<PAGE> 1
ESC STRATEGIC FUNDS, INC.
- - --------------------------------------------------------------------------------
November 8, 1995
Dear Shareholder:
We are pleased to present the September 30, 1995, semi-annual report for the ESC
Strategic Funds. We take this opportunity to inform you of the progress of the
Funds, to discuss expectations and to express our great appreciation for your
investment and confidence in our effort.
The ESC Strategic Funds are comprised of a Multiple Manager Series and a Single
Manager Series. This report addresses the progress of each series and each
specific fund.
MULTIPLE MANAGER SERIES
Each fund in this series is diversified across several counter-balancing, yet
compatible, investment styles. The purpose is to ensure that a successful
manager, which runs the risk of being over-valued by way of superior
appreciation, does not become over-weighted within a particular fund and that an
under-performing manager is able to receive additional cash in advance of
returning to favor. Unlike some funds which attempt to anticipate trends, the
Multiple Manager Series adheres to a consistent strategy of maintaining target
allocations to each manager and respective market sectors.
ESC STRATEGIC INCOME FUND achieved a total return of 0.56% during the most
recent quarter ended September 30, 1995, as compared to a return of 2.30% for
the Lipper World Income Fund Index and a loss of 1.04% for the Salomon World
Government Index. For the six month period ended September 30, 1995, the Fund
returned 5.33% as compared to 9.10% and 4.23% for the same indices,
respectively.
According to a recent article in the Wall Street Journal, U.S. bond returns are
shaping up to be the third best in modern times. The 30-year bond yield recently
declined to its lowest level in 20 months. As a result, the U.S. allocations of
the ESC Strategic Income Fund, both within the investment grade and high-yield
sectors, expanded beyond their target allocations. Accordingly at quarter end,
cash was re-directed from these allocations to the international segment.
Following are the management firms, actual allocations and target allocations at
quarter end:
<TABLE>
<CAPTION>
ALLOCATIONS AS OF
9/30/95
ACTUAL TARGET
------ ------
<S> <C> <C> <C>
Cincinnati Asset Management U.S. High Yield 34.0% 33.3%
Murray Johnstone International International 31.6% 33.3%
Llama Asset Management Investment Grade 34.4% 33.4%
</TABLE>
ESC STRATEGIC APPRECIATION FUND gained 10.67% during the quarter ended September
30, 1995, as compared to 9.85% and 8.06% for the Lipper Capital Appreciation
Fund Index and the S&P 500, respectively. For the previous six month period
ended September 30, 1995, the Fund gained 19.59% versus 20.17% for the Lipper
Index and 18.26% for the S&P 500.
1995 has been characterized by enormous strength in the technology sector and a
"catch-up" by the S&P 500 to spectacular growth in earnings which occurred in
1994 when the financial markets were under severe strain. Accordingly, the
managers continue to discover exciting investment opportunities and remain fully
invested in companies exhibiting consistent, superior growth in earnings with
above-average fundamental characteristics. The month of August was particularly
strong for Mid Cap Growth as technology is prominently represented in this
market segment. However, at quarter end, the fund was re-balanced toward Mid Cap
Growth as technology began to correct as noted below:
<TABLE>
<CAPTION>
ALLOCATIONS AS OF
9/30/95
ACTUAL TARGET
------ ------
<S> <C> <C> <C>
GlobeFlex Capital Mid to Large Cap Growth 32.6% 33.3%
Equitable Asset Management Small Cap Growth 33.8% 33.4%
Brandes Investment Partners Value 33.6% 33.3%
</TABLE>
<PAGE> 2
ESC STRATEGIC GLOBAL EQUITY FUND returned 5.07% during the quarter ended
September 30, 1995, while the Lipper Global Fund Index and FTA World Index
gained 5.56% and 5.09%, respectively. During the six months ended September 30,
1995, the Fund returned 11.01% as compared to 13.53% and 8.61% for the same
indices.
This year's strength in domestic equities, coming on the heels of 1994's
disappointments in developed and especially emerging markets seems to have
thrown the concept of global diversification into doubt. However, successful
investing is the early discovery of value where the consensus yet fears to tread
but is sure to arrive or return eventually. Under-performance combined with
superior fundamentals leads to attractive valuations which should eventually
entice investors. Earnings in European countries are expanding but are valued at
lower P/Es than U.S. counterparts. Latin America and India continue to make
significant strides in efficiency and productivity as a result of
denationalization and privatization. Superior economic growth as measured by
gross domestic product continues throughout Asia as reported in an October 1995
analysis compiled by The Economist. And, within all these areas, growth
compounds while valuations compress thus creating new opportunities for
long-term investors accepting the risks and potential rewards of a global
investment strategy.
Because of recent gains in the U.S. segment, the ESC Strategic Global Equity
Fund was re-balanced to the international developed and emerging market
segments. Unlike other funds which may have been forced to liquidate emerging
market holdings at distressed prices in rather thin markets, the multiple
manager concept seeks to benefit from the confusion of others by re-directing
cash toward distressed areas as such value becomes most appealing but where
investment sentiment has yet to firm. The table below sets forth changes from
actual to target allocations as of quarter end:
<TABLE>
<CAPTION>
ALLOCATIONS AS OF
9/30/95
ACTUAL TARGET
------ ------
<S> <C> <C> <C>
GlobeFlex Capital Mid to Large Cap Growth 37.7% 36.2%
Murray Johnstone International Developed Markets 56.2% 41.5%
Blairlogie Capital Management Emerging Markets 6.1% 0
Murray Johnstone International Emerging Markets 0 22.3%
</TABLE>
SINGLE MANAGER SERIES
This series utilizes a traditional single management firm approach to provide
investors access to more focused portfolio disciplines.
ESC STRATEGIC SMALL CAP FUND returned 17.96% during the quarter ended September
30, 1995, as compared to 12.50% for the Lipper Small Company Growth Fund Index
and 9.43% for the Russell 2000. During the six month period ended September 30,
1995, the Fund achieved a return of 27.29% versus 22.92% and 19.02% for the same
indices, respectively.
The Fund seeks fundamentally sound companies generating consistently superior
earnings growth rather than compete with the legions of analysts and economists
attempting to determine the next direction of the economy or the market.
Investor confusion combined with a lack of sustained diligence on the part of
Wall Street creates opportunities which continue to present themselves at an
accelerating pace.
ESC STRATEGIC ASSET PRESERVATION FUND provided a total return of 1.29% during
the quarter ended September 30, 1995, while the Lipper Short Investment Grade
Index returned 1.45%. The Merrill Lynch 1-3 Year Government Index returned
1.50%. During the six month period ended September 30, 1995, the Fund returned
4.35%. This compares to returns of 4.91% and 4.76% for the same indices,
respectively. We continue to be pleased with the relative stability of the Fund
in the midst of what will surely remain a confusing interest rate environment.
We appreciate your interest in the ESC Strategic Funds and invite all questions
and comments. For more complete information, including management fees and
expenses in addition to the unique risks involved with investing in the
international markets and small capitalization stocks, please call
1-800-372-3360 for a prospectus and read it carefully before investing in any of
the Funds. We look forward to reporting our progress as we enter 1996 and wish
you a very pleasant fall in the meantime.
Sincerely,
/s/ W. HOWARD CAMMACK, JR.
--------------------------
W. Howard Cammack, Jr.
Treasurer
<PAGE> 3
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC ASSET PRESERVATION FUND
Portfolio of Investments (unaudited) -- September 30, 1995
<TABLE>
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - ---------- --------- -----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS -- 56.7%
BANKING-- 8.4%
A-/A2 Bank America Corp.,
7.50%, 3/15/1997....... 250,000 $ 254,629
A-/A3 First Union Corp.,
9.45%, 6/15/1999....... 250,000 273,239
A/A2 Nationsbank Corp.,
5.125%, 9/15/1998...... 250,000 242,045
BBB-/NR Union Planters Corp.,
10.125%, 4/01/1999..... 300,000 305,494
-----------
1,075,407
-----------
BUSINESS SERVICES -- 2.0%
A/A2 Xerox Corp.,
8.75%, 11/01/1995...... 250,000 250,520
-----------
CHEMICALS -- 3.7%
A+/A2 ICI Wilmington Corp.,
7.625%, 3/15/1997...... 465,000 474,725
-----------
COMPUTERS -- 2.0%
A/A3 IBM Corp.,
6.375%, 11/01/1997..... 250,000 250,937
-----------
ENTERTAINMENT -- 2.0%
A+/A1 Bass America, Inc.,
6.75%, 8/01/1999....... 250,000 253,321
-----------
FINANCIAL SERVICES -- 9.9%
AA-/AA3 Associates Corp. North
America,
8.50%,1/10/2000........ 100,000 107,411
A-/A3 Caterpillar Financial
Medium Term Note,
6.03%, 11/16/1995...... 300,000 300,210
AAA/Aaa General Motors Acceptance
Corp.,
8.10%, 9/19/1996....... 250,000 254,422
BBB/Baa1 Salomon Inc., Medium
Term Note,
5.00%, 7/15/1996....... 250,000 246,381
A/A3 Smith Barney Shearson
Holdings Corp.,
6.00%, 3/15/1997....... 250,000 249,309
A+/A2 Travelers, Inc.,
7.75%, 6/15/1999....... 100,000 104,247
-----------
1,261,980
-----------
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - ---------- --------- -----------
<S> <C> <C> <C>
FOOD SERVING -- 2.0%
A+/A2 Grand Metropolitan
Investment Corp.,
6.50%, 9/15/1999....... 250,000 $ 250,251
-----------
HOLDING COMPANIES -- 3.1%
A1/A+ ITT Hartford Inc.,
7.25%, 12/01/1996...... 400,000 403,068
-----------
HOUSEHOLD PRODUCTS -- 1.9%
AA/Aa2 Procter & Gamble Co.,
5.2%, 11/01/1995....... 250,000 249,880
-----------
INSURANCE -- 2.3%
A+/A2 International Lease
Finance Corp.,
6.625%, 6/01/1996...... 300,000 300,925
-----------
BEVERAGES -- 2.0%
A/A1 Pepsico, Inc.,
6.80%, 5/15/2000....... 250,000 254,525
-----------
OIL/GAS - EXPLORATION -- 4.0%
AA-/A1 BP America Corp.,
7.43%, 2/15/1999....... 250,000 258,595
AAA/Aa2 Shell Oil Co.,
7.70%, 2/01/1996....... 250,000 251,425
-----------
510,020
-----------
PHARMACEUTICALS -- 4.0%
A-/A2 American Home Products
Corp., 7.70%,
2/15/2000.............. 250,000 261,648
AA-/Aa3 Smith Kline Beecham
Corp., 5.25%,
1/26/1996.............. 250,000 249,502
-----------
511,150
-----------
RETAIL -- 2.0%
BBB+/Baa1 Sears Roebuck & Co.,
8.55%, 8/01/1996....... 250,000 255,005
-----------
TOBACCO -- 2.3%
A/A2 Philip Morris Cos., Inc.,
6.375%, 1/15/1998...... 300,000 299,827
-----------
TRANSPORTATION - SHIPPING -- 1.2%
AA/Aa Federal Express Corp.,
9.83%, 7/09/1996....... 150,000 153,953
-----------
</TABLE>
See accompanying notes to financial statements.
1
<PAGE> 4
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC ASSET PRESERVATION FUND
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - ---------- --------- -----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS
(CONTINUED)
UTILITIES -- 2.0%
A-/A2 Carolina Power & Light
Co.,
6.875%, 10/01/1998..... 250,000 $ 251,849
-----------
WASTE SERVICES -- 1.9%
AA-/A1 Waste Management Inc.,
6.25%, 12/15/1995...... 250,000 250,162
-----------
TOTAL CORPORATE
OBLIGATIONS (IDENTIFIED
COST $7,176,022)....... 7,257,505
-----------
MUNICIPAL OBLIGATIONS -- 8.3%
HOUSING DEVELOPMENT -- 3.8%
AA/Aa Tennessee Housing
Development Agency,
5.20%, 1/01/1998....... 500,000 487,735
-----------
UTILITIES -- 4.5%
AAA/Aaa West Knox Utilities
District, 8.40%,
12/01/1997............. 450,000 468,749
AAA/Aaa White House Utility
District of Robertson &
Summer Co.,
7.60%, 1/01/2000....... 100,000 104,022
-----------
572,771
-----------
TOTAL MUNICIPAL
OBLIGATIONS (IDENTIFIED
COST $1,043,006)....... 1,060,506
-----------
U.S. GOVERNMENT
OBLIGATIONS -- 25.8%
MORTGAGED BACKED
SECURITIES -- 13.7%
AAA/Aaa Federal Home Loan
Mortgage Corp., Gold
Balloon #M15202,
6.00%, 9/01/1997....... 419,746 416,200
AAA/Aaa Federal Home Loan
Mortgage Corp., Pool
#M90163, 7.00%,
12/01/1997............. 194,464 196,712
AAA/Aaa Federal Home Loan
Mortgage Corp., Pool
#L90037, 6.00%,
7/01/1998.............. 445,234 441,475
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - ---------- --------- -----------
<S> <C> <C> <C>
MORTGAGED BACKED
SECURITIES (CONTINUED)
AAA/Aaa Federal Home Loan
Mortgage Corp., Gold
Balloon #M90304,
6.00%, 11/01/1998...... 180,987 $ 179,896
AAA/Aaa Federal Home Loan
Mortgage Corp., Gold
Balloon #L90057,
6.00%, 11/01/1998...... 186,964 185,838
AAA/Aaa Federal National Mortgage
Association, #1508,
6.00%, 3/01/1998....... 114,988 108,160
AAA/Aaa Government National
Mortgage Association
#276718,
9.75%, 8/15/1998....... 219,239 228,934
-----------
1,757,215
-----------
GOVERNMENT AGENCY
OBLIGATIONS -- 12.1%
AAA/Aaa Federal Home Loan
Mortgage Corp.,
5.515%, 3/17/1997...... 300,000 298,152
AAA/Aaa Federal Home Loan
Mortgage Corp.,
6.65%, 8/06/1998....... 250,000 250,226
AAA/Aaa Federal Home Loan Bank,
6.155%, 3/22/1999...... 250,000 248,113
AAA/Aaa Federal Home Loan Bank,
8.24%, 2/16/1999....... 250,000 252,120
AAA/Aaa Federal Home Loan
Mortgage Corp.,
6.53%, 9/28/2000....... 250,000 250,097
AAA/Aaa Federal National Mortgage
Association,
5.25%, 5/13/1998....... 250,000 244,096
-----------
1,542,804
-----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS (IDENTIFIED
COST $3,292,051)....... 3,300,019
-----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 5
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC ASSET PRESERVATION FUND
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - ---------- --------- -----------
<S> <C> <C> <C>
U.S. TREASURY
OBLIGATIONS -- 2.8%
AAA/Aaa U.S. Treasury Notes,
5.125%, 3/31/1996...... 100,000 $ 99,781
AAA/Aaa U.S. Treasury Notes
6.875%, 10/31/1996..... 250,000 252,890
-----------
TOTAL U.S. TREASURY
OBLIGATIONS (IDENTIFIED
COST $352,347)......... 352,671
-----------
TOTAL
INVESTMENTS -- 93.6%
(IDENTIFIED COST
$11,863,426)+.......... 11,970,701
-----------
Cash and other assets,
net of
liabilities -- 6.4%.... 819,869
-----------
NET ASSETS -- 100.0%..... $12,790,570
==========
</TABLE>
+ The cost of securities for Federal income tax purposes is substantially the
same.
