------------------------------------------------
<S> <C> <C>
$ 810,000 United Mexican States
Global Bond Series XW
10.375%, 02/17/09....................... $ 862,650
320,000 United Mexican States Global Bond,
Series EMTN
9.750%, 04/06/05........................ 331,200
250,000 United Mexican States Series B
6.250%, 12/31/19........................ 196,875
750,000 United Mexican States Series D, Variable
Rate
6.900%, 12/31/19........................ 702,188
1,075,000 United Mexican States Series W-A
6.250%, 12/31/19........................ 846,563
----------------
24,666,142
----------------
TOTAL FOREIGN OBLIGATIONS
(Cost $34,715,392).............................. 36,591,085
----------------
U.S. CORPORATE OBLIGATIONS -- 56.8%
300,000 Ackerley Group, Inc. Series B
9.000%, 01/15/09........................ 294,000
400,000 Adelphia Communications Corp. Series B
8.375%, 02/01/08........................ 372,000
250,000 Advance Stores Co., Inc. Series B
10.250%, 04/15/08....................... 218,750
250,000 Advanced Glassfiber Yarns
9.875%, 01/15/09........................ 235,000
300,000 Aetna Industries, Inc.
11.875%, 10/01/06....................... 291,000
300,000 Agrilink Foods, Inc.
11.875%, 11/01/08....................... 303,000
150,000 AirGate PCS, Inc., Step Up
13.500%, 10/01/09....................... 84,000
400,000 Allied Holdings, Inc. Series B
8.625%, 10/01/07........................ 354,000
<CAPTION>
Principal
Amount (a) Value
- -----------------------------------------------------------------------
<S> <C> <C>
$ 350,000 Allied Waste North America Series B
7.875%, 01/01/09........................ $ 311,062
150,000 American Axle & Manufacturing Holdings,
Inc.
9.750%, 03/01/09........................ 151,875
400,000 American Cellular Corp.
10.500%, 05/15/08....................... 443,000
400,000 American Eco Corp. Series B
9.625%, 05/15/08........................ 206,500
400,000 American Lawyer Media, Inc. Series B
9.750%, 12/15/07........................ 390,000
250,000 American Media Operations, Inc., 144A
10.250%, 05/01/09....................... 251,875
400,000 Ameristar Casinos, Inc. Series B
10.500%, 08/01/04....................... 408,000
200,000 Ampex Corp. Series B
12.000%, 03/15/03....................... 201,250
300,000 Anthony Crane Rentals Series B
10.375%, 08/01/08....................... 256,500
300,000 Applied Extrusion Technologies, Inc.
Series B
11.500%, 04/01/02....................... 304,500
200,000 Arcadia Financial Ltd.
11.500%, 03/15/07....................... 209,000
400,000 Archibald Candy Corp.
10.250%, 07/01/04....................... 388,000
400,000 Aurora Foods, Inc. Series B
8.750%, 07/01/08........................ 383,000
400,000 Avalon Cable Holdings LLC, Step Up
11.875%, 12/01/08....................... 263,000
400,000 Axia, Inc.
10.750%, 07/15/08....................... 368,500
250,000 Aztar Corp.
8.875%, 05/15/07........................ 241,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE> 37
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- -----------------------------------------------------------------------
<S> <C> <C>
$ 200,000 B&G Foods, Inc. 144A
9.625%, 08/01/07........................ $ 178,500
250,000 Ball Corp.
8.250%, 08/01/08........................ 241,875
350,000 Bayou Steel Corp.
9.500%, 05/15/08........................ 328,562
250,000 Big City Radio, Inc., Step Up
0.000%, 03/15/05........................ 167,500
300,000 Booth Creek Ski Holdings
12.500%, 03/15/07....................... 218,250
200,000 Brand Scaffold Services, Inc.
10.250%, 02/15/08....................... 182,000
400,000 Building Materials Corp. Series B
7.750%, 07/15/05........................ 366,000
200,000 Caprock Communications Corp.
11.500%, 05/01/09....................... 205,250
400,000 CapStar Broadcasting, Step Up
12.750%, 02/01/09....................... 357,500
250,000 Carrols Corp.
9.500%, 12/01/08........................ 228,750
400,000 Casino Magic Corp. (Louisiana) Series B
13.000%, 08/15/03....................... 451,000
500,000 Century Communications Corp. Series B
0.000%, 01/15/08 (b).................... 215,000
250,000 Charter Communications Holdings LLC
Series B
9.920%, 04/01/11........................ 147,812
250,000 Classic Cable, Inc. Series B
9.375%, 08/01/09........................ 246,875
400,000 Classic Communications, Inc., Step Up
13.250%, 08/01/09....................... 278,500
400,000 Coaxial Communications, Inc.
10.000%, 08/15/06....................... 394,000
<CAPTION>
Principal
Amount (a) Value
- -----------------------------------------------------------------------
<S> <C> <C>
$ 250,000 Coinstar, Inc., Step Up
13.000%, 10/01/06....................... $ 251,563
400,000 Collins & Aikman Corp. Series B
10.000%, 01/15/07....................... 394,000
200,000 Condor Systems, Inc., 144A
11.875%, 05/01/09....................... 151,250
300,000 Continental Resources, Inc.
10.250%, 08/01/08....................... 265,877
221,000 Contour Energy Co.
14.000%, 04/15/03....................... 217,685
150,000 Contour Energy Corp. Series B
10.375%, 10/15/06....................... 61,875
400,000 Cumulus Media, Inc.
10.375%, 07/01/08....................... 418,000
400,000 Diamond Brands, Inc.
10.125%, 04/15/08....................... 310,000
300,000 Diamond Triumph Autoglass 144A
9.250%, 04/01/08........................ 211,500
500,000 DIVA Systems Corp. Series B, Step Up
12.625%, 03/01/08....................... 182,500
400,000 Dobson Communications Corp.
11.750%, 04/15/07....................... 451,000
250,000 Dobson/Sygnet Communications Corp.
12.250%, 12/15/08....................... 276,250
250,000 Dura Operating Corp. Series B
9.000%, 05/01/09........................ 236,875
400,000 e. spire Communications, Inc., Step Up
10.625%, 07/01/08....................... 153,000
500,000 e. spire Communications, Inc., Step Up
13.000%, 11/01/05....................... 250,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 38
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
$ 400,000 Eagle Family Foods Series B
8.750%, 01/15/08........................ $ 304,000
400,000 Eagle Geophysical, Inc. Series B
10.750%, 07/15/08....................... 34,000
300,000 Earthwatch, Inc., 144A, Step Up
13.000%, 07/15/07....................... 205,500
400,000 Echostar DBS Corp.
9.375%, 02/01/09........................ 404,000
400,000 Empress Entertainment, Inc.
8.125%, 07/01/06........................ 404,000
400,000 Exodus Communications, Inc.
11.250%, 07/01/08....................... 415,000
250,000 Falcon Holding Group LP Series B
8.375%, 04/15/10........................ 251,875
300,000 Fisher Scientific International, Inc.
9.000%, 02/01/08........................ 289,125
300,000 Fitzgerald Gaming Corp. Series B
12.250%, 12/15/04....................... 161,250
400,000 Fleming Companies, Inc. Series B
10.500%, 12/01/04....................... 370,000
500,000 Focal Communications Corp. Series B,
Step Up
12.125%, 02/15/08....................... 310,000
300,000 Fountain View, Inc. Series B
11.250%, 04/15/08....................... 229,500
250,000 Friendly Ice Cream Corp.
10.500%, 12/01/07....................... 214,375
300,000 Frontier Oil Corp.
11.750%, 11/15/09....................... 297,000
250,000 FrontierVision Operating Partners LP
Series B
11.875%, 09/15/07....................... 225,000
400,000 Galey & Lord, Inc., 144A
9.125%, 03/01/08........................ 88,000
<CAPTION>
Principal
Amount (a) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
$ 350,000 Gaylord Container Corp. Series B
9.750%, 06/15/07........................ $ 329,000
400,000 General Binding Corp.
9.375%, 06/01/08........................ 194,000
300,000 Geo Specialty Chemicals
10.125%, 08/01/08....................... 277,500
250,000 Global Crossing Holdings Ltd.
9.625%, 05/15/08........................ 251,250
250,000 Global Crossing Holdings Ltd., 144A
9.125%, 11/15/06........................ 248,438
400,000 Globalstar L.P.
11.500%, 06/01/05....................... 266,000
300,000 Globe Manufacturing Corp. Series B
10.000%, 08/01/08....................... 145,500
250,000 Globix Corp.
13.000%, 05/01/05....................... 253,750
300,000 Golden Sky DBS, Inc. Series B
13.500%, 03/01/07....................... 184,125
250,000 Gothic Production Corp. Series B
11.125%, 05/01/05....................... 210,625
400,000 Granite Broadcasting Corp.
8.875%, 05/15/08........................ 386,000
400,000 Great Lakes Carbon Corp. Series B (PIK)
10.250%, 05/15/08....................... 382,000
400,000 GST USA, Inc., Step Up
11.875%, 12/15/05....................... 295,000
200,000 Gulf States Steel-Alabama
13.500%, 04/15/03....................... 20,000
400,000 Hard Rock Hotel, Inc. Series B
9.250%, 04/01/05........................ 296,000
350,000 Hayes Lemerez International, Inc.
Series B
8.250%, 12/15/08........................ 323,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE> 39
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
$ 400,000 HMH Properties Series B
7.875%, 08/01/08........................ $ 358,500
250,000 Holley Performance Products, Inc., 144A
12.250%, 09/15/07....................... 240,000
450,000 Hollinger International Publishing, Inc.
9.250%, 02/01/06........................ 445,500
250,000 Hollywood Casino Corp.
11.250%, 05/01/07....................... 262,500
400,000 Hollywood Park, Inc. Series B
9.500%, 08/01/07........................ 398,000
400,000 Home Products International, Inc.
9.625%, 05/15/08........................ 367,000
350,000 Horseshoe Gaming LLC Series B
9.375%, 06/15/07........................ 350,000
350,000 Huntsman Corp., 144A
9.500%, 07/01/07........................ 333,375
400,000 Hyperion Telecommunications, Inc.
Series B, Step Up
13.000%, 04/15/03....................... 356,000
400,000 ICN Pharmaceuticals, Inc. Series B
9.250%, 08/15/05........................ 383,000
400,000 IMPAC Group, Inc. Series B
10.125%, 03/15/08....................... 366,000
400,000 InSight Health Services Corp.
9.625%, 06/15/08........................ 378,000
300,000 Interep National Radio Sales, Inc.
Series B
10.000%, 07/01/08....................... 288,750
250,000 Intermedia Communication, Inc. Series B
8.600%, 06/01/08........................ 230,000
400,000 International Home Foods, Inc.
10.375%, 11/01/06....................... 415,000
<CAPTION>
Principal
Amount (a) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
$ 350,000 Isle of Capri Casinos, Inc.
8.750%, 04/15/09........................ $ 323,750
400,000 ITC DeltaCom, Inc.
8.875%, 03/01/08........................ 385,000
400,000 IXC Communications, Inc.
9.000%, 04/15/08........................ 404,000
335,000 Jackson Products, Inc.
9.500%, 04/15/05........................ 309,875
400,000 James Cable Partners LP Series B
10.750%, 08/15/04....................... 407,000
250,000 Jazz Casino Co.
5.927%, 11/15/09........................ 151,250
250,000 JL French Auto Casting
11.500%, 06/01/09....................... 256,875
400,000 Jones Intercable, Inc.
8.875%, 04/01/07........................ 409,216
400,000 Jordan Telecommunications Products
Series B
9.875%, 08/01/07........................ 434,000
250,000 Key Energy Services, Inc.
14.000%, 01/15/09....................... 274,375
400,000 Keystone Consolidated Industries, Inc.
9.625%, 08/01/07........................ 358,000
150,000 Knology Holdings, Inc., Step Up
11.875%, 10/15/07....................... 100,500
400,000 L-3 Communications Corp.