* See page 17 for Credit Ratings.
See accompanying notes to financial statements.
3
<PAGE> 6
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC INCOME FUND++
Portfolio of Investments (unaudited) -- September 30, 1995
<TABLE>
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - -------- ----------- -----------
<S> <C> <C> <C>
CORPORATE
OBLIGATIONS -- 36.2%
ADVERTISING/
COMMUNICATIONS -- 0.7%
B-/B3 Big Flower Press,
Inc.,
10.75%, 8/01/2003... 250,000 $ 250,000
-----------
ALUMINUM -- 0.7%
B+/B1 Kaiser Aluminum &
Chemical Corp.,
9.875%, 2/15/2002... 250,000 250,000
-----------
AUTO RELATED -- 0.7%
A-/A3 General Motors Corp.,
8.125%, 4/15/2016... 250,000 254,465
-----------
BANKING -- 2.0%
BB-/B1 Banco Rio de la Plata,
8.50%, 7/15/1998.... 420,000 365,925
A-/A2 Comerica Bank,
8.375%, 7/15/2024... 350,000 370,706
-----------
736,631
-----------
BUILDING/FOREST
PRODUCTS -- 1.3%
B+/B3 Pacific Lumber Co.,
10.50%, 3/01/2003... 500,000 470,000
-----------
BROADCASTING -- CABLE
TELEVISION -- 2.8%
B/B3 Adelphia
Communications
Corp.,
12.50%, 5/15/2002... 500,000 501,250
B+/B1 Jones Intercable Inc.,
11.50%, 7/15/2004... 500,000 540,000
-----------
1,041,250
-----------
CHEMICALS -- 1.9%
B/B1 NL Industries, Inc.,
11.75%, 10/15/2003.. 300,000 316,500
BB-/B1 Rexene Corp.,
11.75%, 12/01/2004.. 380,000 408,500
-----------
725,000
-----------
CONTAINERS --
METAL -- 0.7%
BB-/B1 Sea Containers, Ltd.,
12.50%, 12/01/2004.. 250,000 275,000
-----------
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - -------- ----------- -----------
<S> <C> <C> <C>
FINANCIAL
SERVICES -- 0.7%
AAA/Aaa Credit Local de
France, 7.50%,
1/26/1999........... 480,000,000(G) $ 269,345
-----------
FOOD AND HOUSEHOLD
PRODUCTS -- 1.2%
B-/B2 Flagstar Corp.,
10.875%,
12/01/2002.......... 500,000 463,750
-----------
INDUSTRIAL
COMPONENTS -- 1.0%
NR/NR DESC Sociedad de
Fomento,
11.00%, 12/15/1997.. 375,000 369,375
-----------
LEISURE &
TOURISM -- 0.8%
BB-/B2 California Hotel
Finance Corp.,
11.00%, 12/01/2002.. 300,000 312,000
-----------
MANUFACTURING -- 2.2%
B/B3 Anchor Glass Inc.,
9.875%, 12/15/2008.. 300,000 244,500
B/B3 Dictaphone Corp.,
11.75% 8/01/2005.... 95,000 95,000
B/B2 Earle M. Jorgenson
Co., 10.75%
3/01/2000........... 250,000 247,500
B/B2 Weirton Steel Corp.
10.875%,
10/15/1999.......... 240,000 243,000
-----------
830,000
-----------
OIL/GAS -
EXPLORATION -- 5.2%
B/B2 Gerrity Oil & Gas Co.,
11.75%, 7/15/2004... 500,000 460,000
B+/B2 Petroleum Heat &
Power Co.,
12.25%, 2/01/2005... 500,000 540,000
B-/B3 Plains Resources,
Inc., 12.00%,
10/01/1999.......... 500,000 515,000
BB-/B2 TransTexas Gas Corp.,
11.50%, 6/15/2002... 400,000 418,000
-----------
1,933,000
-----------
PAPER PRODUCTS -- 3.7%
B+/B1 S.D. Warren Co.,
12.00%, 12/15/2004.. 300,000 331,500
B/B2 Stone Container Corp.,
10.75%, 4/01/2002... 500,000 505,000
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC INCOME FUND++
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - -------- ----------- -----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS
(CONTINUED)
PAPER PRODUCTS
(CONTINUED)
B-/B3 United Stationers
Supply Co.,
12.75%, 5/01/2005... 500,000 $ 535,000
-----------
1,371,500
-----------
PLASTIC
PRODUCTS -- 2.0%
B/B2 Applied Extrusion
Technologies Corp.,
11.50%, 4/01/2002... 500,000 535,000
B-/B3 Plastic Specialties &
Technologies Inc.,
11.25%, 12/01/2003.. 250,000 226,250
-----------
761,250
-----------
POLLUTION
CONTROL -- 0.4%
B/B3 Allied Waste
Industries, Inc.,
12.00%, 2/01/2004... 150,000 159,000
-----------
RETAIL -- 2.1%
B/B2 Orchard Supply
Hardware Corp.,
9.375%, 2/15/2002... 250,000 232,500
B-/Caa Parisian, Inc.,
9.875%, 7/15/2003... 300,000 252,000
B/B2 Thrifty Payless, Inc.,
11.75%, 4/15/2003... 300,000 312,750
-----------
797,250
-----------
TELE-
COMMUNICATIONS -- 2.5%
AAA/Aaa British Telecom PLC,
7.125%, 9/15/2003... 275,000(J) 403,701
B-/B2 Metrocall, Inc.,
10.375%,
10/01/2007.......... 250,000 253,594
NR/NR Telecom Argentina,
8.375%, 10/18/2000.. 315,000 283,500
-----------
940,795
-----------
TEXTILES &
APPAREL -- 2.9%
B/B3 Hartmarx Corp.,
10.875%, 1/15/2002.. 375,000 371,250
CCC+/B3 Ithaca Industries
Inc.,
11.125%,
12/15/2002.......... 500,000 477,500
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - -------- ----------- -----------
<S> <C> <C> <C>
TEXTILES & APPAREL
(CONTINUED)
B+/B3 West Point Stevens
Inc., 9.375%,
12/15/2005.......... 250,000 $ 243,125
-----------
1,091,875
-----------
UTILITIES -- 0.7%
A+/Aa3 Consolidated Edison
Co., New York, Inc.,
7.50%, 6/15/2023.... 250,000 250,000
-----------
TOTAL CORPORATE
OBLIGATIONS
(IDENTIFIED COST
$13,402,145)........ 13,551,486
-----------
GOVERNMENT
OBLIGATIONS -- 44.2%
ARGENTINA
GOVERNMENT -- 0.9%
NR/NR Argentine Note,
5.00%, 3/31/2023#... 715,000 340,519
-----------
AUSTRALIA
GOVERNMENT -- 0.9%
NR/NR Australia Government
Bond,
12.00%,
11/15/2001.......... 370,000(A) 328,730
-----------
BELGIAN
GOVERNMENT -- 0.7%
NR/Aa1 Belgium (Kingdom of),
8.25%, 2/14/2000.... 250,000(B) 266,875
-----------
CANADA
GOVERNMENT -- 0.9%
NR/Aa1 Canada Government,
7.75%, 9/01/1999.... 195,000(C) 147,045
NR/Aa1 Canada Government,
7.25%, 6/01/2003.... 245,000(C) 177,283
-----------
324,328
-----------
DENMARK
(KINGDOM OF) -- 2.0%
NR/Aaa Denmark (Kingdom of),
8.00%, 11/15/2001... 2,015,000(D) 372,696
NR/Aaa Denmark (Kingdom of),
9.00%, 11/15/2000... 1,920,000(D) 372,135
-----------
744,831
-----------
FRANCE
GOVERNMENT -- 3.3%
NR/Aaa France O.A.T.,
9.50%, 1/25/2001.... 3,350,000(E) 757,243
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 8
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC INCOME FUND++
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - -------- ----------- -----------
<S> <C> <C> <C>
GOVERNMENT
OBLIGATIONS
(CONTINUED)
FRANCE (CONTINUED)
NR/Aaa France O.A.T.,
6.75%, 10/25/2003... 2,550,000(E) $ 499,624
-----------
1,256,867
-----------
GERMANY
GOVERNMENT -- 4.7%
NR/Aaa Deutschland Republic,
8.00%, 7/22/2002.... 420,000(F) 320,932
NR/NR Deutsche Bundesbahn,
6.00%, 8/03/1998.... 1,200,000(F) 864,250
NR/NR Deutsche Bundesbahn,
6.125%,
10/28/2003.......... 175,000(F) 118,105
AAA/NR Treuhandansalt GRM,
6.25%, 3/04/2004.... 675,000(F) 462,284
-----------
1,765,571
-----------
ITALY
GOVERNMENT -- 1.0%
AA3/NR Buoni Poliennali del
Tes, 8.50%,
1/01/1999........... 625,000,000(G) 360,941
-----------
NETHERLANDS
GOVERNMENT -- 1.7%
NR/NR Netherlands
Government,
7.00%, 2/15/2003.... 500,000(H) 325,562
NR/NR Netherlands
Government,
9.00%, 1/15/2001.... 450,000(H) 320,965
-----------
646,527
-----------
SPAIN
GOVERNMENT -- 1.0%
NR/NR Spanish Bond,
12.25%, 3/25/2000... 44,000,000(I) 377,092
-----------
UNITED KINGDOM
GOVERNMENT -- 1.2%
NR/Aaa Treasury Bond,
6.75%, 11/26/2004... 300,000(J) 431,226
-----------
UNITED STATES
GOVERNMENT -- 25.9%
AAA/Aaa Student Loan Marketing
Assoc.,
5.95%, 12/20/1996... 1,000,000 999,146
AAA/Aaa Student Loan Marketing
Assoc.,
6.09%, 1/21/1998.... 200,000 200,275
AAA/Aaa Tennessee Valley
Authority,
7.75%, 12/15/2022... 250,000 255,113
<CAPTION>
CREDIT MARKET
RATING* PRINCIPAL VALUE
- - -------- ----------- -----------
<S> <C> <C> <C>
UNITED STATES
(CONTINUED)
AAA/Aaa U.S. Treasury Note,
5.875%, 7/31/1997... 8,250,000 $ 8,250,000
-----------
9,704,534
-----------
TOTAL GOVERNMENT
OBLIGATIONS
(IDENTIFIED COST
$16,308,161)........ 16,548,041
-----------
EQUITIES -- 1.5%
COMMON STOCK -- 0.1%
RETAIL -- 0.1%
NR/NR Grand Union Co........ 4,419 57,447
-----------
PREFERRED
STOCK -- 1.4%
PUBLISHING &
PRINTING -- 1.4%
B/B2 K-III Communications
Corp., 2.875%,
Exchangeable........ 20,000 530,000
-----------
TOTAL EQUITIES
(IDENTIFIED COST
$777,450)........... 587,447
-----------
TOTAL INVESTMENTS
EXCLUDING SHORT-TERM
(IDENTIFIED COST
$30,487,756)........ 30,686,974
-----------
SHORT-TERM
INVESTMENTS -- 3.7%
NR/NR Chase Manhattan Time
Deposit,
5.625%, due
10/02/95............ 1,380,000 1,380,000
-----------
TOTAL SHORT-TERM
INVESTMENTS
(IDENTIFIED COST
$1,380,000)......... 1,380,000
-----------
TOTAL
INVESTMENTS -- 85.6%
(IDENTIFIED
COST $31,867,756)+............. 32,066,974
-----------
Cash and other assets,
net of
liabilities -- 14.4%... 5,400,036
-----------
NET ASSETS -- 100.0%............. $37,467,010
==========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 9
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC INCOME FUND++
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
+ The cost of securities for Federal income tax purposes is
substantially the same.
# Step bond
* See page 17 for Credit Ratings.
++ See page 17 for Concentration by Country.
Principal denominated in U.S. Dollars unless indicated by
the following currencies:
(A) Australia
(B) Belgium
(C) Canada
(D) Denmark
(E) France
(F) Germany
(G) Italy
(H) Netherlands
(I) Spain
(J) United Kingdom
See accompanying notes to financial statements.
7
<PAGE> 10
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC GLOBAL EQUITY FUND**
Portfolio of Investments (unaudited) -- September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL/ MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
CORPORATE
OBLIGATIONS -- 0.4%
CONSTRUCTION -- BUILDING
MATERIALS -- 0.4%
50,000 Gujarat Ambuja Corp.,
Convertible
3.50%, due
6/30/1999............. $ 54,465 $ 69,500
----------- -----------
TOTAL CORPORATE
OBLIGATIONS........... 54,465 69,500
----------- -----------
COMMON STOCKS -- 78.9%
AGRICULTURE -- 0.9%
88,000 Parmalat Finanziaria
SPA................... 80,542 71,467
5,100 Terra Industries,
Inc. ................. 52,581 72,675
----------- -----------
133,123 144,142
----------- -----------
AUTO RELATED -- 1.4%
35,400 Magneti Marelli SPA..... 75,477 74,847
21,000 Nissan Diesel Motor
Co. .................. 131,444 151,777
----------- -----------
206,921 226,624
----------- -----------
BANKING/SAVINGS
& LOAN -- 6.9%
25,950 Allied Irish Banks
plc................... 123,478 129,030
673 Banco Espanol De
Credito, S.A. ........ 3,955 4,475
5,000 Banco Frances del Rio de
la Plata
S.A. -- ADR++......... 119,283 108,125
12,000 Bangkok Bank Company
Ltd. ................. 104,626 135,063
1,900 Bank of Boston Corp. ... 53,433 90,487
2,020 Banco Santander S.A..... 85,031 84,856
310 Commerzbank AG.......... 66,515 70,726
8,000 Lloyds Bank plc......... 85,513 87,133
18,500 National Australia Bank
Ltd. ................. 200,251 163,485
5,000 SanwaBank Ltd. ......... 100,091 94,139
4,000 Sumitomo Trust &
Banking............... 77,998 77,742
1,500 Union Bank/San
Francisco, CA Co. .... 56,141 79,500
----------- -----------
1,076,315 1,124,761
----------- -----------
BUILDING MATERIALS AND
COMPONENTS -- 0.9%
1,290 Cimpor Cimentos De
Portugal S.A. ........ 20,195 21,062
950 Portland Valderrivas
S.A................... 75,328 65,871
10,000 Williams Holdings plc... 54,605 52,091
----------- -----------
150,128 139,024
----------- -----------
BREWERY -- 0.3%
1,040 Carlsberg AS -- B....... 50,234 51,145
----------- -----------
<CAPTION>
MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
BUSINESS
EQUIPMENT -- 0.8%
7,000 Canon Inc. ............. $ 114,257 $ 125,418
----------- -----------
CHEMICALS -- 3.6%
7,000 BOC Group plc........... 78,987 88,285
1,400 Cabot Corp. ............ 56,377 74,375
1,300 Cytec Industries,
Inc.*................. 51,808 75,237
305 L'Air Liquide........... 38,992 48,651
2,200 Lyondell Petrochemical
Corp. ................ 55,819 56,925
7,000 Mitsui Toatsu Chemicals
Co. .................. 26,071 22,654
3,145 Norsk Hydro AS.......... 138,029 135,227
4,600 Sterling Chemicals,
Inc.*................. 52,601 37,950
2,000 Wellman, Inc. .......... 54,665 49,000
----------- -----------
553,349 588,304
----------- -----------
COMMERCIAL
SERVICES -- 0.8%
2,000 Measurex Corp. ......... 64,896 68,500
1,800 Robert Half
International,
Inc.*................. 36,116 61,425
----------- -----------
101,012 129,925
----------- -----------
COMPUTER
EQUIPMENT -- 2.6%
1,800 Adaptec, Inc.*.......... 59,060 74,250
1,100 Dell Computer Corp.*.... 28,897 93,500
1,100 Komag, Inc.*............ 79,747 71,912
2,800 Read-Rite Corp.*........ 47,114 102,200
2,100 Seagate Technology,
Inc.*................. 48,860 88,462
----------- -----------
263,678 430,324
----------- -----------
COMPUTER
SOFTWARE -- 1.5%
2,530 CAP Gemini Sogeti*...... 89,098 71,036
1,700 McAfee Associates,
Inc.*................. 87,838 87,550
1,400 Sun Microsystems,
Inc.*................. 45,326 88,200
----------- -----------
222,262 246,786
----------- -----------
CONGLOMERATE -- 0.4%
202,500 Mondragon
International......... 54,039 70,096
----------- -----------
CONSTRUCTION -- 0.4%
9,000 Keppel Corporation
Ltd. ................. 76,620 72,203
----------- -----------
CONSUMER NON-
DURABLES -- 0.5%
700 Nike, Inc. Cl. "B"...... 43,267 77,787
----------- -----------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 11
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC GLOBAL EQUITY FUND**
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS
(CONTINUED)
ELECTRICAL AND
ELECTRONICS -- 9.5%
1,950 Alliance Semiconductor
Corp.*................ $ 54,600 $ 77,512
1,100 Altera Corp.*........... 75,416 68,612
3,000 Atmel Corp.*............ 38,125 101,250
1,400 Avnet, Inc. ............ 77,669 72,275
2,000 Burr-Brown Corp. ....... 80,708 74,500
2,100 Cypress Semiconductor
Corp.*................ 41,355 81,112
22,000 General Electric plc.... 98,958 110,258
2,600 Integrated Device
Technology, Inc.*..... 77,347 65,000
1,400 KLA Instruments
Corp.*................ 62,825 112,350
2,000 Lattice Semiconductor
Corp.*................ 76,701 81,250
900 Novellus Systems,
Inc.*................. 29,588 62,775
5,000 Omron Corp.............. 84,557 116,408
1,000 Secom*.................. 64,299 66,808
1,800 Silicon Valley Group,
Inc.*................. 79,667 69,525
2,000 TDK Corp. .............. 90,856 103,249
3,200 Teradyne, Inc.*......... 47,297 115,200
1,900 Varian Associates,
Inc. ................. 80,606 85,265
1,800 Xilinx, Inc.*........... 70,836 86,625
----------- -----------
1,231,410 1,549,974
----------- -----------
ENGINEERING AND
CONSTRUCTION -- 0.9%
1,900 Empresas ICA Sociedad
Controlador -- ADR++... 50,494 21,850
7,000 Maeda Road Construction
Corp. ................ 136,312 131,086
----------- -----------
186,806 152,936
----------- -----------
ENTERTAINMENT -- 1.0%
1,900 Grand Casinos, Inc.*.... 60,409 77,187
12,000 Rank Organisation plc... 81,557 80,503
----------- -----------
141,966 157,690
----------- -----------
FINANCIAL
SERVICES -- 3.9%
3,100 Ahmanson (H.F.) &
Co. .................. 67,320 78,663
2,900 Bear Stearns Companies,
Inc. ................. 60,511 62,350
1,650 Cie Parisienne De
Reescompte............ 124,312 110,783
1,400 First USA, Inc. ........ 63,389 75,950
10,800 Instituto Mobiliare
Italiano SPA.......... 72,452 64,754
2,800 Lehman Brothers Holding,
Inc. ................. 57,918 64,750
6,000 Nomura Securities Co.
Ltd. ................. 113,295 117,826
<CAPTION>
MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
FINANCIAL SERVICES
(CONTINUED)
3,400 Paine Webber Group,
Inc. ................. $ 66,079 $ 67,150
----------- -----------
625,276 642,226
----------- -----------
FOOD & HOUSEHOLD
PRODUCTS -- 1.1%
1,500 IBP, Inc. .............. 49,590 80,062
98 Nestle
SA -- Registered...... 90,880 101,032
----------- -----------
140,470 181,094
----------- -----------
FOREST PRODUCTS &
PAPER -- 5.0%
1,900 Boise Cascade Corp. .... 52,993 76,712
1,700 Bowater, Inc. .......... 51,527 79,262
1,100 Consolidated Papers,
Inc................... 58,512 61,463
1,700 Federal Paper Board,
Inc. ................. 50,815 65,237
3,000 Glatfelter (P.H.) &
Co. .................. 69,180 67,500
2,700 Grupo Industrial
Durango, S.A.
-- ADS*#.............. 50,099 24,300
2,200 James River Corp. of
Virginia.............. 51,351 70,400
3,200 Longview Fibre Co. ..... 56,377 48,800
1,100 Mead Corp. ............. 58,091 64,487
1,700 Rayonier, Inc. ......... 55,327 66,513
1,000 Union Camp Corp......... 50,560 57,625
1,300 Westvaco Corp........... 46,716 59,313
1,000 Willamette Industries,
Inc................... 52,625 66,750
----------- -----------
704,173 808,362
----------- ----------
HEALTH CARE -- 0.7%
800 Becton Dickinson Co.*... 36,948 50,300
1,600 Healthcare Compare
Corp.*................ 50,396 62,000
----------- -----------
87,344 112,300
----------- -----------
HOLDING COMPANIES,
DIVERSIFIED -- 1.4%
15,000 Benpress Holdings
Corp.................. 111,250 91,950
19,000 BTR plc................. 102,678 97,922
1,240 Italmobiliare SPA....... 40,133 21,874
10,000 Renong Berhad........... 15,888 17,366
----------- -----------
269,949 229,112
----------- -----------
INSURANCE -- 2.9%
2,000 American Bankers
Insurance Group,
Inc. ................. 57,750 74,500
2,400 American Finance Group,
Inc. ................. 63,502 72,000
900 American National
Insurance Co. ........ 57,543 52,425
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 12
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC GLOBAL EQUITY FUND**
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS
(CONTINUED)
INSURANCE (CONTINUED)
3,500 Assurances Generales de
France................ $ 114,955 $ 95,778
1,800 AXA Co. ................ 90,572 95,109
3,300 Penncorp Financial
Group, Inc. .......... 76,098 78,788
----------- -----------
460,420 468,600
----------- -----------
INVESTMENT
COMPANIES -- 1.3%
15,000 Korea-Europe Fund
Ltd. ................. 110,625 123,750
8,000 ROC Taiwan Fund......... 85,940 85,000
----------- -----------
196,565 208,750
----------- -----------
MANUFACTURING -- 2.8%
2,500 FSI Industries,
Inc.* ................ 67,668 83,125
1,600 Kulicke & Soffa Ind. ... 63,008 58,400
340 Mannesmann AG........... 111,531 111,637
7,000 Mori Seiki Co. ......... 150,381 139,589
1,650 Parker-Hannifin
Corp. ................ 51,629 62,700
----------- -----------
444,217 455,451
----------- -----------
MEDICAL SUPPLIES -- 1.1%
3,073 Boston Scientific
Corp.*................ 51,964 130,987
2,100 Lincare Holdings,
Inc.*................. 52,905 54,075
----------- -----------
104,869 185,062
----------- -----------
MEDIA -- 0.4%
4,690 Filmes Lusomundo Co..... 58,780 57,769
----------- -----------
METALS --
DIVERSIFIED -- 3.4%
2,900 Allegheny Ludlum
Corp. ................ 60,517 59,087
1,900 Asarco, Inc............. 54,764 59,850
2,000 Cyprus Amax Minerals
Co.................... 58,495 56,250
2,000 Kennametal, Inc......... 49,728 72,500
2,800 Madeco, S.A. -- ADR++... 69,056 65,800
23,000 Mitsubishi Materials
Corp. ................ 109,220 113,382
1,000 Reynolds Metals Co. .... 52,310 57,750
3,400 Stone Container
Corp.*................ 73,329 64,600
----------- -----------
527,419 549,219
----------- -----------
MISCELLANEOUS -- 1.2%
5,500 Debica Depositary
Receipt Pln "A"....... 70,950 79,169
16 Roche Holding AG........ 98,580 113,778
----------- -----------
169,530 192,947
----------- -----------
<CAPTION>
MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
OIL/GAS-
EXPLORATION -- 2.2%
15,000 British Petroleum plc... $ 93,195 $ 112,468
3,000 Oneok, Inc. ............ 65,151 69,750
2,200 Sonat Offshore Drilling,
Inc. ................. 62,557 71,775
3,200 Valero Energy Corp. .... 65,286 76,800
1,600 YPF Sociedad Anonima --
ADR++................. 30,491 28,800
----------- -----------
316,680 359,593
----------- -----------
PACKAGING &
CONTAINER -- 0.4%
1,700 Chesapeake Corp......... 53,827 61,412
----------- -----------
PHARMACEUTICALS -- 2.2%
2,835 Bergen Brunswig Corp.
Cl. "A"............... 48,424 60,598
7,000 Glaxo Wellcome plc...... 83,787 84,750
2,000 Watson Pharmaceutical,
Inc. ................. 84,748 82,000
6,000 Yamanouchi
Pharmaceutical........ 135,479 129,973
----------- -----------
352,438 357,321
----------- -----------
PUBLISHING &
PRINT -- 0.7%
1,790 Elsevier NV............. 16,370 23,029
635 Vnu -- Ver Ned Uitgev
Ver Bezit............. 75,524 84,486
----------- -----------
91,894 107,515
----------- -----------
REAL ESTATE -- 2.7%
15,000 Cheung Kong Holdings.... 82,037 81,921
20,000 Singapore Land Ltd...... 129,033 116,115
24,000 Sotogrande S.A.*........ 76,353 56,248
16,000 Sun Hung Kai Properties
Ltd. ................. 99,872 129,867
3,450 Vallehermoso S.A........ 60,871 60,993
----------- -----------
448,166 445,144
----------- -----------
RETAIL -- 3.2%
20,000 Argyll Group plc........ 94,660 106,075
80,000 Cifra S.A. de
C.V. -- ADR++......... 128,400 99,792
1,900 COMPUSA, Inc.* ......... 61,389 81,700
15,000 Itochu Corp. ........... 104,294 92,772
10,000 Kingfisher plc.......... 79,470 79,556
2,800 Vons Companies, Inc.*... 51,181 66,500
----------- -----------
519,394 526,395
----------- -----------
STEEL -- 0.4%
3,000 J & L Specialty Steel,
Inc. ................. 77,805 63,000
----------- -----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 13
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC GLOBAL EQUITY FUND**
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS
(CONTINUED)
TELE-
COMMUNICATIONS -- 6.0%
1,170 Alcatel Alsthom Develops
Co. .................. $ 107,452 $ 98,575
19,000 Cable & Wireless plc.... 117,120 125,064
15 Nippon Telegraph &
Telecommunications
Corp. ................ 125,811 129,517
45,000 PT Indonesian
Satellite............. 165,359 157,023
2,240 Tele Danmark A/S -- Cl.