8.500%, 05/15/08........................ 377,000
300,000 Lady Luck Gaming Corp.
11.875%, 03/01/01....................... 297,000
400,000 Laroche Industries, Inc. Series B
9.500%, 09/15/07........................ 112,000
400,000 Level 3 Communications, Inc.
9.125%, 05/01/08........................ 378,000
400,000 Lodestar Holdings Inc.
11.500%, 05/15/05....................... 202,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 40
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- ------------------------------------------------------------------------------
<S> <C> <C>
$ 400,000 Logix Communications Enterprise
12.250%, 06/15/08....................... $ 290,000
200,000 Lyondell Chemical Co.
9.875%, 05/01/07........................ 205,000
200,000 Magellan Health Services, Inc.
9.000%, 02/15/08........................ 163,000
250,000 Majestic Star Casino LLC Series B
10.875%, 07/01/06....................... 242,500
400,000 Maxim Group, Inc. Series B
9.250%, 10/15/07........................ 319,000
500,000 McLeodUSA, Inc., Step Up
10.500%, 03/01/07....................... 405,000
200,000 Mediacom LLC
7.875%, 02/15/11........................ 177,000
300,000 Mohegan Tribal Gaming Authority
8.750%, 01/01/09........................ 296,250
300,000 Motors and Gears, Inc. Series D
10.750%, 11/15/06....................... 299,250
200,000 Mrs. Fields Holding Co. - Unit, Step Up
14.000%, 12/01/05....................... 113,000
400,000 Mrs. Fields Original Cookies Series D
10.125%, 12/01/04....................... 326,000
400,000 NE Restaurant Company, Inc.
10.750%, 07/15/08....................... 356,000
250,000 Nebraska Book Co., Inc.
8.750%, 02/15/08........................ 221,250
500,000 Nextel Communications, Inc., Step Up
9.950%, 02/15/08........................ 351,250
500,000 Nextel Partner, Inc., Step Up
0.000%, 02/01/09........................ 337,500
300,000 NEXTLINK Communications, Inc.
9.625%, 10/01/07........................ 294,750
<CAPTION>
Principal
Amount (a) Value
- ------------------------------------------------------------------------------
<S> <C> <C>
$ 400,000 Northland Cable Television
10.250%, 11/15/07....................... $ 403,000
500,000 NTL, Inc., Step Up
9.750%, 04/01/08........................ 348,750
500,000 NTL Communications Corp. Series B,
Step Up
12.375%, 10/01/08....................... 356,250
250,000 Orion Network, Inc.
11.250%, 01/15/07....................... 188,750
400,000 Outboard Marine Corp. Series B
10.750%, 06/01/08....................... 306,000
250,000 Oxford Automotive, Inc. Series D
10.125%, 06/15/07....................... 236,250
400,000 Oxford Health Plans, Inc.
11.000%, 05/15/05....................... 386,000
300,000 Packaged Ice, Inc. Series B
9.750%, 02/01/05........................ 276,000
400,000 Pathmark Stores, Inc.
9.625%, 05/01/03........................ 296,000
400,000 Philipp Brothers Chemicals, Inc.
9.875%, 06/01/08........................ 358,000
300,000 Pioneer Americas Acquisition Corp.
Series B
9.250%, 06/15/07........................ 238,500
200,000 Players International, Inc.
10.875%, 04/15/05....................... 210,000
50,000 Port Royal Holdings, Inc.
10.250%, 10/01/07....................... 51,500
400,000 Premier International Foods Plc., 144A
12.000%, 09/01/09....................... 394,000
400,000 Price Communication Wireless, Inc.
Series B
9.125%, 12/15/06........................ 407,000
400,000 Primus Telecomm Group, Inc. Series B
9.875%, 05/15/08........................ 368,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE> 41
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- ------------------------------------------------------------------------------
<S> <C> <C>
$ 200,000 Protection One, Inc., 144A
8.125%, 01/15/09........................ $ 108,000
250,000 PSINet, Inc.
11.500%, 11/01/08....................... 262,500
135,000 PTC International Finance II SA
11.250%, 12/01/09....................... 132,975
500,000 Qwest Communications International,
Inc., Step Up
9.470%, 10/15/07........................ 405,655
250,000 R & B Falcon Corp. Series B
6.950%, 04/15/08........................ 213,750
400,000 Regal Cinemas, Inc.
9.500%, 06/01/08........................ 304,000
300,000 Republic Technology International LLC,
144A
13.750%, 07/15/09....................... 199,500
200,000 Rhythms NetConnections, Inc.
12.750%, 04/15/09....................... 194,500
200,000 Rural Cellular Corp. Series B
9.625%, 05/15/08........................ 205,500
300,000 Russell-Stanley Holdings, Inc.
10.875%, 02/15/09....................... 262,500
139,050 S.D. Warren Co.
14.000%, 12/15/06....................... 156,431
350,000 S.D. Warren Co. Series B
12.000%, 12/15/04....................... 364,875
300,000 Salem Communications Corp. Series B
9.500%, 10/01/07........................ 300,000
600,000 Santa Fe Hotel, Inc.
11.000%, 12/15/00....................... 588,000
250,000 Sbarro, Inc., 144A
11.000%, 09/15/09....................... 261,250
250,000 Sequa Corp.
9.000%, 08/01/09........................ 243,125
300,000 Sinclair Broadcast Group, Inc.
10.000%, 09/30/05....................... 298,500
<CAPTION>
Principal
Amount (a) Value
- ------------------------------------------------------------------------------
<S> <C> <C>
$ 250,000 SITEL Corp.
9.250%, 03/15/06........................ $ 239,375
400,000 Sprint Spectrum LP
11.000%, 08/15/06....................... 442,256
300,000 Stanadyne Automotive Corp. Series B
10.250%, 12/15/07....................... 245,250
400,000 Startec Global Communications Corp.
12.000%, 05/15/08....................... 352,000
300,000 Station Casinos, Inc.
9.750%, 04/15/07........................ 303,000
150,000 Sterling Chemicals, Inc.
11.750%, 08/15/06....................... 112,500
250,000 Teligent Inc.
11.500%, 12/01/07....................... 243,750
300,000 Tenet Healthcare Corp. Series B
8.125%, 12/01/08........................ 280,500
400,000 Thermadyne Holdings Corp.
9.875%, 06/01/08........................ 350,500
300,000 Time Warner Telecom LLC
9.750%, 07/15/08........................ 307,500
400,000 Trans World Airlines, Inc.
11.375%, 03/01/06....................... 167,000
250,000 Transportation Manufacturing Operations
11.250%, 05/01/09....................... 257,188
400,000 Tri-state Outdoor Media
11.000%, 05/15/08....................... 395,000
400,000 Tropical Sportswear International Corp.
Series B 144A
11.000%, 06/15/08....................... 386,000
500,000 United International Holdings, Inc.
Series B, Step Up
10.750%, 02/15/08....................... 316,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 42
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount (a) Value
- ------------------------------------------------------------------------------
<S> <C> <C>
$ 250,000 United Rentals (North America), Inc.
Series B
9.250%, 01/15/09........................ $ 241,250
400,000 US Office Products Co. 144A
9.750%, 06/15/08........................ 204,000
300,000 US Unwired, Inc., 144A, Step Up
13.375%, 11/01/09....................... 177,000
400,000 Vectura Group, Inc. Series B
10.250%, 06/30/08....................... 386,000
300,000 Voicestream Wireless Corp.
10.375%, 11/15/09....................... 309,000
400,000 Waste Systems International, Inc.,
Convertible 144A
7.000%, 05/13/05........................ 332,000
400,000 WCI Steel, Inc. Series B
10.000%, 12/01/04....................... 411,000
500,000 Winstar Communications, Inc., Step Up
14.000%, 10/15/05....................... 485,000
300,000 Wiser Oil Co.
9.500%, 05/15/07........................ 231,750
400,000 Young Broadcasting, Inc. Series B
8.750%, 06/15/07........................ 383,000
---------------
TOTAL U.S. CORPORATE OBLIGATIONS
(Cost $61,249,358)..................................... 54,864,720
---------------
<CAPTION>
Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 0.9%
1,760 Globix Corp............................. $ 105,600
27,137 Price Communications Corp............... 754,748
--------------
860,348
--------------
TOTAL COMMON STOCKS
(Cost $343,540)........................................ 860,348
--------------
PREFERRED STOCKS -- 0.4%
200 Benedek Communications (PIK), 11.5%..... 163,000
233 Rural Cellular Corp. Series B (PIK),
11.375%................................. 239,407
--------------
TOTAL PREFERRED STOCKS
(Cost $398,616)........................................ 402,407
--------------
WARRANTS -- 0.0%
150 Airgate PCS Inc......................... 16,996
250 Central Bank of Nigeria................. 0
1,200 Classic Communications, Inc............. 20,004
1,500 DIVA Systems............................ 12,000
250 Key Energy Services, Inc................ 6,250
400 Startec Global Communications Corp...... 400
1,153,000 United Mexican States................... 0
--------------
TOTAL WARRANTS
(Cost $15,281)......................................... 55,650
--------------
92,774,210
TOTAL INVESTMENTS -- 96.0%
(Cost $96,722,187)......................................
Other assets in excess of liabilities -- 4.0% 3,847,454
--------------
TOTAL NET ASSETS -- 100.0% $ 96,621,664
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE> 43
Portfolio of Investments
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999 (continued)
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ARS -- Argentinian Peso
FLIRB -- Front Loaded Interest Reduction Bond
PDI -- Past Due Interest
PIK -- Payment in Kind
Step Up -- Security is a "step up" bond where the coupon
increases or steps up at a predetermined rate. Rates shown are current coupon
and next coupon rate when security steps up.
Euro-Dollar -- Securities issued offshore that pay interest and
principal in U.S. Dollars.
Yankee-Dollar -- U.S. Dollar denominated bonds issued by non-
U.S. companies in the U.S.
144A -- Securities restricted for resale to Qualified Institutional
Buyers
Variable Rate -- The rates shown on variable rate securities reflect
the current interest rate at December 31, 1999, which are subject to change
based on the terms of the security, including varying reset dates.
(a) The Principal Amount shown is expressed in United States Dollars unless
stated otherwise.
(b) Security is a zero coupon bond.
The accompanying notes are an integral part of the financial statements.