"B"................... 127,255 116,032
25,000 Telecom Corporation of
New Zealand........... 79,197 97,593
32,000 Telecom Italia Mobile
SPA................... 38,178 65,779
59,600 Telecom Italia Mobile
SPA -- Drnc. Risp. ... 58,100 53,373
1,400 Telefonos De Mexico
S.A., Cl.
"L" -- ADR++.......... 85,948 44,450
1,000 U.S. Robotics Corp.*.... 70,363 85,250
----------- -----------
974,783 972,656
----------- -----------
TEXTILES AND
APPAREL -- 0.4%
12,000 Teijin Limited.......... 68,263 57,698
----------- -----------
TRANSPORTATION -- 0.5%
10,000 Swire Pacific Ltd. Cl.
"A"................... 81,454 79,226
----------- -----------
UTILITIES -- 1.9%
19,000 British Gas plc......... 84,092 79,627
35,000 Consolidates Electric
Power Asia Ltd. ...... 76,675 70,172
2,200 Pacific Enterprises..... 56,233 55,275
2,400 Rochester Gas &
Electric Corp......... 51,746 56,700
10,250 Union Electrica Fenusa
S.A. ................. 43,584 49,623
----------- -----------
312,330 311,397
----------- -----------
<CAPTION>
PRINCIPAL/ MARKET
SHARES COST VALUE
- - ---------- ----------- -----------
<C> <S> <C> <C>
WINE & SPIRITS -- 0.7%
15,500 Grand Metropolitan
plc................... $ 101,898 $ 108,877
----------- -----------
TOTAL COMMON STOCKS..... 11,793,331 12,828,265
----------- -----------
WARRANTS -- 0.0%
HOLDING COMPANIES,
DIVERSIFIED -- 0.0%
400 Metallgesellschaft AG,
10/31/95*............. 3,856 52
----------- -----------
TOTAL WARRANTS.......... 3,856 52
----------- -----------
TOTAL EXCLUDING SHORT-
TERM INVESTMENTS...... 11,851,652 12,897,817
----------- -----------
SHORT-TERM
INVESTMENTS -- 10.9%
1,780,000 Chase Manhattan Time
Deposit, 5.625%, due
10/02/1995............ 1,780,000 1,780,000
----------- -----------
TOTAL SHORT-TERM
INVESTMENTS........... 1,780,000 1,780,000
----------- -----------
TOTAL
INVESTMENTS -- 90.2%.. $13,631,652+ 14,677,817
===========
Cash and other assets,
net of
liabilities -- 9.8%... 1,587,507
-----------
NET ASSETS -- 100.0%.... $16,265,324
===========
</TABLE>
* Non-Income Producing Securities
+ The cost of securities for Federal income tax purposes
is substantially the same.
++ American Depository Receipt.
# American Depository Shares.
** See pg. 17 for Concentration by Country.
See accompanying notes to financial statements.
11
<PAGE> 14
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments (unaudited) -- September 30, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- 81.2%
AUTO RELATED -- 1.4%
21,200 Republic Automotive Parts,
Inc.* .................. $ 306,391 $ 306,075
----------- -----------
CHEMICALS -- 5.2%
30,000 Synalloy Corp. ........... 399,926 686,250
32,500 Carbide/Graphite Group,
Inc. (The)* ............ 518,337 459,063
----------- -----------
918,263 1,145,313
----------- -----------
COMMERCIAL
SERVICES -- 14.6%
65,000 Childrens Comprehensive
Services, Inc.* ........ 165,712 223,437
20,000 Greenwich Air Services,
Inc.* .................. 349,166 410,000
23,300 Norrell Corp. ............ 455,350 757,250
26,000 PMT Services, Inc.* ...... 337,624 627,250
28,800 Regis Corp.*.............. 517,666 619,200
18,000 Right Management
Consultants, Co.*....... 376,288 612,000
----------- -----------
2,201,806 3,249,137
----------- -----------
COMPUTER
EQUIPMENT -- 3.6%
10,000 Cybex Computer Products
Corp. .................. 245,000 250,000
37,000 Vmark Software, Inc. ..... 592,375 559,625
----------- -----------
837,375 809,625
----------- -----------
ELECTRICAL &
ELECTRONICS -- 12.7%
23,000 Alpha Industries,
Inc.* .................. 389,812 411,125
30,200 Aseco Corp.* ............. 260,724 513,400
47,000 B.I., Inc. ............... 323,391 334,875
40,000 CEM Corp.* ............... 522,287 545,000
33,000 Checkmate Electronics,
Inc.* .................. 315,875 507,375
19,000 ITI Technologies,
Inc.* .................. 456,000 515,375
----------- -----------
2,268,089 2,827,150
----------- -----------
ENTERTAINMENT -- 2.4%
20,600 Speedway Motorsports,
Inc.* .................. 388,018 535,600
----------- -----------
FINANCIAL SERVICES -- 3.2%
38,950 Sirrom Capital Corp. ..... 467,856 705,969
----------- -----------
FURNITURE/HOME
APPLIANCE -- 2.3%
28,800 Aaron Rents, Inc. Cl
"B"..................... 382,916 511,200
----------- -----------
<CAPTION>
MARKET
SHARES COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
HEALTH CARE -- 2.3%
42,800 Advocat, Inc.* ........... $ 519,463 $ 508,250
----------- -----------
INSURANCE -- 5.6%
25,000 Poe & Brown, Inc. ........ 607,500 612,500
16,500 Vesta Insurance Group,
Inc. ................... 527,604 639,375
----------- -----------
1,135,104 1,251,875
----------- -----------
LODGING -- 1.4%
30,000 Prime Hospitality
Corp.* ................. 294,252 307,500
----------- -----------
MANUFACTURING -- 7.3%
11,500 Computational Systems,
Inc. 143,750 186,875
45,000 Cavalier Homes, Inc. ..... 436,400 742,500
17,850 Roper Industries, Inc. ... 613,950 691,688
----------- -----------
1,194,100 1,621,063
----------- -----------
MEDICAL SUPPLIES -- 7.3%
17,000 American Homepatient,
Inc.*................... 325,850 433,500
20,000 Hologic, Inc.* ........... 328,750 460,000
19,500 Renal Treatment Centers,
Inc.* .................. 453,664 721,500
----------- -----------
1,108,264 1,615,000
----------- -----------
METALS --
DIVERSIFIED -- 2.7%
16,000 Wolverine Tube, Inc.* .... 447,042 606,000
----------- -----------
PERSONAL CARE -- 1.7%
26,800 Inbrand Corp.* ........... 371,175 375,200
----------- -----------
PUBLISHING & PRINT -- 2.5%
21,900 Thomas Nelson, Inc. ...... 398,409 552,975
----------- -----------
RESTAURANT -- 3.5%
23,950 Daka International,
Inc.* .................. 451,210 784,362
----------- -----------
RETAIL -- 1.5%
20,000 Rexall Sundown, Inc.* .... 263,120 337,500
----------- -----------
TOTAL
INVESTMENTS -- 81.2%.... $13,952,853+ 18,049,794
==========
Cash and other assets, net
of
liabilities -- 18.8%.... 4,186,170
-----------
NET ASSETS -- 100.0%...... $22,235,964
==========
</TABLE>
* Non-Income Producing Securities
+ The cost of securities for Federal income tax purposes is substantially the
same.
See accompanying notes to financial statements.
12
<PAGE> 15
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments (unaudited) -- September 30, 1995
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL MARKET
AMOUNT COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- 92.0%
AGRICULTURE -- 0.4%
6,400 Terra Industries,
Inc. ................. $ 65,984 $ 91,200
----------- -----------
AUTO RELATED -- 2.4%
9,000 Custom Chrome, Inc.*.... 180,540 203,625
5,000 Daimler Benz
AG -- ADR++........... 246,275 248,125
10,500 Republic Automotive
Parts, Inc.*.......... 162,000 151,594
----------- -----------
588,815 603,344
----------- -----------
BANKING/SAVINGS &
LOAN -- 8.2%
1,900 Astoria Financial
Corp. ................ 60,677 80,988
3,000 Banco Bilbao Vizcaya --
ADR++................. 67,417 93,000
2,400 Bank of Boston Corp. ... 65,544 114,300
9,200 First Bell Bancorp,
Inc.*................. 112,590 119,600
6,500 First Mutual Bancorp,
Inc. ................. 83,076 82,875
5,900 Frankfort First Bancorp,
Inc. ................. 74,004 75,225
14,600 F.S.F. Financial
Corp. ................ 187,975 191,625
13,000 Glendale Federal Bank
FSB*.................. 126,030 214,500
5,500 Greenpoint Financial
Corp.................. 132,055 151,937
1,450 HSBC Holdings plc --
ADR++................. 156,056 201,609
7,400 IBS Financial Corp. .... 69,819 125,800
6,000 Industrial Bancorp,
Inc.*................. 75,042 77,250
13,400 Instituto Mobiliare
Italiano -- ADR++..... 251,891 244,550
3,400 MLF Bancorp, Inc........ 47,804 78,625
6,200 Peoples Heritage
Financial Group,
Inc................... 80,735 113,150
1,900 Union Bank/San
Francisco, CA Co. .... 71,109 100,700
----------- -----------
1,661,824 2,065,734
----------- -----------
CHEMICALS -- 3.4%
1,800 Cabot Corp. ............ 72,484 95,625
12,600 Carbide/Graphite Group,
Inc. (The)*........... 212,840 177,975
1,600 Cytec Industries,
Inc.*................. 63,763 92,600
2,400 Lyondell Petrochemical
Corp. ................ 61,519 62,100
8,600 Sterling Chemicals,
Inc.*................. 100,379 70,950
12,000 Synalloy Corp. ......... 144,425 274,500
3,200 Wellman, Inc. .......... 86,585 78,400
----------- -----------
741,995 852,150
----------- -----------
<CAPTION>
SHARES/
PRINCIPAL MARKET
AMOUNT COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
COMMERCIAL
SERVICES -- 5.9%
19,800 Children's Comprehensive
Services, Inc.*....... $ 54,598 $ 68,062
10,000 Greenwich Air Services,
Inc.*................. 174,583 205,000
10,000 Norrell Corp. .......... 195,000 325,000
10,000 PMT Services, Inc.*..... 141,250 241,250
11,900 Regis Corp. ............ 181,838 255,850
8,100 Right Management
Consultants Inc.*..... 169,263 275,400
3,400 Robert Half
International,
Inc.*................. 74,781 116,025
----------- -----------
991,313 1,486,587
----------- -----------
COMPUTER
EQUIPMENT -- 3.2%
2,500 Adaptec, Inc.*.......... 82,028 103,125
1,500 Dell Computer Corp.*.... 48,463 127,500
1,500 Komag, Inc.*............ 108,746 98,062
3,600 Read-Rite Corp.*........ 60,757 131,400
2,600 Seagate Technology,
Inc.*................. 59,397 109,525
15,000 VMark Software, Inc. ... 281,875 226,875
----------- -----------
641,266 796,487
----------- -----------
COMPUTER
SOFTWARE -- 0.9%
2,300 McAfee Associates,
Inc.*................. 118,591 118,450
1,700 Sun Microsystems,
Inc.*................. 57,963 107,100
----------- -----------
176,554 225,550
----------- -----------
CONSUMER
NON-DURABLE -- 1.7%
800 Nike, Inc. Cl "B"....... 53,948 88,900
5,200 Reebok International,
Ltd. ................. 182,312 178,750
14,000 Stride Rite Corp. ...... 170,252 159,250
----------- -----------
406,512 426,900
----------- -----------
ELECTRICAL &
ELECTRONICS -- 12.4%
2,550 Alliance Semiconductor
Corp.*................ 64,707 101,362
7,000 Alpha Industries,
Inc.*................. 127,435 125,125
1,600 Altera Corp.*........... 109,696 99,800
13,000 Aseco Corp.*............ 105,500 221,000
3,600 Atmel Corp.*............ 53,713 121,500
1,800 Avnet, Inc. ............ 99,860 92,925
20,000 B.I., Inc.*............. 143,153 142,500
1,600 BBC Brown Boveri,
Ltd. -- ADR++*........ 131,896 186,450
16,000 CEM Corp.*.............. 210,390 218,000
13,100 Checkmate Electronics,
Inc.*................. 118,638 201,412
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 16
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL MARKET
AMOUNT COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS
(CONTINUED)
ELECTRICAL & ELECTRONICS
(CONTINUED)
2,700 Cypress Semiconductor
Corp.*................ $ 50,836 $ 104,287
3,300 Hitachi, Ltd.*.......... 340,653 363,413
3,400 Integrated Device
Technology, Inc.*..... 101,146 85,000
8,000 ITI Technologies,
Inc.*................. 193,428 217,000
1,300 KLA Instruments
Corp.*................ 55,875 104,325
1,600 Lam Research Corp.*..... 62,600 95,600
2,700 Lattice Semiconductor
Corp.*................ 103,424 109,688
1,200 Novellus Systems,
Inc.*................. 48,500 84,000
2,300 Silicon Valley Group,
Inc.*................. 101,815 88,838
3,800 Teradyne, Inc.*......... 60,351 136,800
2,700 Wyle Electronics........ 114,546 121,162
2,400 Xilinx, Inc.*........... 94,448 115,500
----------- -----------
2,492,610 3,135,687
----------- -----------
ENTERTAINMENT -- 1.2%
2,600 Grand Casinos, Inc.*.... 82,665 105,625
8,000 Speedway Motorsports,
Inc.*................. 144,480 208,000
----------- -----------
227,145 313,625
----------- -----------
FINANCIAL
SERVICES -- 5.0%
4,400 Ahmanson (H.F.) &
Co. .................. 95,552 111,650
3,900 Bear Stearns Cos.,
Inc. ................. 81,377 83,850
2,400 J.P. Morgan & Co........ 146,444 185,700
3,800 Lehman Brothers Holding,
Inc. ................. 78,603 87,875
4,900 Paine Webber Group,
Inc. ................. 95,232 96,775
2,600 Quick & Reilly Group,
Inc. ................. 97,357 119,275
15,250 Sirrom Capital Corp. ... 177,750 276,406
3,800 Student Loan Marketing
Association........... 137,053 205,200
5,400 Westerfed Financial
Corp. ................ 73,224 89,775
----------- -----------
982,592 1,256,506
----------- -----------
FOOD & HOUSEHOLD
PRODUCTS -- 1.4%
1,700 IBP, Inc. .............. 56,702 90,738
5,200 Nestle S.A. -- ADR++*... 233,477 267,681
----------- -----------
290,179 358,419
----------- -----------
FOREST PRODUCTS &
PAPER -- 4.2%
2,300 Boise Cascade Corp. .... 64,149 92,863
2,100 Bowater, Inc. .......... 63,651 97,913
1,400 Consolidated Papers,
Inc. ................. 74,470 78,225
<CAPTION>
SHARES/
PRINCIPAL MARKET
AMOUNT COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
FOREST PRODUCTS & PAPER
(CONTINUED)
2,100 Federal Paper Board,
Inc. ................. $ 62,771 $ 80,587
3,900 Glatfelter (P.H.)
Co. .................. 67,917 87,750
2,800 James River Corp. of
Virginia.............. 65,356 89,600
5,900 Longview Fibre Co. ..... 103,835 89,975
1,300 Mead Corp. ............. 68,653 76,212
2,200 Rayonier, Inc. ......... 71,600 86,075
1,300 Union Camp Corp. ....... 65,728 74,913
2,300 Westvaco Corp. ......... 90,288 104,937
1,600 Willamette Industries,
Inc. ................. 83,150 106,800
----------- -----------
881,568 1,065,850
----------- -----------
FURNITURE/HOME
APPLIANCE -- 0.8%
12,000 Aaron Rents, Inc. Cl.
"B"................... 155,858 213,000
----------- -----------
HEALTH CARE -- 1.5%
15,000 Advocat, Inc.*.......... 193,906 178,125
1,200 Becton Dickinson &
Co.*.................. 56,622 75,450
3,400 Healthcare Compare
Corp.*................ 101,947 131,750
----------- -----------
352,475 385,325
----------- -----------
HOLDING
COMPANIES -- 1.6%
24,400 Hanson plc -- ADR++..... 436,716 396,500
----------- -----------
INSURANCE -- 5.4%
2,500 American Bankers
Insurance Group,
Inc. ................. 72,188 93,125
3,500 American Financial
Group, Inc. .......... 92,607 105,000
1,700 American National
Insurance Co. ........ 106,481 99,025
1,400 Loews Corp.............. 123,409 203,700
10,000 Poe & Brown, Inc. ...... 245,000 245,000
2,800 Safeco Corp. ........... 158,493 183,750
4,100 Lincoln National
Corp. ................ 148,982 193,212
6,500 Vesta Insurance Group,
Inc. ................. 204,567 251,875
----------- -----------
1,151,727 1,374,687
----------- -----------
LODGING -- 0.7%
17,000 Prime Hospitality
Corp.*................ 166,734 174,250
----------- -----------
MANUFACTURING -- 5.3%
17,500 Cavalier Homes, Inc. ... 174,322 288,750
3,600 FSI International,
Inc.*................. 97,411 119,700
23,000 Jardine Matheson
Holdings
Ltd. -- ADR++......... 172,690 155,250
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 17
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL MARKET
AMOUNT COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS
(CONTINUED)
MANUFACTURING
(CONTINUED)
2,400 Kulicke & Soffa
Industries, Inc.*..... $ 94,607 $ 87,600
1,950 Parker-Hannifin
Corp. ................ 58,528 74,100
7,000 Roper Industries,
Inc. ................. 241,500 271,250
3,400 Seimens AG -- ADR++..... 329,700 344,695
----------- -----------
1,168,758 1,341,345
----------- -----------
MEDICAL SUPPLIES -- 3.9%
7,100 American Homepatient,
Inc.*................. 133,900 181,050
3,756 Boston Scientific
Corp.*................ 63,513 160,100
11,000 Hologic, Inc.*.......... 173,820 253,000
3,900 Lincare Holdings,
Inc.*................. 100,125 100,425
7,500 Renal Treatment Centers,
Inc.*................. 171,976 277,500
----------- -----------
643,334 972,075
----------- -----------
METALS --
DIVERSIFIED -- 3.0%
3,800 Allegheny Ludlum
Corp. ................ 79,298 77,425
3,200 Asarco, Inc. ........... 96,967 100,800
2,900 Cyprus Amax Minerals
Co.................... 81,224 81,563
2,500 Kennametal, Inc. ....... 61,839 90,625
1,600 Reynolds Metals Co. .... 82,646 92,400
4,500 Stone Container
Corp.*................ 96,633 85,500
6,300 Wolverine Tube, Inc.*... 170,327 238,613
----------- -----------
668,934 766,926
----------- -----------
OIL/GAS -
EXPLORATION -- 3.5%
7,300 Elf Aquitane -- ADR++... 255,988 245,463
4,300 Oneok, Inc. ............ 93,342 99,975
5,500 Repsol S.A. -- ADR++.... 163,493 174,625
3,200 Sonat Offshore Drilling,
Inc. ................. 90,992 104,400
4,700 Valero Energy Corp. .... 95,906 112,800
8,800 YPF Sociedad Anonima --
ADR++................. 169,040 157,300
----------- -----------
868,761 894,563
----------- -----------
PACKAGING/
CONTAINER -- 0.7%
2,700 Chesapeake Corp. ....... 78,612 97,537
1,600 Temple Inland, Inc. .... 74,296 85,200
----------- -----------
152,908 182,737
----------- -----------
<CAPTION>
SHARES/
PRINCIPAL MARKET
AMOUNT COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
PERSONAL CARE -- 0.7%
12,500 Inbrand Corp.*.......... $ 172,720 $ 175,000
----------- -----------
PHARMACEUTICALS -- 0.7%
3,150 Bergen Brunswig Corp.
Cl. "A"............... 59,167 67,331
2,700 Watson Pharmaceutical,
Inc. ................. 114,435 110,700
----------- -----------
173,602 178,031
----------- -----------
PUBLISHING &
PRINTING -- 0.8%
8,000 Thomas Nelson, Inc...... 139,375 202,000
----------- -----------
REAL ESTATE -- 0.3%
25,800 Hopewell Holdings
Ltd. -- ADR++......... 102,258 87,591
----------- -----------
RESTAURANTS -- 1.3%
10,000 Daka International,
Inc.*................. 175,500 327,500
----------- -----------
RETAIL -- 2.9%
2,700 COMPUSA, Inc.*.......... 93,477 116,100
7,000 Maxim Group, Inc.*...... 91,802 91,000
15,000 Rexall Sundown, Inc.*... 194,688 253,125
3,500 Vons Companies, Inc.*... 63,977 83,125
12,600 Woolworth Corp.......... 198,068 198,450
----------- -----------
642,012 741,800
----------- -----------
TELE-
COMMUNICATIONS -- 7.8%
18,300 Alcatel
Alsthom -- ADR++...... 344,410 311,100
11,400 Stet-Societa Finanziaria
Telefonica
P.A. -- ADR++......... 341,650 346,633
12,700 Tele Denmark AS Cl
"B" -- ADR++.......... 343,992 328,613
9,000 Telefonica de Espana --
ADR++................. 353,115 372,375
12,100 Telefonos de Mexico S.A.
Cl. "L" -- ADR++...... 455,614 385,688
2,400 Tellabs, Inc.*.......... 46,854 101,100
1,400 U.S. Robotics Corp.*.... 98,509 119,350
----------- -----------
1,984,144 1,964,859
----------- -----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 18
ESC STRATEGIC FUNDS, INC.
THE ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments (unaudited) (continued) -- September 30, 1995
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL MARKET
AMOUNT COST VALUE
- - ------- ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- 0.8%
4,300 Pacific Enterprises..... $ 108,033 $ 108,037
3,800 Rochester Gas & Electric
Corp. ................ 79,124 89,775
----------- -----------
187,157 197,812
----------- -----------
TOTAL INVESTMENTS --
92.0%................. $19,491,330+ $23,254,040
==========
LIABILITIES IN EXCESS OF
OTHER
ASSETS -- 8.0%........ 2,014,529
-----------
NET ASSETS -- 100.0%.... $25,268,569
==========
</TABLE>
+ The cost of securities for federal income tax purposes is substantially the
same.
* Non-income producing securities
++ American Depository Receipts
See accompanying notes to financial statements.
16
<PAGE> 19
ESC STRATEGIC FUNDS, INC.
Concentration by Country
<TABLE>
<CAPTION>
INCOME FUND
MARKET GLOBAL EQUITY FUND
COUNTRY VALUE MARKET VALUE
- - ------- ----------- ------------------
<S> <C> <C>
Argentina............................................................... $ 989,944 $ 136,925
Australia............................................................... 328,730 163,689
Belgium................................................................. 266,875 164
Canada.................................................................. 324,328 --
Chile................................................................... -- 65,800
Denmark................................................................. 744,831 166,746
France.................................................................. 1,256,867 517,710
Germany................................................................. 1,765,571 181,571
Great Britain........................................................... 834,927 1,212,924
Hong Kong............................................................... -- 360,919
India................................................................... -- 69,751
Indonesia............................................................... -- 155,593
Ireland................................................................. -- 129,113
Italy................................................................... 630,286 351,021
Japan................................................................... -- 1,668,218
Korea................................................................... -- 133,125
Malaysia................................................................ -- 17,358
Mexico.................................................................. 369,375 183,575
Netherlands............................................................. 646,527 107,059
New Zealand............................................................. -- 97,753
Norway.................................................................. -- 134,892
Philippines............................................................. -- 170,946
Poland.................................................................. -- 76,969
Portugal................................................................ -- 78,265
Singapore............................................................... -- 188,250
Spain................................................................... 377,092 321,127
Switzerland............................................................. -- 213,135
Taiwan.................................................................. -- 85,000
Thailand................................................................ -- 135,044
United States........................................................... 23,531,621 7,555,175
----------- ------------
Total Investments....................................................... $32,066,974 $ 14,677,817
=========== ============
</TABLE>
CREDIT RATINGS (unaudited)
<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
-------- ------------------
<S> <C> <C>
Aaa AAA Instrument judged to be of the highest quality
and carrying the smallest amount of investment
risk.
Aa AA Instrument judged to be of high quality by all
standards.
A A Instrument judged to be adequate by all
standards.
Baa BBB Instrument judged to be of moderate quality by
all standards.
Ba-B BB-B Instrument judged to have speculative elements,
and generally lack desirable characteristics.
Caa-C CCC-C Instrument judged to be predominately speculative
with respect to pay interest and repay
principal in accordance with terms of
obligation.
NR NR Not Rated. In the opinion of the Investment
Adviser, instrument judged to be of comparable
investment quality to rated securities which
may be purchased by the Fund.
</TABLE>
For items possessing the strongest investment attributes of their
category, Moody's gives that letter rating followed by a number. The
Standard & Poor's ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
17
<PAGE> 20
ESC STRATEGIC FUNDS, INC.