42
<PAGE> 44
Investments by Country
American Odyssey Funds, Inc. / Global High-Yield Bond Fund / December 31,
1999
<TABLE>
<CAPTION>
Percentage of
COUNTRY Net Assets
<S> <C>
- -----------------------------------------------------------------
United States 57.5%
Brazil 7.5
Argentina 6.3
Mexico 5.3
Canada 4.9
Great Britain 3.7
Russia 3.2
Bulgaria 1.6
Venezuela 1.4
Bermuda 0.7
Philippines 0.7
Netherlands 0.6
Peru 0.6
Colombia 0.5
Panama 0.4
India 0.3
Bahama Islands 0.2
Ecuador 0.2
Poland 0.2
Nigeria 0.1
Turkey 0.1
---------
Total 96.0%
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE> 45
Portfolio of Investments
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------------------
<S> <C>
COMMON STOCKS -- 98.5%
AEROSPACE & DEFENSE -- 0.0%
18,009 British Aerospace Plc................ $ 119,003
--------------
AUTOMOTIVE -- 2.0%
126,464 Bayerische Motoren Werke AG.......... 3,840,674
63,000 Honda Motor Co., Ltd................. 2,338,919
44,345 Michelin - B......................... 1,733,433
---------------
7,913,026
---------------
BANKING -- 10.7%
150,346 ABN Amro Holdings.................... 3,737,166
14,500 Acom Co., Ltd........................ 1,418,055
388,282 Banco de Santander................... 4,374,346
107,000 Bank of Tokyo-Mitsubishi, Ltd........ 1,488,627
212,240 Barclay's Plc........................ 6,095,639
49,400 Bayerische Hypo-Und Vereinsbank AG... 3,357,026
394,439 Lloyds TSB Group Plc................. 4,923,624
242,550 National Australia Bank Ltd.......... 3,697,942
125,285 National Westminster Bank Plc........ 2,685,559
145,050 Overseas-Chinese Banking Corp. Ltd... 1,332,081
12,300 Takefuji Corp........................ 1,536,974
18,218 UBS AG - Registered.................. 4,893,849
279,445 Westpac Banking Corp................. 1,921,212
---------------
41,462,100
---------------
BEVERAGES, FOOD & TOBACCO -- 3.9%
401,755 British American Tobacco Plc......... 2,277,629
438,260 Cadbury Schweppes Plc................ 2,641,744
<CAPTION>
Shares Value
- ----------------------------------------------------------------------
<S> <C>
442,056 Diageo Plc........................... $ 3,548,074
3,633 Nestle SA............................ 6,620,384
---------------
15,087,831
---------------
BUILDING MATERIALS -- 0.0%
121,000 Hume Industries...................... 122,912
---------------
CHEMICALS -- 1.2%
5,851 Celanese AG *........................ 106,147
81,000 Fuji Photo Film...................... 2,951,786
2,490 Lonza AG *........................... 1,505,761
---------------
4,563,694
---------------
COMMERCIAL SERVICES -- 2.8%
43,025 Brambles Industries Ltd.............. 1,185,885
109,636 Vivendi.............................. 9,851,485
---------------
11,037,370
---------------
COMMUNICATIONS -- 12.6%
22,995 Alcatel Alsthom...................... 5,254,923
395,650 Cable & Wireless Plc................. 6,689,136
338,564 DBS Group Holdings Ltd............... 5,547,879
31,400 Ericsson LM - B...................... 2,010,504
85,500 Koninklijke - KPN NV................. 8,304,017
42,000 Marconi Plc.......................... 741,560
659,348 Telecom Italia SpA................... 9,252,103
2,219,354 Vodafone Group Plc................... 10,972,264
---------------
48,772,386
---------------
CONGLOMERATES -- 0.5%
2,490 Alusuisse Lonza Holdings............. 1,826,202
---------------
ELECTRIC UTILITIES -- 1.4%
53,475 EDP - Electricidade de Portugal SA... 928,855
170,000 Hong Kong Electric Holdings Ltd...... 531,420
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE> 46
Portfolio of Investments
American Odyssey Funds, Inc. / International Equity Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
63,015 National Power Plc...................... $ 364,094
75,970 Veba AG................................. 3,673,985
-----------------
5,498,354
-----------------
ELECTRICAL EQUIPMENT -- 3.0%
268,000 Hitachi Ltd............................. 4,294,084
640,020 Invensys Plc............................ 3,476,205
6,300 Keyence Corp............................ 2,554,344
6,800 Mabuchi Motor Co., Ltd.................. 1,184,544
-----------------
11,509,177
-----------------
ELECTRONICS -- 9.3%
57,000 Murata Manufacturing Co., Ltd........... 13,365,246
58,000 Pioneer Corp............................ 1,529,970
14,300 Rohm Co., Ltd........................... 5,867,812
52,150 Sony Corp............................... 15,437,881
-----------------
36,200,909
-----------------
ENTERTAINMENT & LEISURE -- 0.7%
124,217 EMI Group Plc........................... 1,216,221
519,700 Hilton Group Plc........................ 1,660,545
-----------------
2,876,766
-----------------
FINANCIAL SERVICES -- 1.3%
58,348 Fortis (NL) NV.......................... 2,090,743
147,600 HSBC Holdings Plc *.................... 2,069,632
311,850 Old Mutual Plc *........................ 846,891
-----------------
5,007,266
-----------------
FOOD RETAILERS -- 1.3%
132,220 Koninklijke Ahold NV.................... 3,894,884
171,600 TI Group Plc............................ 1,313,701
-----------------
5,208,585
-----------------
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
HEAVY CONSTRUCTION -- 0.4%
45,000 Pohang Iron & Steel Co. Ltd. ADR........ $ 1,575,000
-----------------
HEAVY MACHINERY -- 4.6%
73,733 Mannesmann AG........................... 17,699,688
-----------------
INDUSTRIAL MACHINE
SERVICES -- 0.4%
86,138 Viag AG................................. 1,571,321
-----------------
INSURANCE -- 9.8%
410,055 Allied Zurich Plc....................... 4,821,181
50,120 Axa..................................... 6,952,571
194,375 ING Groep NV............................ 11,677,642
401,605 Prudential Corp......................... 7,896,639
3,193 Schweizerische Ruckversicherungs-
Gesellschaft............................ 6,524,704
-----------------
37,872,737
-----------------
MEDIA - BROADCASTING
& PUBLISHING -- 4.6%
103,900 Elsevier NV............................. 1,235,090
503,132 Granada Group Plc....................... 5,088,375
455,891 News Corp., Ltd......................... 4,411,976
100,250 Pearson Plc............................. 3,237,925
116,000 Singapore Press Holdings Ltd............ 2,513,558
27,100 VNU NV.................................. 1,417,333
-----------------
17,904,257
-----------------
MEDICAL SUPPLIES -- 2.3%
20,000 Hoya Corp............................... 1,572,956
152,000 Takeda Chemical Industries Ltd.......... 7,499,391
-----------------
9,072,347
-----------------
OFFICE EQUIPMENT -- 2.4%
231,000 Canon................................... 9,162,823
-----------------
OIL & GAS -- 5.0%
375,189 ENI SpA................................. 2,053,259
61,510 Royal Dutch Petroleum Co................ 3,751,495
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE> 47
Portfolio of Investments
American Odyssey Funds, Inc. / International Equity Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
801,623 Shell Transport & Trading............... $ 6,647,218
53,450 Total SA - B............................ 7,098,422
-----------------
19,550,394
-----------------
PHARMACEUTICALS -- 7.4%
110,000 AstraZeneca Group Plc................... 4,552,735
79,947 Aventis SA *............................ 4,623,587
248,800 Glaxo Wellcome Plc...................... 7,017,354
4,022 Novartis AG............................. 5,874,460
5,650 Roche Holding AG........................ 6,671,144
-----------------
28,739,280
-----------------
REAL ESTATE -- 1.2%
241,000 Cheung Kong (Holdings) Ltd.............. 3,061,519
139,000 Sun Hung Kai Properties Ltd............. 1,448,380
-----------------
4,509,899
-----------------
RETAILERS -- 1.5%
144,000 KAO Corp................................ 4,101,019
122,000 Shiseido Co., Ltd....................... 1,775,978
-----------------
5,876,997
-----------------
TELEPHONE SYSTEMS -- 7.4%
30,525 Korea Telecom Corp. ADR................. 2,281,744
1,700 Nippon Telegraph & Telephone Corp....... 2,906,551
3,150 NTT DoCoMo.............................. 12,094,671
31,780 Tele Danmark A/S - B.................... 2,350,004
145,555 Telecom Corp. of New Zealand Ltd........ 683,162
216,332 Telefonica SA *......................... 5,377,386
568,850 Telstra Corp., Ltd...................... 3,081,972
-----------------
28,775,490
-----------------
<CAPTION>
Shares Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION -- 0.8%
55,910 Railtrack Group Plc..................... $ 937,147
77,900 TNT Post Group NV....................... 2,221,357
-----------------
3,158,504
-----------------
TOTAL COMMON STOCKS
(Cost $242,368,404)............................... 382,674,318
-----------------
TOTAL INVESTMENTS -- 98.5%
(Cost $242,368,404)............................... 382,674,318
Other assets in excess of liabilities -- 1.5% 5,818,004
-----------------
TOTAL NET ASSETS -- 100.0% $ 388,492,322
=================
NOTES TO THE PORTFOLIO OF INVESTMENTS:
</TABLE>
ADR -- American Depository Receipt
* -- Non-income producing security.
The accompanying notes are an integral part of the financial statements.
46
<PAGE> 48
Investments by Country
American Odyssey Funds, Inc. / International Equity Fund / December 31, 1999
<TABLE>
<CAPTION>
Percentage of
COUNTRY Net Assets
- -----------------------------------------------------------------------------
<S> <C>
Japan 24.0%
Great Britain 23.6
Netherlands 9.9
France 9.2
Switzerland 8.7
Germany 7.8
Australia 3.7
Italy 2.9
Spain 2.5
Singapore 2.4
Hong Kong 1.3
South Korea 1.0
Denmark 0.6
Sweden 0.5
New Zealand 0.2
Portugal 0.2
Malaysia 0.0
---------
Total 98.5%
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE> 49
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31,
1999
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 99.0%
ADVERTISING -- 0.9%
17,200 Digital Impact, Inc. *.................. $ 862,150
98,400 Penton Media, Inc....................... 2,361,600
-----------------
3,223,750
-----------------
AEROSPACE & DEFENSE -- 0.4%
14,600 Moog, Inc. - Class A *.................. 394,200
111,800 Teledyne Technologies, Inc. *........... 1,055,112
-----------------
1,449,312
-----------------
APPAREL RETAILERS -- 1.7%
40,900 Childrens Place, Inc. (The) *........... 672,294
57,300 Claire's Stores, Inc.................... 1,282,087
138,500 Finish Line, Inc. (The) - Class A *..... 753,094
86,900 Pacific Sunwear of California,
Inc. *.................................. 2,769,937
162,800 Stage Stores, Inc. *.................... 376,475
149,800 The Sports Authority, Inc. *............ 299,600
-----------------
6,153,487
-----------------
BANKING -- 0.7%
21,700 Advanta Corp. - Class A................. 396,025
35,500 Alliance Bancorp, Inc................... 656,750
17,900 Bay Bancshares, Inc..................... 319,962
20,000 Guaranty Bancshares, Inc................ 187,500
20,600 Northrim Bank........................... 204,712
22,700 Union Bancorp, Inc...................... 323,475
4,500 US Trust Corp........................... 360,844
25,000 Wilshire State Bank *................... 209,375
-----------------
2,658,643
-----------------
BEVERAGES, FOOD & TOBACCO -- 0.3%
35,250 Flowers Industries, Inc................. 561,797
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
13,600 Ravenswood Winery, Inc. *............... $ 142,800
61,850 Tasty Baking............................ 521,859
-----------------
1,226,456
-----------------
CHEMICALS -- 2.0%
62,400 Agrium, Inc............................. 491,400
538,800 Calgon Carbon Corp...................... 3,199,125
50,700 IMC Global, Inc......................... 830,212
57,600 Olin Corp............................... 1,141,200
33,800 Potash Corp. of Saskatchewan, Inc....... 1,628,737
-----------------
7,290,674
-----------------
COMMERCIAL SERVICES -- 7.4%
61,900 Corporate Executive Board Co.
(The) *................................. 3,458,662
44,850 Diamond Technology Partners, Inc. *..... 3,854,297
20,800 eBenX, Inc. *........................... 941,200
137,700 Heidrick & Struggles International,
Inc. *.................................. 5,817,825
44,600 Incyte Pharmaceuticals, Inc. *.......... 2,676,000
59,200 Lo-Jack Corp. *......................... 399,600
63,040 Luminant Worldwide Corp. *.............. 2,868,320
109,200 MDC Communications
Corp. *................................. 914,550
79,720 MedQuist, Inc. *........................ 2,057,772
17,200 NetRatings, Inc. *...................... 827,750
11,600 Quest Diagnostics, Inc. *............... 354,525
84,100 Rent-A-Center, Inc. *................... 1,666,231
161,400 Safety-Kleen Corp. *.................... 1,825,838
-----------------
27,662,570
-----------------
COMMUNICATIONS -- 4.1%
39,000 Advanced Fibre Communication, Inc. *.... 1,742,812
54,700 ANADIGICS, Inc. *....................... 2,581,156
77,800 Aspect Communications Corp. *........... 3,043,925
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE> 50
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
13,400 Copper Mountain Networks, Inc. *........ $ 653,250
53,900 Crown Castle International Corp. *...... 1,731,537
42,995 Inet Technologies, Inc. *............... 3,004,276
63,700 Pinnacle Holdings, Inc. *............... 2,699,288
-----------------
15,456,244
-----------------
COMPUTER HARDWARE -- 0.7%
28,500 Creative Technology, Ltd................ 495,187
73,600 Iomega Corp. *.......................... 248,400
51,100 Tektronix, Inc.......................... 1,986,512
-----------------
2,730,099
-----------------
COMPUTER SERVICES -- 6.2%
26,700 BISYS Group, Inc. *.................... 1,742,175
31,700 Com21, Inc. *.......................... 711,269
51,000 Documentum, Inc. *..................... 3,053,625
79,250 Electronics for Imaging *.............. 4,606,406
40,100 eSPEED, Inc. - Class A *............... 1,426,056
41,600 Extreme Networks, Inc. *............... 3,473,600
15,100 Insight Enterprises, Inc. *............ 613,437
13,100 iXL Enterprises, Inc. *................ 727,050
155,000 Mentor Graphics Corp. *................ 2,044,062
58,200 S1 Corp. *............................. 4,546,875
17,600 Ziff-Davis, Inc. *..................... 369,600
-----------------
23,314,155
-----------------
COMPUTER SOFTWARE -- 14.2%
39,000 Best Software, Inc. *.................. 1,150,500
56,675 BindView Development Corp. *........... 2,816,039
38,100 C-bridge Internet Solutions, Inc. *.... 1,852,612
86,000 Dendrite International, Inc. *......... 2,913,250
27,300 Digex, Inc. *.......................... 1,876,875
41,800 E-Tek Dynamics, Inc. *................. 5,627,325
13,700 Entrust Technologies, Inc. *........... 821,144
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
55,900 Information Resources, Inc. *......... $ 517,075
2,800 Liberate Technologies, Inc. *......... 719,600
40,355 Mercury Interactive Corp. *........... 4,355,818
24,400 Micromuse, Inc. *..................... 4,148,000
21,100 MicroStrategy, Inc. *................. 4,431,000
49,400 Net Perceptions, Inc. *............... 2,074,800
64,800 New Era of Networks, Inc. *........... 3,086,100
12,600 Preview Systems, Inc. *............... 817,425
58,733 PRI Automation, Inc. *................ 3,942,453
89,100 PSINet, Inc. *........................ 5,501,925
1,787 Razorfish, Inc. *..................... 169,988
28,200 Rhythms NetConnections, Inc. *........ 874,200
35,000 SCC Communications Corp. *............ 205,625
100,700 SERENA Software, Inc. *............... 3,115,406
39,700 Transaction Systems *................. 1,111,600
10,500 USinternetworking, Inc. *............. 733,687
-----------------
52,862,447
-----------------
ELECTRIC UTILITIES -- 0.7%
30,600 Cinergy Corp.......................... 738,225
12,000 Independent Energy Holdings ADR *..... 399,750
32,000 KeySpan Corp.......................... 742,000
39,400 Teco Energy........................... 731,362
-----------------
2,611,337
-----------------
ELECTRONICS -- 5.5%
55,600 Actel Corp. *......................... 1,334,400
52,200 Dupont Photomasks, Inc. *............. 2,518,650
106,450 Galileo Technology, Ltd. *............ 2,568,106
121,900 LTX Corp. *........................... 2,727,512
118,300 REMEC, Inc. *......................... 3,016,650
125,615 Semtech Corp. *....................... 6,547,682
16,700 TriQuint Semiconductor, Inc. *........ 1,857,875
-----------------
20,570,875
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE> 51
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT & LEISURE -- 2.0%
77,000 Callaway Golf Co....................... $ 1,361,937
103,198 Premier Parks, Inc. *.................. 2,979,842
42,250 Westwood One, Inc. *................... 3,211,000
-----------------
7,552,779
-----------------
FINANCIAL SERVICES -- 1.2%
38,418 Heller Financial, Inc................... 770,761
176,900 Labranche & Co., Inc. *................. 2,255,475
56,900 National Discounts Brokers Group,
Inc. *.................................. 1,500,737
-----------------
4,526,973
FOREST PRODUCTS & PAPER -- 0.1% -----------------
9,500 Boise Cascade Corp....................... 384,750
-----------------
HEALTH CARE PROVIDERS -- 3.5%
69,300 Beverly Enterprises, Inc. *............. 303,188
108,400 Coventry Health Care, Inc. *............ 731,700
116,020 Eclipsys Corp. *........................ 2,973,013
608,700 Mid Atlantic Medical Services *......... 5,059,819
126,092 Province Healthcare Co. *............... 2,395,748
36,400 Triad Hospitals, Inc. *................. 550,550
29,300 Universal Health Services, Inc. -
Class B *............................... 1,054,800
-----------------
13,068,818
-----------------
HEAVY CONSTRUCTION -- 0.3%
59,300 McDermott International, Inc............ 537,406
40,400 Stone & Webster, Inc.................... 679,225
-----------------
1,216,631
-----------------
HEAVY MACHINERY -- 1.1%
39,500 Brooks Automation, Inc. *............... 1,286,219
82,300 CNH Global N.V.......................... 1,095,619
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
23,400 Stanley Works (The)..................... $ 704,925
112,100 Varco International, Inc. *............. 1,142,019
-----------------
4,228,782
-----------------
HOME CONSTRUCTION, FURNISHINGS &
APPLIANCES -- 1.2%
63,700 Gemstar International Group, Ltd. *.... 4,538,625
-----------------
INSURANCE -- 2.6%
17,900 Allmerica Financial Corp................ 995,688
163,100 Annuity and Life Re (Holdings), Ltd..... 4,260,988
35,800 Horace Mann Educators Corp.............. 702,575
35,200 Motor Club of America *................. 294,800
90,100 Mutual Risk Management Ltd.............. 1,514,806
56,100 St. Paul Companies, Inc. (The).......... 1,889,869
-----------------
9,658,726
-----------------
LODGING -- 0.5%
20,000 MGM Grand, Inc. *...................... 1,006,250
43,600 Mirage Resorts, Inc. *................. 667,625
-----------------
1,673,875
-----------------
MEDIA - BROADCASTING & PUBLISHING -- 5.6%
41,000 Adelphia Communications Corp. -
Class A *............................. 2,690,625
7,700 Allegiance Telecom, Inc. *............ 710,325
38,975 Emmis Communications Corp. -
Class A *............................. 4,857,867
8,300 Media General, Inc. - Class A......... 431,600
49,250 Pegasus Communications Corp. *........ 4,814,188
154,000 Readers Digest Association, Inc. (The) -
Class A............................... 4,504,500
76,600 Salem Communications Corp. -
Class A *............................. 1,733,075
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE> 52
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
29,580 Spanish Broadcasting System, Inc. *..... $ 1,190,595
-----------------
20,932,775
-----------------
MEDICAL & BIO-TECHNOLOGY -- 1.3%
18,400 Aurora Biosciences Corp. *.............. 487,600
71,500 Invitrogen Corp. *...................... 4,290,000
-----------------
4,777,600
-----------------
MEDICAL SUPPLIES -- 3.0%
66,400 Mentor Corp............................. 1,713,950
146,610 Mettler-Toledo International, Inc. *.... 5,598,669
41,900 SangStat Medical Corp. *................ 1,246,525
47,400 Veeco Intruments, Inc. *................ 2,218,913
8,000 Zoll Medical Corp. *.................... 305,500
-----------------
11,083,557
-----------------
METALS --4.5%
453,200 Battle Mountain Gold Co. *.............. 934,725
150,100 Bethlehem Steel Corp. *................. 1,257,088
212,500 Birmingham Steel Corp................... 1,128,906
281,700 Homestake Mining Co..................... 2,200,781
174,900 Kaiser Aluminum Corp. *................. 1,344,544
365,000 LTV Corp................................ 1,505,625
45,200 National Steel Corp. - Class B.......... 336,175
104,200 Newmont Mining Corp..................... 2,552,900
73,830 Phelps Dodge Corp....................... 4,955,839
75,000 Teck Corp. - Class B.................... 702,803
-----------------
16,919,386
-----------------
OIL & GAS DISTRIBUTION -- 1.1%
14,800 Laclede Gas Co.......................... 320,050
73,100 MCN Energy Group, Inc................... 1,736,125
18,000 Washington Gas Light Co................. 495,000
123,400 Western Gas Resources, Inc.............. 1,627,338
-----------------
4,178,513
-----------------
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
OIL & GAS EXPLORATION -- 5.1%
129,300 Bellwether Exploration Co. *............ $ 622,256
17,900 Cabot Oil & Gas Corp. - Class A......... 287,519
13,800 Chieftain International, Inc. *......... 238,050
45,300 Devon Energy Corp....................... 1,489,238
313,000 EEX Corp. *............................. 919,438
86,700 Forest Oil Corp. *...................... 1,143,356
253,000 Grey Wolf, Inc. *....................... 727,375
103,900 HS Resources, Inc. *.................... 1,792,275
178,800 Nuevo Energy Co. *...................... 3,352,500
36,500 Pennaco Energy, Inc. *.................. 292,000
196,300 Pioneer Natural Resources Co. *......... 1,754,431
637,165 Santa Fe Snyder Corp. *................ 5,097,320
107,200 Spinnaker Exploration Co. *............ 1,514,200
-----------------
19,229,958
-----------------
OIL & GAS FIELD SERVICES -- 10.2%
26,700 Coflexip SA ADR......................... 1,014,600
37,800 ENSCO International, Inc................ 864,675
214,800 Global Marine, Inc. *................... 3,571,050
106,700 Marine Drilling Companies, Inc. *....... 2,394,081
74,700 Nabors Industries, Inc. *............... 2,311,031
546,660 Ocean Energy, Inc. *.................... 4,236,615
274,400 Oceaneering International, Inc. *....... 4,098,850
78,200 Petroleum Geo-Services ADR *............ 1,392,938
43,800 Precision Drilling Corp. *.............. 1,125,113
273,300 Pride International, Inc. *............. 3,997,013
179,100 Rowan Co., Inc. *....................... 3,884,231
107,100 Santa Fe International Corp............. 2,771,213
32,600 Seitel, Inc. *.......................... 220,050
50,200 Transocean Sedco Forex, Inc............. 1,691,113
56,500 UTI Energy Corp. *...................... 1,303,031
37,600 Veritas DGC, Inc. *..................... 526,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE> 53
Portfolio of Investments
American Odyssey Funds, Inc. / Emerging Opportunities Fund /
December 31, 1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
63,000 Weatherford International, Inc.......... $ 2,516,063
-----------
37,918,067
-----------
PHARMACEUTICALS -- 1.3%
29,600 Carter-Wallace.......................... 530,950
18,000 IVAX Corp. *............................ 463,500
39,900 Medicis Pharmaceutical Corp. -
Class A *............................... 1,698,244
58,800 Mylan Labs, Inc......................... 1,481,025
12,400 Progenics Pharmeceuticals, Inc. *....... 606,050
-----------
4,779,769
-----------
REAL ESTATE -- 0.5%
24,100 Felcor Lodging Trust, Inc. REIT......... 421,750