Statement of Assets and Liabilities (unaudited)
September 30, 1995
<TABLE>
<CAPTION>
ASSET GLOBAL
PRESERVATION INCOME EQUITY SMALL CAP APPRECIATION
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at value (cost $11,863,426;
$30,487,756; $11,851,652; $13,952,853;
$19,491,330, respectively)....................... $11,970,701 $30,686,974 $12,897,817 $18,049,794 $23,254,040
Short-term investments (cost $0; $1,380,000;
$1,780,000; $0; $0, respectively)................ 0 1,380,000 1,780,000 0 0
Cash............................................... 625,275 2,922,777 1,384,549 3,994,932 2,407,314
Foreign Cash (cost $0; $1,647,747; $154,688; $0;
$0).............................................. 0 1,645,384 159,293 0 0
Dividends and interest receivable.................. 188,917 820,483 31,725 1,398 10,615
Receivable for investments sold.................... 0 309,667 312,223 154,316 0
Receivable for fund shares sold.................... 2,500 2,500 0 54,457 8,375
Receivable from sponsor............................ 0 0 0 10,621 0
Withholding tax reclaim............................ 0 0 928 0 0
Prepaid expenses and other assets.................. 6,684 2,834 991 982 1,362
Unamortized organizational expenses (Note 2e)...... 31,463 31,680 31,874 40,132 33,202
---------- ---------- ---------- ---------- ----------
Total Assets................................. 12,825,540 37,802,299 16,599,400 22,306,632 25,714,908
---------- ---------- ---------- ---------- ----------
LIABILITIES
Payable for securities purchased................... 0 252,188 240,054 0 371,101
Payable for fund shares repurchased................ 0 1,250 1,250 4,497 7,800
Advisory fee payable (Note 3)...................... 0 30,455 37,123 17,636 20,375
Administrative services fee payable (Note 3)....... 0 4,568 5,568 2,645 3,056
Transfer agent fee payable (Note 3)................ 415 1,410 1,325 2,310 1,450
12b-1 distribution fee payable (Note 3)............ 4,926 19,280 20,256 28,481 28,849
Other accrued expenses............................. 29,629 26,138 28,500 15,099 13,708
---------- ---------- ---------- ---------- ----------
Total Liabilities............................ 34,970 335,289 334,076 70,668 446,339
---------- ---------- ---------- ---------- ----------
NET ASSETS........................................... $12,790,570 $37,467,010 $16,265,324 $22,235,964 $25,268,569
========== ========== ========== ========== ==========
Net Assets Consist of
Capital Stock...................................... $ 1,274 $ 3,684 $ 1,484 $ 1,554 $ 1,981
Additional paid-in capital......................... 12,701,226 36,582,288 14,885,740 16,995,073 20,676,573
Accumulated undistributed net investment income/
(loss) on investments............................ 867 148,811 (19,365) (71,821) (14,432)
Accumulated undistributed realized gain/(loss) on
investments and foreign currency................. (20,072) 535,372 346,695 1,214,217 841,737
Net unrealized appreciation on investments
and foreign currency translations................ 107,275 196,855 1,050,770 4,096,941 3,762,710
---------- ---------- ---------- ---------- ----------
NET ASSETS......................................... $12,790,570 $37,467,010 $16,265,324 $22,235,964 $25,268,569
========== ========== ========== ========== ==========
SHARES OF BENEFICIAL INTEREST
Class A:
Shares of beneficial interest outstanding........ 1,274,332 3,546,906 1,156,409 1,207,314 1,818,692
========== ========== ========== ========== ==========
Net asset value per share outstanding............ $10.04 $10.17 $10.99 $14.32 $12.76
===== ===== ===== ===== =====
Maximum offering price per share (N/A;
10.17/.955; 10.99/.955; 14.32/.955; 12.76/.955,
respectively).................................. N/A $10.65 $11.51 $14.99 $13.36
==== ===== ===== ===== =====
Class D:
Shares of beneficial interest outstanding........ N/A 137,245 327,330 346,567 162,415
==== ====== ====== ====== ======
Net asset value per share outstanding............ N/A $10.17 $10.88 $14.26 $12.69
==== ===== ===== ===== =====
Maximum offering price per share (N/A;
10.17/.985; 10.88/.985; 14.26/.985; 12.69/.985,
respectively)*................................. N/A $10.32 $11.05 $14.48 $12.88
==== ===== ===== ===== =====
</TABLE>
* The sales load on Class D shares was being waived prior to September 30, 1995.
Beginning November 1, 1995, a 1.50% sales load was being charged.
See accompanying notes to financial statements.
18
<PAGE> 21
ESC STRATEGIC FUNDS, INC.
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
ASSET
PRESERVATION INCOME GLOBAL EQUITY SMALL CAP APPRECIATION
APRIL 1, 1995 APRIL 1, 1995 APRIL 1, 1995 APRIL 1, 1995 APRIL 1, 1995
THROUGH THROUGH THROUGH THROUGH THROUGH
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest (net of
withholding tax of $0,
$8,838, $0, $0, $0,
respectively).......... $401,357 $1,411,793 $ 47,501 $ 79,059 $ 47,407
Dividends (net of
withholding tax
of $0, $0, $12,977, $0,
$1,129,
respectively).......... 0 14,375 128,339 29,111 152,415
-------- ------------- ---------- ---------- ----------
401,357 1,426,168 175,840 108,170 199,822
-------- ------------- ---------- ---------- ----------
Expenses:
Advisory (Note 3)........ 31,106 180,364 72,945 85,128 105,135
Fund Accounting (Note
3)..................... 17,045 20,127 19,793 15,783 18,124
Legal.................... 4,235 11,446 4,800 5,473 6,510
Administrative services
(Note 3)............... 9,332 27,055 10,942 12,769 15,770
Reports to
shareholders........... 1,800 2,200 3,200 4,000 2,700
Audit.................... 9,990 13,120 12,516 3,918 9,115
Registration............. 8,095 11,845 11,845 11,945 8,205
Custodian................ 5,947 11,866 19,806 6,984 9,920
12b-1 Distribution fee
Class A (Note 3)....... 4,926 17,378 10,210 14,669 22,069
12b-1 Distribution fee
Class D (Note 3)....... 0 1,902 10,046 13,812 6,780
Trustee.................. 1,600 1,600 1,600 1,600 1,600
Transfer agent fees and
expenses (Note 3)...... 5,806 7,901 8,180 10,474 8,161
Amortization of
organizational
expenses............... 4,421 4,421 4,421 5,455 4,421
Miscellaneous............ 419 4,804 2,312 3,602 744
-------- ---------- ------- ---------- ----------
Total expenses before
waivers................ 104,722 316,029 192,616 195,612 219,254
Less expenses
waived/reimbursed by
Adviser, Administrator
and Transfer Agent..... (45,438) (5,000) (5,000) (15,621) (5,000)
-------- ---------- --------- ---------- ----------
Net expenses............. 59,284 311,029 187,616 179,991 214,254
-------- ---------- ---------- ---------- ----------
Net investment
income/(loss)............ 342,073 1,115,139 (11,776) (71,821) (14,432)
-------- ---------- ---------- ---------- ----------
Realized gain/(loss) on
investments.............. (449) (79,908) 512,236 727,144 785,077
Net realized gain/(loss) on
foreign currency
transactions and assets
and liabilities
denominated in foreign
currencies............... 0 603,726 129,326 0 0
Change in unrealized
appreciation/
(depreciation) of
investments.............. 179,018 618,158 822,586 3,558,481 2,952,208
Net unrealized gain/(loss)
on foreign currency
translations............. 0 (391,646) 3,704 0 0
-------- ---------- ---------- ---------- ----------
Net realized/unrealized
gain/(loss) on
investments and foreign
currency translation..... 178,569 750,330 1,467,852 4,285,625 3,737,285
-------- ---------- ---------- ---------- ----------
Net increase/(decrease) in
net assets resulting from
operations............... $520,642 $1,865,469 $1,456,076 $4,213,804 $3,722,853
======== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 22
ESC STRATEGIC FUNDS, INC.
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
ASSET PRESERVATION INCOME
----------------------------------- -----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995 SEPTEMBER 30, 1995 MARCH 31, 1995
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss)....... $ 342,073 $ 496,552 $ 1,115,139 $ 1,753,017
Net realized gain/(loss) on
investments...................... (449) (23,866) 523,818 182,152
Change in unrealized appreciation/
(depreciation) of investments.... 179,018 (71,743) 226,512 (29,657)
------------ ------------ ------------ ------------
Net increase/(decrease) in net assets
resulting from operations.......... 520,642 400,943 1,865,469 1,905,512
------------ ------------ ------------ ------------
Distributions to shareholders from
capital gains:
Class A............................ 0 0 0 (25,981)
Class D............................ 0 0 0 (837)
------------ ------------ ------------ ------------
0 0 0 (26,818)
------------ ------------ ------------ ------------
Distributions to shareholders from
net investment income:
Class A............................ (342,073) (496,552) (1,077,508) (1,712,325)
Class D............................ 0 0 (37,631) (40,688)
------------ ------------ ------------ ------------
(342,073) (496,552) (1,115,139) (1,753,013)
------------ ------------ ------------ ------------
Decrease in net assets resulting
from distributions to
shareholders..................... (342,073) (496,552) (1,115,139) (1,779,831)
------------ ------------ ------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Class A.......................... 392,051 12,524,556 2,028,899 35,978,038
Class D.......................... 0 0 211,011 1,181,686
------------ ------------ ------------ ------------
392,051 12,524,556 2,239,910 37,159,724
------------ ------------ ------------ ------------
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions:
Class A.......................... 341,790 493,006 986,843 1,629,846
Class D.......................... 0 0 25,254 31,401
------------ ------------ ------------ ------------
341,790 493,006 1,012,097 1,661,247
------------ ------------ ------------ ------------
Net asset value of shares redeemed:
Class A.......................... (45,542) (1,005,947) (42,335) (5,347,616)
Class D.......................... 0 0 (107,412) 0
------------ ------------ ------------ ------------
(45,542) (1,005,947) (149,747) (5,347,616)
------------ ------------ ------------ ------------
Net increase in net assets from
capital share transactions..... 688,299 12,011,615 3,102,260 33,473,355
------------ ------------ ------------ ------------
Total increase in net assets......... 866,868 11,916,006 3,852,590 33,599,036
Net Assets:
Beginning of period................ 11,923,702 7,696 33,614,420 15,384
------------ ------------ ------------ ------------
End of period...................... $ 12,790,570 $ 11,923,702 $ 37,467,010 $ 33,614,420
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 23
ESC STRATEGIC FUNDS, INC.
Statement of Changes in Net Assets (unaudited) (continued)
<TABLE>
<CAPTION>
GLOBAL EQUITY SMALL CAP
----------------------------------- -----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995 SEPTEMBER 30, 1995 MARCH 31, 1995
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss)....... $ (11,776) $ (71,034) $ (71,821) $ (38,590)
Net realized gain/(loss) on
investments...................... 641,562 (255,749) 727,144 734,152
Change in unrealized appreciation/
(depreciation) of investments.... 826,290 224,480 3,558,481 538,460
------------ ------------ ------------ ------------
Net increase/(decrease) in net assets
resulting from operations.......... 1,456,076 (102,303) 4,213,804 1,234,022
------------ ------------ ------------ ------------
Distributions to shareholders from
capital gains:
Class A............................ 0 0 0 (165,997)
Class D............................ 0 0 0 (48,635)
------------ ------------ ------------ ------------
0 0 0 (214,632)
------------ ------------ ------------ ------------
Distributions to shareholders from
net investment income:
Class A............................ 0 (13,738) 0 0
Class D............................ 0 (2,281) 0 0
------------ ------------ ------------ ------------
0 (16,019)* 0 0
------------ ------------ ------------ ------------
Decrease in net assets resulting
from distributions to
shareholders..................... 0 (16,019) 0 (214,632)
------------ ------------ ------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Class A.......................... 2,414,166 9,446,593 5,583,178 7,982,612
Class D.......................... 213,336 3,411,563 851,991 3,244,649
------------ ------------ ------------ ------------
2,627,502 12,858,156 6,435,169 11,227,261
------------ ------------ ------------ ------------
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions:
Class A.......................... 0 11,265 0 137,196
Class D.......................... 0 1,399 0 48,033
------------ ------------ ------------ ------------
0 12,664 0 185,229
------------ ------------ ------------ ------------
Net asset value of shares redeemed:
Class A.......................... (13,521) (161,554) (295,094) (134,515)
Class D.......................... (339,940) (71,121) (270,050) (160,614)
------------ ------------ ------------ ------------
(353,461) (232,675) (565,144) (295,129)
------------ ------------ ------------ ------------
Net increase in net assets from
capital share transactions..... 2,274,041 12,638,145 5,870,025 11,117,361
------------ ------------ ------------ ------------
Total increase in net assets......... 3,730,117 12,519,823 10,083,829 12,136,751
Net Assets:
Beginning of period................ 12,535,207 15,384 12,152,135 15,384
------------ ------------ ------------ ------------
End of period...................... $ 16,265,324 $ 12,535,207 $ 22,235,964 $ 12,152,135
============ ============ ============ ============
</TABLE>
* Represents distribution in excess of net investment income.
See accompanying notes to financial statements.
21
<PAGE> 24
ESC STRATEGIC FUNDS, INC.
Statement of Changes in Net Assets (unaudited) (continued)
<TABLE>
<CAPTION>
APPRECIATION
-----------------------------------
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------ --------------
<S> <C> <C>
Operations:
Net investment income/(loss)....................................... $ (14,432) $ (7,090)
Net realized gain/(loss) on investments............................ 785,077 145,295
Change in unrealized appreciation/(depreciation) of investments.... 2,952,208 810,502
------------ ------------
Net increase/(decrease) in net assets resulting from operations...... 3,722,853 948,707
------------ ------------
Distributions to shareholders from capital gains:
Class A............................................................ 0 (78,778)
Class D............................................................ 0 (6,832)
------------ ------------
0 (85,610)
------------ ------------
Distributions to shareholders from net investment income:
Class A............................................................ 0 0
Class D............................................................ 0 0
------------ ------------
0 0
------------ ------------
Decrease in net assets resulting from distributions to
shareholders..................................................... 0 (85,610)
------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Class A.......................................................... 5,042,866 14,310,886
Class D.......................................................... 303,135 1,616,586
------------ ------------
5,346,001 15,927,472
------------ ------------
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions:
Class A.......................................................... 0 69,925
Class D.......................................................... 0 6,469
------------ ------------
0 76,394
------------ ------------
Net asset value of shares redeemed:
Class A.......................................................... (338,671) (57,078)
Class D.......................................................... (280,786) (6,097)
------------ ------------
(619,457) (63,175)
------------ ------------
Net increase in net assets from capital share transactions....... 4,726,544 15,940,691
------------ ------------
Total increase in net assets......................................... 8,449,397 16,803,788
Net Assets:
Beginning of period................................................ 16,819,172 15,384
------------ ------------
End of period...................................................... $ 25,268,569 $ 16,819,172
============ ============
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 25
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (unaudited) -- September 30, 1995
1. DESCRIPTION. The ESC Strategic Funds, Inc. (the "Company") was
incorporated in Maryland on November 24, 1993. The Company currently comprises
five portfolios, ESC Strategic Asset Preservation (commencement date April 25,
1994), ESC Strategic Income (commencement date May 4, 1994), ESC Strategic
Global Equity (commencement date May 12, 1994), ESC Strategic Small Cap
(commencement date June 8, 1994), ESC Strategic Appreciation (commencement date
July 6, 1994) (the "Funds"). The Company is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. Each Fund, with the exception of the Small Cap Fund,
operates as a diversified fund. The Small Cap Fund operates as a non-diversified
fund. Class A shares are offered with a maximum front-end sales charge of 4.50%,
which may be reduced or waived in certain cases. Class A shares are also subject
to a Service and Distribution Fee calculated at an annual rate of up to 0.25% of
the average daily net asset value of Class A shares. Class D shares are offered
with a front-end sales charge of 1.50% and are subject to a Service and
Distribution Fee at an annual rate of up to 0.75% based on the average daily net
asset value of Class D shares. Prior to November 1, 1995, the 1.50% sales load
on Class D shares was being waived. ESC Strategic Asset Preservation Fund offers
only one class of shares with no front-end sales charge and a Service and
Distribution Fee calculated at an annual rate of up to 0.25% of the average
daily value of its net assets. The Company's Articles of Incorporation authorize
the issuance of two classes of common stock designated as Class A and Class D
for each Fund, except for ESC Strategic Asset Preservation Fund, which shall
only have Class A Shares. The Company's Board of Directors may, in the future,
authorize the issuance of additional classes of capital stock for the Funds.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies followed by the Funds:
A. Portfolio Valuation. Investments in securities (including options
and financial futures) are valued at the last sales price on the securities
exchange on which such securities are primarily traded or, if there are no
trades, at the current bid price, as of 4:15 p.m. eastern time.