18,300 Heartland Partners LP *................. 375,150
17,900 Storage USA, Inc. REIT.................. 541,475
32,700 Washington Real Estate Investment
Trust................................... 490,500
-----------
1,828,875
-----------
RESTAURANTS -- 0.9%
48,804 Morton's Restaurant Group, Inc. *....... 756,462
101,756 Outback Steakhouse, Inc. *.............. 2,639,296
-----------
3,395,758
-----------
RETAILERS -- 3.4%
16,500 Barnes & Noble, Inc. *.................. 340,313
24,300 Borders Group, Inc. *................... 390,319
27,178 Linens 'n Things, Inc. *................ 805,148
60,700 Michaels Stores *....................... 1,729,950
36,100 MSC Industrial Direct Co., Inc. *....... 478,325
40,500 PC Connection, Inc. *................... 1,397,250
149,900 School Specialty, Inc. *................ 2,267,238
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
84,300 Trans World Entertainment Corp. *....... $ 885,150
121,600 Tweeter Home Entertainment Group,
Inc. *.................................. 4,316,800
------------
12,610,493
------------
TELEPHONE SYSTEMS -- 2.1%
68,780 Focal Communications Corp. *............ 1,659,318
40,440 Illuminet Holdings, Inc. *.............. 2,224,200
59,800 Intermedia Communications, Inc. *....... 2,320,988
40,935 TeleCorp PCS, Inc. *.................... 1,555,530
------------
7,760,036
------------
TEXTILES, CLOTHING & FABRICS -- 0.3%
61,000 Osh Kosh B Gosh - Class A............... 1,284,813
------------
TRANSPORTATION -- 2.4%
65,600 Forward Air Corp. *..................... 2,845,400
29,900 Kirby Corp. *........................... 612,950
150,400 Newport News Shipbuilding, Inc.......... 4,136,000
76,300 Offshore Logistics, Inc. *.............. 715,313
48,300 Transport Corporation of America,
Inc. *.................................. 600,731
26,500 Willis Lease Finance Corp. *............ 170,594
------------
9,080,988
------------
TOTAL COMMON STOCKS
(Cost $297,137,847)............................. 369,840,596
------------
TOTAL INVESTMENTS -- 99.0%
(Cost $297,137,847) 369,840,596
Other assets in excess of liabilities -- 1.0% 3,797,732
------------
TOTAL NET ASSETS -- 100.0% $373,638,328
============
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
ADR -- American Depository Receipt
REIT -- Real Estate Investment Trust
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
52
<PAGE> 54
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund /
December 31, 1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 96.7%
AEROSPACE & DEFENSE -- 3.1%
250,547 Raytheon Co. - Class B.................. $ 6,655,155
100,600 Textron, Inc............................ 7,714,762
------------
14,369,917
------------
AIRLINES -- 1.4%
133,200 Delta Air Lines, Inc.................... 6,635,025
------------
AUTOMOTIVE -- 2.9%
112,600 Ford Motor Co........................... 6,017,062
102,200 General Motors Corp..................... 7,428,662
------------
13,445,724
------------
BANKING -- 10.7%
198,387 Bank of America Corp.................... 9,956,548
151,500 Bank One Corp........................... 4,857,469
143,456 Chase Manhattan Corp.................... 11,144,738
267,200 FleetBoston Financial Corp.............. 9,301,900
91,900 JP Morgan & Co., Inc.................... 11,636,837
80,482 PNC Bank Corp........................... 3,581,449
------------
50,478,941
------------
BEVERAGES, FOOD & TOBACCO -- 1.4%
84,500 Conagra, Inc............................ 1,906,531
130,300 Pepsico, Inc............................ 4,593,075
------------
6,499,606
------------
CHEMICALS -- 3.7%
79,300 Dow Chemical Co. (The).................. 10,596,462
103,400 Du Pont (E.I.) De Nemours & Co.......... 6,811,475
------------
17,407,937
------------
COMPUTER SOFTWARE &
PROCESSING -- 7.0%
128,800 BMC Software, Inc. *.................... 10,295,950
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
161,098 Electronic Data Systems Corp............ $ 10,783,497
364,000 Unisys Corp. *.......................... 11,625,250
------------
32,704,697
------------
COMPUTERS & INFORMATION -- 3.0%
132,000 IBM Corp................................ 14,256,000
------------
ELECTRIC UTILITIES -- 0.5%
67,600 Texas Utilities Co...................... 2,404,025
------------
ELECTRONICS -- 2.4%
137,322 Intel Corp.............................. 11,303,317
------------
ENTERTAINMENT & LEISURE -- 1.3%
91,370 Eastman Kodak Co........................ 6,053,262
------------
FINANCIAL SERVICES -- 7.7%
216,200 Citigroup, Inc. (a)..................... 12,012,612
151,800 Federal National Mortgage Association... 9,478,012
102,024 Morgan Stanley, Dean Witter and Co...... 14,563,926
------------
36,054,550
------------
FOREST PRODUCTS & PAPER -- 3.0%
246,800 International Paper Co.................. 13,928,775
------------
HEALTH CARE PROVIDERS -- 2.8%
454,100 Columbia/HCA Healthcare Corp............ 13,310,806
------------
HEAVY MACHINERY -- 4.3%
99,000 Caterpillar, Inc........................ 4,659,188
255,900 Deere & Co.............................. 11,099,663
81,800 Ingersoll-Rand Co....................... 4,504,113
------------
20,262,964
------------
INSURANCE -- 9.3%
135,800 American General Corp................... 10,303,825
108,000 American International Group, Inc....... 11,677,500
487,200 Conseco, Inc............................ 8,708,700
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE> 55
Portfolio of Investments
American Odyssey Funds, Inc. / Core Equity Fund /
December 31, 1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
227,300 Hartford Financial Services Group, Inc.
(The)................................... $ 10,768,338
69,400 St. Paul Companies, Inc. (The).......... 2,337,913
-------------
43,796,276
-------------
MEDIA - BROADCASTING &
PUBLISHING -- 4.0%
117,500 MediaOne Group, Inc. *.................. 9,025,469
178,000 Tribune Co.............................. 9,801,125
-------------
18,826,594
-------------
MEDICAL SUPPLIES -- 1.9%
145,300 Baxter International, Inc............... 9,126,656
-------------
METALS -- 1.9%
108,000 Alcoa, Inc.............................. 8,964,000
-------------
OIL & GAS -- 11.1%
159,600 Amerada Hess Corp....................... 9,057,300
182,500 Coastal Corp. (The)..................... 6,467,344
183,265 Exxon Mobil Corp........................ 14,764,287
138,800 Royal Dutch Petroleum Co................ 8,388,725
92,000 Texaco, Inc............................. 4,996,750
260,800 Unocal Corp............................. 8,753,100
-------------
52,427,506
-------------
PHARMACEUTICALS -- 1.6%
118,000 Bristol Myers Squibb Co................. 7,574,125
-------------
<CAPTION>
Shares Value
- ---------------------------------------------------------------------
<S> <C> <C>
TELEPHONE SYSTEMS -- 10.4%
238,800 AT&T Corp............................... $ 12,119,100
200,356 Bell Atlantic Corp...................... 12,334,416
235,200 MCI WorldCom, Inc. *.................... 12,480,300
162,800 SBC Communications, Inc................. 7,936,500
60,383 Sprint Corp. (FON Group)................ 4,064,531
-------------
48,934,847
-------------
TRANSPORTATION -- 1.3%
143,300 Union Pacific Corp...................... 6,251,463
-------------
TOTAL COMMON STOCKS
(Cost $378,516,923)............................ 455,017,013
-------------
TOTAL INVESTMENTS -- 96.7%
(Cost $378,516,923) 455,017,013
Other assets in excess of liabilities -- 3.3% 15,400,352
-------------
TOTAL NET ASSETS -- 100.0% 470,417,365
=============
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
(a) An affiliate of American Odyssey Funds Management, Inc.
The accompanying notes are an integral part of the financial statements.
54
<PAGE> 56
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund /
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- -------------------------------------------------------------------------
FOREIGN OBLIGATIONS -- 9.2%
Corporate Debt -- 2.3%
$ 3,000,000 Petro Mexicanos Series P, Yankee-Dollar
9.500%, 09/15/27........................ $ 3,007,500
500,000 Petroleos Mexicanos, Yankee-Dollar
8.850%, 09/15/07........................ 473,465
2,300,000 Sumitomo Bank Treasury 144A, Variable
Rate
9.400%, 12/29/49........................ 2,288,500
100,000 Worldwide Fiber, Inc. 144A
12.000%, 08/01/09....................... 103,500
------------
5,872,965
------------
Government Obligations -- 6.9%
1,230,000 Manitoba (Province) - Series EE,
Yankee-Dollar
9.500%, 09/15/18........................ 1,472,593
2,000,000 Quebec Province, Yankee-Dollar
5.670%, 02/27/26........................ 1,978,900
1,400,000 Republic of Argentina
11.375%, 01/30/17....................... 1,389,500
664,000 Republic of Argentina Global Bond
9.750%, 09/19/27........................ 595,940
3,000,000 Republic of Argentina Global Bond
11.750%, 04/07/09....................... 3,022,500
38,720 Republic of Argentina Series BB,
Variable Rate
6.810%, 03/31/05........................ 34,747
780,000 Republic of Colombia Global Bond Series
NOV
9.750%, 04/23/09........................ 747,825
550,000 Republic of Panama Global Bond
9.375%, 04/01/29........................ 525,250
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------
<S> <C> <C>
$ 650,000 Republic of Philippines Global Bond
9.500%, 10/21/24........................ $ 658,125
400,000 Republic of Philippines Global Bond
9.875%, 01/15/19........................ 393,500
4,760,000 United Mexican States Global Bond
11.500%, 05/15/26....................... 5,688,200
860,000 United Mexican States Global Bond Series
XW
10.375%, 02/17/09....................... 918,050
-----------
17,425,130
-----------
TOTAL FOREIGN OBLIGATIONS
(Cost $22,920,785).................................. 23,298,095
-----------
U.S. CORPORATE OBLIGATIONS -- 33.8%
Asset Backed and Mortgage Backed -- 2.3%
5,000,000 Asset Securitization Corp.
6.660%, 02/14/41........................ 4,860,675
1,020,000 Nomura Assets Securities Corp., REMIC
7.120%, 04/13/36........................ 998,922
-----------
5,859,597
-----------
Corporate Bonds & Notes -- 30.9%
123,000 AirGate PCS, Inc., Step Up
13.500%, 10/01/09....................... 68,880
239,000 Allied Waste North America 144A
10.000%, 08/01/09....................... 215,100
2,000,000 Associates Corporation of North America
8.150%, 08/01/09........................ 2,076,460
2,400,000 Bellsouth Telecommunication Corp.
7.000%, 10/01/25........................ 2,201,856
170,000 Blount, Inc. 144A
13.000%, 08/01/09....................... 180,200
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE> 57
Porfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------
<S> <C> <C>
$ 390,000 Burlington North Santa Fe
6.375%, 12/15/05........................ $ 368,511
66,000 Calpine Corp.
7.750%, 04/15/09........................ 62,700
53,000 Century Communications
8.875%, 01/15/07........................ 51,012
69,000 Chancellor Media Corp.
8.000%, 11/01/08........................ 69,000
1,000,000 CIT Group Holdings
8.375%, 11/01/01........................ 1,021,270
1,500,000 Citicorp Capital I
7.933%, 02/15/27 (a).................... 1,403,610
209,000 CMS Energy Corp.
7.500%, 01/15/09........................ 188,968
1,350,000 Commonwealth Edison Co.
8.375%, 02/15/23........................ 1,333,651
500,000 Commonwealth Edison Co.
8.625%, 02/01/22........................ 520,360
760,000 CSX Corp.
7.450%, 05/01/07........................ 747,095
400,000 Dean Witter Discover & Co.
6.250%, 03/15/00........................ 400,016
380,000 Dow Chemical Co. (The)
7.375%, 11/01/29........................ 364,632
550,000 Dresdner Funding Trust I 144A
8.151%, 06/30/31........................ 519,226
82,000 Echostar DBS Corp.
9.375%, 02/01/09........................ 82,205
18,500,000 Financing Corp. Series D-P
0.000%, 08/03/18 (b).................... 4,991,670
2,500,000 Ford Motor Co.
7.700%, 05/15/69........................ 2,397,200
2,000,000 Ford Motor Credit Corp.
5.750%, 01/25/01........................ 1,977,740
350,000 General Motors Acceptance Corp.
9.625%, 12/15/01........................ 366,530
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------
<S> <C> <C>
$ 4,700,000 General Motors Acceptance Corp. - Units
0.000%, 06/15/15 (b).................... $ 1,358,300
342,029 GG1B Funding Corp.
7.430%, 01/15/11........................ 331,183
231,000 Global Crossing Holdings Ltd., 144A
9.500%, 11/15/09........................ 228,690
2,400,000 GTE Corp.
6.940%, 04/15/28........................ 2,174,448
1,090,000 Hercules Inc. 144A
8.625%, 12/29/00........................ 1,088,888
122,000 Horseshoe Gaming, LLC 144A
8.625%, 05/15/09........................ 117,120
500,000 Huntsman ICI Chemicals 144A
0.000%, 12/31/09 (b).................... 149,620
550,000 IBJ Preferred Cap LLC, 144A, Variable
Rate, FLIRB
8.790%, 12/29/49........................ 519,750
2,000,000 International Paper Co.
7.000%, 06/01/01........................ 1,996,220
2,000,000 JP Morgan Co., Variable Rate
5.913%, 02/15/12........................ 1,736,340
1,500,000 JPM Capital Trust I
7.540%, 01/15/27........................ 1,342,050
360,000 Lear Corp. 144A
7.960%, 05/15/05........................ 346,959
1,000,000 Lear Corp. 144A
8.110%, 05/15/09........................ 941,053
60,000 Level 3 Communications, Inc.
9.125%, 05/01/08........................ 56,700
2,000,000 Lockheed Martin
6.850%, 05/15/01........................ 1,986,240
930,000 Lockheed Martin
8.500%, 12/01/29........................ 932,465
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE> 58
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------
<S> <C> <C>
$ 600,000 Loews Corp.
7.625%, 06/01/23........................ $ 550,128
50,000 Lyondell Chemical Co.
9.875%, 05/01/07........................ 51,250
2,400,000 MCI WorldCom, Inc.
6.950%, 08/15/28........................ 2,179,104
700,000 NBD Bank N.A.
8.250%, 11/01/24........................ 736,281
600,000 News America Holdings
8.250%, 10/17/46........................ 556,314
400,000 News America, Inc.
6.750%, 01/09/38........................ 367,488
1,400,000 News America, Inc. 144A
7.625%, 11/30/28........................ 1,310,232
2,000,000 Niagara Mohawk Power Corp.
7.750%, 05/15/06........................ 2,010,540
900,000 Niagara Mohawk Power Series G
7.750%, 10/01/08........................ 900,963
900,000 Niagara Mohawk Power Series H, Step Up
8.500%, 07/01/10........................ 670,914
2,700,000 Norfolk Southern Corp.
7.800%, 05/15/27........................ 2,641,194
140,000 Nortek, Inc. Series B
8.875%, 08/01/08........................ 133,700
90,000 NTL Communications Corp. Series B, Step
Up
12.375%, 10/01/08....................... 63,000
100,000 P & L Coal Holdings Corp. Series B
9.625%, 05/15/08........................ 99,000
970,000 Pepsi Bottling Group, Inc. Series B
7.000%, 03/01/29........................ 878,128
740,000 Philip Morris Co., Inc. 144A
7.000%, 07/15/05........................ 701,587
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------
<S> <C> <C>
$ 127,000 PSINet, Inc., 144A
10.500%, 12/01/06....................... $ 128,588
690,000 Raytheon Co.
6.750%, 08/15/07........................ 643,722
1,600,000 Republic of New York Corp.
7.200%, 07/15/47........................ 1,325,056
1,740,000 RJ Reynolds Tobacco Holding, Inc. Series
B
7.750%, 05/15/06........................ 1,537,586
1,170,000 RJ Reynolds Tobacco Holding, Inc. Series
B
7.875%, 05/15/09........................ 993,061
2,000,000 RJR Nabisco, Inc.
6.850%, 06/15/05........................ 1,888,760
158,000 Safety-Kleen Corp.
9.250%, 05/15/09........................ 153,655
4,260,000 Seagram (Joseph) & Sons, Inc.
7.600%, 12/15/28........................ 4,011,514
2,000,000 Southern California Edison
6.500%, 06/01/01........................ 1,992,220
2,400,000 TCI Communications, Inc.
7.875%, 02/15/26........................ 2,413,224
950,000 TCI Communications, Inc.
8.750%, 08/01/15........................ 1,036,422
1,860,000 TCI Communications, Inc.
9.650%, 03/31/27........................ 2,044,847
800,000 Telecommunications, Inc.
7.875%, 08/01/13........................ 812,328
18,000,000 Tennessee Valley Authority
0.000%, 12/15/17 (b).................... 4,944,690
50,000 Terex Corp. Series D
8.875%, 04/01/08........................ 47,500
2,000,000 Time Warner Entertainment
8.375%, 03/15/23........................ 2,079,460
1,500,000 U.S. West Capital Funding, Variable Rate
5.548%, 06/15/00........................ 1,499,691
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE> 59
Portfolio of Investments
American Odyssey Funds, Inc./Long-Term Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------
<S> <C> <C>
$ 102,000 US Unwired, Inc., 144A, Step Up
13.375%, 11/01/09....................... $ 60,180
101,000 Voicestream Wireless Corp.
10.375%, 11/15/09....................... 104,535
80,000 Voicestream Wireless Corp., 144A, Step
Up
11.875%, 11/15/09....................... 48,400
109,000 Worldwide Flight Services 144A
12.250%, 08/15/07....................... 108,164
-------------
78,637,344
-------------
Municipal Obligations -- 0.6%
3,150,000 Toll Road Inv Part II 144A
0.000%, 02/15/27 (b).................... 417,060
3,400,000 Toll Road Inv Part II 144A
0.000%, 02/15/28 (b).................... 417,520
2,880,000 Toll Road Inv Part II 144A
0.000%, 02/15/29 (b).................... 328,320
2,880,000 Toll Road Inv Part II 144A
0.000%, 02/15/30 (b).................... 304,704
-------------
1,467,604
-------------
TOTAL U.S. CORPORATE OBLIGATIONS
(Cost $90,286,376).................................. 85,964,545
-------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 49.9%
U.S. Government Agency Mortgage Backed
Obligations -- 31.0%
16,146,507 Federal Home Loan Mortgage Corp.
6.500%, 09/01/27........................ 15,248,439
9,817,371 Federal Home Loan Mortgage Corp.
6.500%, 05/01/29........................ 9,255,916
7,738,581 Federal Home Loan Mortgage Corp.
7.000%, 01/01/28........................ 7,494,274
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------
<S> <C> <C>
$ 4,630,250 Federal Home Loan Mortgage Corp.
7.000%, 04/01/29........................ $ 4,483,911
1,600,000 Federal Home Loan Mortgage Corp., TBA
7.000%, 01/01/30........................ 1,548,496
3,173,000 Federal National Mortgage Association
5.125%, 02/13/04........................ 2,983,128
872,695 Federal National Mortgage Association
6.000%, 10/01/27........................ 804,511
9,393,473 Federal National Mortgage Association
6.500%, 03/01/28........................ 8,856,890
9,794,524 Federal National Mortgage Association
6.500%, 05/01/29........................ 9,228,204
6,309,765 Federal National Mortgage Association
7.000%, 03/01/28........................ 6,100,723
895,012 Federal National Mortgage Association
7.000%, 04/01/28........................ 865,360
359,997 Federal National Mortgage Association
8.500%, 12/01/26........................ 369,447
907,057 Federal National Mortgage Association
8.500%, 07/01/27........................ 930,577
39,470 Government National Mortgage Association
7.000%, 01/15/23........................ 38,385
4,564,729 Government National Mortgage Association
7.000%, 04/15/23........................ 4,439,199
51,328 Government National Mortgage Association
7.000%, 05/15/23........................ 49,916
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE> 60
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
$ 547,430 Government National Mortgage Association
7.000%, 07/15/23........................ $ 532,375
621,536 Government National Mortgage Association
7.000%, 08/15/23........................ 604,444
348,458 Government National Mortgage Association
7.500%, 10/15/22........................ 346,280
110,261 Government National Mortgage Association
7.500%, 01/15/23........................ 109,572
730,672 Government National Mortgage Association
7.500%, 04/15/23........................ 726,106
44,723 Government National Mortgage Association
7.500%, 05/15/23........................ 44,443
456,038 Government National Mortgage Association
7.500%, 06/15/23........................ 453,188
192,769 Government National Mortgage Association
7.500%, 07/15/23........................ 191,565
692,909 Government National Mortgage Association
7.500%, 08/15/23........................ 688,578
770,213 Government National Mortgage Association
7.500%, 10/15/23........................ 765,400
83,918 Government National Mortgage Association
7.500%, 11/15/23........................ 83,394
1,398,468 Government National Mortgage Association
7.500%, 07/15/28........................ 1,384,050
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
193,725 Government National Mortgage Association
9.500%, 09/15/30........................ $ 207,525
------------
78,834,296
------------
U.S. Government Agency Obligations -- 8.0%
3,000,000 Federal Home Loan Bank
5.920%, 06/29/00........................ 2,989,230
3,000,000 Federal Home Loan Mortgage Corp.
6.783%, 08/18/05........................ 2,976,570
3,400,000 Federal National Mortgage Association,
TBA
6.000%, 01/01/29........................ 3,109,946
20,000,000 Resolution Funding Corp., TIGR Coupon
Strip
0.000%, 01/15/11 (b),(c)................ 9,316,800
15,000,000 Resolution Funding Corp., TIGR Principal
Strip
0.000%, 01/15/30 (b).................... 1,972,200
------------
20,364,746
------------
U.S. Treasury Notes -- 10.9%
8,463,411
3.625%, 01/15/08 ++..................... 8,064,048
13,195,316
3.625%, 04/15/28 ++,(c)................. 11,785,000
6,813,446
3.875%, 04/15/29 ++..................... 6,359,943
640,000
6.000%, 08/15/09........................ 620,000
1,040,000
5.250%, 11/15/28........................ 856,700
------------
27,685,691
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $133,832,224)................................. 126,884,733
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE> 61
Portfolio of Investments
American Odyssey Funds, Inc. / Long-Term Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS -- 0.3%
Media-Broadcasting & Publishing -- 0.3%
14,000 News Corp., Ltd......................... $ 829,178
--------------
TOTAL PREFERRED STOCKS
(Cost $910,560)..................................... 829,178
--------------
<CAPTION>
Principle Amount Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 0.8%
U.S. Government Agency Obligations -- 0.8%
$ 2,200,000 Federal Home Loan Mortgage Corp.
5.478%, 05/11/00 (d),(e)................ 2,156,146
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $2,156,146)................................... 2,156,146
--------------
239,132,697
TOTAL INVESTMENTS -- 94.0%
(Cost $250,106,091).................................
Other assets in excess of liabilities -- 6.0% 15,234,873
--------------
TOTAL NET ASSETS -- 100.0% $ 254,367,570
==============
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
FLIRB -- Front Loaded Interest Reduction Bond
REMIC -- Real Estate Mortgage Investment Conduit
TBA -- Delayed Delivery Transaction (Note 9)
TIGR -- Treasury Income Growth Receipts (a stripped U.S. Bond)
Step Up -- Security is a "step up" bond where the coupon increases or steps up
at a predetermined rate. Rates shown are current coupon and next coupon rate
when security steps up.
Yankee-Dollar -- U.S. Dollar denominated bonds issued by non-
U.S. companies in the U.S.
144A -- Securities restricted for resale to Qualified Institutional
Buyers
Variable Rate -- The rates shown on variable rate securities reflect the current
interest rate at December 31, 1999, which are subject to change based on the
terms of the security, including varying reset dates.
(a) An affiliate of American Odyssey Funds Management, Inc.
(b) Security is a zero coupon bond.