Over-the-counter securities, or securities for which there were no
transactions, are valued at the closing bid price, except for open short
positions, when the asked price is used. Bid price is used when no asked
price is available. Bonds and other fixed income securities are valued by
using market quotations, and may be valued on the basis of prices provided
by a pricing service. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by
or at the direction of the Board of Directors. Short-term securities which
mature in 60 days or less are valued at amortized cost, if their terms to
maturity at purchase were 60 days or less, or by amortizing their value on
the 61st day prior to maturity, if their original term to maturity at
purchase exceeded 60 days.
B. Securities transactions and investment income. Securities
transactions are recorded on a trade date basis. Realized gains and losses
from securities transactions are recorded on the identified cost basis.
Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium and accretion of discount on investments,
is accrued daily as earned.
C. Dividend and Capital Gain Distributions to Shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The
amount of dividends and distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences
do not require reclassification. Dividends and distributions which exceed
net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in
excess of net investment income or distributions in excess of net realized
capital gains.
23
<PAGE> 26
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (unaudited) (continued) -- September 30, 1995
Permanent book/tax differences are primarily attributable to
non-deductible organization costs, foreign exchange gains and net operating
losses.
D. Federal income taxes. It is the policy of each of the Funds to
qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. By so qualifying, the Funds will
not be subject to Federal income taxes to the extent that they distribute
all of their taxable and tax-exempt income for the fiscal year. The Funds
also intend to meet the distribution requirements to avoid the payment of
an excise tax. Accordingly, no provision for taxes is recorded.
E. Organizational expenses. Costs incurred in connection with the
organization and initial registration of the Funds have been deferred and
are being amortized on a straightline basis over sixty months beginning
with each Fund's commencement of operations. In the event any of the
initial shares of the Funds are redeemed during the amortization period,
the redemption proceeds will be reduced by a pro rata portion of any
unamortized organization expenses in the proportion as the number of shares
being redeemed bears to the number of initial shares outstanding at the
time of redemption.
F. Determination of net asset value and calculation of
expenses. Expenses directly attributable to a Fund are charged to that
Fund. Other expenses are allocated proportionately among each Fund in
relation to the net assets of each Fund or on another reasonable basis. In
calculating net asset value per share of each class, investment income,
realized and unrealized gains and losses, and expenses other than class
specific expenses, are allocated daily to each class of shares based upon
the proportion of net assets of each class at the beginning of each day.
Distribution expenses are solely borne by the class incurring the expense.
G. Foreign Exchange Transactions. The books and records of the Fund
are maintained in U.S. dollars non-U.S. denominated amounts are translated
into U.S. dollars as follows with the resultant exchange gains and losses
recorded in the Statement of Operations:
(i) market value of investment securities and other assets and
liabilities at the exchange rate on the valuation date,
(ii) purchases and sales of investment securities, income and
expenses at the exchange rate prevailing on the respective date of such
transactions.
H. Forward Foreign Exchange Contracts. A forward foreign exchange
contract is a commitment to sell a foreign currency at a future date at a
negotiated exchange rate. The Funds bear the market risk which arises from
possible changes in foreign exchange values. Risks may arise from the
potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of the foreign currency
relative to the U.S. dollar. The gain or loss from the difference between
the cost or original contracts and the amount realized upon the closing of
such contracts is included in net realized gain on foreign exchange.
I. Short-Selling. The Small Cap Fund can engage in short selling
which obligates the Fund to replace the security borrowed by purchasing the
security at current market value. The Fund would incur a loss if the price
of the security increases between the date of the short sale and the date
on which the Fund replaces the borrowed security. The Fund would realize a
gain if the price of the security declines between those dates. Until the
Fund replaces the borrowed security, the Fund will deposit collateral with
the broker-dealer, usually cash, U.S. government securities, or other
highly liquid securities, sufficient to cover its short position.
24
<PAGE> 27
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (unaudited) (continued) -- September 30, 1995
3. INVESTMENT ADVISORY AND ADMINISTRATION CONTRACTS AND DISTRIBUTION
AGREEMENT. The Company entered into an investment advisory agreement (the
"Investment Advisory Agreement") with Equitable Securities Corporation ("ESC")
(the "Adviser"). The Investment Advisory Agreement provides for the Adviser to
be paid a fee calculated and accrued daily and paid monthly at the annual rates
of 0.50% for ESC Strategic Asset Preservation Fund and 1.00% for each of the
other funds. The Adviser provides portfolio management supervision and certain
administrative, clerical and bookkeeping services for the Company. Equitable
Asset Management is the Advisor for Asset Preservation, Small Cap and also
advises 30.3% of the Appreciation Fund. The Adviser has entered into agreements
with various portfolio managers. Any fees payable under these agreements are
paid by the Adviser. For the six months ended September 30, 1995 the Adviser was
entitled to Advisory fees of $31,106; $180,364; $72,945; $85,128 and $105,135,
for the Asset Preservation, Income, Global Equity, Small Cap and Appreciation
Funds, respectively. The Adviser waived fees of $31,106; $0; $0; $0 and $0 for
the Asset Preservation, Income, Global Equity, Small Cap and Appreciation Funds,
respectively.
Furman Selz Incorporated ("Furman Selz") provides the Funds with
administrative, fund accounting, dividend and capital gain distribution
disbursing and transfer agency services pursuant to the administration agreement
(the "Administration Agreement"). The services under the Administration
Agreement are subject to the supervision of the Company's Board of Directors and
officers and include day-to-day administration of matters related to the
corporate existence of the Company, maintenance of its records, preparation of
reports, supervision of the Funds' arrangement with their custodian and
assistance in the preparation of the Company's Registration Statement under
federal and state laws. Pursuant to the Administration Agreement, the Funds pay
Furman Selz a monthly fee for its services which, on an annualized basis, will
not exceed .15% of the average daily net assets of the Funds and is accrued
daily. For Administrative Services provided, Furman Selz was entitled to fees of
$9,332; $27,055; $10,942; $12,769 and $15,770 for the Asset Preservation,
Income, Global Equity, Small Cap and Appreciation Funds, respectively. Furman
Selz waived fees of $9,332; $0; $0; $0 and $0 for the Asset Preservation,
Income, Global Equity, Small Cap and Appreciation Funds, respectively.
Pursuant to a Services Agreement between the Funds and Furman Selz, Furman
Selz will provide the Funds with transfer and dividend and capital gain
disbursing agent services, for which it receives a fee of $15.00 per account per
year subject to a required minimum fee of $10,000 for each Fund, plus
out-of-pocket expenses. Pursuant to the Fund Accounting Agreement between the
Funds and Furman Selz, Furman Selz assists the Funds in calculating net asset
values and provides certain other account services for each Fund for an annual
fee of $30,000 per fund plus out-of-pocket expenses. For the six months ended
September 30, 1995, Furman Selz was entitled to Transfer Agent fees of $5,806;
$7,901; $8,180; $10,474 and $8,161 for the Asset Preservation, Income, Global
Equity, Small Cap and Appreciation Funds, respectively. Furman Selz waived fees
of $5,000; $5,000; $5,000; $5,000 and $5,000 for the Asset Preservation, Income,
Global Equity, Small Cap and Appreciation Funds, respectively. For Fund
Accounting Services, Furman Selz earned fees, including out of pocket expenses,
of $17,045; $20,127; $19,793; $15,783 and $18,124 for the Asset Preservation,
Income, Global Equity, Small Cap and Appreciation Funds, respectively.
ESC and Furman Selz have agreed to waive sufficient amounts of their fees
to cap the expense ratios for the Funds as follows: Appreciation -- 2.00% (Class
A), 2.50% (Class D); Global Equity -- 2.50% (Class A), 3.00% (Class D); Small
Cap -- 2.00% (Class A), 2.50% (Class D); Income -- 1.70% (Class A), 2.20% (Class
D); Asset Preservation -- 1.00% (Class A). In order to maintain these expense
ratios the Adviser has reimbursed expenses as follows: Asset Preservation -- $0,
Income -- $0, Global Equity -- $0, Small Cap -- $10,621, and Appreciation -- $0.
The Company entered into a distribution agreement (the "Distribution
Agreement") with ESC. Under the Distribution Agreement, ESC as agent for the
Funds, agrees to use its best efforts as sole distributor of the Funds' shares.
ESC does not receive compensation under the Distribution Agreement. Under the
Plan of Distribution, Class A shares
25
<PAGE> 28
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (unaudited) (continued) -- September 30, 1995
will pay the Distributor a fee at an annual rate up to 0.25% of the value of
average daily net assets of Class A shares in return for financing certain
distribution and shareholder service activities related to Class A shares.
During the six months ended September 30, 1995, the actual rates incurred by
Class A shares were: 0.08%; 0.10%; 0.19%; 0.23% and 0.23% for the Asset
Preservation, Income, Global Equity, Small Cap and Appreciation Funds,
respectively. The Plans provide that Class D shares will pay the Distributor
amounts up to an annual rate up to 0.75% of the average daily net assets of
Class D shares to finance certain distribution and shareholder services
activities related to Class D shares. During the six months ended September 30,
1995, the actual rates incurred by Class D shares were: 0%; 0.29%; 0.56%; 0.68%
and 0.69% for the Asset Preservation, Income, Global Equity, Small Cap and
Appreciation Funds, respectively. ESC Strategic Asset Preservation Fund has
adopted a Plan substantially the same as that for Class A shares of the other
Funds. For the six months ended September 30, 1995, Class A fees of $4,926;
$17,378; $10,210; $14,669 and $22,069 and Class D fees of $0; $1,902; $10,046;
$13,812 and $6,780 were incurred for the Asset Preservation, Income, Global
Equity, Small Cap and Appreciation Funds, respectively.
During the six months ended September 30, 1995 the Appreciation Fund, Small
Cap Fund and the Global Equity Fund paid brokerage commissions in total of
$19,675 to Equitable Securities, a subsidiary of the Adviser's subsidiary,
Equitable Trust Company. The Funds were advised that sales load commissions of
$1,443, $846, $44,311 and $31,367 were paid to ESC from the Income, Global
Equity, Small Cap and Appreciation Funds, respectively.
4. SECURITIES TRANSACTIONS.
A. Purchase and sale transactions. The aggregate amount of purchases
and sales of investment securities, other than short-term securities, for
the six months ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
COMMON STOCKS U.S. GOVERNMENT
AND CORPORATE BONDS OBLIGATIONS
-------------------------- --------------------------
PURCHASES SALES PURCHASES SALES
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Asset
Preservation.... $ 1,400,690 $ 0 $ 1,442,652 $ 0
Income............ 7,469,081 9,432,783 10,669,222 7,672,239
Global Equity..... 6,899,463 5,612,524 0 0
Small Cap......... 12,400,347 7,662,003 0 0
Appreciation...... 11,094,089 6,149,248 0 0
</TABLE>
B. Federal Income Tax basis. Cost for book and Federal Income Tax
purposes were substantially identical as of September 30, 1995. Gross
unrealized appreciation and depreciation on investment securities at
September 30, 1995, based on cost for Federal income tax purposes is as
follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
---------- --------- ----------
<S> <C> <C> <C>
Asset Preservation................ $ 117,721 $ (10,446) $ 107,275
Income............................ 693,474 (494,256) 199,218
Global Equity..................... 1,605,211 (559,046) 1,046,165
Small Cap......................... 4,200,495 (103,554) 4,096,941
Appreciation...................... 4,257,205 (494,495) 3,762,710
</TABLE>
26
<PAGE> 29
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (unaudited) (continued) -- September 30, 1995
5. CAPITAL SHARE TRANSACTIONS. The Company is authorized to issue $650
million shares of capital stock with a par value $0.001 each. Transactions in
shares of the Funds for the six months ended September 30, 1995, and year ended
March 31, 1995, were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1995
-------------------------------------------------------------------
ASSET GLOBAL
PRESERVATION INCOME EQUITY SMALL CAP APPRECIATION
------------ --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
CLASS A
Beginning Balance..................... 1,205,690 3,256,233 931,096 780,607 1,418,131
--------- --------- --------- --------- ---------
Shares sold........................... 39,076 197,936 226,632 450,393 428,868
Shares issued in reinvestment of net
investment income and capital gain
distributions....................... 34,098 96,822 0 0 0
Shares redeemed....................... (4,532) (4,085) (1,319) (23,686) (28,307)
--------- --------- --------- --------- ---------
Net increase/(decrease) in shares..... 68,642 290,673 225,313 426,707 400,561
--------- --------- --------- --------- ---------
Closing Balance....................... 1,274,332 3,546,906 1,156,409 1,207,314 1,818,692
========= ========= ========= ========= =========
CLASS D
Beginning Balance..................... -- 124,831 338,355 300,196 159,350
--------- --------- --------- --------- ---------
Shares sold........................... -- 20,508 20,188 66,884 26,436
Shares issued in reinvestment of net
investment income and capital gain
distributions....................... -- 2,478 0 0 0
Shares redeemed....................... -- (10,572) (31,213) (20,513) (23,371)
--------- --------- --------- --------- ---------
Net increase/(decrease) in shares..... -- 12,414 (11,025) 46,371 3,065
--------- --------- --------- --------- ---------
Closing Balance....................... -- 137,245 327,330 346,567 162,415
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1995
-------------------------------------------------------------------
ASSET GLOBAL
PRESERVATION INCOME EQUITY SMALL CAP APPRECIATION
------------ --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
CLASS A
Beginning Balance..................... 769 769 769 769 769
----------- --------- --------- -------- ---------
Shares sold........................... 1,256,945 3,639,895 945,598 779,556 1,416,032
Shares issued in reinvestment of net
investment income and capital gain
distributions....................... 49,971 168,037 1,187 12,870 6,896
Shares redeemed....................... (101,995) (552,468) (16,458) (12,588) (5,566)
----------- --------- --------- -------- ---------
Net increase/(decrease) in shares..... 1,204,921 3,255,464 930,327 779,838 1,417,362
----------- --------- --------- -------- ---------
Closing Balance....................... 1,205,690 3,256,233 931,096 780,607 1,418,131
========= ======== ======== ======== =========
CLASS D
Beginning Balance..................... -- 769 769 769 769
----------- --------- --------- -------- ---------
Shares sold........................... -- 120,814 344,535 309,594 158,543
Shares issued in reinvestment of net
investment income and capital gain
distributions....................... -- 3,248 146 4,514 640
Shares redeemed....................... -- -- (7,095) (14,681) (602)
----------- --------- --------- -------- ---------
Net increase/(decrease) in shares..... -- 124,062 337,586 299,427 158,581
----------- --------- --------- -------- ---------
Closing Balance....................... -- 124,831 338,355 300,196 159,350
========= ======== ======== ======== =========
</TABLE>
27
<PAGE> 30
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (unaudited) (continued) -- September 30, 1995
6. MULTIPLE MANAGER STRATEGY. The Adviser uses the Multiple Manager
Strategy for certain of the Funds from time to time. Under this strategy, the
Adviser allocates portions of a Fund's assets among multiple specialist managers
with dissimilar investment styles and security selection disciplines. The
Adviser monitors the performance both of the total Fund portfolio and of each
Manager and will reallocate Fund assets among individual managers, or recommend
to the Company that it employ or terminate particular Managers, to the extent
the Adviser deems appropriate to achieve the overall objectives of the
particular Fund.