(c) All or a portion of these securities have been segregated to cover delayed
delivery transactions.
(d) Security has been pledged to cover collateral requirements for open
futures.
(e) Rate noted reflects yield to maturity at issue.
=/= Inflation Indexed
The accompanying notes are an integral part of the financial statements.
60
<PAGE> 62
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / December 31,
1999
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN OBLIGATIONS -- 3.7%
Corporate Debt -- 3.7%
$ 5,000,000 Telecom Corporation of New Zealand,
Ltd., 144A
6.250%, 02/10/03........................ $ 4,898,115
-----------
TOTAL FOREIGN OBLIGATIONS
(Cost $5,003,486)..................................... 4,898,115
-----------
U.S. CORPORATE OBLIGATIONS -- 71.0%
Corporate Bonds & Notes -- 71.0%
2,900,000 AES Corp.
9.375%, 10/15/29........................ 2,991,556
5,850,000 AT&T Capital Corp.
6.250%, 05/15/01........................ 5,794,016
4,205,000 CarrAmerica Realty Corp.
6.625%, 10/01/00........................ 4,165,305
1,450,000 CMS Energy Corp.
7.625%, 11/15/04........................ 1,386,461
1,600,000 CMS Energy Corp. Series B
6.750%, 01/15/04........................ 1,484,584
1,000,000 Columbia/HCA Healthcare Corp.
6.630%, 07/15/45........................ 945,270
3,000,000 Columbia/HCA Healthcare Corp.
6.870%, 09/15/03........................ 2,782,500
5,700,000 Comdisco, Inc., Series MTNH
7.250%, 09/20/01........................ 5,662,910
1,400,000 Dayton Hudson Co.
6.800%, 10/01/01........................ 1,397,564
6,000,000 Finova Capital Corp.
6.250%, 11/01/02........................ 5,820,420
5,700,000 Marriott International, Inc.
7.875%, 09/15/09........................ 5,607,501
1,200,000 MBNA Corp.
6.000%, 12/26/00........................ 1,188,252
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
$ 3,000,000 Nationwide Health Properties
6.900%, 10/01/37........................ $ 2,658,867
6,000,000 NorAm Energy Corp.
7.500%, 08/01/00........................ 6,023,220
5,400,000 Norfolk Southern Corp.
6.875%, 05/01/01........................ 5,386,284
4,600,000 Orix Credit Alliance, Inc. MTN, 144A
6.780%, 05/15/01........................ 4,555,895
5,800,000 Osprey Trust, 144A
8.310%, 01/15/03........................ 5,762,758
5,700,000 Park Place Entertainment Corp.
7.950%, 08/01/03........................ 5,649,236
3,200,000 Popular North America, Inc., MTN Series
B
7.300%, 06/05/02........................ 3,185,664
5,000,000 RJR Nabisco, Inc.
6.700%, 06/15/02........................ 4,876,950
3,200,000 Saks, Inc.
7.250%, 12/01/04........................ 3,049,302
1,700,000 Saks, Inc.
7.500%, 12/01/10........................ 1,553,754
1,400,000 Union Pacific Corp. Series MTNC
9.650%, 06/01/00........................ 1,418,648
4,200,000 USAA Capital Corp. Series MTNB, 144A
7.050%, 11/08/06........................ 4,112,333
5,800,000 Utilicorp United, Inc.
6.875%, 10/01/04........................ 5,574,368
-----------
93,033,618
-----------
TOTAL U.S. CORPORATE OBLIGATIONS
(Cost $94,975,982)................................. 93,033,618
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE> 63
Portfolio of Investments
American Odyssey Funds, Inc. / Intermediate-Term Bond Fund / December 31,
1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 21.7%
U.S. Treasury Bonds -- 6.0%
$ 5,600,000
11.250%, 02/15/15....................... $ 7,916,104
-------------
U.S. Treasury Notes -- 15.7%
275,000
5.750%, 04/30/03........................ 269,973
17,700,000
5.875%, 11/15/04........................ 17,354,319
3,000,000
6.250%, 02/15/07........................ 2,951,730
-------------
20,576,022
-------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $28,870,596)................................. 28,492,126
-------------
SHORT-TERM INVESTMENTS -- 1.9%
Commercial Paper -- 1.9%
2,493,000 Household Finance
4.000%, 01/03/00 (a).................... 2,492,446
-------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $2,492,446).................................. 2,492,446
-------------
TOTAL INVESTMENTS -- 98.3%
(Cost $131,342,510)................................ 128,916,305
-------------
Other assets in excess of
liabilities -- 1.7% 2,206,972
-------------
TOTAL NET ASSETS -- 100.0% $ 131,123,277
=============
</TABLE>
NOTES TO THE PORTFOLIO OF INVESTMENTS:
144A -- Securities restricted for resale to Qualified Institutional
Buyers
(a) Rate noted reflects yield to maturity at issue.
The accompanying notes are an integral part of the financial statements.
62
<PAGE> 64
Notes to Financial Statements
American Odyssey Funds, Inc. / December 31, 1999
NOTE 1. ORGANIZATION
American Odyssey Funds, Inc., (the "Company"), was organized as a Maryland
corporation in December 1992. It is registered under the Investment Company Act
of 1940 as an open-end diversified management investment company. It consists of
six separate funds (each a "Fund", collectively the "Funds"): Global High-Yield
Bond Fund, International Equity Fund, Emerging Opportunities Fund, Core Equity
Fund, Long-Term Bond Fund and Intermediate-Term Bond Fund. Shares of the Funds
are offered only to life insurance company separate accounts to serve as the
underlying investment vehicle for variable annuity and variable life insurance
contracts; qualified retirement plans, including Section403(b) arrangements, as
permitted by Treasury regulations; and insurance companies and their affiliates.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
A) SECURITIES VALUATION
Securities traded on a national exchange and those traded on over-the-counter
markets are valued at the last sales price; if there was no sale on such day,
the securities are valued at the mean between the most recently quoted bid and
asked prices. Securities for which market quotations are not readily available
are valued in good faith at fair value using methods determined by the Board of
Directors. Short-term securities which mature in 60 days or less are valued at
amortized cost, which approximates market value, unless this method does not
represent fair market value, at which time the security will be valued at its
fair value as determined in good faith by the Board of Directors.
Futures contracts and options are valued based upon their quoted daily
settlement prices.
B) OFF BALANCE SHEET RISK
The Funds may utilize futures contracts, options, and forward foreign currency
contracts to manage their exposure to the stock and bond markets and to
fluctuations in interest rates and currency values and for investment purposes.
The primary risks associated with the use of these financial instruments are (a)
an imperfect correlation between the change in market value of the other
securities held by the Funds and the change in market value of these financial
instruments, (b) the possibility of an illiquid market, and (c) the
non-performance of the counterparties under the terms of the contract. As a
result, the use of these financial instruments may involve, to a varying degree,
risk of loss in excess of the amount recognized in the Statement of Assets and
Liabilities.
63
<PAGE> 65
C) FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts, if
applicable, are recognized as assets due from the broker. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the value of the contract at the end of each day's trading. Changes in
unrealized gains or losses are recorded as a variation margin and settled daily
with the broker through cash receipts or cash payments, respectively. Gains and
losses are realized upon the expiration or closing of the futures contract.
D) OPTIONS
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's Statement of Assets and Liabilities as an investment and
subsequently marked-to-market to reflect the current market value of the option
purchased. If an option which the Fund has purchased expires on its stipulated
expiration date, the Fund realizes a loss for the amount of the cost of the
option. If the Fund enters into a closing transaction, it realizes a gain or
loss, depending on whether the proceeds from the sale are greater or less than
the cost of the option. If the Fund exercises a put option, it realizes a gain
or loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. If the Fund exercises a call
option, the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
The premium received for a written option is recorded as an asset with an
equivalent liability. The liability is marked-to-market based on the option's
quoted daily settlement price. When an option expires or the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss if the cost of
the closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is eliminated. When a written
call option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the Fund
is obligated to purchase.
E) FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may enter into forward foreign currency contracts to manage their
exposure to fluctuations in certain foreign currencies. The Global High-Yield
Bond Fund may enter into forward foreign currency contracts for investment
purposes as well. A forward currency contract is a commitment to purchase or
sell a foreign currency at a future date at a set price. The forward currency
contracts are valued at the forward rate and are marked-to-market daily. The
change in market value is recorded by the Fund as an unrealized gain or loss.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in currency values.
64
<PAGE> 66
F) REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with the seller wherein the
seller and the buyer agree at the time of sale to a repurchase of the security
at a mutually agreed upon time and price. The Funds will not enter into
repurchase agreements unless the agreement is fully collateralized. Securities
purchased subject to the repurchase agreement are deposited with a custodian
and, pursuant to the terms of the repurchase agreement, must have an aggregate
market value at least equal to the repurchase price plus accrued interest. If
the value of the underlying securities falls below the value of the repurchase
price plus accrued interest, the seller is required to deposit additional
collateral by the next business day. If the request for additional collateral is
not met, or the seller defaults on its repurchase obligation, the Funds maintain
the right to sell the underlying securities at market value and may claim any
resulting loss against the seller. Repurchase agreements could involve certain
risks in the event of default or insolvency of the other party, including
possible delays or restrictions upon the Fund's ability to dispose of the
underlying securities.
G) CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the rate of exchange at the end of the period. Purchases and
sales of securities are translated at the rates of exchange prevailing when such
securities were acquired or sold. Income is translated at rates of exchange
prevailing when accrued.
The Fund does not isolate that portion of currency gains and losses resulting
from changes in foreign exchange rates on investments denominated in foreign
currencies from the fluctuations arising from changes in market prices of these
investments held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of foreign short-term securities and foreign currencies, currency
gains or losses realized between the trade and settlement dates on securities
transactions and the difference in the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, from the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities denominated in foreign currencies other than investments in
securities at fiscal year end, resulting from changes in the exchange rate and
changes in the value of forward foreign currency exchange contracts held.
H) TAXES
It is the Company's policy to comply with the provisions of the Internal Revenue
Code Subchapter M applicable to a regulated investment company. Under such
provisions, the Company will not be subject to federal income tax as the Company
intends to distribute as dividends substantially all of the net investment
income, if any, of each Fund. The Company also intends to distribute annually
all of its net realized capital gains of each Fund. Such dividends and
distributions are automatically reinvested in additional shares of the Funds.
65
<PAGE> 67
I) DISTRIBUTIONS
Dividends from net investment income and capital gains distributions are
determined in accordance with U.S. federal income tax regulations which may
differ from generally accepted accounting principles. As a result, dividends and
distributions differ from net investment income and net realized capital gains
due to timing differences, primarily the deferral of losses due to wash sales
and the deferral of net realized capital losses recognized subsequent to
October 31, 1999. Distributions which were the result of permanent differences
between book and tax amounts, primarily due to the differing treatment of
foreign currency transactions and the inability to carry net operating losses
forward to future years, have been reclassified among additional paid-in
capital, undistributed net investment income and accumulated net realized gain
on investments, futures contracts, option contracts and foreign currency
transactions.
J) SECURITIES TRANSACTIONS
Securities transactions are accounted for on the trade date. Realized gains and
losses are determined on the identified cost basis. Dividend income is recorded
on the ex-dividend date. Interest income is accrued daily as earned.
NOTE 3. MANAGEMENT, SUBADVISORY, AND TRANSFER AGENCY AGREEMENTS AND TRANSACTIONS
WITH AFFILIATES
The Company has entered into a management agreement with American Odyssey Funds
Management, Inc. (AOFM), pursuant to which AOFM manages the investment
operations of the Company and administers the Company's affairs. AOFM has
entered into subadvisory agreements for investment advisory services in
connection with the management of each of the Funds. AOFM supervises the
subadvisors' performance of advisory services and will make recommendations to
the Company's Board of Directors with respect to the retention or renewal of the
subadvisory agreements. AOFM pays for the cost of compensating officers of the
Company, occupancy, and certain clerical and accounting costs of the Company.
The Company bears all other costs and expenses. Each Fund pays AOFM a fee for
its services that is computed daily and paid monthly at an annual rate of 0.25%
of the Fund's average net assets. Each Fund pays its respective subadvisor(s)
directly.
AOFM's management fees for the period January 1, 1999 to December 31, 1999 were
$3,916,299. During the period January 1, 1999 to December 31, 1999, the Funds
also paid $5,379,811 to the Subadvisors.
66
<PAGE> 68
Each Fund pays its subadvisor (or, for any Fund with more than one subadvisor,
each of its subadvisors) a fee that is computed daily and paid monthly at the
annual rates specified below based upon the value of the Fund's average daily
net assets allocated to that subadvisor.
<TABLE>
<CAPTION>
FUND & SUBADVISOR SUBADVISOR'S FEE
- ------------------------------------------------ ----------------------------------------------------------------
<S> <C>
Global High-Yield Bond Fund
- -Credit Suisse Asset Management
(formerly BEA Associates) - 0.425% of assets
International Equity Fund
- -Bank of Ireland Asset Management (U.S.) Limited - 0.45% for first $50 million in assets, plus
- 0.40% for next $50 million in assets, plus
- 0.30% for assets over $100 million
Emerging Opportunities Fund
- -Chartwell Investment Partners - 0.70% for the first $50 million in assets, plus
- 0.50% for the next $50 million in assets, plus
- 0.45% for assets over $100 million
- -SG Cowen Asset Management - 0.50% for the first $50 million in assets, plus
- 0.45% for the next $50 million in assets, plus
- 0.40% for assets over $100 million
Core Equity Fund
- -Equinox Capital Management, LLC - 0.35% for first $100 million in assets, plus
- 0.30% for assets over $100 million
Long-Term Bond Fund
- -Western Asset Management Company - 0.25% for the first $250 million in assets, plus
- 0.15% for assets over $250 million
Intermediate-Term Bond Fund
- -Travelers Asset Management
International Corporation - 0.25% for the first $100 million in assets, plus
- 0.20% for the next $100 million in assets, plus
- 0.15% for assets over $200 million
</TABLE>
The Company has entered into a transfer agency agreement with AOFM pursuant to
which AOFM is responsible for shareholders' record keeping and communications.
AOFM does not currently charge any additional fees for these services.
Travelers Asset Management International Corporation, an affiliate of AOFM,
serves as subadvisor for the Intermediate-Term Bond Fund.
67
<PAGE> 69
NOTE 4. DIRECTED BROKERAGE ARRANGEMENTS
The International Equity Fund, Emerging Opportunities Fund and Core Equity Fund
have entered into directed brokerage service arrangements with certain
broker-dealers. The broker-dealers have agreed to pay certain Fund expenses in
exchange for the Fund directing a portion of the fund brokerage to these
broker-dealers. In no event would the Fund pay additional brokerage or receive
inferior execution of transactions for executing transactions with these
certain broker dealers.
Under these arrangements for the year ended December 31, 1999, broker-dealers
paid custodian expenses for the International Equity Fund, Emerging
Opportunities Fund and the Core Equity Fund of $31,943, $100,493 and $117,187,
respectively.
NOTE 5. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of investment securities
(excluding short-term investments and repurchase agreements), for the year
ended December 31, 1999 were:
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------- --------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Purchases:
U.S. Government........ $ -- $ -- $ -- $ -- $ 150,903,773 $ 205,523,309
Non-U.S. Government.... 46,524,291 57,987,063 338,961,870 264,224,245 49,991,346 198,236,690
------------ ------------- -------------- -------------- -------------- --------------
Total.................. $ 46,524,291 $ 57,987,063 $ 338,961,870 $ 264,224,245 $ 200,895,119 $ 403,759,999
============ ============= ============== ============== ============== ==============
Sales:
U.S. Government........ $ -- $ -- $ -- $ -- $ 160,124,596 $ 218,449,252
Non-U.S. Government.... 38,460,502 63,746,970 327,365,137 271,392,785 33,401,343 169,637,926
------------ ------------- -------------- -------------- -------------- --------------
Total.................. $ 38,460,502 $ 63,746,970 $ 327,365,137 $ 271,392,785 $ 193,525,939 $ 388,087,178
============ ============= ============== ============== ============== ==============
</TABLE>
At December 31, 1999, the cost of securities for federal income tax purposes and
the unrealized appreciation (depreciation) of investments for federal income tax
purposes for each Fund was as follows:
<TABLE>
<CAPTION>
Global Emerging Intermediate-
High-Yield International Opportunities Core Equity Long-Term Term
Bond Fund Equity Fund Fund Fund Bond Fund Bond Fund
------------- --------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Federal Income Tax
Cost................... $ 97,028,576 $ 242,368,404 $ 301,145,234 $ 378,816,122 $ 250,118,203 $ 131,360,008
============ ============== ============== ============== ============= =============
Gross Unrealized
Appreciation........... $ 4,061,955 $ 149,994,728 $ 94,897,408 $ 94,163,832 $ 1,429,165 $ 99,314
Gross Unrealized
Depreciation........... (8,316,321) (9,688,814) (26,202,046) (17,962,941) (12,414,671) (2,543,017)
------------ -------------- -------------- ------------- ------------- -------------
Net Unrealized
Appreciation
(Depreciation)......... $ (4,254,366) $ 140,305,914 $ 68,695,362 $ 76,200,891 $ (10,985,506) $ (2,443,703)
============ ============== ============== ============== ============= =============
</TABLE>
68
<PAGE> 70
NOTE 6. FUTURES CONTRACTS
At December 31, 1999, the Long-Term Bond Fund had entered into the following
futures contracts:
<TABLE>
<CAPTION>
Number Underlying Expiration Nominal Nominal Unrealized
of Contracts Face Value Securities Date Cost Value Depreciation
- ------------ ---------- ---------- ---------- ------- ------- ------------
Long Position
- --------------
<S> <C> <C> <C> <C> <C> <C>
10 Year U.S. Treasury
47 $ 4,700,000 Note 03/31/00 $ 4,626,556 $ 4,505,391 $ (121,165)
U.S. Long-Term Treasury
101 10,100,000 Bond 03/31/00 9,517,765 9,184,687 (333,078)
----------
Total: $ (454,243)
===========
</TABLE>
<TABLE>
<CAPTION>
Number Underlying Expiration Nominal Nominal Unrealized
of Contracts Face Value Securities Date Cost Value Depreciation
- ------------ ---------- ---------- ---------- ------- ------- ------------
Short Position
- --------------
<S> <C> <C> <C> <C> <C> <C>
117 $ 11,700,000 5 Year U.S. Treasury Note 03/31/00 $ 11,638,802 $ 11,467,828 $ 170,974
=========
</TABLE>
At December 31, 1999, the Fund had segregated sufficient cash and/or securities
to cover margin requirements on open future contracts.
NOTE 7. WRITTEN OPTIONS
The Long-Term Bond Fund's activity in written options during the year ended
December 31, 1999 was as follows:
<TABLE>
<CAPTION>
Number of
Options Premiums
--------- ----------
<S> <C> <C>
Options Outstanding at December 31,
1998.................................. 119 $ 126,951
Options Written....................... 6,136 1,288,960
Options Canceled in Closing
Transactions........................ (699) (720,944)
Options Expired....................... (1,281) (324,660)
Options Exercised..................... (4,103) (212,300)
------- -----------
Options Outstanding at December 31,
1999.................................. 172 $ 158,007
======= ===========
Cost of closing transactions............ $ 524,548
===========
</TABLE>
NOTE 8. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund had forward foreign currency contracts which
contractually obligate the Fund to deliver or receive currencies at specified
future dates. The following contracts were open at December 31, 1999 for the
International Equity Fund:
<TABLE>
<CAPTION>
Local Foreign Unrealized
Principal Contract Settlement Current Appreciation/
Sales Amount U.S. $ Value Date U.S. $ Value (Depreciation)
----- ----------- ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 641,881,000 $ 6,156,541 01/18/00 $ 6,283,265 $ (126,724)
Japanese Yen 343,340,000 3,288,697 02/09/00 3,370,815 (82,118)
Japanese Yen 448,559,000 4,296,542 02/18/00 4,410,581 (114,039)
Japanese Yen 385,298,000 3,681,602 02/24/00 3,792,427 (110,825)
Japanese Yen 268,069,000 2,664,702 02/29/00 2,640,814 23,888
------------- ------------- ------------- -----------
Total Sales 2,087,147,000 $ 20,088,084 $ 20,497,902 $ (409,818)
============= ============= ============= ===========
</TABLE>
69
<PAGE> 71
NOTE 9. DELAYED DELIVERY TRANSACTIONS:
The Long-Term Bond Fund may purchase and sell securities on a when-issued or
forward commitment basis. Payment and delivery may take place a month or more
after the date of the transactions. The price of the underlying securities and
the date when the securities will be delivered and paid for are fixed at the
time the transaction is negotiated. The Fund instructs its custodian to
segregate securities having a value at least equal to the net amount of the
purchase commitments.
At December 31, 1999, the Fund has entered into the following delayed delivery
transactions:
<TABLE>
<CAPTION>
Payable
Type Security Settlement Date Amount
- ---- --------------------------- ----------------- ---------------
<S> <C> <C> <C>
Federal National Mortgage
Buy Corporation, TBA, 6% 01/19/00 $ 2,339,844
Federal National Mortgage
Buy Corporation, TBA, 6% 01/19/00 842,344
Federal Home Loan Mortgage
Buy Corporation, 7%, 01/01/30 01/19/00 1,575,500
------------
$ 4,757,688
============
</TABLE>
NOTE 10. FEDERAL INCOME TAXES:
For federal income tax purposes, the Funds indicated below have a capital loss
carryforward as of December 31, 1999 which is available to offset future
capital gains, if any.
<TABLE>
<CAPTION>
Capital Loss Expiration
Carryforward Date
------------ ----------
<S> <C> <C>
Global High-Yield Bond $ 85,972 12/31/2002
148,584 12/31/2005
4,479,269 12/31/2006
578,667 12/31/2007
-----------
$ 5,292,492
===========
Long-Term Bond Fund $ 7,552,317 12/31/2007
===========
Intermediate-Term Bond Fund $ 3,042,240 12/31/2007
===========
</TABLE>
The International Equity Fund and the Core Equity Fund elected to defer to
their fiscal years ending December 31, 2000, $123,961 and $3,205,015,
respectively, of losses recognized during the period November 1, 1999 to
December 31, 1999.
70
<PAGE> 72
Report of Independent Accountants
American Odyssey Funds, Inc. / December 31, 1999
To the Board of Directors and shareholders
of American Odyssey Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Global High-Yield Bond Fund,
International Equity Fund, Emerging Opportunities Fund, Core Equity Fund,
Long-Term Bond Fund and Intermediate-Term Bond Fund, portfolios of American
Odyssey Funds, Inc. (the Company), as of December 31, 1999, and the related
statements of operations, and changes in net assets and financial highlights
for the year then ended. These financial statements and financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The statements of changes in net assets for the year ended
December 31, 1998 and the financial highlights for each of the years in the
four-year period then ended were audited by other independent accountants whose
report, dated February 5, 1999, expressed an unqualified opinion on these
statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Global High-Yield Bond Fund, International Equity Fund, Emerging Opportunities
Fund, Core Equity Fund, Long-Term Bond Fund and Intermediate-Term Bond Fund, as
of December 31, 1999, and the results of their operations, changes in their net
assets and financial highlights for the year then ended in conformity with
generally accepted accounting principles.
[SIGNATURE]
Boston, Massachusetts
February 4, 2000
71
<PAGE> 73
AMERICAN
[LOGO] ODYSSEY(R)
---------
F U N D S
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 2000 American Odyssey Funds Management, Inc.