The Managers are as follows:
ESC Strategic Asset Preservation Fund -- Equitable Asset Management,
Inc.
ESC Strategic Income Fund -- Llama Asset Management Company; Cincinnati
Asset Management, Inc. and Murray Johnstone International Limited.
ESC Strategic Global Equity Fund -- Globeflex Capital, L.P.; Murray
Johnstone International Limited and Blairlogie Capital Management
Limited.
ESC Strategic Small Cap Fund -- Equitable Asset Management, Inc.
ESC Strategic Appreciation Fund -- GlobeFlex Capital, L.P.; Brandes
Investment Partners, Inc., and Equitable Asset Management, Inc.
Equitable Asset Management, Inc. is an affiliate of the Adviser.
7. OFF-BALANCE SHEET RISK. The Funds may invest in various financial
instruments with off-balance sheet risk. These financial instruments include
taking positions in forward contracts and currency swaps. The Funds enter into
such contracts for the purpose of hedging exposure to change in foreign currency
exchange rates on their portfolio holdings.
28
<PAGE> 31
ESC STRATEGIC FUNDS, INC.
Selected Per Share Data and Ratios
<TABLE>
<CAPTION>
ASSET PRESERVATION
--------------------------------------
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------- ---------------
<S> <C> <C>
Net Asset Value, Beginning of Period................................. $ 9.89 $ 10.00
------- -------
Income from Investment Operations:
Net investment income/(loss)....................................... 0.27 0.47
Net realized/unrealized gain/(loss) on investments................. 0.15 (0.11)
------- -------
Total from Investment Operations................................... 0.42 0.36
------- -------
Less Distributions:
Dividends from capital gains....................................... 0 0
Dividends from net investment income............................... (0.27) (0.47)
------- -------
Total Distributions.................................................. (0.27) (0.47)
------- -------
Net Asset Value, End of Period....................................... $ 10.04 $ 9.89
======= =======
Total Return (not reflecting sales load)............................. 4.35% 3.75%
Net Assets, End of Period (in thousands)............................. $12,791 $11,924
Ratios to Average Net Assets of:
Net investment income.............................................. 5.51%* 5.15%*
Expenses net of waivers/reimbursements............................. 0.96%* 1.00%*
Expenses before waivers/reimbursements............................. 1.69%* 2.12%*
Portfolio Turnover Rate.............................................. 0 30%
</TABLE>
* Annualized.
<TABLE>
<CAPTION>
INCOME
--------------------------------------------------------------------------------
CLASS A CLASS D
-------------------------------------- --------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995 SEPTEMBER 30, 1995 MARCH 31, 1995
------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 9.94 $ 10.00 $ 9.94 $ 10.00
------- ------- ------ ------
Income from Investment Operations:
Net investment income/(loss)........ 0.30 0.55 0.27 0.50
Net realized/unrealized gain/(loss)
on investments.................... 0.23 (0.05) 0.23 (0.05)
------- ------- ------ ------
Total from Investment Operations.... 0.53 0.50 0.50 0.45
------- ------- ------ ------
Less Distributions:
Dividends from capital gains........ 0 (0.01) 0 (0.01)
Dividends from net investment
income............................ (0.30) (0.55) (0.27) (0.50)
------- ------- ------ ------
Total Distributions................... (0.30) (0.56) (0.27) (0.51)
------- ------- ------ ------
Net Asset Value, End of Period........ $ 10.17 $ 9.94 $ 10.17 $ 9.94
======= ======= ====== ======
Total Return (not reflecting sales
load)............................... 5.33% 5.30% 5.07% 4.74%
Net Assets, End of Period (in
thousands).......................... $36,071 $32,373 $ 1,396 $ 1,241
Ratios to Average Net Assets of:
Net investment income............... 6.20%* 6.29%* 5.70%* 5.73%*
Expenses net of
waivers/reimbursements............ 1.71%* 1.85%* 2.21%* 2.29%*
Expenses before
waivers/reimbursements............ 1.74%* 1.86%* 2.24%* 2.31%*
Portfolio Turnover Rate............... 57% 92% 57% 92%
</TABLE>
* Annualized.
See accompanying notes to financial statements.
29
<PAGE> 32
ESC STRATEGIC FUNDS, INC.
Selected Per Share Data and Ratios (continued)
<TABLE>
<CAPTION>
GLOBAL EQUITY
--------------------------------------------------------------------------------
CLASS A CLASS D
-------------------------------------- --------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995 SEPTEMBER 30, 1995 MARCH 31, 1995
------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 9.90 $ 10.00 $ 9.82 $ 10.00
------- ------ ------ ------
Income from Investment Operations:
Net investment income/(loss)........ (0.04) (0.05) (0.07) (0.07)
Net realized/unrealized gain/(loss)
on investments.................... 1.13 (0.03) 1.13 (0.10)
------- ------ ------ ------
Total from Investment Operations.... 1.09 (0.08) 1.06 (0.17)
------- ------ ------ ------
Less Distributions:
Dividends from capital gains........ 0 0 0 0
Dividends from net investment
income............................ 0 (0.02) 0 (0.01)
------- ------ ------ ------
Total Distributions................... 0 (0.02) 0 (0.01)
------- ------ ------ ------
Net Asset Value, End of Period........ $ 10.99 $ 9.90 $ 10.88 $ 9.82
======= ====== ====== ======
Total Return (not reflecting sales
load)............................... 11.01% (0.84)% 10.79% (1.72)%
Net Assets, End of Period (in
thousands).......................... $12,702 $ 9,213 $ 3,563 $ 3,322
Ratios to Average Net Assets of:
Net investment income............... (0.04)%* (0.65)%* (0.53)%* (1.51)%*
Expenses net of
waivers/reimbursements............ 2.45%* 2.50%* 2.97%* 2.98%*
Expenses before
waivers/reimbursements............ 2.52%* 3.22%* 3.04%* 3.69%*
Portfolio Turnover Rate............... 47% 76% 47% 76%
</TABLE>
* Annualized.
<TABLE>
<CAPTION>
SMALL CAP
--------------------------------------------------------------------------------
CLASS A CLASS D
-------------------------------------- --------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995 SEPTEMBER 30, 1995 MARCH 31, 1995
------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 11.25 $ 10.00 $ 11.22 $ 10.00
------- ------ ------ ------
Income from Investment Operations:
Net investment income/(loss)........ (0.05) (0.03) (0.08) (0.05)
Net realized/unrealized gain/(loss)
on investments.................... 3.12 1.52 3.12 1.51
------- ------ ------ ------
Total from Investment Operations.... 3.07 1.49 3.04 1.46
------- ------ ------ ------
Less Distributions:
Dividends from capital gains........ 0 (0.24) 0 (0.24)
Dividends from net investment
income............................ 0 0 0 0
------- ------ ------ ------
Total Distributions................... 0 (0.24) 0 (0.24)
------- ------ ------ ------
Net Asset Value, End of Period........ $ 14.32 $ 11.25 $ 14.26 $ 11.22
======= ====== ====== ======
Total Return (not reflecting sales
load)............................... 27.29% 15.03% 27.09% 14.72%
Net Assets, End of Period (in
thousands).......................... $17,295 $ 8,785 $ 4,941 $ 3,367
Ratios to Average Net Assets of:
Net investment income............... (0.73)%* (0.43)%* (1.21)%* (0.93)%*
Expenses net of
waivers/reimbursements............ 1.99%* 2.00%* 2.50%* 2.50%*
Expenses before
waivers/reimbursements............ 2.17%* 3.28%* 2.72%* 3.68%*
Portfolio Turnover Rate............... 56% 151% 56% 151%
</TABLE>
* Annualized.
See accompanying notes to financial statements.
30
<PAGE> 33
ESC STRATEGIC FUNDS, INC.
Selected Per Share Data and Ratios (continued)
<TABLE>
<CAPTION>
APPRECIATION
--------------------------------------------------------------------------------
CLASS A CLASS D
-------------------------------------- --------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995 SEPTEMBER 30, 1995 MARCH 31, 1995
------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 10.67 $ 10.00 $ 10.63 $ 10.00
------- ------- ------ ------
Income from Investment Operations:
Net investment income/(loss)........ 0 0 (0.03) (0.03)
Net realized/unrealized gain/(loss)
on investments.................... 2.09 0.73 2.09 0.72
------- ------- ------ ------
Total from Investment Operations.... 2.09 0.73 2.06 0.69
------- ------- ------ ------
Less Distributions:
Dividends from capital gains........ 0 (0.06) 0 (0.06)
Dividends from net investment
income............................ 0 0 0 0
------- ------- ------ ------
Total Distributions................... 0 (0.06) 0 (0.06)
------- ------- ------ ------
Net Asset Value, End of Period........ $ 12.76 $ 10.67 $ 12.69 $ 10.63
======= ======= ====== ======
Total Return (not reflecting sales
load)............................... 19.59% 7.32% 19.38% 6.92%
Net Assets, End of Period (in
thousands).......................... $23,207 $15,126 $ 2,061 $ 1,693
Ratios to Average Net Assets of:
Net investment income............... (0.09)%* (0.04)%* (0.57)%* (0.56)%*
Expenses net of
waivers/reimbursements............ 1.99%* 2.00%* 2.49%* 2.50%*
Expenses before
waivers/reimbursements............ 2.04%* 2.88%* 2.56%* 3.40%*
Portfolio Turnover Rate............... 32% 58% 32% 58%
</TABLE>
* Annualized.
See accompanying notes to financial statements.
31
<PAGE> 34
ESC STRATEGIC FUNDS, INC.
DIRECTORS AND OFFICERS
DIRECTORS
<TABLE>
<S> <C>
WILLIAM H. CAMMACK* Chairman, Equitable Securities Corporation
W. HOWARD CAMMACK, JR.* Managing Director, Equitable Securities Corporation
J. BRANSFORD WALLACE Chairman, Willis Coroon, PLC
BROWNLEE O. CURREY, JR. President, The Nashville Banner
E. TOWNES DUNCAN Chairman and Chief Executive Officer, Comptronix
Corporation
<CAPTION>
* "Interested Person" as that term is defined in the Investment Company Act of 1940.
- - ---------------------------------------------------------------------------------------------
OFFICERS
<S> <C>
WILLIAM H. CAMMACK President
W. HOWARD CAMMACK, JR. Treasurer
JOHN J. PILEGGI Secretary
JOHN L. McALLISTER Assistant Secretary and Assistant Treasurer
GORDON FORRESTER Assistant Treasurer
JOAN V. FIORE Assistant Secretary
SHERYL HIRSCHFELD Assistant Secretary
</TABLE>
<PAGE> 35
ADDRESS FOR:
[ESC STRATEGIC LOGO]
ESC STRATEGIC FUNDS, INC.
237 PARK AVENUE
NEW YORK, NEW YORK 10017
GENERAL AND ACCOUNT INFORMATION:
(800) 261-FUND(3863)
INVESTMENT ADVISER AND DISTRIBUTOR
- - ---------------------------------------
Equitable Securities Corporation
800 Nashville City Center
511 Union Street
Nashville, Tennessee 37219-1743
ADMINISTRATOR
- - ---------------
Furman Selz Incorporated
230 Park Avenue
New York, New York 10169
CUSTODIAN
- - ----------
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
COUNSEL
- - --------
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
[ESC STRATEGIC LOGO]
ESC Strategic ASSET PRESERVATION Fund
ESC Strategic INCOME Fund
ESC Strategic GLOBAL EQUITY Fund
ESC Strategic SMALL CAP Fund
ESC Strategic APPRECIATION Fund
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1995
